0000950170-24-028009.txt : 20240307 0000950170-24-028009.hdr.sgml : 20240307 20240307162726 ACCESSION NUMBER: 0000950170-24-028009 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 88 CONFORMED PERIOD OF REPORT: 20231231 FILED AS OF DATE: 20240307 DATE AS OF CHANGE: 20240307 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Global Crossing Airlines Group Inc. CENTRAL INDEX KEY: 0001846084 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] ORGANIZATION NAME: 01 Energy & Transportation IRS NUMBER: 981350261 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-56409 FILM NUMBER: 24730538 BUSINESS ADDRESS: STREET 1: 4200 NW 36TH STREET, BUILDING 5A STREET 2: MIAMI INT'L AIRPORT, 4TH FLOOR CITY: MIAMI STATE: FL ZIP: 33166 BUSINESS PHONE: 7867518503 MAIL ADDRESS: STREET 1: 4200 NW 36TH STREET, BUILDING 5A STREET 2: MIAMI INT'L AIRPORT, 4TH FLOOR CITY: MIAMI STATE: FL ZIP: 33166 10-K 1 jetmf-20231231.htm 10-K 10-K
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UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2023

 

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]

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(15U.S.C7262(b)) by the registered public accounting firm that prepared or issued its audit report [ ].

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. [ ].

Indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. [ ].

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). [ ].

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 of the Registrant, based on the closing price of the shares of common stock on (JET) on the NEO Exchange on December 31, 2023 was $21,551,578.

 

The total number of the registrant’s shares outstanding as of March 1, 2024 was 59,269,620 shares., consisting of 40,764,099 shares of Common Stock, 5,537,313 shares of Class A Non-Voting Common Stock, and 12,968,208 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 2023 Annual Meeting of Stockholders.

 

 


 

Cautionary Note Regarding Forward-Looking Statements

 

This annual report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are based on Management's beliefs and assumptions and on information currently available to Management. For this purpose, any statement contained in this report that is not a statement of historical fact may be deemed to be forward-looking, including, but not limited to, statements relating to our future actions, intentions, plans, strategies, objectives, results of operations, cash flows and the adequacy of or need to seek additional capital resources and liquidity. Without limiting the foregoing, words such as “may,” “should,” “expect,” “project,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “budget,” “forecast,” “predict,” “potential,” “continue,” “should,” “could,” “will” or comparable terminology or the negative of such terms are intended to identify forward-looking statements; however, the absence of these words does not necessarily mean that a statement is not forward-looking. Forward-looking statements by their nature involve known and unknown risks and uncertainties and other factors that may cause actual results and outcomes to differ materially depending on a variety of factors, many of which are not within our control. Such factors include, but are not limited to, general economic conditions; competition within our industry; legislative requirements or changes which could render our products or services less competitive or obsolete; our failure to successfully develop new products and/or services or to anticipate current or prospective customers' needs; price increases; limits to employee capabilities; delays, reductions, or cancellations of our contracts with customers, suppliers or other parties; sufficiency of working capital, capital resources and liquidity; conflicts of interest between our significant investors and our other stakeholders; volatility of our operating results and share price and other factors detailed herein and in our other filings with the United States Securities and Exchange Commission (the "SEC" or "Commission"). Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. For a more detailed discussion of the principal factors that could cause actual results to be materially different, you should read our risk factors in Item "1A. Risk Factors", included elsewhere in this report.

 

Forward-looking statements are based on our assessment of current industry, financial and economic information, all of which are dynamic factors subject to rapid and abrupt changes. Our actual results could differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with our business. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements and we hereby qualify all our forward-looking statements by these cautionary statements.

 

Forward-looking statements in this report are based only on information currently available to us and speak only as of the date on which they are made. We undertake no obligation to amend this report or publicly revise these forward-looking statements (other than as required by law) to reflect subsequent events or circumstances, whether as the result of new information, future events or otherwise.

 

The following discussion should be read in conjunction with our financial statements and the related notes contained elsewhere in this report and in our other filings with the Commission. All currency amounts are in US dollars unless otherwise indicated.

 

NOTE REGARDING COMPANY REFERENCES

 

References to the “Company”, “we”, “us” or “our” mean Global Crossing Airlines Group Inc., a Delaware corporation, together with its subsidiaries. References to “GlobalX” mean Global Crossing Airlines Group Inc.

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PART I

ITEM 1. BUSINESS

Overview

 

Global Crossing Airlines Group Inc. (“GlobalX” or the “Company”) operates a US Part 121 domestic flag and supplemental airline using the Airbus A320 family of aircraft (“A320”). GlobalX’s business model is to (1) provide services on an Aircraft, Crew, Maintenance and Insurance (“ACMI”) using wet lease contracts to airlines and non-airlines, and (2) on a Full Service (“Charter”) basis whereby we provide passenger aircraft charter services to customers by charging an “all-in” fee that includes fuel, insurance, landing fees, navigation fees and most other operational fees and costs. GlobalX operates within the United States, Europe, Canada, Central and South America. GlobalX began operating the Airbus A321 freighter (“A321F”) during the first quarter of 2023 after completing all FAA certification requirements with the A321F.

 

The Company was originally incorporated in British Columbia, Canada on September 2, 1966 under the name Shasta Mines & Oil Ltd. On February 4, 1975, the Company changed its name to International Shasta Resources Ltd. On May 20, 1994, the Company changed its name to Consolidated Shasta Resources Inc. On November 23, 1994, the Company changed its name again to Lima Gold Corporation and on September 21, 1999, the Company again changed its name to International Lima Resources Corp. On March 1, 2004, the Company changed its name to Crosshair Exploration & Mining Corp. On June 1, 2004 the Company transitioned (from a provincially incorporated entity to a federally incorporated entity) under the Business Corporation Act (British Columbia) (BCBCA). On October 28, 2011, the Company changed its name to Crosshair Energy Corporation. On September 17, 2013, the Company changed its name to Jet Metal Corp. On February 28, 2017, the Company continued as a corporation governed by the Canada Business Corporations Act and changed its name to Canada Jetlines Ltd.

 

On June 23, 2020, the Company (at the time named Canada Jetlines Ltd.) consummated a business combination with Global Crossing Airlines, Inc.

 

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“). In connection with the U.S. Domestication, the Company changed its name to “Global Crossing Airlines Group Inc.”

Operations

 

GlobalX operates a US Part 121 domestic flag and supplemental airline using the Airbus A320 family of aircraft. GlobalX will remain competitive by providing services on an ACMI and Charter basis to airlines operating within the United States and throughout North and South America, develop aircraft interchanges with leading European charter/tour operators, and provide ACMI and Charters for non-airline customers.

 

GlobalX’s passenger aircraft fleet is built on the Airbus A320-200 fleet family. GlobalX started operations with one leased A320 in 2021 and it has a fleet of eleven aircraft as of December 31, 2023 with plans to increase to 15 within the next 12 months.

 

GlobalX’s cargo aircraft fleet is based on the Airbus A321 aircraft type. GlobalX started operations with one lease A321F aircraft in January 2023 and it has a fleet of three aircraft as of December 31, 2023 with plans to increase to five within the next 12 months.

 

Location of Operations Bases

 

GlobalX operates 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, 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.
In addition, the Company has established Airlines Use Agreements with Orlando (MCO), Nashville (BNA), Dallas (DFW), and Las Vegas (LAS).

 

 

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GlobalX also maintains 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

Employees

GlobalX had approximately 625 and 400 full time employees as of December 31, 2023 and 2022, respectively.

Government Regulation

Aviation Regulation

The airline industry is heavily regulated, especially by the federal government. Two of the primary regulatory authorities overseeing air transportation in the United States are the U.S. Department of Transportation (the “DOT”) and the U.S. Federal Aviation Administration (the “FAA”) . The DOT has authority to issue certificates of public convenience and necessity, exemptions and other economic authority required for airlines to provide domestic and foreign air transportation. International routes and international code-sharing arrangements are regulated by the DOT and by the governments of the foreign countries involved. A U.S. airline’s ability to operate flights to and from international destinations is subject to the air transport agreements between the United States and the foreign country and the carrier’s ability to obtain the necessary authority from the DOT and the applicable foreign government.

The U.S. government has negotiated “open skies” agreements with many countries, which allow unrestricted access between the United States and the applicable foreign country and to points beyond the foreign country on flights serving the foreign country. With certain other countries, however, the United States has a restricted air transportation agreement.

The FAA is responsible for regulating and overseeing matters relating to the safety of air carrier flight operations, including the control of navigable air space, the qualification of flight personnel, flight training practices, compliance with FAA airline operating certificate requirements, aircraft certification and maintenance requirements and other matters affecting air safety. The FAA requires each commercial airline to obtain and hold an FAA air carrier certificate. We currently hold an FAA air carrier certificate.

GlobalX has a Part 121 Air Carrier Certification from the FAA. The FAA uses the process to ensure that the applicant (also referred to as Certificate Holder) is able to design, document, implement, and audit safety critical processes that do two things: (1) Comply with regulations and safety standards; and (2) manage hazard-related risks in the operating environment.

The purpose of the Process is to determine whether an applicant can conduct business in a manner that complies with all applicable regulations and safety standards and allows the applicant to manage the hazard-related risks in its operating systems and environment. The Process is designed to preclude the certification of applicants who are unwilling or unable to comply with regulations or to conform to safe operating practices.

The Process assures that the applicant’s processes, programs, systems, and intended methods of compliance are thoroughly reviewed, evaluated, and tested. Once completed, the Process provides confidence that the applicant’s infrastructure (programs, methods, and systems) results in continued compliance and provides the applicant with the ability to manage hazard related risks in its operating systems and environment.

The FAA will not issue an air carrier certificate until the Safety Analysis and Promotion Division management, the Certification and Evaluation Program Office (CEPO) management, and Air Carrier Safety Assurance (ACSA) Management are confident and agree that the prospective certificate holder is able to provide service at the highest possible degree of safety in the public interest.

As Title 49 of the United States Code states below, safety is both a priority and a legal responsibility of the Certificate Holder. It is up to the FAA to ensure that the Certificate Holder understands and accepts this duty prior to issuing the Air Carrier Certificate. The FAA receives its authority from:

Title 49 United States Code (USC), Section 44702, Issuance of Certificates states “When issuing a certificate under this part, the Administrator shall consider the duty of an air carrier to provide service with the highest possible degree of safety in the public interest … “
Title 49 USC, Section 44705, Air Carrier Operating Certificates, states “The Administrator of the Federal Aviation Administration shall issue an air carrier operating certificate to a person desiring to operate as an air carrier when the Administrator finds, after investigation, that the person properly and adequately is equipped and able to operate safely under this part and regulations and standards prescribed under this part.”

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In order to assure that the policies listed above are followed, the FAA:

Verifies that the applicant can operate safely and that the applicant complies with the regulations and standards prescribed by the Administrator before issuing an air carrier operating certificate and before approving or accepting air carrier programs.
Conducts periodic reviews to re-verify that the applicant organization continues to meet regulatory requirements when environmental changes occur.
Continually validates the performance of the applicant organization’s approved and accepted programs.

Consumer Protection Regulation

The DOT also has jurisdiction over certain economic issues affecting air transportation and consumer protection matters, including unfair or deceptive practices and unfair methods of competition, lengthy tarmac delays, airline advertising, denied boarding compensation, ticket refunds, baggage liability, contracts of carriage, customer service commitments, consumer notices and disclosures, customer complaints and transportation of passengers with disabilities. The DOT frequently adopts new consumer protection regulations, such as rules to protect passengers addressing lengthy tarmac delays, chronically delayed flights, codeshare disclosure and undisclosed display bias. They also have adopted, and do adopt, new rules on airline advertising and marketing practices. The DOT also has authority to review certain joint venture agreements, marketing agreements, code-sharing agreements (where an airline places its designator code on a flight operated by another airline) and wet-leasing agreements (where one airline provides aircraft and crew to another airline) between carriers and regulates other economic matters such as slot transactions.

Security Regulation

The U.S. Transportation Security Administration (the “TSA”) and the U.S. Customs and Border Protection (“CBP”), each a division of the U.S. Department of Homeland Security, are responsible for certain civil aviation security matters, including passenger and baggage screening at U.S. airports, and international passenger prescreening prior to entry into or departure from the United States. International flights are subject to customs, border, immigration and similar requirements of equivalent foreign governmental agencies. We are currently in compliance with all directives issued by such agencies.

Environmental Regulation

We are subject to various federal, state, foreign and local laws and regulations relating to the protection of the environment and affecting matters such as air emissions (including GHG emissions), noise emissions, discharges to surface and subsurface waters, safe drinking water, and the use, management, release, discharge and disposal of, and exposure to, materials and chemicals.

We are also subject to environmental laws and regulations that require us to investigate and remediate soil or groundwater to meet certain remediation standards. Under certain laws, generators of waste materials, and current and former owners or operators of facilities, can be subject to liability for investigation and remediation costs at locations that have been identified as requiring response actions. Liability under these laws may be strict, joint and several, meaning that we could be liable for the costs of cleaning up environmental contamination regardless of fault or the amount of wastes directly attributable to us.

GHG Emissions

Concern about climate change and greenhouse gases has resulted, and is expected to continue to result, in additional regulation or taxation of aircraft emissions in the United States and abroad. In particular, on March 6, 2017, the International Civil Aviation Organization (ICAO), an agency of the United Nations established to manage the administration and governance of the Convention on International Civil Aviation, adopted new carbon dioxide (CO2) certification standards for new aircraft beginning in 2020. These standards, known as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), aim to cap net CO2 emissions from international civil aviation at 2020 levels. The CORSIA framework requires airlines to monitor, report, and offset their emissions above a certain threshold. The new CO2 standards will apply to new aircraft type designs from 2020, and to aircraft type designs already in production as of 2023. In-production aircraft that do not meet the standard by 2028 will no longer be able to be produced unless their designs are modified to meet the new standards. In August 2016, the EPA made a final endangerment finding that GHG emissions cause or contribute to air pollution that may reasonably be anticipated to endanger public health or welfare, which obligates the EPA under the Clean Air Act to set GHG emissions standards for aircraft. In August 2020, the EPA issued a proposed rule regulating GHG emissions from aircraft that largely conforms to the March 2017 ICAO CORSIA standards. However, on January 20, 2021, the new presidential administration, which is expected to promote more aggressive policies with respect to climate change and carbon emissions, including in the aviation sector, announced a freeze with respect to all pending rulemaking. Accordingly, the outcome of this rulemaking may result in stricter GHG emissions standards than those contained in the proposed rule. The inclusion of CORSIA-related measures within

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EPA regulations would align U.S. aviation emissions standards more closely with international efforts to address climate change in the aviation sector.

Noise

Federal law recognizes the right of airport operators with special noise problems to implement local noise abatement procedures so long as those procedures do not interfere unreasonably with interstate and foreign commerce and the national air transportation system, subject to FAA review under the Airport Noise and Control Act of 1990. These restrictions can include limiting nighttime operations, directing specific aircraft operational procedures during take-off and initial climb and limiting the overall number of flights at an airport. While we have had sufficient scheduling flexibility to accommodate local noise restrictions in the past, our operations could be adversely impacted if ICAO or locally imposed regulations become more restrictive or widespread.

Other Regulations

Airlines are also subject to various other federal, state, local and foreign laws and regulations. For example, the U.S. Department of Justice has jurisdiction over certain airline competition matters. The privacy and security of passenger and employee data is regulated by various domestic and foreign laws and regulations.

Corporate Information

Our principal executive offices are located at Building 5A, Miami International Airport, Miami, Florida 33166 and our telephone number is (786) 751-8500.

We will file annual, quarterly, current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). The SEC maintains an Internet site that contains our public filings and other information regarding the Company, at www.sec.gov.

Our website is www.Globalairlinesgroup.com. The information found on our website is not part of this prospectus.

We are also a reporting issuer under the securities laws of every province of Canada except for Quebec.

ITEM 1A. RISK FACTORS

Risk Factors Relating to Our Business

 

We have a limited operating history, which makes it difficult to forecast our revenue and evaluate our business and future prospects.

 

GlobalX has been in the build-out stage of the airline and as a result, investors are unable to review and consider any significant operational history to evaluate future viability or profitability. GlobalX will be subject to the risks, difficulties and uncertainties associated with a start-up airline. The likelihood of GlobalX’s success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the expansion of a business operation in a competitive industry and the development of a customer base. GlobalX could also sustain material losses in the future. GlobalX’s future performance will depend upon a number of factors, including its ability to:

maintain the safety and security of operations;
capitalize on its business strategy;
implement its growth strategy;
provide the intended services at the prices anticipated;
maintain adequate control of expenses;
attract, retain and motivate qualified personnel;
react to customer and market demands; and
generate operating revenue.

 

 

 

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We have a history of net losses, we anticipate increasing operating expenses in the future, and we may not be able to achieve and, if achieved, maintain profitability.

 

GlobalX is generating operating revenue and has negative cash flow from operating activities. It is anticipated that GlobalX will continue to have negative cash flow in the foreseeable future. If our revenue does not increase to offset the expected increases in our operating expenses, we will not be profitable in future periods. Continued losses may have the following consequences:

increasing GlobalX’s vulnerability to general adverse economic and industry conditions;
limiting GlobalX’s ability to obtain additional financing to fund future working capital, capital expenditures, operating costs and other general corporate requirements; and
limiting GlobalX’s flexibility in planning for, or reacting to, changes in its business.

 

Our ability to lease aircraft on favorable terms will have a significant impact on our operating performance, need for capital and profitability.

 

To operate in accordance with its business plan, GlobalX will need to acquire or lease additional aircraft. At present, GlobalX has not acquired any aircraft. However, GlobalX has entered into lease agreements and taken delivery, as lessee, one Airbus A319 family of aircraft, eight Airbus A320 family of Aircraft and five Airbus A321 family of aircraft. While GlobalX does not anticipate any difficulties in entering into satisfactory leasing arrangements for additional aircraft, there is no guarantee that we will be able to enter into leases for additional aircraft on terms satisfactory to it, or at all.

 

The terms of GlobalX’s leasing arrangements will impact the potential profitability of GlobalX’s business. If we are unable to acquire or lease additional aircraft on satisfactory terms, we will be unable to operate in accordance with its business plan. GlobalX’s ability to pay any fixed costs associated with aircraft lease or purchase contractual obligations will depend on GlobalX’s operating performance, cash flow, its ability to secure adequate financing, whether fuel prices continue at current price levels and/or further increase or decrease, further weakening or improvement in the United States economy, as well as general economic and political conditions and other factors that are, to a large extent, beyond GlobalX’s control.

 

Our business has grown rapidly, and we may fail to manage our growth effectively.

 

GlobalX may be subject to growth-related risks including capacity constraints and pressure on its internal systems and controls. The ability of GlobalX to manage growth effectively will require it to continue to implement and improve its operations and financial systems and to expand, train, and manage its employee base. The inability of GlobalX to deal with potential growth could result in a material adverse effect.

 

Any expansion of operations GlobalX may undertake will entail risks; such actions may involve specific operational activities, which may negatively impact the profitability of GlobalX. Consequently, shareholders must assume the risk that: (i) such expansion may ultimately involve expenditures of funds beyond the resources available to GlobalX at that time; and (ii) management of such expanded operations may divert management’s attention and resources away from any other operations, all of which factors may result in a material adverse effect.

 

If we fail to implement our business strategy successfully, our business, results of operations and financial condition will be materially adversely affected.

 

The viability of GlobalX’s business model and its ability to implement this model is dependent on a number of inputs and assumptions, including:

the timing and receipt of all regulatory approvals required or desirable for operations by GlobalX and their impact upon expectations as to future operations of GlobalX;
the expected operations and performance of GlobalX’s business as compared to existing charter operators;
the anticipated competitive response from existing charter operators as well as potential new market entrants which may compete with GlobalX;
impact of existing or new governmental regulation on GlobalX;
future development and growth prospects;
expected operating costs, general administrative costs, costs of services and other costs and expenses;

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the anticipated increase in the size of the airline passenger market in North America;
ability to meet current and future obligations;
treatment under governmental regulatory regimes;
projections of market prices and costs;
ability to obtain equipment, services and supplies in a timely manner, including the ability to lease or purchase aircraft; and
ability to obtain financing or leasing arrangements on acceptable terms, or at all.

 

Should one or more of these inputs and assumptions not be correct or fail to occur as anticipated, there is a risk that GlobalX’s business model may not be implemented as anticipated and GlobalX may suffer a material adverse effect.

In addition, in order to successfully implement our growth strategy, we will require access to an additional number of airport gates and other services at airports we currently serve or may seek to serve. We believe there are currently significant restraints on gates and related ground facilities at many of the most heavily utilized airports in the United States. As a result, if we are unable to obtain access to a sufficient number of slots, gates or related ground facilities at desirable airports to accommodate our growing fleet, we may be unable to compete in those markets, our aircraft utilization rate could decrease, and we could suffer a material adverse effect on our business, results of operations and financial condition. Our Airport Use Agreement with Miami International Airport does not guarantee availability of boarding gates or landing slots at that airport.

 

Our reputation and business could be adversely affected in the event of an emergency, accident or similar public incident involving our aircraft or personnel.

 

A major safety incident involving GlobalX’s aircraft during operations would likely incur substantial repair or replacement costs to the damaged aircraft and a disruption in service. GlobalX could also incur potentially significant claims relating to injured passengers and parties, along with a significant negative impact on GlobalX’s reputation for safety, adversely affecting GlobalX’s ability to attract and retain passengers.

 

We may face unanticipated obstacles to the execution of GlobalX’s business plan.

 

GlobalX’s business plans may change significantly. The execution of GlobalX’s business plan is capital intensive and may become subject to statutory or regulatory requirements. GlobalX may need to make significant modifications to any of GlobalX’s stated strategies depending on future events.

 

We may require additional capital, which may not be available on terms acceptable to us or at all.

 

The ability of GlobalX to execute its build-out and growth strategy and achieve operations will depend on acquiring substantial additional financing through debt financing, equity financing or other means. Failure to obtain such financing may result in the delay or indefinite postponement of such growth strategy or even impact the ability of GlobalX to continue as a going concern.

 

There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favorable to GlobalX. If additional financing is raised by GlobalX through the issuance of its securities, shareholders may suffer significant dilution. If additional financing is not available, or if available, not available on satisfactory terms, this could result in a material adverse effect or could require GlobalX to reduce, delay, scale back or eliminate portions of its actual or proposed operations or could prevent GlobalX from continuing as a going concern.

 

GlobalX may also need to raise capital by incurring long-term or short-term indebtedness in order to fund its business objectives. This could result in increased interest expense and decreased net income. Investors are cautioned that there can be no assurance as to the terms of such financing and whether such financing will be available. The level of GlobalX’s indebtedness could impair its ability to obtain additional financing in the future on a timely basis to take advantage of business opportunities that may arise.

 

We rely on third-party specialists and other commercial partners to perform functions integral to our operations.

 

GlobalX is expected to secure goods and services from a number of third party suppliers. Any significant interruption in the provision of goods and services from any such key suppliers, some of which would be beyond GlobalX’s control, or any significant increase in price of such goods and services, could have a material adverse effect. GlobalX will be reliant upon providers of aircraft, such as Airbus and other third party leasing companies, which will make GlobalX susceptible to any problems connected with aircraft or engines or components, including defective materials, mechanical problems or negative perceptions in the traveling community. The delay or inability of any provider of aircraft to deliver aircraft or engines or components as GlobalX requires could negatively impact GlobalX’s growth strategy and could result in a material adverse effect.

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Our limited fleet size could prevent us from replacing aircraft that face unscheduled maintenance.

 

Given the limited number of aircraft GlobalX currently operates, if one or more aircraft becomes unavailable due to unscheduled maintenance, repairs or other reasons, GlobalX could suffer material adverse financial and reputational impacts.

Our business has been and in the future may be materially adversely affected by the price and availability of aircraft fuel. Unexpected increases in the price of aircraft fuel or a shortage or disruption in the supply of aircraft fuel could have a material adverse effect on our business, results of operations and financial condition.

 

GlobalX will be dependent on fuel to operate its business, and therefore, will be exposed to the risk of volatile fuel prices. Fuel prices are impacted by a host of global events outside of GlobalX’s control, such as significant weather events, market speculation, geopolitical tensions, refinery capacity, government taxes and levies, and GlobalX demand and supply. GlobalX’s fuel costs are expected to make up one of the largest anticipated expenses of GlobalX. A significant change in the price of fuel would materially affect GlobalX’s projected operating results and growth strategy. A fuel supply shortage or significantly higher fuel prices could result in a curtailment of GlobalX’s planned scheduled service. There can be no assurance that increases in the price of fuel can be offset by fuel surcharges or any potential hedging transactions.

 

We operate a limited number of aircraft types.

 

Critical to GlobalX’s business model is a supply of modern and cost-effective aircraft that can service the various sectors required to fly GlobalX’s planned route network. Should the A319, A320 or A321 family of aircraft not be available in accordance with GlobalX growth strategy or should the aircraft lease or maintenance costs increase drastically there could be a material impact on GlobalX’s growth strategy, cost structure and potential profitability. In addition, a switch to a different family of aircraft could have a material adverse effect on our cost structure.

 

A critical cost-saving element of our business strategy is to operate a limited number of aircraft types; however, our dependence on the A319, A320 and A321 family of aircraft for all of our aircraft makes us vulnerable to any design defects or mechanical problems associated with this aircraft type or these engines. In the event of any actual or suspected design defects or mechanical problems with this family of aircraft, whether involving our aircraft or that of another airline, we may choose or be required to suspend or restrict the use of our aircraft. Our business could also be materially adversely affected if the public avoids flying on our aircraft due to an adverse perception of our plane type or engine type, whether because of safety concerns or other problems, real or perceived, or in the event of an accident involving such aircraft or engine. Our intellectual property rights, particularly our branding rights, are vulnerable, and any inability to protect them may adversely affect our business and financial results.

 

We consider our intellectual property rights, particularly our branding rights such as our trademark applicable to our airline, to be a significant and valuable aspect of our business. We aim to protect our intellectual property rights through a combination of trademark, copyright and other forms of legal protection, contractual agreements and policing of third-party misuses of our intellectual property, but cannot guarantee that such efforts will be successful. Our failure to obtain or adequately protect our intellectual property or any change in the law that lessens or removes the current legal protections of our intellectual property may diminish our competitiveness and adversely affect our business and financial results. Any litigation or disputes regarding intellectual property may be costly and time-consuming and may divert the attention of our management and key personnel form our business operations, either of which may adversely affect our business and financial results.

 

Our quarterly results of operations fluctuate due to a number of factors, including seasonality.

 

The charter airline industry is seasonal. The demand for and the pricing of charter services does fluctuate throughout the year, as it does with most air travel industries. Historically, demand for air travel is higher in the second and third quarters, driving higher revenues, than in the first and fourth quarters, which are periods of lower travel demand. In so much as GlobalX has fixed costs relating to air crews, insurance, leases, rent and other payments, lower periods of demand, combined with lower prices, could lead to negative cash flow and earnings for a given period.

 

Threatened or actual terrorist attacks or security concerns involving airlines could have a material adverse effect on our business, results of operations and financial condition.

 

The September 11, 2001 terrorist attacks and subsequent terrorist activity have caused uncertainty in the minds of the traveling public. The occurrence of a major terrorist attack or attempted terrorist attack (whether domestic or international and whether involving GlobalX or another carrier or no carrier at all) and additional restrictive security measures that are implemented in response could have a material adverse effect on passenger demand for air travel and on the number of passengers traveling on GlobalX’s flights. It could also lead to

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a substantial increase in insurance, airport security and other costs. Any resulting reduction in passenger revenues and/or increases in insurance, security or other costs could result in a material adverse effect.

 

The rapid spread of the COVID-19 virus and its variants has had and may continue to have an adverse impact on our business, operating results, financial condition and liquidity. A new outbreak of COVID-19 or another disease or similar public health threat in the future could also have an adverse effect on our business, operating results, financial condition and liquidity.

 

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic causing a massive market disruption to the aviation industry. Measures such as travel restrictions, including testing regimes, “stay at home” and quarantine orders, limitations on public gatherings, cancellation of public events and many others have resulted in a decline in demand for air travel.

 

While most restrictions have been removed in the United States, and a recovery is underway in the domestic airline industry, additional governmental and other restrictions and regulations may be implemented or reinstated in the future in response to further outbreaks of COVID-19 or another disease, including travel restrictions (including on domestic air travel within the United States), quarantines of populations (including our personnel), limitations on aircraft capacity, testing requirements and restrictions on our ability to access our facilities or aircraft or requirements to collect additional passenger data. In addition, governments, non-governmental organizations and entities in the private sector may issue non-binding advisories or recommendations regarding air travel or other physical distancing measures, including limitations on the number of persons that should be present at public gatherings, which may significantly reduce demand. These and other restrictions and regulations, as well as the general concern about the virus among travelers, have had, and could continue to have, a material adverse impact on our business, operating results, financial condition and liquidity.

 

Future outbreaks of COVID-19 or another disease could have a material negative impact on demand. Reduced demand would have an adverse impact on our revenues and lower levels of flying can lead to higher unit costs. Actual or perceived risk of infection from COVID-19 or another disease could have a material adverse effect on the public’s demand for and willingness to use air travel, which could harm our reputation and business. Our operations may be further impacted in the event of additional instances of actual or perceived risk of infection of COVID-19 or another disease among our employees, suppliers or business partners, and this impact may have a material adverse effect if we are unable to maintain a suitably skilled and sized workforce and address related employee matters. In addition, supply chain disruptions may impede our cargo customers’ ability to deliver freight to the airports we serve, which could reduce their need for our services and thus have a material adverse effect on our business, results of operations and financial condition.

 

The industry may also be subject to enhanced health and hygiene requirements in attempts to counteract future outbreaks of COVID-19 or another disease, which requirements may be costly and take a significant amount of time to implement, or drive additional staffing during a time when staffing shortages are common place.

 

We may take additional actions in response to COVID-19 or another disease to improve our financial position, including measures to improve liquidity, such as the issuance of unsecured and secured debt securities, equity securities and equity-linked securities, the sale of assets and/or the entry into additional bilateral and syndicated secured and/or unsecured credit facilities. There can be no assurance as to the timing of any such issuance, or that any such additional financing will be completed on favorable terms, or at all. Any such actions may be material in nature and could result in significant additional borrowing. Our reduction in expenditures, measures to improve liquidity or other strategic actions that we may take in the future in response to COVID-19 or another disease may not be effective in offsetting decreased demand, which could result in a material adverse effect on our business, operating results, liquidity and financial condition.

 

Even as enhanced screenings, quarantine and other requirements, and travel restrictions have eased, we may continue to experience similar adverse effects to our business, operating results, financial condition and liquidity resulting from a recessionary or depressed economic environment that may persist, including increases in unemployment, and our business and operating results may not return to pre-COVID-19 pandemic levels on a timely basis or at all. The impact of future outbreaks of COVID-19 or another disease on our businesses, operating results, financial condition and liquidity could exacerbate the other risks identified in this prospectus.

 

General economic conditions may reduce the demand for our services.

 

The financial success of GlobalX may be sensitive to adverse changes in general economic conditions in the United States such as war, terrorist attacks, recession, inflation, labor disputes, demographic changes, pandemics, weather or climate changes, unemployment and interest rates. Such changing conditions could reduce demand in the marketplace for GlobalX’s services.

 

We may become involved in litigation that may materially adversely affect us.

 

GlobalX may be subject to litigation arising out of its operations. Damages claimed under such litigation may be material or may be indeterminate, and the outcome of such litigation may materially impact GlobalX’s business, results of operations, or financial condition.

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While GlobalX will assess the merits of any lawsuit and defend itself accordingly, it may be required to incur significant expense or devote significant financial resources to defending itself against such litigation. In addition, the adverse publicity surrounding such claims may result in a material adverse effect.

 

Increased labor costs, union disputes, employee strikes and other labor-related disruption, may adversely affect our business, results of operations and financial condition.

 

GlobalX intends to have a non-unionized workforce. In the event that unionization activities occur with its workforce, GlobalX will incur increased labor costs. Increased labor costs will negatively impact upon GlobalX’s cost structure and will adversely affect GlobalX’s ability to operate an airline.

 

Many factors could affect our ability to control our costs and to maintain a low cost structure.

 

Our business plan calls for our operations to be based at MIA, which is our primary hub, with the vast majority of our projected flights consisting of daily round trips departing from and returning to MIA. If we are unable to continue to secure operating capacity at MIA for our operations or planned expansion our business will be substantially harmed. And, assuming that we do obtain operating capacity at MIA, there is no guarantee that the fees and other costs related to operating out of MIA will not increase. Our operating performance and results of operations could be harmed by any such increase in fees or costs charged by the airport. We have reached an agreement with Sheltair Aviation (2) for the financing and construction of a new aircraft maintenance facility at the Fort Lauderdale- Hollywood International Airport (KFLL). We expect to break ground on this new facility in Q2 2024, occupy the facility in Q2 2025, and to cost approximately $25 million to construct. KFLL will become the new base of operations at such point. However, there is no guarantee that the facility at KFLL will be completed on time or on budget and as a result any delays or cost increases could have a material adverse impact on the airline.

 

We will rely heavily on technology and automated systems to operate our business and any failure of these technologies or systems or failure by their operators could harm our business.

 

We will need to put in place a significant amount of information technology and automated systems to operate our business. The functionality and implementation of these systems will be one of the keys to achieving low operating costs. These systems are expected to include a computerized airline reservation system, flight operations system, financial planning, management and accounting systems, telecommunications systems, website, maintenance systems and check-in kiosks. An inability to implement these systems in a timely fashion could result in delays in the start of our operations. In addition, in order for our operations to work efficiently, our website and reservation system will need to be able to accommodate a high volume of traffic, maintain secure information and deliver flight information. Substantially all of our tickets are expected to be issued to passengers as electronic tickets. We intend for our reservation system to be hosted and maintained under a long term contract by a third-party service provider and we plan to rely on this reservation system to issue, track and accept electronic tickets. If we are unable to contract with the third party service provider or otherwise are unable to implement our reservation system or our reservation system fails or experiences interruptions, and we are unable to book seats for any period of time, we could lose a significant amount of revenue as customers book seats on competing airlines.

 

Unauthorized breach of our information technology infrastructure could compromise the personally identifiable information of our passengers, prospective passengers or personnel and expose us to liability, damage our reputation and have a material adverse effect on our business, results of operations and financial condition.

 

Our anticipated processing, storage, use and disclosure of personal data could give rise to liabilities as a result of government regulation or a significant data breach may adversely affect the Company’s business. In our regular business operations, we collect, transmit, process and store sensitive data, including personal and financial information of our customers and employees such as payment processing information and information of our business partners. GlobalX depends on the ability to use information we collect to provide our services and operate our business.

 

GlobalX must manage increasing legislative, regulatory and consumer focus on privacy issues and data security. For example, in May 2018, the EU’s General Data Protection Regulation became effective, which imposes significant privacy and data security requirements, as well as potential for substantial penalties for non-compliance. Recent penalties imposed by regulators have resulted in substantial adverse financial consequences to those companies. Also, some of GlobalX’s commercial partners, such as credit card companies, have imposed data security standards that GlobalX must meet. These standards continue to evolve. GlobalX will continue its efforts to meet its privacy and data security obligations; however, it is possible that certain new obligations or customer expectations may be difficult to meet and could increase GlobalX’s costs.

 

Additionally, GlobalX must manage evolving cybersecurity risks. Our network systems and storage applications, and those systems and storage and other business applications maintained by our third-party providers, may be subject to attempts to gain unauthorized access,

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breach, malfeasance or other system disruptions. In some cases, it is difficult to anticipate or to detect immediately such incidents and the damage caused thereby. In addition, as attacks by cybercriminals become more sophisticated, frequent and intense, the costs of proactive defense measures may increase. While we continually work to safeguard our internal network systems, including through risk assessments, system monitoring, information security policies and employee awareness and training, and review and validate our third-party security standards, there is no assurance that such actions will be sufficient to prevent cyber-attacks or data breaches.

 

The loss, disclosure, misappropriation of or access to customers’, employees’ or business partners’ information or GlobalX’s failure to meet its obligations could result in legal claims or proceedings, penalties and remediation costs. A significant data breach or GlobalX’s failure to meet its obligations may adversely affect GlobalX’s reputation, relationships with our business partners, business, operating results and financial condition.

 

Failure to comply with applicable environmental regulations could have a material adverse effect on our business, results of operations and financial condition.

 

We expect to be subject to increasingly stringent federal, state, local and foreign laws, regulations and ordinances relating to the protection of the environment, including those relating to emissions to the air, discharges to surface and subsurface waters, safe drinking water, and the management of hazardous substances, oils and waste materials. Compliance with all environmental laws and regulations can require significant expenditures and any future regulatory developments in the U.S. and abroad could adversely affect operations and increase operating costs in the airline industry. For example, climate change legislation was previously introduced in Congress and such legislation could be re-introduced in the future by Congress and state legislatures, and could contain provisions affecting the aviation industry, compliance with which could result in the creation of substantial additional costs to us. Similarly, the Environmental Protection Agency issued a rule that regulates larger emitters of greenhouse gases. Future operations and financial results may vary as a result of such regulations. Compliance with these regulations and new or existing regulations that may be applicable to us in the future could increase our cost base and could have a material adverse effect on our business, results of operations and financial condition. Governmental authorities in several U.S. and foreign cities are also considering or have already implemented aircraft noise reduction programs, including the imposition of nighttime curfews and limitations on daytime take-offs and landings, which could adversely affect our operations going forward, particularly if locally-imposed regulations become more restrictive or widespread.

 

Non-compliance with the growing Regulations and Guidelines for Minimizing Aircraft Emissions and its Impact on Climate Change.

 

Concerns about climate change may prompt governments to introduce regulatory changes affecting the aviation industry, potentially resulting in increased costs. These changes could involve emission reduction requirements, capital investments in specific equipment or technologies, or other additional expenses linked to emissions. Indirectly, these regulatory activities may raise operating costs, including fuel expenses.

 

Assets securing loans, such as aircraft, spare parts, and airport slots, may depreciate if there is a shift in customer demand towards low-carbon alternatives. Operational impacts, such as increased flight cancellations, may result in revenue loss. We may incur significant expenses to enhance the climate resilience of our infrastructure in response to the physical effects of climate change, although the materiality of such costs remains uncertain.

 

Growing public awareness of climate change threats might lead customers to reduce air travel frequency or opt for airlines perceived as more environmentally sustainable. Business customers may explore alternatives like virtual meetings and workspaces. The advancement of high-speed rail in markets served by short-haul flights may offer passengers lower-carbon travel options, affecting the demand for our services.

 

In addition, the International Civil Aviation Organization (ICAO) endorsed the implementation of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). CORSIA aims to achieve carbon-neutral growth in the global aviation sector from 2021 to 2035. It mandates airlines to offset the increase in carbon dioxide (CO2) emissions, relative to an ICAO-defined baseline, for a significant majority of international flights. This offsetting is accomplished through the acquisition of carbon offsets or the utilization of low-carbon fuels.

 

The future costs associated with CORSIA compliance are uncertain, influenced by variables like the availability and pricing of carbon offset credits and low-carbon aircraft fuels. We acknowledge the potential impact on our business due to the uncertain landscape of compliance costs.

 

Notably, we lack direct control over CORSIA compliance costs until 2032, as they are contingent on global aviation sector emissions growth. Beginning in 2033, such requirements incorporate a factor for individual airline operator emissions growth. Due to the competitive and unpredictable nature of the airline industry, we cannot assure the ability to offset CORSIA-related costs through fare adjustments, surcharges, revenue increases, or other operating cost reductions.

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We have a significant amount of aircraft-related fixed obligations that could impair our liquidity and thereby harm our business, results of operations and financial condition.

 

We expect to lease all of our aircraft. Our ability to pay the fixed costs associated with our contractual obligations under these leases will depend on our operating performance and cash flow, which will in turn depend on, among other things, the success of our current business strategy, whether fuel prices continue at current price levels and/or further increase or decrease, further weakening or improving in the U.S. economy, as well as general economic and political conditions and other factors that are, to some extent, beyond our control. The amount of our aircraft related fixed obligations could have a material adverse effect on our business, results of operations and financial condition.

 

Rising maintenance and repair costs could adversely affect cash flow and results of operation.

 

As we anticipate ordering all aircraft fresh from maintenance, our initial maintenance costs will in all likelihood be lower at the beginning of the aircraft lease. Our fleet will require more maintenance as it ages and our maintenance and repair expenses for each of our aircraft will likely be incurred at approximately the same intervals. Moreover, because we anticipate that our current fleet will be acquired over a relatively short period, significant maintenance that is scheduled on each of these planes will likely occur at roughly the same time, meaning we will likely incur our most expensive scheduled maintenance obligations, known as heavy maintenance, across our present fleet around the same time. These more significant maintenance activities could result in out-of-service periods during which our aircraft are dedicated to maintenance activities and unavailable to generate revenue. In addition, we anticipate that the terms of our lease agreements will require us to pay supplemental rent, also known as maintenance reserves, to be paid to the lessor in advance of the performance of major maintenance, resulting in our recording significant prepaid deposits on our balance sheet. We expect scheduled and unscheduled aircraft maintenance expenses to increase as a percentage of our revenue over the next several years. Any significant increase in maintenance and repair expenses would have a material adverse effect on our business, results of operations and financial condition.

 

We may face difficulties in recruiting and hiring our workforce.

 

From time to time, the airline industry has experienced a shortage of personnel licensed by the FAA, especially pilots and mechanics. We expect to compete against the major U.S. and foreign flag airlines for labor in these highly-skilled positions. Major U.S. airlines may offer wage and benefit packages that exceed our wage and benefit packages. If we are unable to hire, train and retain qualified employees at its anticipated costs, we may be unable to successfully execute our business plan. Moreover, in the future, we may have to increase wages and benefits in order to attract and retain qualified personnel or risk considerable employee turnover.

 

The airline industry is particularly sensitive to changes in economic conditions.

 

Negative economic conditions or a reoccurrence of such conditions would negatively impact our business, results of operations and financial condition. Our business and the airline industry in general are affected by many changing economic conditions beyond our control, including, among others:

changes and volatility in general economic conditions, including the severity and duration of any downturn in the U.S. or Global economy and financial markets;
changes in consumer preferences, perceptions, spending patterns or demographic trends, including any increased preference for higher-fare carriers offering higher amenity levels, and reduced preferences for low-fare carriers offering more basic transportation, during better economic times;
higher levels of unemployment and varying levels of disposable or discretionary income;
depressed housing and stock market prices; and
lower levels of actual or perceived consumer confidence.

 

These factors can adversely affect the results of our operations, our ability to obtain financing on acceptable terms, and our liquidity generally. Unfavorable general economic conditions, such as higher unemployment rates, a constrained credit market, housing-related pressures and increased focus on reducing business operating costs can reduce spending for leisure, visiting friends and relatives, and business travel. For many travelers, in particular the leisure and visiting friends and relatives travelers we serve, air transportation is a discretionary purchase that they can eliminate from their spending in difficult economic times. Unfavorable economic conditions could also affect our ability to raise prices to counteract increased fuel, labor or other costs, resulting in a material adverse effect on our business, results of operations and financial condition.

 

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Risks associated with our presence in international emerging markets, including political or economic instability, and failure to adequately comply with existing legal requirements, may materially adversely affect us.

 

Some of our target growth markets include countries with less developed economies, legal systems, financial markets and business and political environments are vulnerable to economic and political disruptions, such as significant fluctuations in gross domestic product, interest and currency exchange rates, civil disturbances, government instability, nationalization and expropriation of private assets, trafficking and the imposition of taxes or other charges by governments. The occurrence of any of these events in markets served by us now or in the future and the resulting instability may have a material adverse effect on our business, results of operations and financial condition.

 

We will emphasize compliance with all applicable laws and regulations and will implement and refresh policies, procedures and certain ongoing training of our employees, third-party specialists and partners with regard to business ethics and key legal requirements; however, we cannot assure you that our employees, third-party specialists or partners will adhere to our code of ethics, other policies or other legal requirements. If we fail to enforce our policies and procedures properly or maintain adequate recordkeeping and internal accounting practices to record our transactions accurately, we may be subject to sanctions. In the event we believe or have reason to believe our employees, third-party specialists or partners have or may have violated applicable laws or regulations, we may incur investigation costs, potential penalties and other related costs which in turn may have a material adverse effect on our reputation, business, results of operations and financial condition.

 

We face limits on foreign ownership and control.

 

To comply with restrictions imposed by federal law on foreign ownership of U.S. airlines, we will restrict voting of shares of capital stock by non-U.S. citizens. The restrictions imposed by federal law currently require that no more than 25% of our stock be voted or controlled, directly or indirectly, by persons who are not U.S. citizens and that our president and at least two-thirds of the members of our board of directors be U.S. citizens.

 

To be considered a U.S. citizen, you must be: (1) individual who is a citizen of the U.S.; (2) a partnership each of whose partners is an individual who is a citizen of the U.S.; or (3) a corporation or association organized under the laws of the U.S. or a state, the District of Columbia, or a territory or possession of the U.S., of which the president and at least two-thirds of the board of directors and other managing officers are citizens of the U.S., which is under the actual control of citizens of the U.S., and in which at least 75 percent of the voting interest is owned and controlled by persons that are citizens of the U.S.

 

No shares of stock may be voted by or at the direction of non-U.S. citizens unless such shares are registered on a separate stock record, which is referred to as the foreign stock record. Further, no shares of its capital stock will be registered on the foreign stock record if the amount so registered would exceed the foreign ownership restrictions imposed by federal law.

 

We are subject to extensive regulation by the FAA, the DOT, the TSA, CBP and other U.S. and foreign governmental agencies, compliance with which could cause us to incur increased costs and adversely affect our business, results of operations and financial condition.

 

Airlines are subject to extensive regulatory and legal compliance requirements, both domestically and internationally, that involve significant costs. In the last several years, Congress has passed laws, and the DOT, FAA and TSA have issued regulations, relating to the operation of airlines that have required significant expenditures. We expect to continue to incur expenses in connection with complying with government regulations. Additional laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce the demand for air travel. If adopted, these measures could have the effect of raising charter prices, reducing revenue and increasing costs.

 

We cannot assure you that these and other laws or regulations enacted in the future will not harm our business. Our ability to operate as an airline is dependent on our maintaining certifications issued to us by the DOT and the FAA. The FAA has the authority to issue mandatory orders relating to, among other things, the grounding of aircraft, inspection of aircraft, installation of new safety-related items and removal and replacement of aircraft parts that have failed or may fail in the future. A decision by the FAA to ground, or require time consuming inspections of or maintenance on, our aircraft, for any reason, could negatively affect our business and financial results. Federal law requires that air carriers operating large aircraft be continuously “fit, willing and able” to provide the services for which they are licensed. Our “fitness” is monitored by the DOT, which considers factors such as unfair or deceptive competition, advertising, baggage liability and disabled passenger transportation. While the DOT has seldom revoked a carrier’s certification for lack of fitness, such an occurrence would render it impossible for us to continue operating as an airline. The DOT may also institute investigations or administrative proceedings against airlines for violations of regulations.

 

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International routes are regulated by treaties and related agreements between the United States and foreign governments. Our ability to operate international routes is subject to change because the applicable arrangements between the United States and foreign governments may be amended from time to time. Our access to new international markets may be limited by our ability to obtain the necessary certificates to fly the international routes. In addition, our operations in foreign countries are subject to regulation by foreign governments and our business may be affected by changes in law and future actions taken by such governments, including granting or withdrawal of government approvals and restrictions on competitive practices. We are subject to numerous foreign regulations based on the large number of countries outside the United States where we currently provide service. If we are not able to comply with this complex regulatory regime, our business could be significantly harmed.

 

Risk Factors Relating Ownership of Our Common Stock

 

We do not know whether an active, liquid and orderly market will develop for our common stock or what the market price of our common stock will be, and, as a result, it may be difficult for you to sell your shares of our common stock.

 

Our common stock currently trades on the OTCQB and NEO and our Class B Non-Voting Common Stock trades on the NEO, each with very limited daily trading volume. The market price of our common stock and our Class B Non-Voting Common Stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

limited daily trading volume resulting in the lack of a liquid market;
our success in purchasing aircraft, obtaining regulatory approval and other authorizations for our business;
general market, political and economic conditions;
changes in fuel prices;
changes in earnings estimates and recommendations by financial analysts;
our failure to meet financial analysts’ performance expectations;
changes in market valuations of our competitors; and
the expiration of the lock-up periods on shares of our common stock that were outstanding.

 

Until our common stock is listed on a qualified national securities exchange or our common stock price exceeds $5 per share, our common stock will be considered a “penny stock” and will not qualify for exemption from the “penny stock” restrictions, which may make it more difficult for you to sell your shares.

 

Our common stock has traded on the OTCQB at a price of less than $5.00 per share and, as a result, is considered a “penny stock” by the SEC and subject to rules adopted by the SEC regulating broker- dealer practices in connection with transactions in “penny stocks.” The SEC has adopted regulations which generally define a “penny stock” to be any equity security that is not listed on a qualified national securities exchange and that has a market price of less than $5.00 per share, or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, these rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule relating to the penny stock market. Disclosure is also required to be made about current quotations for the securities and commissions payable to both the broker-dealer and the registered representative. Finally, broker-dealers must send monthly statements to purchasers of penny stocks disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. As a result of our common stock being subject to the rules on penny stocks, the liquidity of our common stock may be adversely affected.

 

We will require additional capital in the future and raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our business assets.

 

We will require additional capital in the future and we may seek additional capital through a combination of public and private equity offerings, debt financings, working capital lines of credit and potential licenses and collaboration agreements. We, and indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future offerings. To the extent that we raise additional capital through the sale of equity or debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire additional aircraft and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future.

 

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If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline.

 

The trading market for our common stock and our Class B Non-Voting Stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We do not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock could decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

 

Insiders will continue to have substantial influence over us, which could limit your ability to affect the outcome of key transactions, including a change of control.

 

Our directors, executive officers, holders of more than 5% of our outstanding stock and their respective affiliates will beneficially own shares representing approximately 40% of our outstanding common stock . As a result, these stockholders, if they act together, will be able to influence our management and affairs and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of our company and might affect the market price of our common stock and our Class B Non-Voting Common Stock.

 

Our corporate charter and Bylaws include provisions limiting voting and ownership by non-U.S. citizens.

 

To comply with restrictions imposed by federal law on foreign ownership of U.S. airlines, our Certificate of Incorporation and Bylaws restrict voting of shares of our common stock by non-U.S. citizens. The restrictions imposed by federal law currently require that no more than 24.9% of our stock be voted, directly or indirectly, by persons who are not U.S. citizens, that no more than 49.9% of our outstanding stock be owned (beneficially or of record) by persons who are not U.S. citizens and that our president and at least two-thirds of the members of our board of directors and senior management be U.S. citizens. Our Bylaws provide that the failure of non-U.S. citizens to register their shares on a separate stock record, which we refer to as the “foreign stock record,” would result in a suspension of their voting rights in the event that the aggregate foreign ownership of the outstanding common stock exceeds the foreign ownership restrictions imposed by federal law. Our Bylaws also provide that any transfer or issuance of our stock that would cause the amount of our stock owned by persons who are not U.S. citizens to exceed foreign ownership restrictions imposed by federal law will be void and of no effect.

 

Our Bylaws further provide that no shares of our common stock will be registered on the foreign stock record if the amount so registered would exceed the foreign ownership restrictions imposed by federal law. If it is determined that the amount registered in the foreign stock record exceeds the foreign ownership restrictions imposed by federal law, shares will be removed from the foreign stock record in reverse chronological order based on the date of registration therein, until the number of shares registered therein does not exceed the foreign ownership restrictions imposed by federal law. We are currently in compliance with these ownership restrictions.

 

We are an “emerging growth company” and a “smaller reporting company” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include, but are not limited to: (i) exemption from compliance with the auditor attestation requirements pursuant to SOX; (ii) exemption from compliance with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; (iii) reduced disclosure about our executive compensation arrangements; and (iv) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

We incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

 

As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company. SOX, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.

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We expect that we will need to hire additional accounting, finance, and other personnel as we continue to grow to comply with public company reporting requirements, as a public company, and our management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements. These requirements will increase our legal and financial compliance costs and will make some activities more time- consuming and costly. For example, the rules and regulations applicable to us as a public company may make it more difficult and more expensive for us to maintain director and officer liability insurance, which could make it more difficult for us to attract and retain qualified members of our board of directors. We are currently evaluating these rules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

 

Pursuant to Section 404 of SOX, we are required to furnish a report by our management on our internal control over financial reporting beginning with our second filing of an Annual Report on Form 10-K with the SEC after we became a public company. However, while we remain an emerging growth company or smaller reporting company, we are not required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 of SOX within the prescribed period, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we are not able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404 of SOX. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Delaware law and provisions in our Certificate of Incorporation and Bylaws might discourage, delay, or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.

 

Provisions in our Certificate of Incorporation and Bylaws may discourage, delay, or prevent a merger, acquisition, or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. Therefore, these provisions could adversely affect the price of our common stock.

 

In addition, Section 203 of the General Corporation Law of the State of Delaware, or DGCL, prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

Any provision of our Certificate of Incorporation, Bylaws, or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.

 

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

 

As a public company, we are subject to the periodic reporting requirements of the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act are accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

 

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 1C. CYBERSECURITY

 

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GlobalX's Audit Committee, comprising board members and senior management from various departments including IT, operations, legal, risk management, and others, diligently engage in regular cybersecurity risk assessments. These comprehensive assessments are designed to proactively identify potential threats, vulnerabilities, and risks that could impact the integrity and security of the company's airline systems, data infrastructure, and operational continuity. Evaluations span critical areas such as safeguarding flight systems, protecting passenger data, and mitigating operational disruptions.

 

Moreover, the GlobalX Audit Committee remains committed to providing timely updates and detailed reports, offering insights into the airline's cybersecurity posture, ongoing initiatives, prevalent incident trends, and active remediation efforts. These reports are meticulously crafted, incorporating key metrics, performance indicators, and actionable recommendations aimed at continual enhancement.

 

The committee vested with cybersecurity oversight consistently conducts periodic reviews of GlobalX's cybersecurity policies, procedures, and controls. These reviews are pivotal in ensuring the ongoing effectiveness of the company's cybersecurity framework and its alignment with emerging threats and evolving industry best practices. Regular updates are meticulously implemented to fortify the company's cybersecurity resilience in response to emerging risks and evolving regulatory requirements.

 

As of December 31, 2022, and 2023, GlobalX remains proud to report that it has not encountered any cybersecurity incidents that have materially impacted, or are reasonably likely to materially impact, the Company.

ITEM 2. PROPERTIES

Not applicable.

ITEM 3. LEGAL PROCEEDINGS

 

On October 1, 2021, GEM Global Yield LLC SCS ("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.

 

On March 29, 2023 Global Crossing Airlines and GEM entered into a final settlement which included a payment plan for the $2,000,000 CAD over nine months plus the extension of the agreement for 12 months. Consequently, GlobalX has adjusted the current liabilities to reverse the previously accrued interest and attorney’s fees no longer due. Upon final payment GEM agrees to file a satisfaction of judgment in County of New York, effectively settling this issue. GlobalX made payments due per final settlement and the Company had no outstanding balance as of December 31, 2023.

 

On August 11, 2023 Global Crossing Airlines in combination with Top Flight Charters and its minority interest member filed a lawsuit in the United States District Court Southern District of Florida against Shorts Travel Management, Inc (Shorts) and STM Charters, Inc seeking to have an old non-solicit agreement signed by Top Flight' minority interest member to be declared invalid, that Shorts alleged trade secrets do not exist and sought damages arising from the Shorts defamation per se based on numerous false statements made by Shorts in the marketplace. On October 4, 2023, Shorts responded in court by denying the claims made and countersued all parties for breach of contract and theft of trade secrets. This case is currently in the discovery phase.

 

There have been no material changes in our risk factors from those disclosed above in “Part I. Item 1A. Risk Factors”.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

18


 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our shares of common stock are traded on the OTCQB Marketplace (“OTCQB”) under the symbol “JETMF” and on the NEO Exchange (“NEO”) under the symbol “JET.” Our shares of Class B Non-Voting Common Stock are traded on the NEO under the symbol “JET.B”

The Company has not paid any cash dividends.

The equity compensation plan information called for by Item 201(d) of Regulation S-K is set forth in Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of Part III of this report under the heading “Equity Compensation Plan Information”.

 

Issuer Purchases of Equity Securities

 

We did not purchase any of our registered equity securities during the period covered by this Annual Report.

 

ITEM 6. [Reserved]

19


 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Subsidiaries Name

Place of incorporation

Interest%

Principal activity

Global Crossing Airlines Holdings, Inc.

Delaware, United States

100% ownership by Global Crossing Airlines Group, Inc.

Holding company

Global Crossing Airlines, Inc.

Delaware, United States

100% ownership by Global Crossing Airlines Holdings Inc.

US 121 Charter company

GlobalX Travel Technologies, Inc.

Delaware, United States

80% ownership by Global Crossing Airline Holdings, Inc.

Acquire and develop travel technology

UrbanX Air Mobility, Inc.

Delaware, United States

100% ownership by Global Crossing Airlines Holdings Inc.

Air Charter operator

Global Crossing Airlines Operations, LLC

Florida, United States

100% ownership by Global Crossing Airlines Inc.

Operating Company

LatinX Air S.A.S

Ecuador

100% ownership by Global Crossing Airlines Inc

Air Charter operator

GlobalX Colombia S.A.S.

Colombia

100% ownership by Global Crossing Airlines Inc

Air Charter operator

GlobalX Air Tours, LLC

Florida, United States

100% ownership by Global Crossing Inc.

Air charter service

Charter Air Solutions, LLC

Montana, United States

80% ownership by the Global Crossing Airlines Holdings Inc.

Charter Broker

 

The following discussion and analysis should be read in conjunction with the Financial Statements included in Item 8 of this report. This Item 7 contains forward-looking statements that involve risks and uncertainties. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date of this report. Actual results may differ materially from those expressed or implied in such forward-looking statements. Factors which could cause actual results to differ materially are discussed throughout this report and include, but are not limited to, those set forth at the end of this Item 7 under the heading "Cautionary Statement Regarding Forward Looking Statements." Additional factors are under the heading “Risk Factors”.

 

Background

Certain Terms - Glossary

The following represents terms and statistics specific to our business and industry. They are used by management to evaluate and measure operations, results, productivity, and efficiency.

ACMI:

Service offering, whereby we provide outsourced cargo and passenger aircraft operating solutions, including the provision of an aircraft, crew, maintenance, and insurance, while customers assume fuel, demand and price risk. In addition, customers are generally responsible for landing, navigation and most other operational fees and costs

Block Hour

The time interval between when an aircraft departs the terminal until it arrives at the destination terminal

Charter

Service offering, whereby we provide cargo and passenger aircraft charter services to customers. The customer generally pays a fixed charter fee that includes fuel, insurance, landing fees, navigation fees and most other operational fees and costs

Net Available Aircraft

The number of aircraft available each month reduced by (netted) days the aircraft is unavailable due to various maintenance events or deliveries during a month

2Y Check

“Heavy” airframe maintenance checks, which are the most extensive in scope and are generally performed every two years and can take from 20 – 40 days to complete.

6Y Check

 “Heavy” airframe maintenance checks, which are the most extensive in scope and are generally performed every six years and can take from 45-75 days to complete

12Y Check

“Heavy” airframe maintenance checks, which are the most extensive in scope and are generally performed every six years and can take from 60 – 100 days to complete

Heavy Maintenance

Scheduled maintenance activities that are extensive in scope and are primarily based on time or usage intervals, which include, but are not limited to 2Y Checks, 6Y Checks, 12Y checks and engine overhauls. In addition, unscheduled engine repairs involving the removal of the engine from the aircraft are considered to be Heavy Maintenance.

Line Maintenance

Maintenance events occurring during normal day-to-day operations.

Non-heavy Maintenance

Discrete maintenance activities for the overhaul and repair of specific aircraft components, including landing gear, auxiliary power units and engine thrust reversers.

Utilization

The average number of Block Hours operated per day per aircraft.

Business Overview

20


 

 

GlobalX operates a US Part 121 domestic flag and supplemental airline using the Airbus A320 family of aircraft. GlobalX’s business model is to (1) provide services on an ACMI using wet lease contracts to airlines and non-airlines, and (2) on a Charter basis whereby we provide passenger aircraft charter services to customers by charging an “all-in” fee that includes fuel, insurance, landing fees, navigation fees and most other operational fees and costs. GlobalX operates within the United States, Europe, Canada, Central and South America. GlobalX began operating the Airbus A321 freighter (“A321F”) 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/tour 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.

 

Business Developments

The twelve months period ended December 31, 2023 for GlobalX was characterized by the achievement of significant regulatory milestones in addition to considerable investment in crew, staff, maintenance, and systems to build out our platform, bolster our infrastructure to prepare GlobalX to continue its rapid expansion through the delivery of additional aircraft in 2024. GlobalX is comprised of three key assets which allows us to generate income – our certifications, our aircraft, and our crew.

From a regulatory perspective GlobalX in the twelve months period ended December 31, 2023 has achieved the following:

Received our EASA TCO allowing us to operate in Europe
Received our UK TCO allowing us to operate in the UK
Received our Cargo Certification from the FAA allowing us to launch Cargo operations
Successfully passed our DOD Audit – allowing us to register and start operating flights for the Department of Defense
Successfully passed our IOSA Audit – allowing us to operate for other airlines without an extensive audit process

From an aircraft perspective GlobalX in the twelve months period ended December 31, 2023 has achieved the following:

Taken delivery of three A321F to launch Cargo operations
Taken delivery of two A320 passenger aircraft and one A319 passenger aircraft
Completed five heavy maintenance events and one non-heavy maintenance event

From a crew perspective GlobalX in the twelve months period ended December 31, 2023 has achieved the following:

Hired and trained the required number of people in dispatch, crew scheduling, operation control center and maintenance to allow for 24 hours, 7 day a week operation on a global basis
Increased our pilot headcount from 70 to 138

In short, the twelve months period ended December 31, 2023 was a time when GlobalX invested in its people, prepared for its growth, and established a robust infrastructure for its future.

 

Launch cargo charter flights with A321P2F (Passenger to Freighter)

 

GlobalX added the A321F (passenger to freighter) aircraft to its operating certificate and into the fleet commencing Q1 2023 and expects cargo to be an integral part of the GlobalX business. GlobalX operates the majority of its A321Fs under ACMI charter operations with major package operators and major freight and logistics companies. Under these types of 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,

21


 

with GlobalX assuming the operational risk of providing a functional aircraft, trained crew, in a safe and on time manner as the ACMI operator.

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.
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 outsourced to FAA-approved service providers. The 6Y and 12Y checks will be primarily paid for using funds from the accrued maintenance reserves paid to lessors under operating leases.

 

Strategy to Address Competitive Response

 

We expect the existing charter operators based in the U.S. to respond to GlobalX’s entry into the market by lowering their pricing to customers. The expected competitive response typically includes lowered ACMI rates for key contracts. We believe GlobalX’s existing relationships with potential customers and the underserved demand in the U.S., coupled with our newer planes allowing for a more cost-efficient operation, will allow us to address any competitive pressure and grow as anticipated.

 

GlobalX Charter Service

22


 

 

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. We expect our primary line of business and focus to be commercial charter services throughout North and South America and the Caribbean, with established several key customer including the US Government, scheduled airlines, US colleges and indirect air carriers.

 

We provide our services through two contract structures: (1) ACMI and (2) Charter.

 

We believe operating charter flights will largely insulate our expected profitability from fluctuations in jet fuel prices, which are typically the largest and most volatile expense for an air carrier. Under the vast majority of our commercial passenger charter arrangements, our customers bear 100% of the cost of jet fuel. In addition, consistent with industry practice, we plan for those customers to pay us our contract price approximately two weeks in advance of their flights.

 

Because our ACMI customers are responsible for fuel costs, our expected commercial ACMI revenues would not be affected directly by fuel price changes. However, a significant increase in fuel prices would likely have an adverse effect on demand for the use of our aircraft, which could have a material adverse effect on our profitability and financial position.

 

Experienced management team

Our management team has extensive operating and leadership experience in the airfreight, airline, and aircraft leasing, maintenance, and management industries at companies such as Republic Airways, Eastern Airlines, JetBlue Airways, Virgin America, Hawaiian Airlines, American Airlines, US Airways, Atlas Air, Breeze Airways, Emirates, North American Airlines, Miami Air, Spirit Airlines, 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, 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 services contract charter airline, operating both passenger and cargo charter aircraft while recruiting and maintaining a dynamic team of customer-centric flight crews, ground teams and management staff.

 

In launching a US 121 Domestic Flag and Supplemental charter airline in the United States, GlobalX has done the following:

 

Launch passenger charter flights with A320/A321 all passenger aircraft

 

GlobalX operates its A320 family aircraft under ACMI/Full Contract charter operations for major airlines, tour operators, college and professional sports teams, incentive groups, major resorts and casino groups.

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.

 

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, 2023 and 2022

 

Operating Revenue & Statistics

 

The following discussion should be read in conjunction with our Financial Statements and other financial information appearing and referred to elsewhere in this report.

23


 

The analysis of GlobalX results for the twelve months period ended on December 31, 2023 and 2022 requires an understanding of how the Company fundamentally evolved during that time period. 2022 was our first year of full operations and was a period where the company was focused on securing new customers, entering new markets and flying to new locations; primarily in the domestic and Caribbean markets. As a young company, we were learning how to operate effectively and efficiently.

By contrast in 2023, GlobalX expanded existing relationships, entered the Cargo market, expanded operations in the European ACMI market and increased focus on operating for existing airlines once we completed our IOSA certification. Our key metric is block hours flown and block hours flown per available aircraft, which is the measure by which we track commercial activity. While other airlines discuss available seat miles and revenue per available seat mile (“rasm”), cost per available seat mile (“casm”), these metrics are not germane to our business model as an ACMI and Charter operator. GlobalX charters the entire aircraft, does not take fuel risk, and does not take third party risk therefore all results are evaluated on a block hour basis.

The following table compares our Operating Fleet (average aircraft equivalents during the period) and total Block Hours operated:

 

Operating Fleet

 

2023

 

 

2022

 

 

Inc/(Dec)

 

 

Inc/(Dec)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A319

 

 

0.3

 

 

 

 

 

 

0.3

 

 

N/A

 

A320

 

 

6.8

 

 

 

5.6

 

 

 

1.2

 

 

 

21.4

%

A321

 

 

3.5

 

 

 

1.0

 

 

 

2.5

 

 

 

250.0

%

Total Operating Average Aircraft Equivalents

 

 

10.6

 

 

 

6.6

 

 

 

4.0

 

 

 

60.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Aircraft Available

 

 

9.7

 

 

 

5.9

 

 

 

3.8

 

 

 

64.4

%

Total Block Hours

 

 

18,072

 

 

 

8,666

 

 

 

9,406

 

 

 

108.5

%

Average Utilization per available aircraft

 

 

1,863

 

 

 

1,474

 

 

 

389

 

 

 

26.4

%

 

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

 

2023

 

 

2022

 

 

Inc/(Dec)

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charter

 

$

114,123,521

 

 

$

73,318,834

 

 

$

40,804,687

 

 

 

55.7

%

ACMI

 

 

40,476,555

 

 

 

13,374,760

 

 

 

27,101,795

 

 

 

202.6

%

Other

 

 

5,521,449

 

 

 

10,416,611

 

 

 

(4,895,162

)

 

 

-47.0

%

Total

 

$

160,121,525

 

 

$

97,110,205

 

 

$

63,011,320

 

 

 

64.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Block Hours

 

2023

 

 

2022

 

 

Inc/(Dec)

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charter

 

 

8,852

 

 

 

6,253

 

 

 

2,599

 

 

 

41.6

%

ACMI

 

 

9,157

 

 

 

2,328

 

 

 

6,829

 

 

 

293.3

%

Non Revenue

 

 

63

 

 

 

85

 

 

 

(22

)

 

 

-25.9

%

Total

 

 

18,072

 

 

 

8,666

 

 

 

9,406

 

 

 

108.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue per Block Hour

 

2023

 

 

2022

 

 

Inc/(Dec)

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charter

 

$

12,893

 

 

$

11,726

 

 

$

1,167

 

 

 

10.0

%

ACMI

 

$

4,420

 

 

$

5,744

 

 

$

(1,324

)

 

 

-23.1

%

 

Charter revenue for the period increased $40.8 million or 55.7%, from $73.3 million in 2022 to $114.1 million in 2023. $33.5 million of the increased revenue is attributable to flying more block hours as the number of block hours operated increased 41.6% from 6,253 in 2022 to 8,852 block hours in 2023, driven by the increased number of aircraft available to operate. In addition, the net rate for Charter flying increased 10.0% from $11,726 per block hour to $12,893 per block hour. There are two factors impacting the net Charter rate; first is the rate that we charged customers for the ACMI portion of the contract and second was the cost of fuel. Average fuel cost was lower in 2023 so that reduced the rate by $1,027 per block hour. This was offset by an increase of $2,194 per block hour in the average rate charged to customers. The net effect was an increase of $1,167 per block hour. This increase contributed $7.3 million of the total charter revenue improvement.

24


 

ACMI revenue for the period increased by $27.1 million or 202.6% from $13.4 million in 2022 to $40.5 million in 2023. This variance can largely be explained by a 65% increase in the number of available aircraft which resulted in an increase from 2,328 block hours in 2022 to 9,157 block hours in 2023, an increase of 293.3% or 6,829 block hours. The average revenue per block hour dropped from $5,744 in 2022 to $4,420 in 2023 due to several factors. Generally, when a customer commits to a greater minimum number of block hours in a month, there is a reduction on the revenue per block hour charged. In 2023, not only was GlobalX flying more hours, GlobalX flew more hours per month per aircraft, primarily servicing key customers in Europe. There were also several contracts in 2022 that flew under the minimum guaranteed rate, which increased the revenue per block hour flown that did not occur in 2023.Those two factors combined to reduce the average revenue per block hour by 23.1% or $1,324 per block hour.

Other revenue for the period decreased by $4.9 million from $10.4 million in 2022 to $5.5 million in 2023, due a specific contract in 2022 that GlobalX was not able to operate due to the Company's lack of regulatory approval. This contract had a guaranteed minimum amount of block hours that were paid even though GlobalX was unable to operate the flights. The associated revenue earned under the contract was booked as other revenue with no operational block hours.

 

Operating Expenses

 

The following table compares our Operating Expenses (in dollars):

 

Operating Expenses

 

2023

 

 

2022

 

 

Inc/(Dec)

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, Wages, & Benefits

 

$

54,056,847

 

 

$

30,629,414

 

 

$

23,427,433

 

 

 

76.5

%

Aircraft Fuel

 

 

29,475,548

 

 

 

23,035,395

 

 

 

6,440,153

 

 

 

28.0

%

Maintenance, materials and repairs

 

 

8,602,949

 

 

 

4,377,378

 

 

 

4,225,571

 

 

 

96.5

%

Depreciation and amortization

 

 

2,292,797

 

 

 

609,489

 

 

 

1,683,308

 

 

 

276.2

%

Contracted ground and aviation services

 

 

20,506,701

 

 

 

15,607,926

 

 

 

4,898,775

 

 

 

31.4

%

Travel

 

 

8,334,474

 

 

 

5,024,758

 

 

 

3,309,716

 

 

 

65.9

%

Insurance

 

 

5,009,477

 

 

 

3,580,377

 

 

 

1,429,100

 

 

 

39.9

%

Aircraft Rent

 

 

33,631,717

 

 

 

15,614,081

 

 

 

18,017,636

 

 

 

115.4

%

Other

 

 

14,078,145

 

 

 

9,867,929

 

 

 

4,210,216

 

 

 

42.7

%

Total Operating Expenses

 

$

175,988,655

 

 

$

108,346,747

 

 

$

67,641,908

 

 

 

62.4

%

Salaries, wages, and benefits increased to $54.1 million up from $30.6 million, a $23.4 million, or 76.5% increase, primarily due to the hiring and training of pilots and other airline personnel necessitated by the growing fleet and operations. The total employees grew 59.0% from 393 to 625 and pilots increased from 70 to 138, or 97.1%.

Aircraft fuel is directly correlated to the number of Charter block hours which increased 2,599 or 41.6%, the average spot price of jet fuel which decreased by 20.2% from $3.37 per gallon in 2022 to $2.69 per gallon in 2023 and the type of aircraft being flown with A321’s burning more fuel than an A320. The consequence of all three factors was that fuel increased 28.0% from $23.0 million to $29.5 million.

Maintenance, materials, and repairs increased by $4.2 million, from $4.4 million to $8.6 million, or 96.5%, primarily due to the increase in both the number of aircraft to 14 and the number of block hours flown which increased 108.5%. These volume drivers were partially offset by rate improvement from $505 per block hour to $476 per block hour, a 5.6% decrease. This decrease in rate per block hour was achieved through increased efficiencies and the benefits of a larger scaled operation.

Depreciation and amortization increased $1.7 million, or 276.2%, from $0.6 million to $2.3 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 $4.9 million, or 31.4%, from $15.6 million to $20.5 million, These costs are directly correlated to the number of Charter hours operated in a specific period. Year-over-year Charter block hours increased 41.6%. This was offset by a reduction in station specific cost such as navigation expense, aircraft security expense, and ground handling due to favorable pricing and station mix.

Travel increased $3.3 million or 65.9%, from $5.0 million to $ 8.3 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 $1.4 million, or 39.9%, from $3.6 million to $5.0 million, primarily related to the increase in the number of aircraft.

25


 

Aircraft rent increased $18.0 million, or 115.4%, from $15.6 million to $33.6 million, primarily due to the increase in the number of aircraft from eight to fourteen aircraft in the fleet.

Operating loss increased by $4.7 million, from an operating loss of $11.2 million to $15.9 million, however operating loss as a percentage improved from (11.5%) to (9.8%), a 15% improvement. This was a direct result of GlobalX’s ability to grow its revenue faster than its cost structure as the airline works towards achieving scale and profitability. Specifically, the Salaries, wages, and benefits rate improved by 15.4% dropping from $3,534 to $2,991 per block hour as planners and schedulers are able to achieve optimization. Maintenance, material, and repairs saw a 5.8% improvement as the rate dropped $505 per block hour to $476 per block hour. Travel rates improved 20.5% from $580 per block hour to $461 per block hour. Insurance improved from $413 per block hour to $277 per block hour or 33%. These improvements are a function achieving economies of scale through organic growth as the company is better able to negotiate favorable terms and deliver optimal operational performance.

 

Non-operating Expenses (Income)

 

The following table compares our Non-operating Expenses (Income) :

 

Non-Operating Expenses (Income)

 

2023

 

 

2022

 

 

Inc/(Dec)

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized Loss (Gain) on Financial Instruments

 

$

-

 

 

$

(96,415

)

 

$

96,415

 

 

N/A

 

Other non-operating

 

 

-

 

 

 

3,058,938

 

 

 

(3,058,938

)

 

N/A

 

Interest Expense

 

 

4,916,281

 

 

 

1,621,932

 

 

 

3,294,349

 

 

 

203.1

%

Total Non-Operating Expenses (Income)

 

$

4,916,281

 

 

$

4,584,455

 

 

$

331,826

 

 

 

7.2

%

 

Other non-operating expenses decreased by $3.0 million due to the write-off of deferred costs in 2022 incurred in connection with GEM line of credit, as discussed in note 9 of the consolidated financial statements.

Interest expense, net increased $3.3 million driven mainly by the interest payable on the debentures issued in 2023.

 

Net Loss

Net Loss increased by $5.2 million to a net loss of $21.0 million from $15.8 million in 2022 however net loss as a percentage improved from (16.25%) to (12.9%), a 20% improvement. This was a direct result of GlobalX’s ability to grow its revenue faster than its cost structure as the airline works towards achieving scale and profitability. This is despite financing cost increasing 220% from $1.6 million to $5.2 million. It is important to consider that as GlobalX increases aircraft count and block hours flown the company is able to achieve operational efficiencies, evident in the expense rates per total block hours. The Salaries, wages, and benefits rate improved by 15.4% dropping from $3,534 to $2,991 per block hour as planners and schedulers are able to achieve optimization. Maintenance, material, and repairs saw a 5.8% improvement as the rate dropped $505 per block hour to $476 per block hour. Travel rates improved 20.5% from $580 per block hour to $461 per block hour. Insurance improved from $413 per block hour to $277 per block hour or 33%. These improvements are a function achieving economies of scale through organic growth as the company is better able to negotiate favorable terms and deliver optimal operational performance.

Liquidity and Capital Resources

The most significant liquidity events during 2023 were as follows:

Operating Activities. For 2023, Net Cash used in operating activities decreased from $3.6 million to $1.3 million consisting primarily of $19.5 million increase in accrued liabilities and other liabilities and accounts payables, $7.7 million of increase in accounts receivable, $7.9 million of increase in operating leases obligations and $11.4 million increase noncash adjustments for depreciation and amortization of fixed assets, operating lease right of use assets and debt issue costs, $2.5 million increase of share-based payments. These were partially offset by $5.0 million of increase in net loss. For 2022, net cash used in operating activities decreased from $10.8 million to $3.6 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.

26


 

As of December 31, 2023, the Company had approximately $11.6 million in unrestricted cash and cash equivalents and approximately $6.1 million in restricted cash, an increase of approximately $9.7 million and $2.5 million from December 31, 2022, respectively primarily due to the Secured Notes entered on August 2, 2023 and increase in operations. Management is confident that the augmented cash and cash equivalents, coupled with the anticipated rise in sales linked to the Company’s strategies to attract more funds, will adequately address the Company’s liquidity requirements for the next twelve months. Management is actively assessing various options to procure additional funds, including exploring opportunities for additional equity or debt financing.

The Company has significant fixed and noncancelable lease commitments of aircraft, equipment and related maintenance checks. As of December 31, 2023, the Company had total of $14.2 million due in the next 12 months of future minimum lease payments under finance and operating leases. As of December 31, 2023, the Company had total of $65.8 million due after 12 months from the balance sheet date of future minimum lease payments under finance and operating leases, respectively, and approximately $29 million in notes payable included in the non-current liabilities presented in the Company’s consolidated balance sheet. The Company finished 2023 with eleven passenger aircraft and three cargo aircraft and expects the fleet to increase to 15 passenger aircraft and five cargo aircraft by the end of 2024. To achieve the number of aircraft deliveries in 2024, the Company currently has seven aircrafts 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 2023, net cash used for investing activities increased from $5.2 million to $13.2 million, consisting of an increase of $9.1 million of deposit, deferred costs and other assets and $4.0 million of purchases of property and equipment. 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.

Financing Activities. For 2023, net cash provided by financing activities increased from $6.2 million to $26.7 million, consisting primarily of net proceeds of approximately $24.9 million from note payable, and $1.9 million from proceeds from issuance of shares. 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.

The Company continuously seeks to identify external sources of capital from time to time depending on our cash requirements, assessment of current and anticipated market conditions, and the after-tax cost of capital. Our access to capital markets can be adversely impacted by prevailing economic conditions and by financial, business and other factors, some of which are beyond our control. Additionally, the Company’s borrowing costs are affected by market conditions and may be adversely impacted by a tightening in credit markets.

The Company regularly assesses our anticipated working capital needs, debt and leverage levels, debt maturities, capital expenditure requirements and future investments or acquisitions to maximize shareholder return, efficiently finance our ongoing operations and maintain flexibility for future strategic transactions. The Company also regularly evaluates its liquidity and capital structure to ensure financial risks, adequate liquidity access and lower cost of capital are efficiently managed.

 

Off-Balance Sheet Arrangements

 

As of December 31, 2023, the Company had no off-balance sheet arrangements.

 

Critical Accounting Estimates

 

The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:

requires assumptions to be made that were uncertain at the time the estimate was made, and
changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition

We base our estimates and judgments on our experience, our current knowledge, our beliefs of what could occur in the future, our observation of trends in the industry, information provided by our customers and information available from other resources. Actual results may differ from the estimates under different assumptions or conditions. We have identified the following policies and estimates as those that we believe are most critical to our financial condition and results of operations and that require management's most subjective and complex judgments in estimating the effect of inherent uncertainties: allowance for credit losses, fair value measurements

27


 

for stock-based compensation and deferred tax valuation allowance. See footnote 2 of the Company's consolidated financial statements for significant accounting policies.

 

Recently Adopted 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 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 adoption of this pronouncement had no material impact on our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Not Applicable.

28


 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

 

Page

Global Crossing Airlines Group Inc. CONSOLIDATED FINANCIAL STATEMENTS

 

Report of Independent Registered Public Accounting Firm (PCAOB No. 89)

28

Consolidated Balance Sheets as of December 31, 2023 and 2022

30

Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022

31

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022

32

Consolidated Statements of Equity for the Years Ended December 31, 2023 and 2022

33

Notes to Consolidated Financial Statements

34

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Global Crossing Airlines Group Inc.

 

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Global Crossing Airlines Group, Inc. (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has limited operating history, has recurring net losses and negative cash flows from operations since inception, and has a working capital deficit as of December 31, 2023, these factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Rosenberg Rich Baker Berman P.A.

Somerset, New Jersey

March 7, 2024

We have served as the Company’s auditor since 2020.

29


 

GLOBAL CROSSING AIRLINES GROUP INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

December 31, 2023

 

 

December 31, 2022

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,595,706

 

 

$

1,875,673

 

Restricted cash

 

 

6,079,531

 

 

 

3,585,261

 

Accounts receivable, net of allowance

 

 

10,180,739

 

 

 

2,664,174

 

Prepaid expenses and other current assets

 

 

2,551,612

 

 

 

2,193,449

 

Current assets held for sale

 

 

184,155

 

 

 

1,405,741

 

Total Current Assets

 

 

30,591,743

 

 

 

11,724,298

 

Property and equipment, net

 

 

5,524,990

 

 

 

2,441,288

 

Finance leases, net

 

 

4,108,277

 

 

 

2,710,899

 

Operating lease right-of-use assets

 

 

76,880,504

 

 

 

27,952,609

 

Deposits

 

 

12,506,275

 

 

 

5,702,089

 

Other assets

 

 

1,716,558

 

 

 

632,790

 

Total Assets

 

$

131,328,347

 

 

$

51,163,973

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

7,481,071

 

 

$

4,997,080

 

Accrued liabilities

 

 

17,465,320

 

 

 

9,458,629

 

Deferred revenue

 

 

9,895,583

 

 

 

3,200,664

 

Customer deposits

 

 

3,935,496

 

 

 

1,617,337

 

Current portion of notes payable

 

 

-

 

 

 

1,810,468

 

Current portion of long-term operating leases

 

 

13,650,119

 

 

 

6,445,915

 

Current portion of finance leases

 

 

599,228

 

 

 

335,527

 

Total current liabilities

 

 

53,026,817

 

 

 

27,865,620

 

Other liabilities

 

 

 

 

 

 

Note payable

 

 

29,174,794

 

 

 

5,081,294

 

Long-term operating leases

 

 

65,158,453

 

 

 

23,189,835

 

Other liabilities

 

 

3,835,424

 

 

 

2,282,892

 

Total other liabilities

 

 

98,168,671

 

 

 

30,554,021

 

Total Liabilities

 

$

151,195,488

 

 

$

58,419,641

 

Commitments and Contingencies (Note 7)

 

 

 

 

 

 

Equity (Deficit)

 

 

 

 

 

 

Common stock - $.001 par value; 200,000,000 authorized; 58,925,871 and 53,440,482 issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

 

$

58,891

 

 

$

53,440

 

Additional paid-in capital

 

 

38,943,133

 

 

 

30,774,197

 

Retained deficit

 

 

(59,093,845

)

 

 

(38,083,304

)

Total Company's stockholders’ deficit

 

 

(20,091,821

)

 

 

(7,255,667

)

Noncontrolling interest

 

 

224,680

 

 

 

-

 

Total stockholders’ deficit

 

 

(19,867,141

)

 

 

(7,255,667

)

Total Liabilities and Deficit

 

$

131,328,347

 

 

$

51,163,973

 

 

See accompanying notes to consolidated financial statements.

30


 

GLOBAL CROSSING AIRLINES GROUP INC.

CONSOLIDATED STATEMENT OF OPERATIONS

 

 

 

 

Year Ended December 31, 2023

 

 

Year Ended December 31, 2022

 

 

 

 

 

 

 

 

Operating Revenue

 

$

160,121,525

 

 

$

97,110,205

 

Operating Expenses

 

 

 

 

 

 

Salaries, Wages, & Benefits

 

 

54,056,847

 

 

 

30,629,414

 

Aircraft Fuel

 

 

29,475,548

 

 

 

23,035,395

 

Maintenance, materials and repairs

 

 

8,602,949

 

 

 

4,377,378

 

Depreciation and amortization

 

 

2,292,797

 

 

 

609,489

 

Contracted ground and aviation services

 

 

20,506,701

 

 

 

15,607,926

 

Travel

 

 

8,334,474

 

 

 

5,024,758

 

Insurance

 

 

5,009,477

 

 

 

3,580,377

 

Aircraft Rent

 

 

33,631,717

 

 

 

15,614,081

 

Other

 

 

14,078,145

 

 

 

9,867,929

 

Total Operating Expenses

 

$

175,988,655

 

 

$

108,346,747

 

Operating Loss

 

 

(15,867,130

)

 

 

(11,236,542

)

Non-Operating Expenses

 

 

 

 

 

 

Foreign Exchange (gain) or loss

 

 

-

 

 

 

(96,415

)

Other non-operating expenses

 

 

-

 

 

 

3,058,938

 

Interest Expense

 

 

4,916,281

 

 

 

1,621,932

 

Total Non-Operating Expenses

 

 

4,916,281

 

 

 

4,584,455

 

Loss before income taxes

 

 

(20,783,411

)

 

 

(15,820,997

)

Income tax expense

 

 

2,450

 

 

 

-

 

Net Loss

 

 

(20,785,861

)

 

 

(15,820,997

)

Net Income attributable to Noncontrolling Interest

 

 

224,680

 

 

 

-

 

Net Loss attributable to the Company

 

 

(21,010,541

)

 

 

(15,820,997

)

Loss per share:

 

 

 

 

 

 

Basic

 

$

(0.37

)

 

$

(0.30

)

Diluted

 

$

(0.37

)

 

$

(0.30

)

Weighted average number of shares outstanding

 

 

56,763,879

 

 

 

52,074,647

 

 

 

 

-

 

 

 

 

Fully diluted shares outstanding

 

 

56,763,879

 

 

 

52,074,647

 

 

See accompanying notes to consolidated financial statements.

31


 

GLOBAL CROSSING AIRLINES GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

For The Twelve Months Ended December 31,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$

(20,785,861

)

 

$

(15,820,997

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation expense

 

 

2,292,797

 

 

 

609,489

 

Bad debt expense

 

 

5,915

 

 

 

219,759

 

Loss on sale of property

 

 

135,772

 

 

 

 

Loss (gain) on sale of spare parts

 

 

22,619

 

 

 

(191,530

)

Loss on deferred costs

 

 

 

 

 

2,809,031

 

Foreign exchange loss (gain)

 

 

 

 

 

(96,415

)

Gain on disposal of flight equipment

 

 

(455,700

)

 

 

 

Amortization of debt issue costs

 

 

901,956

 

 

 

630,290

 

Amortization of operating lease right of use assets

 

 

8,172,685

 

 

 

4,797,056

 

Share-based payments

 

 

2,465,039

 

 

 

1,386,533

 

Interest on finance leases

 

 

435,266

 

 

 

102,561

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(7,746,494

)

 

 

(1,946,757

)

Assets held for sale

 

 

1,665,740

 

 

 

(340,561

)

Prepaid expenses and other current assets

 

 

(321,844

)

 

 

(1,262,183

)

Accounts payable

 

 

2,364,759

 

 

 

2,938,216

 

Accrued liabilities and other liabilities

 

 

17,153,154

 

 

 

6,353,307

 

Operating lease obligations

 

 

(7,927,758

)

 

 

(3,482,839

)

Other liabilities

 

 

242,240

 

 

 

(306,008

)

Net cash used in operating activities

 

 

(1,379,715

)

 

 

(3,601,048

)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Deposits, deferred costs and other assets

 

 

(9,143,650

)

 

 

(3,247,035

)

Purchases of property and equipment

 

 

(4,042,292

)

 

 

(1,911,669

)

Net cash used in investing activities

 

 

(13,185,942

)

 

 

(5,158,704

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Principal payments on finance leases

 

 

(479,923

)

 

 

(501,169

)

Proceeds on issuance of shares

 

 

1,871,784

 

 

 

802,325

 

Proceeds from note payable

 

 

35,289,725

 

 

 

5,925,529

 

Repayment of note payable

 

 

(9,901,626

)

 

 

 

Net cash provided by financing activities

 

 

26,779,960

 

 

 

6,226,685

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

12,214,303

 

 

 

(2,533,067

)

Cash, cash equivalents and restricted cash - beginning of the year

 

 

5,460,934

 

 

 

7,994,001

 

Cash, cash equivalents and restricted cash - end of the year

 

$

17,675,237

 

 

$

5,460,934

 

Non-cash transactions

 

 

 

 

 

 

Right-of-use (ROU) assets acquired through operating leases

 

$

57,100,580

 

 

$

10,081,357

 

Equipment acquired through finance leases

 

$

1,915,366

 

 

$

(2,840,936

)

Note Payable reductions through accounts receivable from sale of Assets held for sale

 

$

145,089

 

 

$

-

 

Discount on proceeds from note payable due to professional fees

 

$

35,900

 

 

$

-

 

Acquisition of Intangible Asset

 

$

428,400

 

 

$

-

 

Airframe Parts acquired through financing

 

$

-

 

 

$

1,065,180

 

Warrants issued for debt (debt discount)

 

$

3,837,565

 

 

$

2,130,642

 

Cash paid for

 

 

 

 

 

 

Interest

 

$

753,414

 

 

$

622,439

 

 

See accompanying notes to consolidated financial statements.

32


 

GLOBAL CROSSING AIRLINES GROUP INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

 

 

 

Common Stock Number of Shares

 

 

Amount

 

 

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