Note Payable |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note Payable | 4. NOTE PAYABLE
On August 2 and December 21, 2023, the Company consummated the placement of $35 million and $0.7 million, respectively, of senior secured notes due 2029 (the “Secured Notes”).
The terms of the Secured Notes include: • a term of 6 years and maturity date of June 30, 2029 with no principal payments due until maturity date; • the notes bear interest at a fixed rate of 15% per annum and include an upfront fee of 2% of the principal payment; • the Company is permitted to prepay all (but not less than all) of the notes beginning on July 1, 2025 subject to a redemption premium of (i) 7.5% of the principal to be redeemed on or prior to August 2, 2026, (ii) 5.0% of the principal to be redeemed after August 2, 2026 and on or prior to August 2, 2027, (iii) 2.5% of the principal to be redeemed after August 2, 2027 and on or prior to August 2, 2028, (iv) 0% of the principal to be redeemed after August 2, 2028; • the investors were granted 10 million warrants, each exercisable into one share of Class A common stock at an exercise price of $1.00 per share, with such warrants expiring on June 30, 2030; • each of the Company's material subsidiaries guaranteed the notes; • the notes and the related guarantees are secured by a lien on substantially all of the property and assets of the Company and the guarantors of the notes. • financial covenants requiring minimum adjusted EBITDA of (i) $5,000,000 for the fiscal year ended December 31, 2023, (ii) $15,000,000 for the fiscal year ended December 31, 2024 and (iii) $25,000,000 for the fiscal year ending December 31, 2025; • minimum liquidity of $5,000,000 measured at each quarter end; and • collateral of substantially of all the Company's assets.
The Company determined that the terms of the warrants issued in the financing require the warrants to be classified as equity. Accordingly, upon issuance, the Company recorded debt issuance costs of $3.8 million related to the warrants along with a corresponding credit to additional paid in capital. As the warrants are classified as equity warrants the Company will not remeasure the warrants each accounting period.
The debt issuance costs resulting from the warrants along with other direct costs of the financing will be amortized to interest expense using the effective interest method.
Related to issuance of Secured Notes of $0.7 million on December 21, 2023, the Company and the purchasers of the Secured Notes amended the original placement of $35 million of the Secured Notes to allow for the sale of an additional $5 million senior secured notes due 2029 to current purchasers and the total warrants increased by 142,874 warrants with an exercise price of $1.00 per warrant. The net proceeds from the sale of the additional notes were used to repurchase $4.3 million principal amount of Secured Notes from a current purchaser of the Secured Notes plus payment of accrued interest due of $251,000, with the remaining balance used for general corporate purposes, including the transaction expenses and deposits to expand its current fleet of aircraft. No other substantial modification to the terms of the $35 million Secured Notes from August 2, 2023 was made in the issuance of the additional notes.
Notes Payable is comprised of the following in thousands:
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