RNS Number:0047E
MAXjet Airways Inc.
18 September 2007
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE
UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF IRELAND OR
SOUTH AFRICA.
18 September 2007
MAXJET AIRWAYS, INC.
("MAXjet" or the "Company")
INTERIM RESULTS FOR THE 6 MONTHS TO JUNE 2007
MAXjet today announces its results for the half year to 30 June 2007. All
financial data is reported in US dollars unless otherwise stated.
Highlights
* Well-established operation flying more routes than any other all
Business Class airline, with flights from London Stansted to four key business
and leisure markets across the United States (New York, Washington, Las Vegas
and Los Angeles)
* Increased fleet size from three to five aircraft
* Period culminated in a system-wide load factor of 83.1% (June 2007)
* Scheduled passenger numbers increased 49% to 31,186 during the
period, with MAXjet's 100,000th revenue passenger carried in August 2007
* Revenues for the six months ended 30 June 2007 improved 74% to $27.3
million
* Unit revenues increased 30% from 10.8 US cents per available seat
mile to 14.0 cents
* Total operating expenses increased 30% to $59.2 million on a 34%
growth in unit capacity reflecting substantial expenses related to fleet
growth, pre-service aircraft expense and short-term leases to meet demand
* Full-year guidance of revenues of not less that $80 million reflects
continued fleet growth, continued unit revenue improvements, and network
expansion
* Elevated fuel costs expected to continue through 2007
Commenting on the results, William Stockbridge, MAXjet Chief Executive, said:
"MAXjet pioneered the affordable transatlantic all-business class segment two
years ago and in the last half year we have continued to consolidate our leading
position. We are now diversified into four scheduled markets all of which are
displaying encouraging demand. Load factors, yields and forward bookings
continue to be strong.
"During the period, we completed our AIM offering, invested in fleet expansion
and eliminated all debt from our balance sheet. We have made significant
investments in the first half of 2007 to accelerate our network expansion and
these have bolstered our segment-leading growth, leading to our full year
guidance of revenues of not less that $80 million."
For further information, please contact:
MAXjet Airways, Inc +1 703 574 6600
Bill Stockbridge, CEO
John Severson, CFO
Josh Marks, EVP, Head of Strategy & Route Development
Panmure Gordon, Nominated Adviser and Broker +44 207 459 3600
Grant Harrison
Andrew Potts
Chris Bucknall
FD +44 207 831 3113
Ben Foster
Charlie Watenphul
Notes to Editors
MAXjet Airways introduced the affordable all-business class segment, starting
service between London Stansted and New York (JFK) in November 2005. Since
launching the low-fare all-business class segment MAXjet has carried over
100,000 passengers and introduced new services from London to Washington, Las
Vegas and Los Angeles.
MAXjet offers the amenities of Business Class, including fast check-in security
clearance, departure lounges, padded leather seats with 170 degrees of recline
and 60" seat pitch, gourmet meals and an arrivals facility at Stansted, at fares
comparable to flexible Economy Class.
MAXjet offers convenient flight schedules with evening departures from cities
across the United States and return flights from Stansted that appeal to both
business and leisure passengers.
MAXjet has attracted a customer base of small business, large business and
affluent leisure consumers with significant repeat business and high customer
satisfaction.
Group Product Offering
We are an all-business class airline focused on providing low-cost, all-business
class service in markets with business and affluent leisure demand. We offer
our passengers a unique flying experience, with deep-recline seats (170degrees)
spaced at a 60" pitch, portable on demand entertainment systems, ample stowage
space and gourmet meals. On the ground, we provide dedicated check-in
facilities located in primary terminals, fast track security, business class
departure lounges in most locations and an arrival facility in London.
Our exclusive focus on all-business class creates a more spacious cabin
environment and material cost efficiencies when compared to traditional
airlines' multi-cabin model. We operate Boeing 767-200 wide-body aircraft
configured with between 92 and 102 forward facing seats. There are no Economy
Class seats on our aircraft. Seats are arranged in three columns of two seats,
with no middle seats. This configuration maximizes profitable seating space
while maintaining a comfortable, spacious wide-body environment. By offering
only a single cabin product, we achieve operating scale and cost savings in
procuring high-end amenities and catering, applying low-cost carrier principles
to an all-business class airline. Our low-density seating configuration also
reduces fuel burn and expands the economic range of our aircraft.
We commenced service on 1 November 2005 and currently provide scheduled service
between London Stansted Airport (STN) and four points in the United States: New
York (JFK), Washington Dulles (IAD), Las Vegas McCarran (LAS) and Los Angeles
(LAX). MAXjet operates six round-trip nonstop flights between Stansted and JFK,
four round trip flights between Stansted and Washington Dulles, four round-trip
flights between Stansted and Las Vegas McCarran, and four round-trip flights
between Stansted and Los Angeles. Service to New York JFK will increase to
daily on 20 October 2007. We have also applied for a designation from the U.S.
Department of Transportation to offer services from Seattle, Washington to
Shanghai, China beginning in March 2009 and intend to provide such service if
this designation is granted.
Since 1 November 2005 we have carried over 100,000 revenue passengers.
In addition to scheduled passenger transportation, we provide cargo and charter
services. We offer cargo capacity through general sales agents on all of our
existing routes, with available capacity of between five and twenty metric tons
per flight segment. We transport cargo using excess space on our flights, but
we do not operate any dedicated cargo aircraft.
Competitive Strengths
We believe that our low-cost business model gives us several competitive
strengths, including the following:
* We target what we believe is the most profitable segment of airline
activities - the niche business class market - and emphasize the attributes
most important to this class of customers.
* As an all-business class carrier, our product, including our fare
structure, is focused, simple and easy for customers to understand.
* We have a low-cost structure owing to low fit out, operating and
capital costs associated with our all-B767 fleet, scalable airport services
model utilizing main terminal facilities, low labor costs and lean corporate
overhead. This low-cost structure makes our price point a difficult one for
many of our competitors to match.
* We have a growing network focused on London Stansted, with current
nonstop service to four primary United States gateways (New York, Washington,
Las Vegas and Los Angeles). By building a network of routes from London
Stansted rather than introducing multiple daily departures on existing routes,
we believe we are well-positioned to minimize direct competition with
competing carriers.
* We are focused on introducing new non-stop routes to destinations
which other all-business class airlines cannot currently reach.
* We have a proven track record and a growing repeat customer base.
Our Business Strategy
Our goal is to be the worldwide leader in long-haul all-business class service.
To achieve this goal, we are pursuing the following business strategies:
* We intend to pursue new market opportunities once the liberalized
aviation agreement ("Open Skies") between the United States and the member
states of the European Community takes effect in April 2008, by adding
scheduled service from London to Open Skies points beyond London in the Middle
East, Asia and Africa. The new points will complement our United States-bound
service and build connecting traffic using Stansted. On July 17, 2007 we
received approval from the U.S. Department of Transportation to operate from
the United States to all Open Skies points, as well as beyond services from
cities in Open Skies countries to other cities in Open Skies countries,
subject to the relevant bilateral agreements.
* We intend to grow passenger volumes on our existing routes by
increasing our sales and marketing efforts and adding weekly frequencies.
We are targeting new markets that have strong business and leisure demand,
have high-quality airport facilities that do not require substantial capital
investment, do not have a dominant carrier and can provide new connectivity
options for our passengers.
* We intend to maximize our revenue and fleet utilization by seeking
additional opportunities to carry revenue-earning cargo and other ancillary
revenues.
* We intend to acquire additional aircraft and expand our fleet during 2008.
Summary of Results
Half Year Ended 30-Jun-07 30-Jun-06 % Change
Scheduled Passengers 31,186 20,862 49%
Revenue ($000s) $27,295 $15,711 74%
Operating Loss ($000s) ($31,900) ($29,985) -6%
Loss per share ($2.05) ($3.51) 41%
First Half Operational Performance
During the first half of 2007 MAXjet delivered substantial growth in passenger
traction, capacity, and unit revenue, culminating with an 83.1% system-wide load
factor in June 2007.
Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 1st Half
Revenue Passengers 3,621 2,928 4,342 5,692 6,636 7,967 31,186
Available Seats (a) 7,962 6,338 7,032 7,632 8,580 9,656 47,200
Rev. Passenger Miles (a) 14,487 11,952 17,788 23,466 26,609 32,103 126,404
Available Seat Miles (a) 31,002 24,861 28,003 31,135 34,594 38,652 188,247
System Load Factor (a) 46.7% 48.1% 63.5% 75.4% 76.9% 83.1% 67.1%
Cumulative LF% (a) 46.7% 47.3% 52.7% 58.9% 63.0% 67.1%
RASM (b) 10.5 9.8 15.4 14.9 15.0 16.7 12.9
(a) Includes all scheduled flights marketed by MAXjet Airways but excludes
charter operations
(b) Revenue per Available Seat Mile (i.e. Unit Revenue) in US Cents
Since the end of the half-year, MAXjet has had continued strength in both
passenger counts and systemwide load factors. MAXjet carried 7,612 revenue
passengers with a 75.5% system-wide load factor in July, and 7,580 passengers
and 76.4% systemwide load factor in August. This continued strength during
traditionally slower periods of the year reflects the following:
- A consistent mix of business and leisure traffic
- Complementary demand across routes to the eastern and western United States
- Significant repeat business on specific routes and across the system
- Developing strength in the Company's brand
During the first half of 2007, MAXjet completed 472 of 482 scheduled departures
for a 98% completion factor. Of the 472 completed flights in the period, 95
departures were delayed more than 30 minutes due to mechanical, weather or
air-traffic control factors, resulting in an 80.5% on-time performance rate.
Route & Yield Development
The Directors have pursued a route strategy based on diversification of our
network rather than increasing daily departures in existing markets. By June
2007 MAXjet operated in three scheduled markets (between London and New York,
Washington and Las Vegas) and had announced the launch of its fourth route to
Los Angeles, which subsequently commenced service on 30 August. In addition,
the Company announced the launch of a fourth weekly service to Las Vegas
commencing 2 September 2007 and daily service to New York (increasing from six
weekly flights) commencing 20 October 2007.
The Directors have pursued a fare strategy that avoids fuel surcharges and other
hidden fees in favor of transparent fares that are easily distributed through
offline and online channels. In response to escalating fuel prices, MAXjet has
implemented measured fare increases and has tightened low-end inventory
availability.
During the first quarter of 2007 the Company tested customer elasticity at both
the high and low ends of its pricing spectrum. By closing and opening low-end
inventory in isolation the Company developed demand patterns across its New
York, Washington and Las Vegas markets. This demand data has enabled the
Company to record consistent improvements in both load factor and unit revenues
through the balance of 2007.
MAXjet has seen significant low-fare competition from other all Business Class
entrants in the New York market. Even with new entrants increasing discount
Business Class capacity, the Company continued to improve its unit revenues
during the first half of 2007, reflecting the Company's first mover advantage in
the low-fare Business Class space.
AIM Listing & Capital Structure
MAXjet raised $93.7 million after expenses and was admitted successfully to AIM
in June 2007. In connection with the AIM offering all preferred stock converted
to common and all debt was retired. Prior to admission the Company had
outstanding $6.8 million of preferred stock, $9.7 million of convertible debt
(Term A, including PIK interest), $30.5 million of non-convertible debt (Term B)
and a $1.5 million credit facility.
Non-cash preferred dividends of $4.6 million resulted from the conversion of
preferred stock into five million shares of common stock at a discount to the
offering price, concurrent with the closing of the AIM offering.
The outstanding Term A debt was converted into an aggregate of 4.9 million
shares. This conversion resulted in a non-cash charge of $3.8 million. The Term
B debt was repaid and unamortized discounts of $2 million were written off. The
credit facility was also repaid.
After retiring debt, the Company had $50.3 million in unrestricted cash as of 30
June 2007.
As of June 30, 2007 the Company had outstanding 68.4 million shares of common
stock, 14.6 million warrants to acquire common stock at an average of $2.19 per
share and 2.2 million stock options to acquire common stock at an average of
$2.23 per share.
Financial Accounting Standards Board Interpretation No. 46, "Consolidation of
Variable Interest Entities," requires that if an enterprise is the primary
beneficiary of a variable interest in a Variable Interest Entity ("VIE"), then
that enterprise should include the assets, liabilities and results of operations
of the VIE in its consolidated financial statements. Effective January 17,
2007, as a result of the execution of leases for its fourth and fifth aircraft,
the Company consolidated the financial statements of the lessor, KMW 767 Leasing
SPV ("KMW Leasing"), an affiliate of the Company's Chairman, Kenneth Woolley.
This determination was based on three factors: (i) KMW Leasing is a VIE, (ii)
the Company holds a variable interest in KMW Leasing and (iii) MAXjet is the
primary beneficiary of KMW Leasing.
All intercompany transactions and balances between MAXjet and KMW Leasing have
been eliminated. The primary impact of this consolidation on the balance sheet
is a net increase in property and equipment and other assets by $27.4 million
with an offsetting $27.4 million in minority interest in Variable Interest
Entity. The impact on the Statement of Operations is to decrease aircraft lease
expense by $7.7 million, increase depreciation expense by $1.8 million and
reflect the charge of $5.9 million for minority interest in Variable Interest
Entity.
Business Highlights from 1H 2007
The Company focused on investments that would drive growth in the second half of
the year and in 2008.
Passenger and Barter Revenue. Revenue increased to $24.4 million in the first
half of 2007, up 75% from the same period of 2006. Primary drivers of
improvement were:
* An improvement in unit revenue (Revenue per Available Seat Mile, or
RASM) to 14.01 cents for the first half of 2007 versus 10.79 cents for the
same period in 2006. RASM improved to 16.7 cents in June 2007 from 10.5
cents in January 2007.
* System-wide load factor improved to 67.1% for the first half of 2007
from 51.1% in the first half of 2006. During the first half of 2007, load
factor improved to 83.1% in June 2007 from 46.7% in January.
* Passengers carried improved 49% to 31,186 passengers in the first half
of 2007 from 20,862 in 2006.
Cargo. MAXjet received approval to carry revenue cargo in October 2006. During
the first half of 2007, MAXjet qualified each of its stations to handle revenue
cargo. During the first half of 2007 MAXjet carried $0.5 million in revenue
cargo.
Charter. MAXjet's charter business performed strongly in the first half of
2007. Charter revenue grew 33% to $2.4 million. During the second half of
2007, MAXjet has focused its resources on launching Los Angeles, new frequencies
to New York and Las Vegas and ensuring availability of a spare aircraft.
Aircraft. During the first half of 2007, the Company increased its fleet size
from three to five aircraft with the lease of two long range B767 aircraft.
These aircraft were placed in modification to MAXjet specifications with one
commencing revenue service on 20 August 2007 and the second within the next 30
days. Lease expense for these two aircraft amounted to $7.7 million during the
first half of 2007 which was recorded as depreciation and minority interest due
to the consolidation of KMW Leasing.
MAXjet leases a fleet of five B767-200 aircraft. Four aircraft are currently in
revenue service and one aircraft is completing modification and will enter
service within the next 30 days. MAXjet's flight schedule can be operated with
four aircraft, and the fifth aircraft will be an operating spare. A spare
aircraft is part of the Directors' strategy to continue improving on-time
performance and minimize cancellations.
During the first half of 2007, the average operating fleet size was 3.0
aircraft, up from 1.5 aircraft for the same period in 2006.
Wages and Benefits. Crew training investments to service new routes began in
early 2007, driving an increase in overall wages and benefits to $11.4 million
from $8.7 million for the same period in 2006, in proportion to capacity
increases.
Aircraft Fuel. During the first half of 2007, MAXjet consumed 6.5 million
gallons of fuel. Total cost per gallon decreased from $2.13 in the first half
of 2006 to $2.03 in the same period of 2007. Fuel prices have approximated
$2.25 per gallon since June 30. MAXjet expects its fuel cost in the second half
of 2007 to remain in this range, with an average cost per gallon during 2007 of
approximately $2.17, assuming no further increases in the market.
Aircraft Maintenance. Overall aircraft maintenance costs increased to $3.6
million in the first half of 2007 from $2.3 million in the same period of 2006,
an increase of 56% reflecting increased operations and a larger fleet.
MAXjet reserves for heavy checks on its aircraft on a monthly basis. While cash
reserves are paid on a monthly basis, the costs associated with heavy checks are
recognized only when incurred. No heavy checks occurred during the first half
of 2006. MAXjet completed a heavy check in August 2007 and is scheduled to
conduct two heavy checks during the first half of 2008.
Marketing and Distribution. Total marketing and distribution expenditures
dropped to $2.8 million from $6.3 million in 2006. On a passenger basis,
marketing expenditure per revenue passenger flown dropped to $89 from $303. This
reflects significant repeat business and growing strength in the Company's
brand, along with marketing strategies discussed below.
Passenger Service Expenses. These expenses increased from $3.3 million in the
first half of 2006 to $7.8 million in the first half of 2007. During late May
and June 2007 one of the Company's three active B767s was out of service for an
extended period. MAXjet continued to operate all scheduled markets through this
period. MAXjet contracted with two charter airlines to operate VIP-configured
aircraft on a wet-lease basis on the Washington route. Both vendors offered
aircraft with 65 seats or fewer. As a result, in addition to wet-lease costs,
on peak days MAXjet also re-accommodated passengers on other airlines. Total
costs related to interrupted trip expenditures and sub-service were $4.1 million
in the first half of 2007, compared to $1.1 million for the same period in 2006.
Interest Expense & Other. Interest Expense and Other for the period was $11.8
million, compared to $0.4 million in 2006. Expense was primarily related to
high-coupon short-term financing that bridged the Company to its successful AIM
listing in June 2007. All debt was retired after the listing. Equity issued in
exchange for convertible notes also drove a $3.8 million non-cash expense during
the period.
Key Activities in H2 2007
Fleet Growth. The Company's fourth aircraft, a B767-200ER with auxiliary fuel
capacity and crew rest facilities, entered revenue service on 20 August 2007.
MAXjet expects the Company's fifth aircraft, a sister ship to the fourth, to
enter revenue service within the next 30 days. The fourth aircraft entered
revenue service later than anticipated, and a similar delay occurred with the
Company's fifth. Delays were driven by parts and component availability.
Continuing its strategy of planned growth, the Company is negotiating a Letter
of Intent to lease a sixth Boeing 767 aircraft. The Company has made
improvements to its aircraft acquisition processes to reduce potential
engineering- and parts-related delays for this sixth aircraft.
Product enhancements and positive trends in New York and Washington. MAXjet
significantly improved its product offering at New York JFK by changing from
Terminal One to Terminal Four. MAXjet's new Terminal Four facilities include a
secluded check-in area adjacent to the terminal entrance and a new lounge
facility with full hot meal service and ample seating. With significantly less
ramp congestion than at Terminal One, MAXjet has already seen improved taxi
times.
On 20 October 2007 MAXjet expects to increase London-New York frequency to daily
service. A new Saturday morning departure from London Stansted convenient for
business travelers will leave at 10:45am while flights on other days of the week
will depart Stansted at 2:30pm. Return flights will depart daily from JFK at 8:
15pm.
Both revenue load factor and unit revenue performance in the New York market for
2007 continue to outperform the same periods in 2006 by a significant margin.
On the Washington route, load factors and unit revenues during each month of
operation in 2007 have significantly improved compared against the same months
in 2006. The Directors are encouraged by this progress.
Washington operations have been impacted by two factors. First, the
unavailability of one of the Company's aircraft in May and June 2007, resulting
in subleased capacity with smaller aircraft on the Washington route, resulted in
a number of overbooked flights that reduced both passenger counts and route
revenue compared to expectations. Second, delays associated with the entry into
service of the Company's fourth aircraft and a concurrent heavy check on an
active aircraft resulted in a schedule reduction during early August 2007. Eight
of eleven round-trip flights that did not operate during this period were in
Washington.
Continued strength in Las Vegas and now Los Angeles. On 30 August 2007 MAXjet
launched service to Los Angeles LAX from London Stansted. Early revenues from
the Los Angeles market significantly exceeded start-up revenues experienced when
launching earlier markets. The Los Angeles service is projected to generate 20%
more revenue per flight during each of its first two full months of operation as
compared to the first two months of operation for Las Vegas. Bookings for Los
Angeles within 30 days of departure, generally the highest yielding and most
business-oriented, are significantly exceeding those seen currently in Las Vegas
and are comparable to those in New York, MAXjet's most mature and
business-oriented market.
On 2 September 2007 MAXjet increased frequency to Las Vegas, with four weekly
round-trip flights on Mondays, Thursdays, Saturdays and Sundays. Load factors
in the mid-to-high eightieth percentile have continued even with strong yield
trends.
Increasing network diversity. New services from London Stansted to Los Angeles
and Las Vegas continue to reduce MAXjet's economic risk in any one market,
consistent with the Directors' strategy of network diversification. By
September 2007, only 34% of MAXjet's scheduled departures will be between London
and New York, with 22% between London and each of Washington, Las Vegas and Los
Angeles. On an available seat mile basis, 26% of MAXjet's scheduled capacity is
planned between London and New York, with 18%, 28% and 29% between London and
Washington, Las Vegas and Los Angeles respectively.
This trend is expected to continue through the rest of 2007, with additional
frequencies planned on a systemwide basis to meet demand.
September Weekly Departures
(All figures weekly) Departures % Deps ASMs (000s) % ASMs
New York - London (a) 12 34% 3,915 26%
Washington - London 8 22% 2,720 18%
Las Vegas - London 8 22% 4,270 28%
Los Angeles - London 8 22% 4,367 28%
Total 36 100% 15,273 100%
(a) Service to New York increases to daily on 20 October 2007
Strong passenger demographics. Recent surveys of MAXjet customers indicate that
the airline continues to draw highly valued demographics. MAXjet's dominant
customer segment averages between 45 and 54 years of age and is primarily
composed of senior executives and entrepreneurs. MAXjet's passengers are as
likely to be traveling on business as on leisure (either vacation or visiting
family). 96% of MAXjet customers have already or plan to positively refer the
airline to their friends and family.
MAXjet's marketing activities through the second half of 2007 are focused on
increasing awareness in this target demographic. Through both online and
offline channels the Company is targeting this demographic through e-marketing,
business to business initiatives and partnerships with high-profile brands.
MAXjet plans to launch a new website in November 2007 with additional
self-service tools that will increase the airline's capacity to handle
significant sales growth in 2008 and beyond.
Current Trading & Prospects
MAXjet continues to benefit from its early mover advantage and proven business
model. Passenger growth continues both in existing and new markets. Unit
capacity will increase 59% in September versus August 2007 and over 100%
compared to September 2006.
The Directors have pursued a strategy of network diversification, by spreading
capacity from London across the United States, and they continue to evaluate the
best deployment of current and future assets. At the same time the availability
of an operating spare aircraft will be maintained to ensure the highest
reliability in the sector. We expect shortly to introduce additional weekly
frequencies on existing routes to meet demand.
We are seeing increased repeat business and addressing a larger market in London
than other all Business Class competitors. Revenue from UK-based passengers now
reflects a significant majority of our overall business. Even with a strong
Pound, traction with US-based customers continues to grow.
We remain focused on building our network in preparation for Open Skies. We are
strongly supportive of the initiative and have received United States Department
of Transportation approval to operate beyond London Stansted to Open Skies
points in Asia, Africa and the Middle East. A strong base of US business
combined with a schedule that optimizes connectivity and top-tier terminal
facilities at Stansted position us well to capitalize on these opportunities.
The Directors have reviewed their expectations for the current year. The
Directors are encouraged by systemwide progress in unit revenues especially
given increased competition from other all Business Class airlines in New York.
MAXjet will launch daily service from New York in October, reflecting our core
strength in both business and leisure segments. The Directors' strategy of
network diversification has provided unique opportunities in the western United
States on which MAXjet is capitalizing. To maintain first-mover advantage the
Directors expect to make further investments in these routes, and are seeking
new opportunities that build on the trends seen to date. The Directors expect
that based on the current flight schedule, plus announced capacity increases,
full-year 2007 revenues will be no less than $80 million.
Expenses have been impacted by higher-than-expected fuel prices. The late
delivery of the spare aircraft necessitated wet-leasing of aircraft and other
expenses to accommodate passengers; the Directors are confident that after the
entry into service of the fifth aircraft, within the next 30 days, these costs
will be significantly lower on an ongoing basis.
MAXjet remains the segment leader with the largest fleet, broadest route
network, largest customer base, most operational experience, and first-mover
advantage in key markets from London. The Directors remain strongly optimistic
about future prospects.
Financial Statements
Statement of Operations
Six Months Ended June 30, 2006 and 2007
Six Months Ended Six Months Ended June
June 30, 2006 30, 2007
(unaudited) (unaudited)
Operating revenues:
Passenger $ 13,243 $ 22,125
Barter 663 2,242
Charter flights 1,806 2,404
Other - 524
15,712 27,295
Operating expenses:
Wages and benefits 8,675 11,487
Aircraft fuel 10,309 13,175
Aircraft and engines leases 2,004 3,875
Handling, landing and airport fees 3,379 3,955
Aircraft maintenance 2,281 3,569
Depreciation and amortization 928 4,007
Marketing and distribution 6,314 2,785
Passenger service expenses 3,330 7,783
Other operating expenses 8,477 8,559
45,697 59,195
Operating loss (29,985) (31,900)
Other income (expense):
Interest expense (314) (6,007)
Interest income 7 229
Loss on extinguishment of debt - (5,771)
Loss on foreign currency transactions, net (91) (163)
(398) (11,712)
Net loss before minority interest in Variable - (43,612)
Interest Entity
Minority interest in Variable Interest Entity - (5,859)
Net loss (30,383) (49,471)
Preferred dividends - (4,551)
Net loss applicable to common stockholders $ (30,383) $ (54,022)
Loss per common share (basic and diluted) $ (3.51) $ (2.05)
See Notes to Financial Statements
Consolidated Condensed Balance Sheets
December 31, 2006 June 30, 2007
(unaudited)
Assets
Current assets:
Cash and cash equivalents 588 50,301
Restricted cash 1,728 4,362
Accounts and other receivables 3,525 7,483
Inventories of parts and supplies, at cost 523 799
Prepaid barter advertising 172 18
Maintenance reserves & Prepaid expenses 2,544 4,824
Total current assets 9,080 67,786
Property and equipment, at cost:
Aircraft and engines 8,864 40,989
Rotable parts 1,806 2,641
Other equipment and vehicles 4,884 5,555
15,554 49,185
Less accumulated depreciation and amortization (3,715) (7,722)
11,839 41,463
Long term portion of maintenance reserves 613 610
Deposits 4,626 1,677
Other assets 677 -
Total assets 26,835 111,535
Liabilities and Stockholder's (Deficit) Equity
Current liabilities:
Accounts payable 12,109 13,828
Accrued and other liabilities 11,017 12,169
Contingent payment obligations 3,761 -
Barter liability 5,335 3,162
Air traffic liability 6,317 18,877
Current portion of debt due to stockholders 3,832 -
Notes payable 24,088 -
Total current liabilities 66,459 48,036
Debt due to stockholders 1,578 -
Commitments and contingencies - -
Minority interest in Variable Interest Entity - 27,429
Stockholder's (deficit) equity:
Common stock, $.05 par value; 180,000,000 shares 917 3,421
authorized; 68,413,649 and 18,336,225 shares issued
and outstanding at June 30, 2007 and December 31,
2006, respectively
Capital in excess of par 75,795 204,585
Equity in consolidated Variable Interest Entity - -
Accumulated income (deficit) (117,914) (171,936)
Total stockholder's (deficit) equity (41,202) 36,070
Total liabilities and stockholder's (deficit) equity 26,835 111,535
See Notes to Financial Statements
Condensed Consolidated Statement of Cash Flows
Six Months Ended June 30, 2007 and June 30, 2006
Six Six
Months Ended Months Ended
June 30, 2006 June 30, 2007
(unaudited) (unaudited)
Cash flows from operating activities
Net loss $ (30,383) $ (49,471)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 928 4,007
Amortization of debt discount - 3,048
Amortization of deferred financing fees - 1,453
Stock compensation expense 358 500
Minority interest in Variable Interest Entity - 5,859
Loss on extinguishment of debt - 3,770
Other non-cash charges and credits 139 2,621
Changes in:
Accounts and other receivables (2,946) (3,958)
Inventories of parts and supplies, at cost (239) (276)
Prepaid expenses and other current assets (1,220) (884)
Accounts payable 664 1,719
Accrued and other liabilities 2,282 1,151
Air traffic liability 5,578 12,560
Prepaid barter advertising and barter liability 3,265 (2,017)
Aircraft/ engine maintenance reserves (1,445) (1,393)
Net cash used in operating activities (23,019) (21,311)
Cash flows from investing activities
Payments for deposits on aircraft leases and other (100) (51)
Purchases of property and equipment, net (15,124) (3,630)
Proceeds from sale of aircraft in sale/leaseback 10,121 -
transaction
Proceeds from sales of short-term investments 199 -
Increase in restricted cash (1,795) (2,634)
Net cash used in investing activities (6,699) (6,315)
Condensed Consolidated Statement of Cash Flows (continued)
Six Six
Months Ended Months Ended
June 30, 2006 June 30, 2007
(unaudited) (unaudited)
Cash flows from financing activities
Proceeds from issuance of notes payable 5,000 11,000
Repayment of notes payable - (32,425)
Distributions to investors in Variable Interest - (5,430)
Entity
Proceeds from working capital loans and other 8,400 -
financing
Repayment of working capital loans and other (5,425) (4,047)
financing
Proceeds from loan for aircraft 10,121 -
Payment of loan for aircraft (10,121) -
Proceeds from issuance of common stock, net of offering 545 102,233
costs
Proceeds from issuance of preferred stock, net of 20,532 6,784
offering costs
Payment of deferred financing fees (300) (776)
Net cash provided by financing activities 28,752 77,339
Net increase (decrease) in cash and cash equivalents (966) 49,713
Cash and cash equivalents at beginning of period 3,105 588
Cash and cash equivalents at end of period $ 2,139 $ 50,301
Cash payments for interest $ 178 $ 5,310
See Notes to Financial Statements
Notes to Financial Statements - unaudited
1. Basis of Presentation
The accompanying condensed consolidated unaudited interim financial statements
of MAXjet Airways, Inc. ("the Company" or "MAXjet") reflect all normal recurring
adjustments which management believes are necessary to present fairly the
financial position, results of operations, and cash flows of the Company for the
respective periods presented. Certain information and footnote disclosures
normally included in annual financial statements prepared in accordance with
accounting principles general accepted in the United States of America ("GAAP")
have been condensed or omitted. These condensed consolidated unaudited interim
financial statements should be read in conjunction with the audited financial
statements of the Company and notes thereto.
Financial Accounting Standards Board Interpretation No. 46 (revised December
2003) ("FIN 46R"), "Consolidation of Variable Interest Entities," requires that
if an enterprise is the primary beneficiary of a variable interest in a variable
interest entity ("VIE"), the enterprise should include the assets, liabilities
and results of operations of the VIE in its consolidated financial statements.
Effective January 17, 2007, as a result of the execution of two leases for
aircraft, the Company consolidated the financial statements of the lessor, KMW
767 Leasing SPV ("KMW Leasing"), after determining that KMW Leasing is a VIE,
the Company holds a variable interest in KMW Leasing and that MAXjet is the
primary beneficiary of KMW Leasing. All intercompany transactions and balances
have been eliminated.
The preparation of the financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
Certain prior period amounts in our condensed consolidated unaudited interim
financial statements have been reclassified to be consistent with the current
period presentation.
In May 2007, the Company's Board of Directors authorized a one-for-five reverse
split of the common stock. All references in the financial statements to the
number of shares outstanding, per share amounts, and stock option data of the
Company's common stock have been restated to reflect the effect of the reverse
stock split for all periods presented. (See Note 6 - Stockholders' (Deficit)
Equity).
On June 14, 2007, the Company raised #50.5 million (approximately $100 million)
in an initial public offering ("IPO") on the AIM Market of the London Stock
Exchange ("AIM") following the placement of 36,601,088 shares at #1.38
(approximately $2.73). In connection with this offering the Company incurred
$6.8 million in expenses, resulting in total fundraising, net of expenses, of
$93.7 million.
2. Long-Term Debt - Related Parties
In June 2006, J&K Engine Leasing, LLC, an entity that is owned by two
stockholders of the Company loaned $3 million to the Company to purchase two
aircraft engines. The loan was payable in 36 monthly payments of principal and
interest of approximately $93 thousand beginning in August 2006 with the final
payment due in July 2009. Interest accrued at a rate of 7% based on a declining
principal balance, commencing with the first payment. The aircraft engines
collateralized the loan. Under the terms of this agreement, the Company was
required to pay a commitment fee of $300 thousand payable as part of the loan.
This agreement called for a mandatory repayment of the entire amount of the loan
in the event the Company closed an equity financing of $25 million after June
30, 2006 but prior to July 1, 2009. Accordingly, the remaining loan balance was
paid in full upon completion of the AIM IPO on June 14, 2007.
On December 31, 2006, the Company signed an Amended and Restated Credit
Agreement (the "Agreement") with existing and new lenders that became effective
on January 12, 2007 following a required equity financing of at least $7 million
as described below. Additionally, the Agreement was amended in April 2007 to
extend the maturity date of the loans, as well as other modifications ("April
Amendment"). The amended terms are listed below.
The Agreement consisted of segmented terms as follows:
* Term A Loans consisting of $9 million in new financing with an option
to increase borrowings by an additional $2 million; and
* Term B Loans consisting of; (i) senior unsecured notes in the amount
of $27 million issued in September 2006; (ii) an additional note for $2
million with the same terms as the senior unsecured notes; and, (iii) $1.5
million of the $3 million loan received in July 2006 from two stockholders of
the Company used as a deposit to secure the purchase of two aircraft (see
Note 3 - Leases, Including Leases with Related Parties).
Thus, the Agreement covered $11 million of new debt (with a provision to
increase this amount by $2 million) and $28.5 million of existing debt.
The Loans were amended to bear interest at 18.5% as follows: "Until the earlier
of (i) the date of the Qualified IPO and (ii) June 30, 2007, Interest on the
Term B Loans shall cease to bear cash interest on the unpaid principal amount
thereof and such Loan shall instead bear payable-in-kind interest ("PIK
Interest") on the unpaid principal amount thereof at a rate of 18.5% per annum,
which PIK Interest shall accrue and be added and capitalized to the principal
outstanding balance of such Loan on a monthly basis."
The April Amendment changed the maturity from September 1, 2007 to the
following:
"The Maturity Date for the Loans shall be extended from September 1, 2007 to one
year and one day following the date of a Qualified IPO; provided, that if the
Borrower has not completed a Qualified IPO on or prior to December 31, 2007,
then the Maturity Date shall be December 31, 2007."
Both the Term A and Term B Loans could be repaid at any time without penalty.
The loans required repayment under any of the following circumstances 1) a net
asset sale exceeding $500 thousand (asset sales less than $500 thousand do not
trigger mandatory repayment if the funds of the asset sale are reinvested in the
Company); 2) receipt of net insurance/condemnation proceeds (proceeds less than
$500 thousand do not trigger repayment if the proceeds are reinvested in the
Company); 3) upon change of control for Term B Loans; 4) upon new debt in excess
of $2 million other than permitted debt.
If the Company were to complete a qualified IPO that resulted in gross cash
proceeds of at least $30 million, the Term A Loans including interest would
automatically convert into the securities offered at the IPO at 75% of the
offering price and then reducing by 1.5% per month if not consummated by May 1,
2007. If the Company did not raise $30 million at IPO, then the Term A lenders
could elect to convert their loans into the security offering in the IPO on
specified terms. Term A lenders also had the option to convert their loans into
common stock of the Company upon a substantial sale of the Company.
The IPO event was defined as follows: "Qualified IPO" means an initial public
offering of the Borrower's Securities (either in (i) connection with a listing
on the AIM market of the London Stock Exchange, (ii) pursuant to an effective
registration statement filed with the Securities and Exchange Commission in
accordance with the Securities Act with a listing on any public equity market or
(iii) a listing on any other public equity market) which provides minimum net
proceeds (together the net proceeds of any Concurrent Private Offering in the
United States) to the Borrower of at least $30 million. "Concurrent Private
Offering" shall mean a private securities offering in the United States of the
same Securities offered by the Borrower in the IPO occurring within 3 months of
the IPO."
Upon such event, the Company had a mandatory obligation to prepay a portion of
the loan to those electing such prepayment as follows: "Borrower shall use 30%
of the net proceeds of the first $50 million of a Qualified IPO and 50% of the
net proceeds of a Qualified IPO over $50 million to prepay the Lenders electing
to be prepaid pursuant to such Section subject to compliance with any Qualified
IPO working capital requirements of the AIM market."
Prior to closing the Agreement, the Company was required to meet several
conditions precedent including perfecting the Term A lenders security interest
and a capital contribution of at least $7 million from the Company's equity
holders.
Additionally the April Amendment required that the Company raise a minimum of
$500 thousand in preferred equity within 60 days of the signed amendment.
The Agreement called for compliance with a series of affirmative covenants that
required regular financial reviews as well as financial covenants that required
certain minimum cash balances and limits on capital expenditures. Term A Loans
were secured by all of the Company's assets and, in the case of assets that were
already secured the Term A lenders had second priority security interest.
On June 14, 2007, MAXjet completed the AIM IPO, thus triggering a mandatory
conversion at the applicable conversion rate per the Term A loan agreement. The
loan balance of $9.7 million, including PIK interest, was converted at
approximately $1.97 per share based upon the terms of the agreement.
Accordingly, the note holders received 4,928,911 shares of common stock of the
Company upon completion of the AIM IPO. Upon conversion of the Term A Loans the
Company recorded loss on extinguishment of debt and additional paid in capital
of $3.8 million.
Term B loans consisting of $28.5 million in financing issued in 2006 and $2
million issued in January 2007 in connection with the Agreement were paid in
full in the amount of $32.4 million, including PIK interest, with the proceeds
from the offering.
Additionally, the Company repaid $1.5 million of a $3 million loan received from
two stockholders of the Company in July 2006, plus accrued interest, upon
completion of the AIM IPO (see Note 3 - Leases, Including Leases with Related
Parties).
Unamortized discounts of $2 million resulting from the allocation of a portion
of the proceeds from the Term B Loans to warrants issued in connection with such
loans were written off at the time of debt repayment and treated as a loss on
the extinguishment of debt.
As of June 30, 2007, there were no outstanding loans and therefore there were no
aggregate annual principal maturities for the subsequent five-year period.
3. Consolidation of Variable Interest Entity
In July 2006, MAXjet paid a $3 million deposit to an affiliate of Marathon
Capital (a third party) related to the planned purchase of two Boeing 767 200ER
aircraft. In January 2007, KMW Leasing (an affiliate of Kenneth M. Woolley,
MAXjet's Chairman) acquired the company that owned those aircraft for
approximately $27 million and entered into agreements to lease the two aircraft
to MAXjet. As a lease inception fee, MAXjet issued 426,357 shares of common
stock valued at $1.65 million to the owners of KMW Leasing. The initial term of
the lease agreements expired on March 31, 2007 and was subsequently amended to
expire on October 30, 2007.
The Company has the right under the lease agreements to purchase the aircraft
for the greater of the lessor's costs or the appraised value of the aircraft
(the "Call Option"). In addition, the lessor can require the Company to
purchase the aircraft for $13.5 million, plus defined lessor costs, on or before
September 15, 2007, but not earlier than September 10, 2007 (the "Put Option").
The Company can elect to reject the Put Option by paying a fee of $1 million per
aircraft.
The Company has determined KMW Leasing to be a variable interest entity as
defined by FIN 46R and that the assets, liabilities and results of operations of
KMW Leasing must be included in its consolidated financial statements. The
determination was made based on the following analysis:
a. KMW Leasing is considered to be a variable interest entity with regard to
MAXjet because the Put Option provision in the agreements between MAXjet and KMW
Leasing may cause MAXjet to absorb a portion of the expected losses of KMW
Leasing;
b. MAXjet holds a variable interest in KMW Leasing because the put option
represents a variable interest in KMW Leasing's expected gains or losses; and,
c. The Company is the primary beneficiary of KMW Leasing because of the
principal-agency relationship between MAXjet and the related-party owners of KMW
Leasing and KMW Leasing, through the wording and spirit of the lease agreements,
is designed solely to provide the Company with the Aircraft it leases and would
not otherwise exist.
The two aircraft constitute substantially all of KMW Leasing's assets. KMW
Leasing has no outstanding obligations to third parties as of June 30, 2007. In
connection with consolidation, the Company has reclassified the $3 million
deposit as an additional cost of the aircraft.
4. Preferred Stock
In April and May of 2007, the Company issued 4,392,580 shares of Series A-1
Convertible Preferred Stock ("Series A-1"), par value $.01 per share, to
accredited investors pursuant to a Private Placement Memorandum ("PPM"), in
exchange for $6.8 million net of financing costs of $74 thousand. Additionally,
in connection with this PPM, the Company issued 31,612 Series A-1 shares to a
broker as a commission.
In accordance with EITF Topic D-98 "Classification and Measurement of Redeemable
Securities", since the Series A-1 has a conditional cash redemption provision,
the preferred stock was recorded as temporary equity.
In connection with the completion of the AIM IPO on June 14, 2007, all Series
A-1 shares were converted into common shares under a mandatory conversion
feature. The shares of common stock issued were calculated using the mandatory
conversion formula for the Series A-1 shares that determines the conversion
price as the lower of (i) the original conversion price of $3.875 or (ii)
Liquidation preference of $1.55 per share divided by 50% of the AIM IPO Price.
The liquidation preference of $1.55 per share divided by 50% of the AIM IPO
share price ($1.135) was substantially less than the original conversion price
and thus became the conversion price yielding 5,019,905 shares of common stock
in exchange for all outstanding Series A-1 shares.
In accordance with EITF No. 98-5 "Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios" and
EITF No. 00-27 "Application of Issue No. 98-5 to Certain Convertible
Instruments", the Company considered whether there was a beneficial conversion
feature embedded in the Series A-1 shares and whether the conversion feature
represented an embedded derivative subject to bifurcation under SFAS 133
"Accounting for Derivative Instruments and Hedging Activities". Based on
analysis performed by the Company, it was determined that the conversion feature
did not represent an embedded derivative but that there was a contingent
beneficial conversion feature. As a result, upon conversion of the Series A-1
shares, the Company recognized additional paid in capital and a deemed preferred
stock dividend of $4.6 million representing the value of the conversion feature
calculated pursuant to EITF No. 00-27
5. Commitments and Contingencies
Various lawsuits and claims and contingent liabilities arise in the ordinary
course of the Company's business. The ultimate disposition of certain of these
contingencies is not determinable at this time. The Company's management
believes there are no current outstanding matters that will materially affect
the Company's financial position or results of operations.
6. Stockholders' (Deficit) Equity
In addition to the funds raised in the AIM IPO (See Note 1 - Basis of
Presentation), the following equity transactions were completed for the six
months ended June 30, 2007:
One-for-five Split of the Common Stock
On May 18, 2007, the Company's Board of Directors authorized a one-for-five
reverse split of the common stock, which has been given retroactive effect in
the accompanying financial statements. The par value per share was adjusted
from $0.01 to $0.05.
Common Stock
In January 2007, as required by the Amended and Restated Credit Agreement
discussed above (see Note 2 - Long-Term Debt - Related Parties), the Company
issued 1,737,859 shares of common stock at $3.87 per share for total proceeds of
$6.7 million. The Company also provided an immediate second round of equity
financing wherein participating holders could purchase their pro rata share of
any additional shares at $2.00 per share. In this second round, the Company
issued an additional 313,391 shares of common stock in exchange for $627
thousand. Thus the total equity financing resulted in 2,051,250 shares issued
for $7.4 million.
As discussed in Note 2- Long-term Debt - Related Parties, upon completion of the
AIM IPO, the Term A loans in the amount of $9.7 million were converted into
4,928,911 shares of common stock based upon the terms of the loan agreement.
As discussed in Note 4 - Preferred Stock, upon completion of the AIM IPO
4,424,192 shares of Series A-1 preferred stock were converted into 5,019,905
shares of common stock based upon the terms of the preferred stock agreement
Contingent Securities Exchange
In the conversion of notes payable into common stock in May 2005, certain
stockholders (the "Contingent Holders") retain (i) contingent payment rights to
receive an aggregate of $6 million in cash upon the trigger event of the sale of
$50 million of Series A Preferred Stock and (ii) contingent warrants to purchase
common stock with an aggregate exercise price of $6 million (the "Contingent
Securities").
In January 2007, the Company offered Contingent Holders the right to exchange
each Contingent Holder's Contingent Securities for such holder's pro rata share
of 1.05 million shares of common stock at $3.87 per share (the "Contingent
Securities Exchange"). Contingent Holders elected to participate in the
Contingent Securities Exchange and the transaction was completed in January
2007.
Warrants
Warrants issued (i) in connection with Term B loans ($30.5 million) (see Note 2-
Long-Term Debt - Related Parties), and (ii) to a stockholder in relation to a
collateralized note issued in July 2006 ($1.5 million) are exercisable, either
in whole or in part, until expiration dates ranging from July to December 2011,
at an exercise price contingent upon a completed IPO. The contingent exercise
price was equal to 80% of the IPO offering price.
Effective June 14, 2007, upon the successful completion of the AIM IPO, the
contingency was resolved and the warrants became exercisable at 80% of the AIM
IPO offering price, or #1.10 (approximately $2.18).
Additionally, three individuals hold outstanding warrants issued in 2004 which
are exercisable, either in whole or in part, until June 16, 2014. The warrant
holders are entitled to acquire a number of Preferred Shares upon exercise of
the warrants up to a quantity equal to $230 thousand. These warrants become
exercisable immediately prior to the closing of the Company's 'initial public
offering' (for the purposes of these 2004 Warrants, 'initial public offering'
does not include admission of the Company's shares to AIM) for the number of
Common Shares into which the Preferred Shares issuable pursuant to the warrants
would then be converted.
7. Statements of Cash Flows - Supplemental Disclosures of
Non-Cash Investing and Financing Activities
In January 2007, the Company issued 1,050,000 shares of common stock in exchange
for contingent payment rights and related warrants.
In connection with the Company's consolidation of KMW Leasing, the Company
recorded approximately $27 million in property and equipment and equity.
In June 2007, the Company converted 4,424,192 shares of preferred stock to
5,019,905 shares of common stock.
In June 2007, the Company converted Term A Loans of $9.7 million to 4,928,911
shares of common stock.
In June 2007, the Company recorded a deemed dividend of approximately $4.6
million in connection with a beneficial conversion feature related to the Series
A Preferred Stock.
During the six months ended June 30, 2007, the Company amortized approximately
$1.5 million in deferred financing fees..
In April 2006, $500 thousand in working capital advances from a related party
was converted to 645,995 shares of Series A Convertible Preferred at $0.774 per
share.
8. Share-Based Compensation
Stock Options
The Company accounts for share-based employee compensation arrangements in
accordance with the provisions of SFAS No. 123(R), Shared-Based Payment
(Revised) and Staff Accounting Bulletin No. 107, Share Based Payments. Under
SFAS 123(R), compensation cost is calculated on the date of the grant and then
amortized over the vesting period. The fair value of each stock option granted
is estimated on the grant date using the Black-Scholes option pricing model
using the following assumptions: common stock value on the grant date, risk-free
interest rate, expected term, expected volatility, and dividend yield.
In April 2007 the Board of Directors adopted and the shareholders of the Company
approved the MAXjet Airways, Inc. 2007 Stock Incentive Plan (the "2007"
Plan).The Board resolved to set aside 10,000,000 shares for issuance under the
Plan. Under the Plan, employees of the Company are eligible for the grant of
incentive stock options and employees, consultants and outside directors are
eligible for the grant of non-qualified stock options or the award or sale of
shares of Common Stock. The exercise price of stock options granted under the
Plan will be determined by the Board of Directors but will not be less than the
fair value of the underlying common stock on the date of grant. The term of an
option will be set forth in each stock option agreement but will not exceed ten
years from the date of grant. For grants to individuals owning more than 10% of
total outstanding voting power of the Company, such term will not exceed five
years from the date of grant. Upon termination of employment, the vested
portion of an employee's options will expire three months after termination.
The Company issued 1,920,110 options to employees that vest 25% one year from
the date of grant and ratably over the next three years, and 280,000 options to
employees and non-employees that vest immediately. Those options that vest
immediately are subject to a 14 month restriction period before they can be
exercised. The Company has not granted any other stock options to date under
this plan. The valuation assumptions used are noted in the following table:
Six Months Ended
Black Scholes Assumptions 30-Jun-07
Risk-Free Rate Of Return (1) 4.57% - 4.59%
Expected Dividend Yield 0
Expected Volatility (2) 53.00%
Expected Term (in years) (3) 4.1 - 7
Weighted Average Expected Forfeitures 15%
Fair Value Weighted Average 93%
1) The risk-free interest rate is based on the implied yield available on
U.S. Treasury constant maturity interest rates whose term is consistent with the
expected life of the stock options.
2) The expected volatility is based upon an independent valuation report.
3) The expected life of the options represents the estimated period from
grant until exercise and is based upon the average of the vesting term and the
original contractual term, which represents the Company's best estimate as there
is no historical evidence
A summary of option activity as of June 30, 2007, and changes during the period
ended is presented below:
Six Months Ended June 30, 2007
Options Weighted-average Weighted-Average
Exercise Price Remaining
Contractual Term
Granted 2,200,110 2.23 7
Exercised 0 0 0
Forfeited or expired 0 0 0
Outstanding at June 30, 2007 2,200,110 2.23 4.71
Vested 280,000 2.58 5.69
Excercisable 0 0 0
The weighted-average grant-date fair value of options granted during the six
months ended June 30, 2007 was $0.93. The total fair value of options exercised
during the six months ended June 30, 2007 was $0.
As of June 30, 2007, there was $1,133 thousand of total unrecognized
compensation cost related to nonvested share-based compensation arrangements
granted under the Plan. That cost is expected to be recognized over a
weighted-average period of 4.57 years. The total fair value of shares vested
during the years ended June 30, 2007 was $305 thousand.
Restricted Stock
Under the Plan, the Board is also authorized to grant restricted stock at a
purchase price to be determined by the Board but not less than the fair value of
the stock. Awards of restricted stock will be subject to established forfeiture
conditions, rights of repurchase, rights of first refusal and other transfer
restrictions as determined by the Board.
Pursuant to the terms of the Plan dated April 5, 2007, the Company issued
1,250,000 shares of restricted stock that vest ratably over three years at each
anniversary date of the grant. The Company measured the fair value of the stock
on the date of grant at $1.40 per share based on valuation provided by an
independent appraisal. As of June 30, 2007 there are no shares vested.
9. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The components of
deferred tax assets and liabilities at December 31, 2006 and June 30, 2007 are
as follows:
December 31, 2006 June 30, 2007
Deferred tax assets (liabilities):
Difference in financial reporting for - -
Depreciation and amortization 857 (792)
Bad debt expense 62 -
Accrued payroll and vacation (36) (180)
Prepaid expenses (1,012) (1,877)
State tax accrual - -
Accrued straight line rent - 1
Start-up costs 34,978 34,978
Net operating loss carryforward 12,228 34,574
Total deferred tax asset, net 47,077 66,704
Valuation allowance (47,077) (66,704)
Net deferred tax asset - -
There is no provision for income taxes for the periods December 31, 2006 and
June 30, 2007.
For the six months ended June 30, 2007, the Company generated a tax net
operating loss of $56 million for federal income tax purposes. As of June 30,
2007, the Company had federal tax net operating loss carry forwards of
approximately $87 million that can be carried to future years, subject to normal
limitations. The tax net operating losses begin to expire for federal and state
income tax purposes in 2023. For financial statement purposes, a valuation
allowance has been recognized to reduce the deferred tax asset associated with
the Company's federal and state income tax net operating loss carry forwards as
realization of such assets is presently not more likely than not. The Company's
ability to utilize net operating loss carry forwards may be limited upon the
occurrence of certain events, including significant changes in ownership
interests, as defined in Section 382 of the Internal Revenue Code. As a result,
the Company may be limited as to the amount of net operating loss carry forward
that may be utilized in subsequent years because of the potential Section 382
limitations. It is Management's intention to review the potential application
of Section 382 prior to the Company's utilization of any such losses to ensure
the integrity of such losses is reasonably assured.
The effective tax rate on income before income taxes differed from the federal
income tax statutory rate for the following reasons:
Six Months Ended June 30,
2006 2007
Tax at statutory U.S. tax rates (10,634) (17,315)
Nondeductible items:
Permanent items 10 70
State income tax benefits, net of (1,445) (2,385)
Federal benefit
Other - Adjustment of state tax rate 31 -
Valuation allowance 12,038 19,630
Total income tax provision - -
In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (FIN
48), which clarifies the accounting and disclosure associated with certain
aspects of recognition and measurement related to accounting for income taxes.
The Company adopted FIN 48 in January 2007. There is no impact to the Company's
financial statements as a result of the implementation of FIN 48.
The Company files U.S. Federal, state and local income tax returns. With a few
exceptions, the Company is no longer a subject to U.S. Federal, state and local
tax examinations by tax authorities for years ending on or before December 31,
2003. The Company has not made any cash tax payments as of June 30, 2006 and
2007.
10. Net Loss Per Share
The following table shows how the Company computed basic and diluted loss per
common share for the six months ended June 30, 2006 and 2007 after the effects
of a one-for-five reverse stock split:
2006 2007
Numerator:
Net loss $ (30,383) $ (49,471)
Preferred dividends (107) (4,551)
Net loss applicable to common $ (30,490) $ (54,022)
stockholders
Denominator:
Weighted-average shares outstanding for 8,698 26,327
basic loss per share
Effect of dilutive securities
Stock options and restricted stock - -
grants
Warrants - -
Debt & equity issues convertible into - -
common stock
Adjusted weighted-average shares 8,698 26,327
outstanding and assumed conversions for
diluted loss
Loss per share $ (3.51) $ (2.05)
In accordance with the Statement of Financial Accounting Standards No. 128:
"Earnings per Share", no potential common share is included in the diluted per
share earnings or loss computation if it is anti-dilutive. When a Company
reports a loss, the effect of including potential common shares is
anti-dilutive.
For the six months ended June 30, 2006, the Company did not include the per
share effect of 2.8 million of potential common shares related to Convertible
Notes Payable, 2.8 million shares of potential common shares related to
Convertible Preferred Stock and 1.3 million potential common shares associated
with Warrants.
For the six months ended June 30, 2007, the Company did not include the per
share effect of 1.2 million of potential common shares related to Warrants, 220
thousand of potential common shares related to stock options, and 1.5 million of
potential common shares related to the Series A-1 Preferred Stock before
conversion on June 14, 2007. The effect of converting the Series A-1 Preferred
Stock in June 2007 has been included in the basic earnings per share above and
is discussed further in Note 6 - Stockholders' (Deficit) Equity - Common Stock.
11. Segment Reporting
Air transportation services accounted for all the Company's operations in the
six month periods ended June 30, 2006 and 2007. Accordingly, segment
information is not provided.
12. Recently Issued Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS
No. 157"). SFAS No. 157 establishes a framework for measuring fair value, and
expands disclosure about fair value measurements. SFAS No. 157 does not require
any new fair value measurements; rather it specifies valuation methods to be
applied when fair value measurements are required under existing or future
accounting pronouncements. SFAS No. 157 is effective for fiscal years beginning
after November 15, 2007, and interim periods within those financial years.
Early application of statements is encouraged. The effect, if any, of adopting
SFAS No. 157 on the Company's financial position and results of operations has
not been finalized.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No 115 ("SFAS No. 159"). SFAS No. 159 permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. The objective is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. Additionally, SFAS No. 159 establishes presentation and disclosure
requirements designed to facilitate comparisons between entities that choose
different measurement attributes for similar types of assets and liabilities.
This accounting standard is effective for financial statements issued for fiscal
years beginning after November 15, 2007, with early adoption permitted. The
Company will adopt SFAS No. 159 in fiscal year 2008 and is currently evaluating
what impact, if any SFAS No. 159 will have on its financial position or results
of operations.
13. Subsequent Events
On July 24, 2007, the Company granted an additional 1,720,360 stock options to
employees at a strike price of $2.73 subject to a four-year vesting period from
the date of grant.
On August 1, 2007, the Company paid $900,000 to KMW Leasing II to purchase a
Pratt & Whitney JT9D-7R4E4 Aircraft Engine with EIN 716808.
Forward Looking Statements
This news release contains statements of a forward-looking nature relating to
future events or financial results of MAXjet Airways, Inc. Readers are cautioned
that such statements are only predictions and actual events or results may
differ materially. In evaluating such statements, investors should specifically
consider the various factors that could cause actual events or results to differ
materially from those indicated from such forward-looking statements. These
include: the ability to obtain additional financing or refinancing as may be
required; the ability to achieve and maintain profitable operations; the ability
to attract new customers; the ability to successfully implement our business
strategy; the ability to commence service in new markets on a timely basis and
to ramp usage by customers in accordance with our expectations; and significant
competition.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR IFFVVAVIDLID
Maxjet (LSE:MAXJ)
과거 데이터 주식 차트
부터 5월(5) 2024 으로 6월(6) 2024
Maxjet (LSE:MAXJ)
과거 데이터 주식 차트
부터 6월(6) 2023 으로 6월(6) 2024
