FLYEXCLUSIVE INC

Previous wording

flyExclusive is a premier owner and operator of curated private aviation experiences dedicated to surpassing passenger expectations for quality, convenience, and safety. Our mission is to be the world’s most vertically integrated private aviation company through capital-efficient program growth, an industry-leading pricing model, optimal dispatch availability, in-house training, and a controlled premium customer experience on modernized aircraft. As of March 31, 2024, we had 100 aircraft in our owned and leased fleet that includes light, midsize, super-midsize, and large jets. As one of the nation’s largest Citation operators, flyExclusive has curated a versatile fleet of Citation CJ3 / CJ3+, Citation Excel / XLS / XLS+, Citation Encore+, Citation Sovereign, Citation X, and Challenger 350 aircraft. The introduction of Gulfstream aircraft into flyExclusive’s fleet in 2020, opened up the opportunity for flyExclusive to expand its footprint internationally. We have a long track record of success and growth across a full range of industry services. Our core competitive advantage is the purpose-built, in-house control of decisions and processes needed to operate a successful private aviation company through a range of market environments.

Current wording

flyExclusive is a premier owner and operator of curated private aviation experiences dedicated to surpassing passenger expectations for quality, convenience, and safety. Our mission is to be the world’s most vertically integrated private aviation company through capital-efficient program growth, an industry-leading pricing model, optimal dispatch availability, in-house training, and a controlled premium customer experience on modernized aircraft. As of June 30, 2024, we had 93 aircraft in our owned and leased fleet that includes light, midsize, super-midsize, and large jets. As one of the nation’s largest Citation operators, flyExclusive has curated a versatile fleet of Citation CJ3 / CJ3+, Citation Excel / XLS / XLS+, Citation Encore+, Citation Sovereign, Citation X, and Challenger 350 aircraft. We have a long track record of success and growth across a full range of industry services. Our core competitive advantage is the purpose-built, in-house control of decisions and processes needed to operate a successful private aviation company through a range of market environments.

Previous wording

We have a diversified and evolving business model generating charter revenue through our jet club membership program, our guaranteed revenue program (“GRP”), our fractional program, and our maintenance, repair, and overhaul (“MRO”) program. Our chief operating decision maker, who is our chief executive officer, reviews our financial information presented on a consolidated basis, and accordingly, we operate under one reportable segment, which is charter aviation services.

Current wording

We have a diversified and evolving business model generating charter revenue through our jet club membership program, guaranteed revenue program (“GRP”, which ended in June 2023), fractional program, and maintenance, repair, and overhaul (“MRO”) program. Our chief executive officer and chief financial officer review the financial information presented on a consolidated basis, and accordingly, we operate under one reportable segment, which is charter aviation services.

Previous wording

Jet club revenue is generated from flight operations as well as membership fees. Jet club members are guaranteed access to our fleet of light, midsize and super-midsize aircraft. New members pay a minimum deposit of $100 thousand up to a maximum of $500 thousand depending on their level of membership. Membership levels determine the daily rate a member is charged for future flights. Membership and incidental fees are also applied against a member’s account. The initial and all subsequent deposits to replenish the member’s account are non-refundable.

Current wording

Jet club revenue is generated from flight operations as well as membership fees. Jet club members are guaranteed access to our fleet of light, midsize and super-midsize aircraft. New members pay a minimum deposit of $0.1 million up to a maximum of $0.5 million depending on their level of membership. Membership levels determine the daily rate a member is charged for future flights. Membership and incidental fees are also applied against a member’s account. The initial and all subsequent deposits to replenish the member’s account are non-refundable.

Previous wording

GRP revenue is derived from contracts with wholesale customers whereby the customer commits to utilize a specified minimum number of hours per quarter in exchange for guaranteed access to aircraft. Each aircraft requires a deposit that is recorded on the balance sheet. Revenue is billed weekly and guaranteed based on contract rates for light, midsize, and super-midsize aircraft. Contract terms allow us to bill for ancillary services based on the circumstances of a flight. Rates are assessed each quarter to account for changes in fuel cost. We did not derive any revenue from GRP during the second half of the year ended December 31, 2023 or three months ended March 31, 2024 and we do not anticipate future revenue from GRP. See discussion of the termination of the GRP Agreement in the following section.

Current wording

GRP revenue is derived from contracts with wholesale customers whereby the customer commits to utilize a specified minimum number of hours per quarter in exchange for guaranteed access to aircraft. Each aircraft requires a deposit that is recorded on the balance sheet. Revenue is billed weekly and guaranteed based on contract rates for light, midsize, and super-midsize aircraft. Contract terms allow us to bill for ancillary services based on the circumstances of a flight. Rates are assessed each quarter to account for changes in fuel cost. We did not derive any revenue from GRP subsequent to June 30, 2023 and do not anticipate future revenue from GRP. See discussion of the termination of the GRP Agreement in the following section.

Previous wording

On June 30, 2023, we served WUP a Notice of Termination of the parties’ Fleet Guaranteed Revenue Program Agreement, dated November 1, 2021 (the “GRP Agreement”). As a result of the termination, we do not believe that the GRP program will generate revenue following the date of the GRP Agreement’s termination, which had a material impact on the financial statements for the year ending December 31, 2023. For some time prior to the termination of the GRP Agreement we were planning, for the strategic reasons of avoiding excessive reliance on a single customer and shifting towards focusing on wholesale and contractual retail customers, to scale down business with WUP, and we had already reflected scaled down revenue accordingly in our publicly disclosed projections, with GRP revenue expected to total only 1.5% of total forecasted revenue for fiscal year 2024. However, the termination of the GRP Agreement will have a material impact on the financial statements beyond 2023 until we are able to successfully effectuate this planned strategic shift and replace the revenue lost from the termination of the GRP Agreement. Additionally, as of June 27, 2023, WUP accounted for $15.7 million in receivables, which was a significant majority of total receivables at that time. When the agreement with WUP was terminated on June 30, 2023, the receivable balances were eliminated, as allowable under relevant accounting standards, by being applied against existing deposits held under the GRP Agreement. The GRP Agreement provided for an orderly draw down period of the designated aircraft at a maximum of two aircraft per month. The Company submitted a bill for monies due under the GRP Agreement during the draw down period through July 31, 2024. Billed but unrecorded amounts through March 31, 2024 totaled $59.0 million.

Current wording

On June 30, 2023, we served WUP a Notice of Termination of the parties’ Fleet Guaranteed Revenue Program Agreement, dated November 1, 2021 (the “GRP Agreement”). As a result of the termination, we do not believe that the GRP program will generate revenue following the date of the GRP Agreement’s termination, which had a material impact on the financial statements for the year ending December 31, 2023. For some time prior to the termination of the GRP Agreement we were planning, for the strategic reasons of avoiding excessive reliance on a single customer and shifting towards focusing on wholesale and contractual retail customers, to scale down business with WUP, and we had already reflected scaled down revenue accordingly in our publicly disclosed projections. However, the termination of the GRP Agreement will have a material impact on the financial statements beyond 2023 until we are able to successfully effectuate this planned strategic shift and replace the revenue lost from the termination of the GRP Agreement. Additionally, as of June 27, 2023, WUP accounted for $15.7 million in receivables, which was a significant majority of total receivables at that time. When the agreement with WUP was terminated on June 30, 2023 the receivable balances were eliminated, as allowable under relevant accounting standards, by being applied against existing deposits held under the GRP Agreement. The GRP Agreement provided for an orderly draw down period of the designated aircraft at a maximum of two aircraft per month. The Company submitted a bill for monies due under the GRP Agreement during the draw down period through July 31, 2024. Billed but unrecorded amounts through June 30, 2024 totaled $59.0 million.

Previous wording

See the section entitled “Risk Factors — Risks Relating to LGM - On June 30, 2023, we terminated our agreement with Wheels Up that accounted for a significant portion of our total revenues the past two years. Such termination could have an adverse effect on our business, results of operations and financial condition if we fail to materially replace the revenue derived from Wheels Up moving forward as expected”in our Annual Report on Form 10-K for the year ended December 31, 2023 and Note 23 "Commitments and Contingencies" of the notes to the condensed consolidated financial statements included elsewhere in this Report, for more information on the WUP termination.

Current wording

See the section entitled “Risk Factors — Risks Relating to LGM - On June 30, 2023, we terminated our agreement with Wheels Up that accounted for a significant portion of our total revenues the past two years. Such termination could have an adverse effect on our business, results of operations and financial condition if we fail to materially replace the revenue derived from Wheels Up moving forward as expected”in our Annual Report on Form 10-K for the year ended December 31, 2023 and Note 23 "Commitments and Contingencies" of the notes to the condensed consolidated financial statements (unaudited) consolidated financial statements included elsewhere in this Report, for more information on the WUP termination.

Previous wording

During the fourth quarter of 2023, we began the process of modernizing our fleet. Our plan is to sell a portion of our fleet that is older and replace those aircraft with newer models, which will grant our customers access to newer aircraft. In connection with this effort, within the first quarter of 2024, we recorded a portion of the Gulfstream fleet as being held for sale. We expect the fleet modernization to take place over the next two years and do not anticipate a material decline to revenue as we will replace sold models with the newer aircraft.

Current wording

During the fourth quarter of 2023, we began the process of modernizing our fleet. Our plan is to sell a portion of our fleet that is older and replace those aircraft with newer models, which will grant our customers access to newer aircraft. In connection with this effort, within the first six months of 2024, we recorded a portion of the fleet as being held for sale. We expect the fleet modernization to take place over the next two years and do not anticipate a material decline to revenue as we will replace sold models with the newer aircraft which offer increased availability and operating efficiency.

Previous wording

The CARES Act also provides an Employee Retention Credit (“ERC”) program. The goal of the ERC program is to encourage employers to retain and continue paying employees during periods of pandemic-related reduction in business volume even if those employees are not actually working, and therefore, are not providing a service to the employer. Under the Act, eligible employers could take credits up to 70% of qualified wages with a limit of $7 thousand per employee per quarter for the first three quarters of calendar year 2021. In order to qualify for the ERC in 2021, organizations generally have to experience a more than 20% decrease in gross receipts in the quarter compared to the same quarter in calendar year 2019 or its operations are fully or partially suspended during a calendar quarter due to “orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes)”

Current wording

The CARES Act also provides an Employee Retention Credit (“ERC”) program. The goal of the ERC program is to encourage employers to retain and continue paying employees during periods of pandemic-related reduction in business volume even if those employees are not actually working, and therefore, are not providing a service to the employer. Under the Act, eligible employers could take credits up to 70% of qualified wages with a limit of $7 thousand per employee per quarter for the first three quarters of calendar year 2021. In order to qualify for the ERC in 2021, organizations generally have to experience a more than 20% decrease in gross receipts in the quarter compared to the same quarter in calendar year 2019 or its operations are fully or partially suspended during a calendar quarter due to “orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes)” due to COVID-19. The credit is taken against our share of Social Security Tax when our payroll provider files, or subsequently amends the applicable quarterly employer tax filings.

Previous wording

We calculate Adjusted EBITDA as net income (loss) adjusted for (i) interest income (expense), (ii) income tax expense, (iii) depreciation and amortization, (iv) equity-based compensation, (v) public company readiness expenses, (vi) non-cash loss on assets held for sale, which represents the impairment charges recognized on assets designated for sale prior to their disposal, (vii) gain on forgiveness of CARES Act Loan, (viii) change in fair value of derivative liability, (ix) change in fair value of warrant liabilities, and (x) gain on extinguishment of debt (related to the derivative liability).

Current wording

We calculate Adjusted EBITDA as net income (loss) adjusted for (i) interest income (expense), (ii) income tax expense, (iii) depreciation and amortization, (iv) equity-based compensation, (v) public company readiness expenses, (vi) non-cash loss on assets held for sale, which represents the impairment charges recognized on assets designated for sale prior to their disposal, (vii) gain on forgiveness of CARES Act Loan, (viii) change in fair value of derivative liability, and (ix) change in fair value of warrant liabilities.

Previous wording

**LGM’s historical flight hours for the three months ended March 31, 2024 and March 31, 2023, without flight hours derived from GRP were as follows: 16,284 hours for the three months ended March 31, 2024 and 9,589 hours for the three months ended March 31, 2023.

Current wording

**The Company’s historical flight hours for the six months ended June 30, 2024 and June 30, 2023, without flight hours derived from GRP were as follows: 32,770 hours for the six months ended June 30, 2024 and 20,298 hours for the six months ended June 30, 2023.

Previous wording

***LGM’s historical hours per aircraft for the three months ended March 31, 2024 and March 31, 2023, without flight hours derived from GRP were as follows: 161.9 hours per aircraft for the three months ended March 31, 2024 and 104.4 hours per aircraft for the three months ended March 31, 2023.

Current wording

***The Company’s historical hours per aircraft for the six months ended June 30, 2024 and June 30, 2023, without flight hours derived from GRP were as follows: 333.5 hours per aircraft for the six months ended June 30, 2024 and 218.3 hours per aircraft for the six months ended June 30, 2023.

Previous wording

We define members per aircraft as members contributing to revenues divided by aircraft contributing to revenues. We use members per aircraft to control the customer experience through the management of our customer to aircraft ratio. In the first quarter of 2024, 99.0% of our customers were fulfilled on our fleet without the potential high-cost of reliance of third parties to meet demand. An optimal customer to aircraft ratio allows us to gain a competitive advantage by having sufficient aircraft available to meet member demand and be flexible to backfill unused aircraft for wholesale use.

Current wording

We define members per aircraft as members contributing to revenues divided by aircraft contributing to revenues. We use members per aircraft to control the customer experience through the management of our customer to aircraft ratio. For the six months ended June 30, 2024, 98.7% of our customers were fulfilled on our fleet without the potential high-cost of reliance of third parties to meet demand. An optimal customer to aircraft ratio allows us to gain a competitive advantage by having sufficient aircraft available to meet member demand and be flexible to backfill unused aircraft for wholesale use.

Previous wording

Other income (expense) consists of dividend income, realized gain/loss on sales of investment securities, and state tax payments.

Current wording

Other expense consists of dividend income, realized gain/loss on sales of investment securities, and state tax payments.

Previous wording

The following table sets forth our results of operations for the three months ended March 31, 2024 and 2023 (in thousands, except percentages):

Current wording

The following table sets forth our results of operations for the six months ended June 30, 2024 and 2023 (in thousands, except percentages):

Previous wording

-An increase of $1.5 million for salaries & wage related expense;

Current wording

-An increase of $2.9 million for salaries and wage related expense;

Previous wording

-An increase of $1.9 million for aircraft lease expense;

Current wording

-An increase of $2.9 million for aircraft lease expense;

Previous wording

-An increase of $1.7 million for affiliate lift expense;

Current wording

-An increase of $4.2 million for affiliate lift expense;

Previous wording

-An increase of $1.5 million in overhaul program expense; and

Current wording

-An increase of $2.9 million in overhaul program expense;

Previous wording

-An increase of $4.1 million in personnel-related expenses

Current wording

-An increase of $7.5 million in personnel-related expenses

Previous wording

-An increase of $1.7 million in bad debt expense;

Current wording

-An increase of $1.9 million in bad debt expense;

Previous wording

-An increase of $1.0 million in insurance expense

Current wording

-An increase of $2.3 million in insurance expense.

Previous wording

Other income (expense) changed by $0.9 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily as a result of a $0.6 million aircraft deposit writeoff that did not recur during the current period, a $0.3 million decrease in state taxes, and a $0.1 million decrease on realized losses related to marketable securities.

Current wording

Other expense changed by $0.6 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily as a result of a $0.2 million decrease in realized losses on securities.

Previous wording

Jet club and charter revenue increased by $23.9 million, or 47%, to $74.4 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. 149.9% of the increase in jet club and charter revenue was attributable to an increase in flight hours, partially offset by a decrease of 49.9% attributable to a decrease in effective hourly rates during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Jet club and charter revenue increased by $16.2 million, or 29%, to $72.5 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Jet club and charter flight hours increased by 52.3%, partially offset by a 15.5% decrease in effective hourly rates during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Previous wording

GRP revenue decreased by $25.0 million, or 100%, to $0 for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The decrease was due to the termination of the WUP agreement that occurred on June 30, 2023, resulting in no GRP revenue during the first quarter of 2024.

Current wording

GRP revenue decreased by $42.0 million to $0 for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The decrease was due to the termination of the WUP agreement that occurred on June 30, 2023, resulting in no GRP revenue during 2024.

Previous wording

Fractional ownership revenue increased by $3.2 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 due to fractional membership growth.

Current wording

Fractional ownership revenue increased by $3.3 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 due to fractional membership growth.

Previous wording

Maintenance, repair, and overhaul revenue increased by $0.8 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 due to an increase in in external services for outside customers.

Current wording

Maintenance, repair, and overhaul revenue increased by $1.1 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 due to an increase in external services for outside customers.

Previous wording

Cost of revenue increased by $9.0 million, or 14%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to:

Current wording

Cost of revenue increased by $7.7 million, or 12%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to:

Previous wording

Selling, general and administrative expenses increased by $9.3 million, or 58%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in selling, general and administrative expenses was primarily attributable to:

Current wording

Selling, general and administrative expenses increased by $2.9 million, or 16%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase in selling, general and administrative expenses was primarily attributable to:

Previous wording

-An increase of $1.4 million in professional fees, advertising, and marketing costs;

Current wording

-A decrease of $1.5 million in professional fees, advertising, and marketing costs;

Previous wording

-An increase of $0.2 million in rent expense; and

Current wording

-An increase of $0.2 million in bad debt expense;

Previous wording

Depreciation and amortization expenses increased by $76 or 1.2%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to an increase in depreciation expense resulting from an increase in owned aircraft.

Current wording

Depreciation and amortization expenses decreased by $0.4 million, or 5%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily due to an decrease in depreciation expense resulting from a decrease in owned aircraft.

Previous wording

Loss (gain) on aircraft held for sale changed by $3.6 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 as a result of a portion of the fleet being classified as held for sale at the current period-end without similar activity for the three months ended March 31, 2023, and as a result of the favorable environment for selling aircraft for the three months ended March 31, 2023 as compared to the three months ended March 31, 2024.

Current wording

Loss (gain) on aircraft held for sale changed by $0.7 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 as a result of a portion of the fleet being classified as held for sale at the current period-end without similar activity for the three months ended June 30, 2023, and as a result of the favorable environment for selling aircraft for the three months ended June 30, 2023 as compared to the three months ended June 30, 2024.

Previous wording

Interest income increased by $0.2 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily as a result of an increase in interest income on treasury bills.

Current wording

Interest income increased by $0.1 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily as a result of an increase in interest income on treasury bills.

Previous wording

Change in fair value of derivative liability changed by $0.6 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to the identification and measurement of an embedded derivative related to our convertible notes in 2023. There was no comparable activity in 2024 due to the conversion of the note in the prior year.

Current wording

Change in fair value of derivative liability changed by $0.5 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 due to the identification and measurement of an embedded derivative related to our convertible notes in 2023. There was no comparable activity in 2024 due to the conversion of the note in the prior year.

Previous wording

Change in fair value of warrant liabilities changed by $2.8 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to warrants recorded during the fourth quarter of 2023 as a result of the Merger as well as additional warrants issued in the first quarter of 2024. There was no comparable activity in the first quarter of 2023.

Current wording

Change in fair value of warrant liabilities changed by $0.9 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 due to warrants recorded during the fourth quarter of 2023 as a result of the Merger as well as additional warrants issued in the first quarter of 2024. There was no comparable activity in the second quarter of 2023.

Previous wording

Our principal sources of liquidity have historically consisted of financing activities, including proceeds from equity sales to the Company's founder and notes payable, and operating activities, primarily from the increase in deferred revenue associated with prepaid flights. As of March 31, 2024 we had $5.3 million of cash and cash equivalents, $71.4 million in short-term investments in securities and $4.2 million available borrowing capacity under the 2018 term loan. As of March 31, 2024, we had $0.5 million of available borrowing capacity under the 2023 revolving line of credit. Our cash equivalents primarily consist of liquid money market funds, and our investments primarily consist of fixed-income securities including corporate bonds, government bonds, municipal issues, and U.S. treasury bills.

Current wording

Our principal sources of liquidity have historically consisted of financing activities, including proceeds from equity sales and notes payable, and operating activities, primarily from the increase in deferred revenue associated with prepaid flights. As of June 30, 2024 we had $9.3 million of cash and cash equivalents, $69.4 million in short-term investments in securities and $4.4 million available borrowing capacity under the 2018 Term Loan. As of June 30, 2024, we had $0.5 million of available borrowing capacity under the 2023 Revolving Line of Credit. Our cash equivalents primarily consist of liquid money market funds, and our investments primarily consist of fixed-income securities including corporate bonds, government bonds, municipal issues, and U.S. treasury bills.

Previous wording

We believe factors that could affect our liquidity include our rate of revenue growth, changes in demand for our services, competitive pricing pressures, other growth initiatives, our ability to keep increases in operating expenses in line with growth in revenues, and overall economic conditions. In addition, because of the current disparity between the $11.50 per share exercise price of our outstanding Public Warrants and Private Placement Warrants and the current trading price of the Class A Common Stock, which closed on July 30, 2024, at $4.20 per share, we are unlikely to receive significant proceeds from the exercise of those Warrants in the near term. To the extent that our current liquidity is insufficient to fund future activities, we would need to raise additional funds. In the future, we may attempt to raise additional capital through the sale of equity securities or through debt financing arrangements. If we raise additional funds by issuing equity securities, the ownership of existing shareholders will be diluted. The incurrence of additional debt financing might be restricted or prohibited by the terms of our current or future debt obligations and would result in debt service obligations, and any such debt could include operating and financing covenants that could restrict our operations. In the event that additional funds are required from outside sources, we might not be able to raise funds on terms acceptable to us or at all. If we are unable to source external financing, we could be forced to delay, reduce, suspend or cease our working capital requirements, capital expenditures and business development efforts, which would have a negative impact on our business, prospects, operating results and financial condition.

Current wording

We believe factors that could affect our liquidity include our rate of revenue growth, changes in demand for our services, competitive pricing pressures, other growth initiatives, our ability to keep increases in operating expenses in line with growth in revenues, and overall economic conditions. In addition, because of the current disparity between the $11.50 per share exercise price of our outstanding Public Warrants and Private Placement Warrants and the current trading price of the Class A Common Stock, which closed on August 2, 2024, at $4.120 per share, we are unlikely to receive significant proceeds from the exercise of warrants in the near term. To the extent that our current liquidity is insufficient to fund future activities, we would need to raise additional funds. In the future, we may attempt to raise additional capital through the sale of equity securities or through debt financing arrangements. If we raise additional funds by issuing equity securities, the ownership of existing shareholders will be diluted. The incurrence of additional debt financing might be restricted or prohibited by the terms of our current or future debt obligations and would result in debt service obligations, and any such debt could include operating and financing covenants that could restrict our operations. In the event that additional funds are required from outside sources, we might not be able to raise funds on terms acceptable to us or at all. If we are unable to source external financing, we could be forced to delay, reduce, suspend or cease our working capital requirements, capital expenditures and business development efforts, which would have a negative impact on our business, prospects, operating results and financial condition.

Previous wording

We believe that our existing cash on hand, cash generated from operations and available borrowings under our debt arrangements will enable us to secure refinancing as needed to meet our obligations as they become due within the next 12 months. If we are not able to refinance, our liquidity and business would be materially adversely impacted.

Current wording

We believe that our existing cash on hand, cash generated from operations and available borrowings under our debt arrangement will enable us to secure refinancing as needed to meet our obligations as they become due within the next 12 months. If we are not able to refinance, our liquidity and business would be materially adversely impacted.

Previous wording

The duration of our leases varies from two to 30 years, and the leases are generally non-cancellable operating leases. Our vehicle leases are typically month-to-month and are classified as short-term leases.

Current wording

The duration of our leases varies from two to 30 years, and the leases are generally operating leases. Our vehicle leases are typically month-to-month and are classified as short-term leases.

Previous wording

We currently anticipate that cash required for expenditures for the next 12 months is approximately $124.4 million, which includes accounts payable of $32.1 million, accrued expenses and other current liabilities of $23.3 million, short-term notes payable of $27.8 million, short-term debt contractual principal payments due of $24.9 million and non-cancellable lease payments of $16.3 million. We plan to refinance contractual principal payments that comprise the short-term debt liability as they become due. As stated above, we have maintained a positive relationship with our debtholders and have not historically had any difficulty refinancing our debt obligations. Based on our historical experience and the fact that we have not suffered any decline in creditworthiness, we expect that our cash on hand and cash earnings will enable us to secure the necessary refinancing. The accounts payable, accrued expenses, and lease liabilities will be settled using a combination of cash generated by operations, sale of investments and incremental borrowing activity, if necessary.

Current wording

We currently anticipate that cash required for expenditures for the next 12 months is approximately $121.6 million, which includes accounts payable of $30.7 million, accrued expenses and other current liabilities of $24.4 million, short-term notes payable of $28.5 million, the current portion of long-term debt contractual principal payments due of $22.8 million and lease payments of $15.2 million. We plan to refinance contractual principal payments that comprise the short-term debt liability as they become due. As stated above, we have maintained a positive relationship with our debtholders and have not historically had any difficulty refinancing our debt obligations. Based on our historical experience and the fact that we have not suffered any decline in creditworthiness, we expect that our cash on hand and cash earnings will enable us to secure the necessary refinancing. The accounts payable, accrued expenses, and lease liabilities will be settled using a combination of cash generated by operations, sale of investments and incremental borrowing activity, if necessary.