Volato Group Inc

Previous wording

The following discussion of our financial condition and results of operations (MD&A) should be read in conjunction with our consolidated financial statements and the related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”) and our audited consolidated financial statements included in our most recent Annual Report on form 10-k for the year ended December 31, 2023. This discussion contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in “Risk Factors” included in our most recent Annual Report on form 10-K for the year ended December 31, 2023. Unless the context otherwise requires, references in this MD&A section to “we,” “us,” “our,” and “the Company” are intended to mean the business and operations of Volato Group, Inc.

Current wording

The following discussion of our financial condition and results of operations (MD&A) should be read in conjunction with our consolidated financial statements and the related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”) and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. This discussion contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in “Risk Factors” included in our Annual Report on form 10-K for the year ended December 31, 2023. Unless the context otherwise requires, references in this MD&A section to “we,” “us,” “our,” and “the Company” are intended to mean the business and operations of Volato Group, Inc.

Previous wording

Our revenue is generated through our aircraft ownership program, a focused commercial strategy which includes deposit products, charter flights and aircraft management services. Our aircraft ownership program is an asset-lite model whereby we sell each fleet aircraft to a limited liability company (LLC) and sell LLC membership interests to third-party owners. The LLC then leases the aircraft back to us for management and charter operation on behalf of the LLC under 14 C.F.R. Part 135. In turn, program participants (JetShare owners) invest in those special purpose entities to fund the aircraft purchase. We operate the aircraft on behalf of the special purpose entity and enters into charter agreements with the individual JetShare owners to provide preferential access and charter pricing for our HondaJet fleet.

Current wording

Our revenue was generated through our aircraft ownership program, a focused commercial strategy which includes deposit products, charter flights and aircraft management services. Our aircraft ownership program is an asset-lite model whereby we sell each fleet aircraft to a limited liability company (LLC) and sell LLC membership interests to third-party owners. The LLC then leases the aircraft back to us for management and charter operation on behalf of the LLC under 14 C.F.R. Part 135. In turn, program participants (“JetShare owners”) invest in those special purpose entities to fund the aircraft purchase. We operate the aircraft on behalf of the special purpose entity and enters into charter agreements with the individual JetShare owners to provide preferential access and charter pricing for our HondaJet fleet.

Previous wording

•We generated total revenue of $15.1 million an increase of $2.1 million, or 16%, compared to the three months ended June 30, 2023. Revenue from aircraft usage increased by $2.7 million, or 28%;

Current wording

•We generated total revenue of $40.3 million an increase of $36.6 million, or 1002%, compared to the three months ended September 30, 2023 primarily related to an increase from aircraft sales of $38.2 million;

Previous wording

•Adjusted negative EBITDA 1 was $11.4 million for the three months ended June 30, 2024 compared to adjusted negative EBITDA of $7.6 million for the same period last year.

Current wording

•Adjusted EBITDA was $3.2 million for the three months ended September 30, 2024 compared to negative adjusted EBITDA of $1.7 million for the same period last year.

Previous wording

Financial highlights for the six months ended June 30, 2024 include:

Current wording

Financial highlights for the nine months ended September 30, 2024 include:

Previous wording

•Adjusted negative EBITDA 2 was $24.5 million for the six months ended June 30, 2024 compared to adjusted negative EBITDA of $14.3 million for the same period last year.

Current wording

•Negative adjusted EBITDA was $4.7 million for the nine months ended September 30, 2024 compared to negative adjusted EBITDA of $4.2 million for the same period last year.

Previous wording

We compete for market share in the highly fragmented private aviation industry. The top 10 largest operators control approximately 25% of the total flight hours operated in the United States. For example, there are over 400 light jet operators (excludes air ambulance) offering Part 135 charter services in our primary network service area, flying approximately 293,000 flight hours. The breadth of operators and the product options (fractional, deposit/card programs, charter) makes the industry highly competitive.

Current wording

We competed for market share in the highly fragmented private aviation industry. The top 10 largest operators control approximately 25% of the total flight hours operated in the United States. For example, there are over 400 light jet operators (excluding air ambulance) offering Part 135 charter services in our primary network service area, flying approximately 293,000 flight hours. The breadth of operators and the product options (fractional, deposit/card programs, charter) makes the industry highly competitive.

Previous wording

The private aviation industry is volatile and affected by economic cycles and trends. Our financial performance is susceptible to economically driven changes in demand particularly for our discretionary charter and deposit products. Our cost structure and private aviation demand levels can be greatly impacted by the price of jet fuel, pilot salaries and availability, changes in government regulations, consumer confidence, safety concerns, and other factors. Our experience operating light jets leads us to believe that operating the most efficient fleet in each class of airplanes (i.e., light, mid, super mid, large cabin), will prove beneficial in an economic downturn.

Current wording

The private aviation industry is volatile and affected by economic cycles and trends. Our financial performance has been susceptible to economically driven changes in demand particularly for our discretionary charter and deposit products. Our cost structure and private aviation demand levels has been greatly impacted by the price of jet fuel, pilot salaries and availability, changes in government regulations, consumer confidence, safety concerns, and other factors.

Previous wording

The competition for pilots has intensified in recent years. We have relied on increasing pilot pay and benefits to continue to attract qualified applicants including equity compensation. While we have been able to attract and retain the appropriate number of pilots to date, there is no guarantee that we will be able to continue to do so without further increasing our cost structure.

Current wording

The competition for pilots has intensified in recent years. We have relied on increasing pilot pay and benefits to continue to attract qualified applicants including equity compensation.

Previous wording

Comparison of three and six months ended June 30, 2024 and June 30, 2023

Current wording

Comparison of three and nine months ended September 30, 2024 and 2023

Previous wording

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

Current wording

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

Previous wording

Cost of revenue comprises expenses tied to the associated revenue streams: aircraft sales, aircraft usage, and managed aircraft. Aircraft sales cost of revenue is our purchase price of the aircraft. Aircraft usage cost of revenue includes all of the costs related to operations of our HondaJet floating fleet including flight crew salary and benefits, fuel, maintenance, owner revenue share, lease costs, and landing and other airport fees. The managed aircraft cost of revenue includes all costs incurred in our managed aircraft including the cost of flight crews, fuel, maintenance, and landing and other airport fees.

Current wording

Cost of revenue comprises expenses tied to the associated revenue streams: aircraft sales, managed aircraft and subscription based revenue. Aircraft sales cost of revenue is our purchase price of the aircraft. Managed aircraft cost of revenue includes all costs incurred in our managed aircraft including the cost of flight crews, fuel, maintenance, and landing and other airport fees. Subscription costs includes costs of our proprietary software, the Vaunt program.

Previous wording

Cost of revenue increased by $2.3 million, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase in cost of revenue was the result of a an increase in aircraft usage as we add more aircraft to our floating fleet, offset by lower cost of revenue from managed aircraft of $0.5 million, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Current wording

Cost of revenue increased by $30.4 million, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase in cost of revenue was the result of an increase in aircraft sales as we took delivery of aircraft during the three months ended September 30, 2024.

Previous wording

Selling, general and administrative expenses increased by $3.6 million, or 59%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase in selling, general and administrative is primarily related to higher salaries of $1.5 million to support the growth in the company, higher professional fees and other expenses associated with becoming a public company of $1.2 million and higher advertising and marketing expense of $0.7 million. In May 2024, we implemented cost savings measures to support our path to profitability. On a proforma basis, assuming these cost savings had been implemented at the beginning of April, our selling, general and administrative expenses would have been $8.3 million for the three months ended June 30, 2024.

Current wording

Selling, general and administrative expenses increased by $2.5 million, or 116%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase in selling, general and administrative expenses was primarily related to higher professional fees and other expenses associated with becoming a public company of $0.5 million and higher software and related fees of $0.3 million.

Previous wording

Selling, general and administrative expenses increased by $9.1 million or 74% for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase in selling, general and administrative is primarily related to higher salaries of $3.9 million to support the growth of the company, higher professional fees and other expenses associated with becoming a public company of $2.9 million and higher advertising and marketing expense of $2.5 million. In May 2024, we implemented cost savings measures to support our path to profitability. On a proforma basis, assuming these cost savings had been implemented at the beginning of January, our selling, general and administrative expenses would have been $17.3 million for the six months ended June 30, 2024.

Current wording

Selling, general and administrative expenses increased by $7.7 million or 133% for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase in selling, general and administrative expenses is primarily related to higher salaries of $1.1 million, higher professional fees and other expenses associated with becoming a public company of $2.9 million.

Previous wording

Gain on sale of consolidated entity consists of the gain on the sale of Fly Dreams LLC during 2023.

Current wording

Gain on sale of consolidated entity consists of the gain on the sale of Fly Dreams during 2023.

Previous wording

As part of the Business Combination, we entered into an agreement for an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Agreement”). In July 2024, the Forward Purchase Agreement was terminated. As of June 30, 2024, we recorded a fair value adjustment on the Forward Purchase Agreement resulting in a $2.8 million non-cash loss on the change in fair value for the three months ended June 30, 2024 and a non-cash loss of $3.0 million for the six months ended June 30, 2024

Current wording

As part of the Business Combination, we entered into the Forward Purchase Agreement. In July 2024, the Forward Purchase Agreement was terminated. As of September 30, 2024, we recorded a fair value adjustment on the Forward Purchase Agreement resulting in a zero non-cash loss on the change in fair value for the three months ended September 30, 2024 and a non-cash loss of $3.0 million for the nine months ended September 30, 2024.

Previous wording

Interest expense primarily consists of interest related to our credit facilities and convertible notes and amortization of debt issuance costs. Interest expense increased $502 thousand, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 primarily as a result of an increase in the Shearwater debt facility.

Current wording

Interest expense primarily consists of interest related to our aircraft purchase and sale agreement with TVPX Aircraft Solutions, Inc., the business loan and security agreement with TVT Capital Source LLC, credit facilities and convertible notes and amortization of debt issuance costs. Interest expense increased $2.4 million, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 primarily as a result of the aircraft purchase and sale agreement and the business loan and security agreement.

Previous wording

Interest expense increased $746 thousand, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily as a result of an increase in the Shearwater debt facility.

Current wording

Interest expense increased $3.2 million, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily as a result of the aircraft purchase and sale agreement and the business loan and security agreement.

Previous wording

Non-GAAP financial measures are an addition, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP and should not be considered as an alternative to any performance measures derived in accordance with GAAP. We believe that these non-GAAP financial measures of financial results provide useful supplemental information to investors, about Volato. However, there are a number of limitations related to the use of these non-GAAP financial measures and their nearest GAAP equivalents, including that they exclude significant expenses that are required by GAAP to be recorded in Volato’s financial measures. In addition, other companies may calculate non-GAAP financial measures differently, or may use other measures to calculate their financial performance, and therefore, our non-GAAP financial measures may not be directly comparable to similarly titled measures of other companies.

Current wording

Non-GAAP financial measures are an addition, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP and should not be considered as an alternative to any performance measures derived in accordance with GAAP. We believe that these non-GAAP financial measures of financial results provide useful supplemental information about the Company to investors. However, there are a number of limitations related to the use of these non-GAAP financial measures and their nearest GAAP equivalents, including that they exclude significant expenses that are required by GAAP to be recorded in Volato’s financial measures. In addition, other companies may calculate non-GAAP financial measures differently, or may use other measures to calculate their financial performance, and therefore, our non-GAAP financial measures may not be directly comparable to similarly titled measures of other companies.

Previous wording

We calculate Adjusted EBITDA as net loss adjusted for (i) interest expense, net, (ii) provision for income taxes (benefit) (iii) depreciation and amortization, (iv) equity-based compensation expense, (v) acquisition, integration, and capital raise related expenses, and (v) other items not indicative of our ongoing operating performance. We include Adjusted EBITDA as a supplemental measure for assessing operating performance.

Current wording

We calculate Adjusted EBITDA as net loss adjusted for (i) interest expense, net, (ii) provision for income taxes (benefit) (iii) depreciation and amortization, (iv) equity-based compensation expense, and other non-operating items. We include Adjusted EBITDA as a supplemental measure for assessing operating performance.

Previous wording

Our principal sources of liquidity have historically consisted of financing activities, including proceeds from the issuance of stock, borrowings under our credit facilities, and capital raises from convertible debt and preferred stock. We additionally manage liquidity through the aircraft sales which provides up front deposits from our customers and aircraft usage. As of June 30 2024, we had $7.2 million of cash and restricted cash. During the year ended December 31, 2023, we converted our line of credit from a related party into convertible notes, and therefore have no credit facilities for future borrowings.

Current wording

Our principal sources of liquidity have historically consisted of financing activities, including proceeds from the issuance of stock, borrowings under our credit facilities, and capital raises from convertible debt and preferred stock. We additionally manage liquidity through the aircraft sales which provides up front deposits from our customers and aircraft usage. As of September 30, 2024, we had $5.6 million of cash and restricted cash. During the year ended December 31, 2023, we converted our line of credit from a related party into convertible notes, and therefore have no credit facilities for future borrowings.

Previous wording

We believe factors that could affect our liquidity include the ability of our OEM partners to meet our delivery schedule and our ability to sell those aircraft, the growth rate of our charter and deposit program flying, changes in demand for our services, competitive pricing pressures, our ability to raise additional funds on favorable terms, the timing and extent of spending on software development and other growth initiatives, our ability to improve the efficiency of our network flying, our ability to realize greater fleet utilization and manage our expense, and overall economic conditions. To the extent that our current liquidity is insufficient to fund future activities, we will need to raise additional funds. We may attempt to raise additional capital through the sale of equity securities, through debt financing arrangements, or both. Raising additional funds by issuing equity securities will dilute the ownership of existing shareholders. The occurrence of additional debt financing would result in debt service obligations, and any future instruments governing such debt could provide for operating and financing covenants that could restrict our operations. In the event that additional funds are required from outside sources, we may not be able to raise it on terms acceptable to us or at all.

Current wording

We believe factors that could affect our liquidity include the ability of our OEM partners to meet our delivery schedule and our ability to sell those aircraft, our ability to raise additional funds on favorable terms, the timing and extent of spending on software development and other growth initiatives, our ability to manage our expense, and overall economic conditions. To the extent that our current liquidity is insufficient to fund future activities, we will need to raise additional funds. We may attempt to raise additional capital through the sale of equity securities, through debt financing arrangements, or both. Raising additional funds by issuing equity securities will dilute the ownership of existing shareholders. The occurrence of additional debt financing would result in debt service obligations, and any future instruments governing such debt could provide for operating and financing covenants that could restrict our operations. In the event that additional funds are required from outside sources, we may not be able to raise it on terms acceptable to us or at all.

Previous wording

We have incurred negative cash flows from operating activities and significant losses from operations historically and plan to raise additional capital to fund our future operations. We believe our cash on hand, our plans for capital raising, and our results of operations including our planned sale of aircraft during the year ending December 31, 2024, will be sufficient to meet our projected working capital and capital expenditure requirements for a period of at least 12 months from the date of this report. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be adversely affected. These factors raise substantial doubt regarding our ability to continue as a going concern.

Current wording

We have incurred negative cash flows from operating activities and significant losses from operations historically and plan to raise additional capital to fund our future operations. We believe that our current cash position, along with our anticipated margin from aircraft sales and proceeds from future debt and/or equity financings, when combined with prudent cash and expense management, will allow the us continue as a going concern and to fund our operations for at least one year from the date of these financials statements. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be adversely affected. These factors raise substantial doubt regarding our ability to continue as a going concern.

Previous wording

The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table summarizes our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):

Previous wording

Net cash used in operating activities for the six months ended June 30, 2024 was $7.4 million. The cash outflow from operating activities consisted of our net loss of $34.3 million, non-cash items of $3.7 million, and a change in net operating assets and liabilities of $23.3 million. The change in net operating assets and liabilities was primarily as a result of an increase in customer deposits and deferred revenue of $16.2 million and an increase in accounts payable and accrued liabilities of $5.4 million.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2024 was $11.1 million. The cash outflow from operating activities consisted of our net loss of $38.7 million, non-cash items of $3.4 million, and a change in net operating assets and liabilities of $24.2 million. The change in net operating assets and liabilities was primarily as a result of an increase in customer deposits and deferred revenue of $8.9 million and an increase in accounts payable and accrued liabilities of $3.0 million. The change in net assets and liabilities for discontinued operations for the nine months ended September 30, 2024 was $6.1 million.

Previous wording

Net cash used in operating activities for the six months ended June 30, 2023 was $13.3 million. The cash outflow from operating activities consisted of our net loss of $17.4 million, non-cash items of $0.9 million, and a change in net operating assets and liabilities of $5.0 million. The change in net operating assets and liabilities was primarily a result of an increase in accounts payable and accrued liabilities of $5.4 million, an increase in customer deposits and deferred revenue of $1.1 million and a decrease in deposits of $1.8 million.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2023 was $24.1 million. The cash outflow from operating activities consisted of our net loss of $29.2 million, non-cash items of $21 thousand, and a change in net operating assets and liabilities of $5.1 million. The change in net operating assets and liabilities was primarily a result of an increase in accounts payable and accrued liabilities of $2.6 million, an increase in customer deposits and deferred revenue of $4.7 million and a decrease in deposits of $3.9 million. The change in net assets and liabilities for discontinued operations for the nine months ended September 30, 2023 was $3.9 million.

Previous wording

Net cash used in investing activities for the six months ended June 30, 2024 was $113 thousand related to the purchase of property and equipment.

Current wording

Net cash used in investing activities for the nine months ended September 30, 2024 was $145 thousand related to the purchase of property and equipment.

Previous wording

Net cash provided by investing activities for the six months ended June 30, 2023 was $1.7 million. Cash flow from investing activities was primarily attributable to $4.2 million from the sale of equity-method investments, offset by $2.3 million for the purchase of equity-method investments.

Current wording

Net cash provided by investing activities for the nine months ended September 30, 2023 was $1.4 million. Cash flow from investing activities was primarily attributable to $350 thousand from the sale of consolidated entity offset by 821 thousand to the purchase of property and equipment. Cash provided by investing activity from discontinued operations for the nine months ended September 30, 2023 was $1.9 million.

Previous wording

Net cash used financing activities for the six months ended June 30, 2024 was $2.0 million. Cash flow from financing activities consisted of repayment on loans.

Current wording

Net cash used financing activities for the nine months ended September 30, 2024 was $136 thousand. Cash flow from financing activities consisted of repayment on loans of $3.9 million offset by proceeds for the issuance of debt of $4.0 million.

Previous wording

Net cash provided by financing activities for the six months ended June 30, 2023 was $11.2 million. Cash flow from financing activities was primarily attributable proceeds from the issuance of convertible notes of $10.7 million and proceeds from line of credit of $1.0 million.

Current wording

Net cash provided by financing activities for the nine months ended September 30, 2023 was $25.0 million. Cash flow from financing activities was primarily attributable proceeds from the issuance of convertible notes of $12.7 million and proceeds from line of credit of $1.0 million.

Previous wording

Our principal commitments consist of contractual cash obligations under our credit facilities and other loans, operating leases for certain controlled aircraft. We have committed to acquire four (4) Gulfstream G-280 aircraft for total consideration of $79.0 million with expected deliveries in 2024 and 2025, of which $48 million was funded and paid through June 30, 2024. Additionally, we have committed to acquire an additional 22 Honda HA-420 aircraft for a total consideration of $154.9 million, with expected deliveries between the second quarter of 2023 and the fourth quarter of 2025, of which $1.5 million was funded and paid through June 30, 2024.

Current wording

Our principal commitments consist of contractual cash obligations under our credit facilities and other loans, operating leases for certain controlled aircraft. We have committed to acquire four (4) Gulfstream G-280 aircraft for total consideration of $79.0 million of which $48 million was funded and paid through September 30, 2024. The first Gulfstream G280 was delivered in the third quarter of 2024 with the remaining three Gulfstream G280s expected to be delivered throughout fiscal year 2025.

Previous wording

Our management’s discussion and analysis of our financial condition and results of our operations is based on our consolidated financial statements and accompanying notes, which have been prepared in accordance with GAAP. Certain amounts included in or affecting the consolidated financial statements presented in this Annual Report and related disclosure must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the consolidated financial statements are prepared. Management believes that the accounting policies set forth below comprise the most important “critical accounting policies” for the company. A “critical accounting policy” is one which is both important to the portrayal of our financial condition and results of operations and that involves difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management evaluates such policies on an ongoing basis, based upon historical results and experience, consultation with experts and other methods that management considers reasonable in the particular circumstances under which the judgments and estimates are made, as well as management’s forecasts as to the manner in which such circumstances may change in the future.

Current wording

Our management’s discussion and analysis of our financial condition and results of our operations is based on our consolidated financial statements and accompanying notes, which have been prepared in accordance with GAAP. Certain amounts included in or affecting the consolidated financial statements presented in this Quarterly Report on Form 10-Q and related disclosure must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the consolidated financial statements are prepared. Management believes that the accounting policies set forth below comprise the most important “critical accounting policies” for the company. A “critical accounting policy” is one which is both important to the portrayal of our financial condition and results of operations and that involves difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management evaluates such policies on an ongoing basis, based upon historical results and experience, consultation with experts and other methods that management considers reasonable in the particular circumstances under which the judgments and estimates are made, as well as management’s forecasts as to the manner in which such circumstances may change in the future.

Previous wording

The Company generates revenue primarily through three sources: (i) the sale of aircraft, (ii) charter flights which include deposit products, retail and wholesale charter flights and owner flights, and (iii) aircraft management services.

Current wording

The Company generates revenue primarily through: (i) the sale of aircraft, and (iii) aircraft management services.

Previous wording

If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, additional impairment testing is not required. We test for goodwill impairment annually during its fourth quarter on October 1.

Current wording

If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, additional impairment testing is not required. We test for goodwill impairment annually during the fourth quarter on October 1.

Previous wording

The Company evaluates its ownership, contractual relationships, and other interests in entities to determine the nature and extent of the interests, whether such interests are variable interests and whether the entities are VIEs in accordance with ASC 810, Consolidations. These evaluations can be complex and involve Management judgment as well as the use of estimates and assumptions based on available historical information, among other factors. Based on these evaluations, if the Company determines that it is the primary beneficiary of a VIE, this VIE entity is consolidated into the consolidated financial statements.

Current wording

The Company evaluates its ownership, contractual relationships, and other interests in entities to determine the nature and extent of the interests, whether such interests are variable interests and whether the entities are VIEs in accordance with ASC 810, Consolidations. These evaluations can be complex and involve management’s judgment as well as the use of estimates and assumptions based on available historical information, among other factors. Based on these evaluations, if the Company determines that it is the primary beneficiary of a VIE, this VIE entity is consolidated into the consolidated financial statements.