Filed Pursuant to Rule 424(b)(3)
Registration No. 333-279385
PROSPECTUS
Jet.AI
Inc.
30,100,000
Shares of Common Stock
This
prospectus relates to the resale from time to time of up to 30,100,000 shares of our common stock, par value $0.0001 per share
(“Common Stock”), by the selling stockholder identified herein (collectively, with any of such stockholder’s transferees,
pledgees, assignees, distributees, donees or successors-in-interest, the “Selling Stockholder”). The shares of Common Stock
being registered hereunder include (i) 100,000 shares of Common Stock (the “Effectiveness Shares”) we issued to the Selling
Stockholder on September 3, 2024 in lieu of paying an Effectiveness Fee (as defined herein); and (ii) up to 30,000,000 shares
of Common Stock issuable upon conversion of (x) 50 shares of Series B Preferred Stock, par value $0.0001 per share (“Series
B Preferred Stock”), held by the Selling Stockholder and issued pursuant to the Letter Agreement (as defined below) (the “Letter
Agreement Shares”), and (y) 1,500 shares of Series B Preferred Stock issuable upon the exercise of a warrant (the “Warrant”)
held by the Selling Stockholder (the “Warrant Conversion Shares,” and, together with the Effectiveness
Shares and the Letter Agreement Shares, the “Shares”). For additional information on the
Shares, see “Prospectus Summary - The Selling Stockholder Transaction.”
Our
registration of the Shares covered by this prospectus does not mean that the Selling Stockholder will offer or sell any of the
Shares. The Selling Stockholder acquired the Shares in private transactions exempt from registration under the Securities
Act of 1933, as amended (the “Securities Act”).
We
will not receive any proceeds from the resale of the Shares by the Selling Stockholder in this offering. All selling and other
expenses incurred by the Selling Stockholder will be paid by the Selling Stockholder, except for certain legal fees and expenses, which
will be paid by us. The Selling Stockholder may sell, transfer or otherwise dispose of any or all of the Shares offered by this
prospectus from time to time on The Nasdaq Stock Market LLC (“Nasdaq”) or any other stock exchange, market, or trading facility
on which the shares are traded, or in private transactions. The Shares may be offered and sold or otherwise disposed of by the
Selling Stockholder at fixed prices, market prices prevailing at the time of sale, prices related to prevailing market prices, or privately
negotiated prices. Refer to the section entitled “Plan of Distribution” for more information regarding how the Selling
Stockholder may offer, sell, or dispose of their Shares. To the extent that the Selling Stockholder exercises all or part
of the Warrant, we will receive the exercise price of such exercise. We will bear all fees and expenses incident to our obligation
to register the Shares.
Our
Common Stock is traded on Nasdaq under the symbol “JTAI”. On October 22, 2024, the last reported sale price of our
Common Stock on Nasdaq was $0.0911 per share.
We
may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire
prospectus and any amendments or supplements carefully before you make your investment decision.
We
are an “emerging growth company” as defined under U.S. federal securities laws and, as such, have elected to comply with
reduced public company reporting requirements. This prospectus complies with the requirements that apply to an issuer that is an emerging
growth company.
Investing
in our Common Stock involves risks. Before buying any shares of Common Stock, you should review carefully the risks and uncertainties
described under the heading “Risk Factors” beginning on page 10 of this prospectus and in the documents incorporated
by reference into this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is October 23, 2024
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”)
pursuant to which the Selling Stockholder may, from time to time, offer and sell or otherwise dispose of the shares of our Common Stock
covered by this prospectus. We will not receive any proceeds from the sale by the Selling Stockholder of the Shares offered by
them described in this prospectus. We may also file a prospectus supplement or post-effective amendment to the registration statement
of which this prospectus forms a part. The prospectus supplement or post-effective amendment may add, update or change information contained
in this prospectus. If there is any inconsistency between the information in this prospectus and the applicable prospectus supplement
or post-effective amendment, you should rely on the prospectus supplement or post-effective amendment, as applicable. The registration
statement we filed with the SEC, of which this prospectus forms a part, includes exhibits that provide more detail of the matters discussed
in this prospectus. You should read this prospectus, any post-effective amendment, and any applicable prospectus supplement and the related
exhibits filed with the SEC before making your investment decision. The registration statement and the exhibits can be obtained from
the SEC, as indicated under the section entitled “Where You Can Find More Information.”
You
should rely only on the information contained in this prospectus. Neither we nor the Selling Stockholder have authorized anyone to provide
you with any information or to make any representations other than those contained in this prospectus, any post-effective amendment,
or any applicable prospectus supplement prepared by or on behalf of us or to which we have referred you. We and the Selling Stockholder
take no responsibility for and can provide no assurance as to the reliability of any other information that others may give you. If anyone
provides you with different or inconsistent information, you should not rely on it. You should assume that the information appearing
in this prospectus, any post-effective amendment and any applicable prospectus supplement to this prospectus is accurate only as of the
date on its respective cover. Our business, financial condition, results of operations and prospects may have changed since those dates.
Neither we nor the Selling Stockholder are making an offer to sell our Common Stock in any jurisdiction where the offer or sale thereof
is not permitted. You should not assume that the information appearing in this prospectus any post-effective amendment and any applicable
prospectus supplement to this prospectus is accurate as of any date other than their respective dates. Our business, financial condition,
results of operations and prospects may have changed since those dates. You should read carefully the entirety of this prospectus before
making an investment decision.
INDUSTRY
AND MARKET DATA
Some
of the market and industry data contained in this prospectus are based on independent industry publications or other publicly available
information. We believe this information is reliable as of the applicable date of its publication, however, we have not independently
verified and cannot assure you as to the accuracy or completeness of this information. As a result, you should be aware that the market
and industry data contained herein, and our beliefs and estimates based on such data, may not be reliable.
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus or incorporated by reference herein. This summary does not contain
all of the information you should consider before investing in our shares of Common Stock. Before deciding to invest in our shares
of Common Stock, you should read this entire prospectus carefully, including the section of this prospectus entitled “Risk
Factors” beginning on page 10.
As
used in this prospectus, unless the context requires otherwise, the terms “Company,” “Jet.AI,”
“we,” “our” and “us” refer to Jet.AI Inc. (f/k/a Oxbridge Acquisition Corp.), and its
consolidated subsidiaries.
Company
Overview
Our
business strategy combines concepts from fractional jet and charter jet programs with innovations in artificial intelligence, also referred
to herein is “AI.” Our purposeful enhancement of price discovery has the potential to produce fairer and more inclusive results
for aircraft owners and travelers alike.
We
formed the Company on June 4, 2018. We developed and, in September 2019, launched our booking platform represented by our iOS app JetToken
(the “App”), which originally functioned as a prospecting and quoting platform to arrange private jet travel with third party
carriers. Following our acquisition of HondaJets, we began selling jet cards and fractional ownership interests in our aircraft. In 2023,
we launched an AI-enhanced booking app called CharterGPT. Beginning in 2023, we launched our Jet.AI Operator Platform to provide a B2B
software platform for SaaS products. Currently we offer the following SaaS software to aircraft owners and operators generally:
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Reroute
AI: recycles aircraft waiting to return to base into prospective new charter bookings to destinations within specific distances;
and |
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DynoFlight:
enables aircraft operators to estimate aircraft emissions then purchase carbon removal credits via our DynoFlight API. |
We
have also established a specific version of a private jet by-the-seat booking tool for the Las Vegas Golden Knights and Cirrus Aviation
via 380 Software LLC. 380 Software LLC is a by-the-seat charter joint venture between us and Cirrus Aviation.
Our
strategy involves expanding our fleet of aircraft with larger aircraft capable of traveling longer distances, developing a national jet
card program based on third party aircraft, further enhancing the AI functionality of Charter GPT, and expanding upon our B2B software
offerings.
The
Business Combination
On
August 10, 2023, Jet.AI Inc., a Delaware corporation (f/k/a Oxbridge Acquisition Corp.), consummated a “Business Combination”
pursuant to the Business Combination Agreement and Plan of Reorganization, dated February 24, 2023, as amended by Amendment No. 1 to
the Business Combination Agreement, dated as of May 11, 2023, by and among Oxbridge Acquisition Corp. (“Oxbridge”), the Merger
Subs and Jet Token. Pursuant to the Business Combination Agreement, Oxbridge redomiciled as a Delaware corporation and was immediately
renamed Jet.AI, Inc., and promptly thereafter, (a) OXAC Merger Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary
of Oxbridge (“First Merger Sub”) merged with and into Jet Token with Jet Token surviving the merger as a wholly owned subsidiary
of Jet.AI Inc.; and (b) Jet Token merged with and into Summerlin Aviation LLC (f/k/a OXAC Merger Sub II, LLC), a Delaware limited liability
company and a direct wholly owned subsidiary of Oxbridge (“Second Merger Sub”) (each merger and all other transactions contemplated
by the Business Combination Agreement, the “Business Combination”).
The
Business Combination resulted in certain securities of Oxbridge and Jet Token being converted into securities of the Company. As a result
of the Business Combination and certain actions taken by the Company following the Business Combination, Jet.AI Inc. has one class of common stock, listed on Nasdaq under the ticker symbol “JTAI”. See “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Business Combination” for a further discussion
of the terms of the Business Combination.
Certain
Financing Arrangements
Prior
to and in connection with the Business Combination, we entered into certain financing arrangements intended to provide us with equity-based
financing, including (i) a Share Purchase Agreement, dated as of August 4, 2022 (the “Share Purchase Agreement”), entered
into by Jet Token and GEM Yield LLC SCS and GEM Yield Bahamas Limited (together with GEM Yield LLC SCS, “GEM”), which was
automatically assigned to the Company upon the closing of the Business Combination (the “Closing”); and (ii) a Forward Purchase
Agreement entered into on August 6, 2023 (as amended on August 31, 2023 and October 2, 2023) with (a) Meteora Capital Partners, LP (“MCP”),
(b) Meteora Select Trading Opportunities Master, LP (“MSTO”), and (c) Meteora Strategic Capital, LLC (“MSC” and,
collectively with MCP and MSTO, “Meteora”) for OTC Equity Prepaid Forward Transactions. In
connection with the Business Combination, we also entered into settlement agreements with Maxim Group LLC, the underwriter for
the Company’s initial public offering (“Maxim”), and with OAC Sponsor
Ltd., a Cayman Islands exempted company (the “Sponsor”), the sponsor of Oxbridge, each providing for the issuance of equity
in satisfaction of Oxbridge payment obligations.
See
“Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Liquidity and Capital
Resources – Overview” for a further discussion of the terms of these financing arrangements and other recent financing
transactions.
The
Selling Stockholder Transaction
General
On
March 28, 2024, Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) and certain
other transaction documents described below with the Selling Stockholder in connection with a private placement which closed
on March 29, 2024 (the “Closing Date”), which we collectively refer to as the “Selling Stockholder Transaction”.
Pursuant
to the Securities Purchase Agreement, the Company agreed to issue to the Selling Stockholder (a) 150 shares of Series B Preferred Stock,
which are convertible into shares of Common Stock, (b) the Warrant to purchase up to 1,500 shares of Series B Preferred Stock
at an exercise price of $10,000 per share, and (c) 250,000 shares of Common Stock.
The
Company received gross proceeds of approximately $1.5 million, not including customary placement fees and reimbursement of certain amounts
payable to Maxim as placement agent and other expenses payable by the Company in connection with the Selling Stockholder Transaction.
This amount excludes the proceeds, if any, from the exercise of the Warrant. The Company used net proceeds received at the initial
closing, intends to use the proceeds upon any further exercise of the Warrant for working capital, capital expenditures, product
development, and other general corporate purposes. The Company has not allocated specific amounts of net proceeds for any of these purposes.
Series
B Preferred Stock
On
March 28, 2024, we filed a Certificate of Designations of the Series B Preferred Stock with the Secretary of State of the State of Delaware,
which provides for the issuance of up to 5,000 shares of Series B Preferred Stock (the “Certificate of Designations”). The Series B Preferred Stock ranks pari
passu with the Company’s Series A Preferred Stock and its Series A-1 Preferred Stock and senior
to all other capital stock of the Company.
Each
share of Series B Preferred Stock converts into a number of shares of our Common Stock, subject to certain limitations, including a beneficial
ownership limitation of 4.99% (calculated in accordance with the rules promulgated under Section 13(d) of the Securities Exchange Act
of 1934, as amended (“Exchange Act”)), which can be adjusted to a beneficial ownership limitation of 9.99% upon 61 days prior
written notice by the Selling Stockholder. From time to time the Selling Stockholder may convert Series B Preferred
Stock into Common Stock which it may liquidate and thereafter receive additional shares of Common Stock pursuant to subsequent conversions
of its Series B Preferred Stock. Although the beneficial ownership limitation imposes a legally binding limitation on the Selling Stockholder’s
beneficial ownership at any point in time, it does not prohibit the Selling Stockholder from, over time, receiving shares of Common Stock
upon separate conversions of its shares of Series B Preferred Stock that, in the aggregate and over a period of time, exceed the beneficial
ownership limitation.
Subject
to the limitations set forth in the preceding paragraph and provided there is an effective registration statement covering the Selling
Stockholder’s resale of Common Stock issuable upon conversion of the shares of Series B Preferred Stock, the shares
of Series B Preferred Stock will automatically convert into shares of Common Stock on or prior to the tenth trading day after the
issuance date of such shares of Series B Preferred Stock. The number of shares of Common Stock issuable upon conversion of a share of
Series B Preferred Stock is calculated by dividing the conversion amount per share of Series B Preferred Stock by the then conversion
price. The conversion amount is equal to the stated value of the shares of Series B Preferred Stock, which is $10,000, plus any additional
amounts and late charges calculated in accordance with the Certificate of Designations. The conversion price is equal to 90% (or, in
the case of a delisting, 80%) of the lowest daily volume weighted average price (“VWAP”) of our Common Stock over a period
beginning on the trading day after we deliver shares of Common Stock upon such conversion to the Selling Stockholder and ending
on the trading day on which the aggregate dollar trading volume of our Common Stock exceeds seven times the applicable conversion amount,
subject to a five-trading day minimum period for such calculation, and subject to certain adjustments.
If
certain defined “triggering events” defined in the Certificate of Designations occur, such as a breach of the registration
rights agreement entered into with the Selling Stockholder on March 29, 2024 (the “Registration Rights Agreement”), suspension
of trading of the Common Stock, or our failure to convert the Series B Preferred Stock into Common Stock when a conversion right
is exercised, then we may be required to redeem the Series B Preferred Stock for cash at 110% of its stated value.
The
foregoing description of the Series B Preferred Stock does not purport to be complete and is qualified in its entirety by reference to
the Certificate of Designations, a copy of which is filed as Exhibit 3.5 to the registration statement of which this prospectus forms
a part and is incorporated herein by reference.
Other
Transaction Documents
The
Warrant exercise price is initially set at $10,000 per share of Series B Preferred Stock, subject to adjustment for certain events, such
as stock splits, issuance of additional shares as a dividend or otherwise. If the Warrant is exercised in full for cash, the Company
would receive additional gross proceeds of approximately $15.0 million. The Company cannot predict when or if the Warrant will be exercised.
It is possible that the Warrant may never be exercised. At any time when the Warrant is exercisable for less than 1,000 shares of Series
B Preferred Stock, the Company has the right to redeem all or a portion of the Warrant by paying to the Selling Stockholder in
cash $100 per share of Series B Preferred Stock that would otherwise be issuable pursuant to the Warrant.
Pursuant
to the Securities Purchase Agreement, the Company agreed to submit to its stockholders a proposal to approve the issuance of shares
of Common Stock issuable upon conversion of the shares of Series B Preferred Stock in accordance with Nasdaq Rules at a special meeting
of stockholders at the earliest practicable date after the date of the Securities Purchase Agreement, but in no event later than ninety
(90) days after the Closing Date. The Company entered into a voting agreement (the “Voting
Agreement”) with Michael Winston, the Company’s Interim Chief Executive Officer, and the Sponsor, who together held approximately
43.6% of the voting power of the Company as of the record date for the Company’s annual meeting of stockholders, agreeing to vote
in favor of the proposal. At its annual meeting of stockholders, which took place on September 24, 2024, the Company sought stockholder
approval for the potential issuance of shares of Common Stock pursuant to the Selling Stockholder Transaction in an amount that, upon
issuance, could result in the issuance of shares of Common Stock in an amount in excess of 20% of the Company’s outstanding shares
of Common Stock at a price less than the “minimum price” as defined by and in accordance with Nasdaq Listing Rule 5635(d).
The Company’s stockholders approved such potential issuance at the annual meeting. The Securities Purchase Agreement obligates
the Company to reserve no less than 200% of the maximum number of shares of Common Stock issuable upon conversion of the Series B Preferred
Stock outstanding, using an alternate conversion method (the “Required Reserve Amount”). The Company and the Selling Stockholder
have agreed that the Required Reserve Amount is 45,000,000 shares of Common Stock. In order to meet that obligation, the Company sought
stockholder approval to amend its certificate of incorporation to increase the number of authorized shares of Common Stock to 200,000,000
at its annual meeting of stockholders. The Company received such approval on September 24, 2024.
Additionally,
the Company entered into the Registration Rights Agreement, which, among other things, provides that the Company will register the resale
of the 250,000 shares of Common Stock and the shares of Common Stock issuable upon conversion of the Series B Preferred Stock, including
shares of Common Stock issuable upon conversion of the shares of Series B Preferred Stock issuable upon exercise of the Warrant. The
Company was required to prepare and file a registration statement with the SEC no later than 30 days following the filing of the Company’s
Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”) but in no event later than May 15, 2024
(the “Filing Failure”, and such deadline, the “Filing Deadline”), and to use its commercially reasonable efforts
to have the registration statement and any amendment declared effective no later than the earlier of the (a) 60th calendar day following
the filing of the Form 10-K (or, if such registration statement is subject to a full review by the SEC, the 100th calendar day after
such filing) and (b) 2nd business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC
that such registration statement will not be reviewed or will not be subject to further review (the “Effectiveness Deadline”).
The Company filed a registration statement on Form S-1 pursuant to the foregoing obligation by the Filing Deadline. Because this registration
statement was not declared effective by the SEC by the Effectiveness Deadline, the Company was obligated to pay to the Selling
Stockholder a fee of $100,000 (the “Effectiveness Fee”). On September 3, 2024, the Company issued to the Selling
Stockholder 100,000 shares of Common Stock (“Effectiveness Shares”) in lieu of paying the Effectiveness Fee in cash.
On
September 24, 2024, the Company and the Selling Stockholder entered into a letter agreement (the “Letter Agreement”)
that set forth certain understandings and agreements among the Company and the Selling Stockholder. Pursuant to the Letter Agreement,
the Selling Stockholder agreed to refrain from taking action to protect its legal rights under the transaction documents, related to
certain actions and transactions identified in the Letter Agreement that the Company has undertaken or effected prior to the date of
the Letter Agreement. As consideration for the waiver, the Company agreed to a release of the Selling Stockholder and its affiliates
and issued an additional 50 shares of Series B Preferred Stock to the Selling Stockholder.
On
October 10, 2024, the Company and the Selling Stockholder entered into a second letter agreement (the “Second Letter Agreement”)
that set forth certain understandings and agreements among the Company and the Selling Stockholder. Pursuant to the Second Letter Agreement,
the Selling Stockholder agreed to refrain from taking action to protect its legal rights under the transaction documents, related to
certain actions and transactions identified in the Second Letter Agreement. Such actions include the Company’s filing of an amendment
to the registration statement on Form S-1 (File No. 333-281911) with the SEC and a registered direct offering. As consideration for the
waiver, the Company agreed to change the Conversion Measurement Period (as defined in the Certificate of Designations) for the previously
issued 200 shares of Series B Preferred Stock to begin on March 28, 2024 and to end in accordance with the Certificate of Designations.
The
Company has also agreed to, among other things, indemnify the Selling Stockholder, its members, managers, directors, officers,
partners, employees, agents, representatives and persons who control the Selling Stockholder under the registration statement
from certain liabilities and pay all fees and expenses (excluding any underwriting discounts and selling commissions) incident to the
Company’s obligations under the Registration Rights Agreement.
The
securities issued pursuant to the Securities Purchase Agreement were not registered under the Securities Act and were offered pursuant
to an exemption from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act and/or Rule
506(b) of Regulation D promulgated under the Securities Act. The securities may not be offered or sold in the United States absent registration
or an applicable exemption from registration requirements.
Copies
of the Securities Purchase Agreement, the Voting Agreement, the Warrant, the Registration Rights Agreement, and the Letter
Agreement are filed as Exhibits 10.30, 10.31, 4.5, 10.32, and 10.39, respectively, to the registration statement of which
this prospectus forms a part. The above summary of such agreements and documents does not purport to be complete and is qualified in
its entirety by reference to such agreements and are incorporated herein by reference herein.
Nasdaq
Compliance
Our
Common Stock is currently listed on Nasdaq under the symbol “JTAI”. On December 1, 2023, the Company received a notification
letter (the “Initial Notice Letter”) from the Nasdaq Listing Qualifications Staff of Nasdaq notifying the Company
that its amount of stockholders’ equity has fallen below the $10 million required minimum for continued listing on The Nasdaq Global
Market set forth in Nasdaq Listing Rule 5450(b)(1)(A) (the “Minimum Stockholders’ Equity Requirement”). The Company’s
stockholders’ deficit as of December 31, 2023 was $(3,963,039). The Initial Notice Letter also noted that as of September 30,
2023, the Company did not meet The Nasdaq Global Market alternative listing criteria for the “Market Value”
standard or the “Total Assets / Total Revenues” standard. The Initial Notice Letter further noted that
the Company may consider applying to transfer the Company’s securities to The Nasdaq Capital Market, which would require
the Company to, among other things, meet The Nasdaq Capital Market’s continued listing requirements. On August 14, 2024,
the Nasdaq Hearings Panel granted the Company’s request to transfer the Company’s securities from The Nasdaq Global
Market to The Nasdaq Capital Market to be effective as of the opening of trading on August 16, 2024.
On
April 14, 2024, the Company received an additional notification letter from Nasdaq (the “Second Notice Letter”)
stating that the Company is not in compliance with Nasdaq Listing Rule 5450(a)(1), as the minimum bid price of the Company’s
Common Stock has been below $1.00 per share for 30 consecutive business days (the “Minimum Bid Price Requirement”). The notification
of noncompliance has no immediate effect on the listing or trading of the Company’s Common Stock on Nasdaq. The Company has 180
calendar days, or until October 14, 2024, to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the minimum
bid price of the Company’s Common Stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during
this 180-calendar day grace period. In the event the Company does not regain compliance with the Minimum Bid Price Requirement by October
14, 2024, the Company may be eligible for an additional 180-calendar day compliance period because it elected to transfer
to The Nasdaq Capital Market. To qualify, the Company would
be required to meet the continued listing requirements for market value of publicly held shares and all other initial listing standards
for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of its intention
to cure the bid price deficiency during the second compliance period. The Company’s failure to regain compliance during this period
could result in delisting. The Company intends to actively monitor the bid price of its Common Stock and may, if appropriate, consider
implementing available options to regain compliance with the Minimum Bid Price Requirement.
On
May 30, 2024, the Company received an additional notification letter from Nasdaq (the “Third Notice Letter”) stating
that the Company has not regained compliance with the Minimum Stockholders’ Equity Requirement for continued listing
discussed in the Initial Notice Letter, which it was required to meet by May 29, 2024 pursuant to its compliance plan. The
Third Notice Letter notified the Company that, unless the Company requested an appeal hearing before the Nasdaq Hearings Panel (the
“Panel”) by June 6, 2024, trading of the Company’s Common Stock would be suspended at the opening of business
on June 10, 2024, and a Form 25-NSE would be filed with the SEC, which would remove the Company’s securities from
listing and registration on Nasdaq (such notification, the “Delisting Notice”).
As
directed in the Third Notice Letter, the Company
timely requested a hearing before the Panel and paid the applicable fee to appeal the Delisting Notice. The Delisting Notice
has no immediate effect on the listing or trading of the Company’s Common Stock. The Company’s hearing request stayed
the suspension of trading on the Company’s securities, and the Company’s securities continue to trade on Nasdaq. On August
14, 2024, in connection the implementation of the Company’s compliance plan, the Nasdaq Hearings Panel granted the Company’s
request to transfer the Company’s securities from The Nasdaq Global Market to The Nasdaq Capital Market to be effective
as of the opening of trading on August 16, 2024. Further the Nasdaq Hearings Panel granted the Company’s request to have until
November 26, 2024 to demonstrate compliance with its previously submitted plan, a deadline that the Company believes to be
attainable. The Company is working diligently to cure the deficiencies set forth in the Delisting Notice and plans to regain
compliance with the continued listing requirements as soon as practicable.
Although
the Company believes it will be able to achieve compliance with Nasdaq’s continued listing requirements, there can be no assurance
that the Company will be able to regain compliance with such requirements, or maintain compliance with any other listing requirements
within the time frame required by Nasdaq or at all, particularly if the Company’s stock price trades below $1.00 for a sustained
period. Nasdaq’s determination that we fail to meet the continued listing standards of Nasdaq may result in our securities
being delisted from Nasdaq as set forth in the Delisting Notice.
Risk
Factors
Our
business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed
more fully in the “Risk Factors” section of this prospectus immediately following this prospectus summary. These risks include
the following:
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The
Company is an early-stage company with a limited operating history. |
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The
Company may not be able to continue to operate its business if it is not successful in securing
additional fundraising and, as a result, may not be able to continue as a going concern. |
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The
Company may not be able to successfully implement its growth strategies. |
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The
Company’s operating results are expected to be difficult to predict based on a number of factors that also will affect its
long-term performance. |
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If
the Company cannot internally or externally finance its aircraft or generate sufficient funds to make payments to external financing
sources, the Company may not succeed. |
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The
Company may not have enough capital as needed and may be required to raise more capital and the terms of subsequent financings may
adversely impact your investment. |
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The
Company’s business and reputation rely on, and will continue to rely on, third parties. |
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Demand
for the Company’s products and services may decline due to factors beyond its control. |
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The
Company faces a high level of competition with numerous market participants with greater financial resources and operating experience. |
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Aviation
businesses are often affected by factors beyond their control including: air traffic congestion at airports; airport slot restrictions;
air traffic control inefficiencies; natural disasters; adverse weather conditions, such as hurricanes or blizzards; increased and
changing security measures; changing regulatory and governmental requirements; new or changing travel-related taxes; or the outbreak
of disease; any of which could have a material adverse effect on the Company’s business, results of operations and financial
condition. |
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The
Company’s business is primarily focused on certain targeted geographic regions, making it vulnerable to risks associated with
having geographically concentrated operations. |
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The
operation of aircraft is subject to various risks, and failure to maintain an acceptable safety record may have an adverse impact
on our ability to obtain and retain customers. |
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The
supply of pilots to the airline industry is limited and may negatively affect the Company’s operations and financial condition.
Increases in labor costs may adversely affect the Company’s business, results of operations and financial condition. |
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The
Company is exposed to operational disruptions due to maintenance. |
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Significant
increases in fuel costs could have a material adverse effect on the Company’s business, financial condition and results of
operations. |
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If
efforts to continue to build a strong brand identity and improve member satisfaction and loyalty are not successful, the Company
may not be able to attract or retain members, and its operating results may be adversely affected. |
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The
demand for the Company’s services is subject to seasonal fluctuations. |
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If
we fail to comply with the continued listing requirements of Nasdaq, we would face possible delisting, which would result in a limited
public market for our shares, limit our ability to access existing liquidity facilities and make obtaining future financing more
difficult for us. |
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Stockholders
may experience dilution of their ownership interest due to the issuance of additional shares of Common Stock upon the conversion
of the Series B Preferred Stock, especially since the Series B Preferred Stock has fluctuating conversion rates that are set at a
discount to market prices of our shares of Common Stock during the period immediately following conversion. |
| |
● |
The
issuances of additional shares of Common Stock under the Share Purchase Agreement and the GEM Warrant may result in dilution of future
Jet.AI stockholders and have a negative impact on the market price of Common Stock. |
| |
● |
Certain
existing stockholders purchased our securities at a price below the current trading price of such securities, and may experience
a positive rate of return based on the current trading price. |
| |
● |
Sales
of Common Stock, or the perception of such sales, by us or the Selling Stockholder pursuant to this prospectus in the public market
or otherwise could cause the market price for Common Stock to decline and the Selling Stockholder still may receive significant proceeds. |
THE
OFFERING
| Common
Stock offered by Selling Stockholder |
|
Up
to 30,100,000 shares of Common Stock. |
| |
|
|
| Common
Stock outstanding prior to this offering |
|
141,689,977
shares of Common Stock (as of October 22,
2024). |
| |
|
|
| Common
stock to be outstanding after this offering |
|
171,789,977
shares of Common Stock, assuming the sale of
all of the Shares. |
| |
|
|
| Use
of proceeds |
|
We
will not receive any proceeds from the sale of the Shares offered by the Selling Stockholder,
except with respect to amounts received by us upon exercise of the Warrant.
We
will receive up to an aggregate of approximately $15.0 million from the exercise of the Warrant, assuming the exercise in full of
the Warrant.
We
expect to use proceeds from the exercise of the Warrant, if any, for general corporate and working capital purposes. The exercise
price of the Warrant is $10,000 per share of Series B Preferred Stock, subject to adjustment for certain events. See “Use
of Proceeds” on page 92 for additional information. |
| |
|
|
| Risk
factors |
|
You
should read the “Risk Factors” section of this prospectus for a discussion of factors to consider carefully before deciding
to invest in shares of our Common Stock. |
| |
|
|
| Market
for the Common Stock |
|
Our
Common Stock is traded on Nasdaq under the symbol “JTAI”. |
RISK
FACTORS
Investing
in our Common Stock involves a high degree of risk. In addition to the information, documents or reports included or incorporated by
reference in this prospectus and, if applicable, any prospectus supplement or other offering materials, you should carefully consider
the risks described below in addition to the other information contained in this prospectus, before making an investment decision. Our
business, financial condition or results of operations could be harmed by any of these risks. As a result, you could lose some or all
of your investment in our Common Stock. The risks and uncertainties described below are not the only ones we face. Additional risks not
currently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair
our business operations.
Risks
Related to the Company’s Business
The
Company is an early-stage company with a limited operating history.
The
Company’s predecessor operating company Jet Token, Inc. was formed on June 4, 2018. Accordingly, the Company has a limited history
upon which an investor can evaluate its performance and future prospects. The Company has a short history and a limited number of aircraft
and related customers. The Company’s current and proposed operations are subject to all business risks associated with newer enterprises.
These include likely fluctuations in operating results as the Company reacts to developments in its markets, difficulty in managing its
growth and the entry of competitors into the market. The Company has incurred net losses to date and anticipates continuing net losses
for the foreseeable future. The Company cannot assure you that it will be profitable in the foreseeable future or generate sufficient
profits to pay dividends. If the Company does achieve profitability, the Company cannot be certain that it will be able to sustain or
increase such profitability. The Company has not consistently generated positive cash flow from operations, and it cannot be certain
that it will be able to generate positive cash flow from operations in the future. To achieve and sustain profitability, the Company
must accomplish numerous objectives, including broadening and stabilizing its sources of revenue and increasing the number of paying
members to its service. Accomplishing these objectives may require significant capital investments. The Company cannot be assured that
it will be able to achieve these objectives.
The
Company may not be able to continue to operate its business if it is not successful in securing additional fundraising and, as a result,
may not be able to continue as a going concern.
The
Company is dependent on funds from its operations, proceeds from its financing arrangements and additional fundraising in order to sustain
its ongoing operations. The Company has suffered recurring losses from operations and has a significant accumulated deficit. As a result
of these recurring losses from operations, negative cash flows from operating activities and the need for additional capital there is
substantial doubt of the Company’s ability to continue as a going concern. Therefore, our independent registered public accounting
firm included an explanatory paragraph expressing substantial doubt about the Company’s ability to continue as a going concern
in its report on the Company’s audited financial statements for the year ended December 31, 2023. The financial statements have
been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), which contemplate that the Company
will continue to operate as a going concern. The Company’s financial statements do not contain any adjustments that might result
if it is unable to continue as a going concern. There are no assurances that management will be able to raise capital on terms acceptable
to the Company. If the Company is unable to obtain sufficient amounts of additional capital, the Company may be required to reduce the
near-term scope of its planned development and operations, which could delay implementation of the Company’s business plan and
harm its business, financial condition and operating results. In such circumstances, the Company may have to significantly reduce its
operations or delay, scale back or discontinue the development of one or more of its products, seek alternative financing arrangements,
declare bankruptcy or terminate its operations entirely.
The
Company may not be able to successfully implement its growth strategies.
The
Company’s growth strategies include, among other things, expanding its addressable market by opening up private aviation to non-members
through our marketplace, expanding into new domestic markets and developing adjacent businesses. The Company faces numerous challenges
in implementing its growth strategies, including its ability to execute on market, business, product/service and geographic expansions.
The Company’s strategies for growth are dependent on, among other things, its ability to expand existing products and service offerings
and launch new products and service offerings. Although the Company devotes significant financial and other resources to the expansion
of its products and service offerings, its efforts may not be commercially successful or achieve the desired results. The Company’s
financial results and its ability to maintain or improve its competitive position will depend on its ability to effectively gauge the
direction of its key marketplaces and successfully identify, develop, market and sell new or improved products and services in these
changing marketplaces. The Company’s inability to successfully implement its growth strategies could have a material adverse effect
on its business, financial condition and results of operations and any assumptions underlying estimates of expected cost savings or expected
revenues may be inaccurate.
The
Company’s operating results are expected to be difficult to predict based on a number of factors that also will affect its long-term
performance.
The
Company expects its operating results to fluctuate significantly in the future based on a variety of factors, many of which are outside
its control and difficult to predict. As a result, period-to-period comparisons of the Company’s operating results may not be a
good indicator of its future or long-term performance. The following factors may affect the Company from period-to-period and may affect
its long-term performance:
| |
● |
the
Company may fail to successfully execute its business, marketing and other strategies; |
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|
|
| |
● |
the
Company’s ability to grow complementary products and service offerings may be limited, which could negatively impact its growth
rate and financial performance; |
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|
|
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● |
the
Company may be unable to attract new customers and/or retain existing customers; |
| |
● |
the
Company may require additional capital to finance strategic investments and operations, pursue business objectives and respond to
business opportunities, challenges or unforeseen circumstances, and the Company cannot be sure that additional financing will be
available; |
| |
|
|
| |
● |
the
Company’s historical growth rates may not be reflective of its future growth; |
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|
|
| |
● |
the
Company’s business and operating results may be significantly impacted by general economic conditions, the health of the U.S.
aviation industry and risks associated with its aviation assets; |
| |
|
|
| |
● |
litigation
or investigations involving the Company could result in material settlements, fines or penalties and may adversely affect the Company’s
business, financial condition and results of operations; |
| |
|
|
| |
● |
existing
or new adverse regulations or interpretations thereof applicable to the Company’s industry may restrict its ability to expand
or to operate its business as intended and may expose the Company to fines and other penalties; |
| |
|
|
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● |
the
occurrence of geopolitical events such as war, terrorism, civil unrest, political instability, environmental or climatic factors,
natural disaster, pandemic or epidemic outbreak, public health crisis and general economic conditions may have an adverse effect
on the Company’s business; |
| |
|
|
| |
● |
some
of the Company’s potential losses may not be covered by insurance, and the Company may be unable to obtain or maintain adequate
insurance coverage; and |
| |
|
|
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● |
the
Company is potentially subject to taxation-related risks in multiple jurisdictions, and changes in tax laws could have a material
adverse effect on its business, cash flow, results of operations or financial condition. |
The
Company’s business is primarily focused on certain targeted geographic regions, making it vulnerable to risks associated with having
geographically concentrated operations.
Jet.AI’s
customer base is primarily concentrated in certain geographic regions of the United States. As a result, Jet.AI’s business, financial
condition and results of operations are susceptible to regional economic downturns and other regional factors, including state regulations
and budget constraints and severe weather conditions, catastrophic events or other disruptions. As Jet.AI seeks to expand in its existing
markets, opportunities for growth within these regions will become more limited and the geographic concentration of the Company’s
business may increase.
If
the Company cannot internally or externally finance its aircraft or generate sufficient funds to make payments to external financing
sources, the Company may not succeed.
As
is customary in the aviation industry, the Company is reliant on external financing for the acquisition of its aircraft and is likely
to need additional financing in the future in order to grow its fleet. If the Company is unable to generate sufficient revenue or other
funding to make payments on this lease arrangement, the lessor may take back the aircraft, which would have a material adverse effect
on the Company’s business and reputation. Furthermore, if the Company does not have access to external financing for future aircraft,
for whatever reason, including reasons relating to the Company’s business or prospects or the broader economy, the Company may
not be in a position to grow and/or survive.
The
Company may not have enough capital as needed and may be required to raise more capital and the terms of subsequent financings may adversely
impact your investment.
The
Company anticipates needing access to credit in order to support its working capital requirements as it grows. Interest rates are rising,
and it is a difficult environment for obtaining credit on favorable terms. If the Company cannot obtain credit when needed, the Company
may issue debt or equity securities to raise funds, modify its growth plans, or take some other action. Interest on debt securities could
increase costs and negatively impact operating results and convertible debt securities could result in diluting your interest in the
Company. If the Company is unable to find additional capital on favorable terms, then it is possible that it will choose to cease its
sales activity. In that case, the only asset remaining to generate a return on your investment could be the Company’s intellectual
property. Even if the Company is not forced to cease its sales activity, the unavailability of capital could result in the Company performing
below expectations, which could adversely impact the value of your investment.
The
Company’s business and reputation rely on, and will continue to rely on, third parties.
The
Company has relied on a third-party app developer to develop the initial versions of its App and the Company may continue to rely on
third parties for future development of portions of any new or revised App. In place of a third-party app developer, the Company relies
both on internal development and freelance contractors supervised by the Company’s Chief Technology Officer. The Company intends
to continue to build its internal development team and to gradually decrease its reliance on external contractors for app development.
If there were delays or complications in the further development of the App, this might result in difficulties that include but are not
limited to the following:
| |
● |
Increased
Development Costs: Extended development timelines can result in higher costs associated with personnel, software licenses, hardware,
and other development resources. Delays may require additional investments to address technical issues, hire more personnel, or acquire
additional technology or expertise to expedite the development process. These increased costs may negatively impact our financial
performance and profitability. |
| |
|
|
| |
● |
Missed
Time-to-Market Opportunities: Delays in App development may cause us to miss strategic market windows, limiting our ability to capture
early adopters and gain a competitive advantage. Competitors may seize the opportunity to launch similar apps, potentially eroding
our market share and diminishing our growth prospects. Our ability to generate revenue and establish a strong market presence may
be compromised as a result. |
| |
|
|
| |
● |
Customer
Dissatisfaction and Loss of Trust: If delays or complications prolong the release of our App, it may lead to customer frustration
and disappointment. Anticipation for the App’s availability may diminish, and users may turn to alternative solutions or competitors.
Customer dissatisfaction can harm our reputation and brand image, resulting in a loss of trust and reducing customer loyalty and
engagement with our products and services. |
| |
|
|
| |
● |
Negative
Impact on Revenue and Financial Performance: The delay in launching our App may impact our revenue projections, financial forecasts,
and investment plans. The inability to generate expected revenue streams can adversely affect our cash flow, profitability, and ability
to meet financial obligations or raise additional capital. Our valuation and attractiveness to investors may also be negatively impacted. |
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|
|
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● |
Opportunity
Costs and Competitive Disadvantage: Time spent on addressing delays and complications diverts management’s attention and resources
away from other strategic initiatives or product developments. We may miss out on potential partnership opportunities, market expansions,
or product enhancements, resulting in missed revenue and growth opportunities. Competitors who successfully launch their apps within
a shorter timeframe may gain a competitive advantage over us. |
| |
|
|
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● |
Loss
of Investor Confidence: Extended delays or ongoing complications may erode investor confidence in our ability to execute our business
plan successfully. Investors may question our management’s capability, resulting in reduced investor interest, difficulty in
raising funds, and a potential decline in our stock price. The loss of investor confidence can have broader implications for our
overall financial stability and long-term viability. |
The
Company also expects to rely heavily on its existing operating partner, Cirrus Aviation Services, to maintain and operate the Company’s
leased aircraft for charter services and the Company will rely on third party operators when its clients book flights through its platform
with those operators. Both the Company and Cirrus actively book charters onto the Company’s aircraft. Cirrus books charters via
its 24-hour charter department and the Company books charters via its App. The failure of these third parties to perform these roles
properly may result in damage to the Company’s reputation, loss of clients, potential litigation and other costs. The Company may
also experience delays, defects, errors, or other problems with their work that could have an adverse effect on its results and its ability
to achieve profitability.
The
Company relies on third-party Internet, mobile, and other products and services to deliver its mobile and web applications and flight
management system offerings to customers, and any disruption of, or interference with, the Company’s use of those services could
adversely affect its business, financial condition, results of operations, and customers.
The
Company’s platform’s continuing and uninterrupted performance is critical to its success. That platform is dependent on the
performance and reliability of Internet, mobile, and other infrastructure services that are not under the Company’s control. While
the Company has engaged reputable vendors to provide these products or services, the Company does not have control over the operations
of the facilities or systems used by its third-party providers. These facilities and systems may be vulnerable to damage or interruption
from natural disasters, cybersecurity attacks, human error, terrorist attacks, power outages, pandemics, and similar events or acts of
misconduct. In addition, any changes in one of the Company’s third-party service provider’s service levels may adversely
affect the Company’s ability to meet the requirements of its customers. While the Company believes it has implemented reasonable
backup and disaster recovery plans, the Company has experienced, and expects that in the future it will experience, interruptions, delays
and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software
errors, website hosting disruptions, capacity constraints, or external factors beyond the Company’s control. Sustained or repeated
system failures would reduce the attractiveness of the Company’s offerings and could disrupt the Company’s customers’
businesses. It may become increasingly difficult to maintain and improve our performance, especially during peak usage times, as the
Company expands its products and service offerings. Any negative publicity or user dissatisfaction arising from these disruptions could
harm the Company’s reputation and brand, may adversely affect the usage of the Company’s offerings, and could harm the Company’s
business, financial condition and results of operation.
The
Company relies on third parties maintaining open marketplaces to distribute its mobile and web applications.
The
success of the Company’s App relies in part on third parties maintaining open marketplaces, including the Apple App Store and Google
Play, which make our App available for download. The Company cannot be assured that the marketplaces through which it distributes its
App will maintain their current structures or that such marketplaces will not charge the Company fees to list its App for download.
The
Company may be unable to adequately protect its intellectual property interests or may be found infringing on the intellectual property
interests of others.
The
Company’s intellectual property includes its trademarks, domain names, website, mobile and web applications, software (including
our proprietary algorithms and data analytics engines), copyrights, trade secrets, and inventions (whether or not patentable). The Company
believes that its intellectual property plays an important role in protecting its brand and the competitiveness of its business. If the
Company does not adequately protect its intellectual property, its brand and reputation may be adversely affected and its ability to
compete effectively may be impaired.
The
Company protects its intellectual property through a combination of trademarks, domain names and other measures. The Company has registered
its trademarks and domain names that it currently uses in the United States. The Company’s efforts may not be sufficient or effective.
Further, the Company may be unable to prevent competitors from acquiring trademarks or domain names that are similar to or diminish the
value of its intellectual property. In addition, it may be possible for other parties to copy or reverse engineer the Company’s
App or other technology offerings. Moreover, the Company’s proprietary algorithms, data analytics engines, or other software or
trade secrets may be compromised by third parties or the Company’s employees, which could cause the Company to lose any competitive
advantage it may have from them.
In
addition, the Company’s business is subject to the risk of third parties infringing its intellectual property. The Company may
not always be successful in securing protection for, or identifying or stopping infringements of, its intellectual property and it may
need to resort to litigation in the future to enforce its rights in this regard. Any such litigation could result in significant costs
and a diversion of resources. Further, such enforcement efforts may result in a ruling that the Company’s intellectual property
rights are unenforceable.
Moreover,
companies in the aviation and technology industries are frequently subject to litigation based on allegations of intellectual property
infringement, misappropriation, or other violations. As the Company expands and raises its profile, the likelihood of intellectual property
claims being asserted against it grows. Further, the Company may acquire or introduce new technology offerings, which may increase the
Company’s exposure to patent and other intellectual property claims. Any intellectual property claims asserted against the Company,
whether or not having any merit, could be time-consuming and expensive to settle or litigate. If the Company is unsuccessful in defending
such a claim, it may be required to pay substantial damages or could be subject to an injunction or agree to a settlement that may prevent
it from using its intellectual property or making its offerings available to customers. Some intellectual property claims may require
the Company to seek a license to continue its operations, and those licenses may not be available on commercially reasonable terms or
may significantly increase the Company’s operating expenses. If the Company is unable to procure a license, it may be required
to develop non-infringing technological alternatives, which could require significant time and expense. Any of these events could adversely
affect the Company’s business, financial condition, or operations.
A
delay or failure to identify and devise, invest in and implement certain important technology, business, and other initiatives could
have a material impact on the Company’s business, financial condition and results of operations.
In
order to operate its business, achieve its goals, and remain competitive, the Company continuously seeks to identify and devise, invest
in, implement and pursue technology, business and other important initiatives, such as those relating to aircraft fleet structuring,
business processes, information technology, initiatives seeking to ensure high quality service experience, and others.
The
Company’s business and the aircraft the Company operates are characterized by changing technology, introductions and enhancements
of models of aircraft and services and shifting customer demands, including technology preferences. The Company’s future growth
and financial performance will depend in part upon its ability to develop, market and integrate new services and to accommodate the latest
technological advances and customer preferences. In addition, the introduction of new technologies or services that compete with the
Company’s product and services could result in its revenues decreasing over time. If the Company is unable to upgrade its operations
or fleet with the latest technological advances in a timely manner, or at all, its business, financial condition and results of operations
could suffer.
The
Company is dependent on its information systems which may be vulnerable to cyber-attacks or other events.
The
Company’s operations are dependent on its information systems and the information collected, processed, stored, and handled by
these systems. The Company relies heavily on its computer systems to manage its client account balances, booking, pricing, processing
and other processes. The Company receives, retains and transmits certain confidential information, including personally identifiable
information that its clients provide. In addition, for these operations, the Company depends in part on the secure transmission of confidential
information over public networks to charter operators. The Company’s information systems are subject to damage or interruption
from power outages, facility damage, computer and telecommunications failures, computer viruses, security breaches, including credit
card or personally identifiable information breaches, coordinated cyber-attacks, vandalism, catastrophic events and human error. If the
Company’s platform is hacked, these funds could be at risk of being stolen which would damage the Company’s reputation and
likely its business. Any significant disruption or cyber-attacks on the Company’s information systems, particularly those involving
confidential information being accessed, obtained, damaged, or used by unauthorized or improper persons, could harm the Company’s
reputation and expose it to regulatory or legal actions and adversely affect its business and its financial results.
Because
the Company’s software could be used to collect and store personal information, privacy concerns in the territories in which the
Company operates could result in additional costs and liabilities to the Company or inhibit sales of its software.
The
regulatory framework for privacy issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many
government bodies and agencies have adopted or are considering adopting laws and regulations regarding the collection, use, storage and
disclosure of personal information and breach notification procedures. The Company is also required to comply with laws, rules and regulations
relating to data security. Interpretation of these laws, rules and regulations and their application to the Company’s software
and services in applicable jurisdictions is ongoing and cannot be fully determined at this time.
In
the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, the Electronic
Communications Privacy Act, the Computer Fraud and Abuse Act, the California Consumer Privacy Act of 2018 (the “CCPA”) and
other state and federal laws relating to privacy and data security. By way of example, the CCPA requires covered businesses to provide
new disclosures to California residents, provide them new ways to opt-out of certain disclosures of personal information, and allows
for a new cause of action for data breaches. It includes a framework that includes potential statutory damages and private rights of
action. There is some uncertainty as to how the CCPA, and similar privacy laws emerging in other states, could impact the Company’s
business as it depends on how such laws will be interpreted. As the Company expands its operations, compliance with privacy laws may
increase its operating costs.
The
Company may not have enough funds to sustain the business until it becomes profitable.
The
Company may not accurately anticipate how quickly it may use its funds and whether these funds are sufficient to bring the business to
profitability.
Jet.AI
is subject to risks related to taxation in the United States.
Significant
judgments based on interpretations of existing tax laws or regulations are required in determining Jet.AI’s provision for income
taxes. Jet.AI’s effective income tax rate could be adversely affected by various factors, including, but not limited to, changes
in the mix of earnings in tax jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities,
changes in existing tax policies, laws, regulations or rates, changes in the level of non-deductible expenses (including share-based
compensation), changes in the location of Jet.AI’s operations, changes in Jet.AI’s future levels of research and development
spending, mergers and acquisitions or the results of examinations by various tax authorities. Although Jet.AI believes its tax estimates
are reasonable, if the Internal Revenue Service or any other taxing authority disagrees with the positions taken on its tax returns,
Jet.AI could have additional tax liability, including interest and penalties. If material, payment of such additional amounts upon final
adjudication of any disputes could have a material impact on our results of operations and financial position.
Changes
to applicable tax laws and regulations or exposure to additional income tax liabilities could affect Jet.AI’s business and future
profitability.
One
of the Company’s predecessors, Oxbridge Acquisition Corp., was organized under the laws of the Cayman Islands. Jet.AI is a U.S.
corporation and thus subject to U.S. corporate income tax on its worldwide income. Further, since Jet.AI’s operations and customers
are located throughout the United States, Jet.AI is subject to various U.S. state and local taxes. U.S. federal, state, local and non-U.S.
tax laws, policies, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to Jet.AI
and may have an adverse effect on its business and future profitability.
For
example, several tax proposals have been set forth that would, if enacted, make significant changes to U.S. tax laws. Such proposals
include an increase in the U.S. income tax rate applicable to corporations (such as Jet.AI) from 21% to 28%. Congress may consider, and
could include, some or all of these proposals in connection with tax reform that may be undertaken. It is unclear whether these or similar
changes will be enacted and, if enacted, how soon any such changes could take effect. The passage of any legislation as a result of these
proposals and other similar changes in U.S. federal income tax laws could adversely affect Jet.AI’s business and future profitability.
As
a result of plans to expand Jet.AI’s business operations, including to jurisdictions in which tax laws may not be favorable, its
obligations may change or fluctuate, become significantly more complex or become subject to greater risk of examination by taxing authorities,
any of which could adversely affect Jet.AI’s after-tax profitability and financial results.
In
the event that Jet.AI’s business expands domestically or internationally, its effective tax rates may fluctuate widely in the future.
Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under GAAP, changes in deferred tax assets and liabilities, or changes in tax laws. Factors
that could materially affect Jet.AI’s future effective tax rates include, but are not limited to: (a) changes in tax laws or the
regulatory environment, (b) changes in accounting and tax standards or practices, (c) changes in the composition of operating income
by tax jurisdiction and (d) pre-tax operating results of Jet.AI’s business.
Additionally,
Jet.AI may be subject to significant income, withholding, and other tax obligations in the United States and may become subject to taxation
in numerous additional U.S. state and local and non-U.S. jurisdictions with respect to income, operations and subsidiaries related to
those jurisdictions. Jet.AI’s after-tax profitability and financial results could be subject to volatility or be affected by numerous
factors, including (a) the availability of tax deductions, credits, exemptions, refunds and other benefits to reduce tax liabilities,
(b) changes in the valuation of deferred tax assets and liabilities, if any, (c) the expected timing and amount of the release of any
tax valuation allowances, (d) the tax treatment of stock-based compensation, (e) changes in the relative amount of earnings subject to
tax in the various jurisdictions, (f) the potential business expansion into, or otherwise becoming subject to tax in, additional jurisdictions,
(g) changes to existing intercompany structure (and any costs related thereto) and business operations, (h) the extent of intercompany
transactions and the extent to which taxing authorities in relevant jurisdictions respect those intercompany transactions, and (i) the
ability to structure business operations in an efficient and competitive manner. Outcomes from audits or examinations by taxing authorities
could have an adverse effect on Jet.AI’s after-tax profitability and financial condition. Additionally, the Internal Revenue Service
and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products
and services and the use of intangibles. Tax authorities could disagree with Jet.AI’s intercompany charges, cross-jurisdictional
transfer pricing or other matters and assess additional taxes. If Jet.AI does not prevail in any such disagreements, Jet.AI’s profitability
may be affected.
Jet.AI’s
after-tax profitability and financial results may also be adversely affected by changes in relevant tax laws and tax rates, treaties,
regulations, administrative practices and principles, judicial decisions and interpretations thereof, in each case, possibly with retroactive
effect.
Jet.AI’s
ability to utilize its net operating loss and tax credit carryforwards to offset future taxable income may be subject to certain limitations.
In
general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an
“ownership change” is subject to limitations on its ability to use its pre-change net operating loss carryforwards (“NOLs”)
to offset future taxable income. The limitations apply if a corporation undergoes an “ownership change,” which is generally
defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period.
If the Company has experienced an ownership change at any time since its incorporation, Jet.AI may be subject to limitations on its ability
to utilize its existing NOLs and other tax attributes to offset taxable income or tax liability. In addition, future changes in Jet.AI’s
stock ownership, which may be outside of Jet.AI’s control, may trigger an ownership change. Similar provisions of state tax law
may also apply to limit Jet.AI’s use of accumulated state tax attributes. As a result, even if Jet.AI earns net taxable income
in the future, its ability to use its pre-change NOL carryforwards and other tax attributes to offset such taxable income or tax liability
may be subject to limitations, which could potentially result in increased future income tax liability to Jet.AI.
Jet.AI’s
sole material asset is its direct and indirect interests in its subsidiaries and, accordingly, Jet.AI will be dependent upon distributions
from its subsidiaries to pay taxes and cover its corporate and other overhead expenses and pay dividends, if any, on the Common Stock.
Jet.AI
is a holding company and it has no material assets other than its direct and indirect equity interests in its subsidiaries. Jet.AI will
have no independent means of generating revenue. To the extent Jet.AI’s subsidiaries have available cash, Jet.AI will cause its
subsidiaries to make distributions of cash to pay taxes, cover Jet.AI’s corporate and other overhead expenses and pay dividends,
if any, on the Common Stock. To the extent that Jet.AI needs funds and its subsidiaries fail to generate sufficient cash flow to distribute
funds to Jet.AI or are restricted from making such distributions or payments under applicable law or regulation or under the terms of
their financing arrangements, or are otherwise unable to provide such funds, Jet.AI’s liquidity and financial condition could be
materially adversely affected.
Risks
Related to the Company’s Operating Environment
Demand
for the Company’s product and services may decline due to factors beyond its control.
Demand
for private jet charters may be negatively impacted by factors affecting air travel generally, such as adverse weather conditions, an
outbreak of a contagious disease and other natural events, terrorism and increased security screening requirements.
In
particular, the recurrence of a pandemic, whether COVID-19 or otherwise, may result in a decline in air travel. Additionally, the reimposition
of travel restrictions and other measures intended to contain the spread of any such virus may contribute to a decline in demand for
air travel. If travel remains in a general decline for a significant period of time, the Company may be unable to compete with more established
operators and may not be able to achieve profitability in the medium term or at all.
More
broadly, business jet travel is highly correlated to the performance of the economy, and an economic downturn, such as the current economic
environment, which has been adversely affected by high rates of inflation, increasing interest rates, and low consumer sentiment, is
likely to have a direct impact on the use of business jets. The Company’s customers may consider private air travel through its
products and services to be a luxury item, especially when compared to commercial air travel. As a result, any economic downturn which
has an adverse effect on the Company’s customers’ spending habits could cause them to travel less frequently and, to the
extent they travel, to travel using commercial air carriers or other means considered to be more economical than the Company’s
products and services. For example, beginning in 2008 and in connection with weakened macroeconomic conditions, the corporate and executive
jet aviation industry, and companies that utilize corporate jets, experienced intensified political and media scrutiny. It is likely
that the current economic downturn will impact demand for private jet travel for some time.
Any
of these factors that cause the demand for private jet travel to decline may also result in delays that could reduce the attractiveness
of private air charter travel versus other means of transportation, particularly for shorter distance travel, which represents our primary
market currently. Delays also frustrate passengers, affecting the Company’s reputation and potentially reducing fleet utilization
and charter bookings as a result of flight cancellations and increase costs. The Company may experience decreased demand, as well as
a loss of reputation, in the event of an accident involving one of its aircraft or an aircraft booked through our platform or any actual
or alleged misuse of its platform or aircraft by customers in violation of law. Demand for the Company’s product and services may
also decline due to actions that increase the cost of private air charter travel versus other forms of transportation, particularly efforts
aimed at addressing climate change such as carbon tax initiatives or other actions. Any of the foregoing circumstances or events which
reduced the demand for private jet charters could negatively impact the Company’s ability to establish its business and achieve
profitability.
The
Company faces a high level of competition with numerous market participants with greater financial resources and operating experience.
The
private air travel industry is extraordinarily competitive. Factors that affect competition in this industry include price, reliability,
safety, regulations, professional reputation, aircraft availability, equipment and quality, consistency and ease of service, willingness
and ability to serve specific airports or regions, and investment requirements. The Company plans to compete against private jet charter
and fractional jet companies as well as business jet charter companies. Both the private jet charter companies and the business jet charter
companies have numerous competitive advantages that enable them to attract customers. Jet.AI’s access to a smaller aircraft fleet
and regional focus puts it at a competitive disadvantage, particularly with respect to its appeal to business travelers who want to travel
overseas.
The
fractional private jet companies and many of the business jet charter companies have access to larger fleets of aircraft and have greater
financial resources, which would permit them to more effectively service customers. Due to the Company’s relatively small size,
it is more susceptible to their competitive activities, which could prevent the Company from attaining the level of sales required to
sustain profitable operations.
Recent
consolidation in the industry, such as VistaJet’s acquisitions of XOJET and JetSmarter and Wheels Up’s acquisition of Delta
Private Jets as well as Gama Aviation, a business jet services company, and increased consolidation in the future could further intensify
the competitive environment the Company faces.
There
can be no assurance that the Company’s competitors will not be successful in capturing a share of our present or potential customer
base. The materialization of any of these risks could adversely affect the Company’s business, financial condition and results
of operations.
Aviation
businesses are often affected by factors beyond their control including: air traffic congestion at airports; airport slot restrictions;
air traffic control inefficiencies; natural disasters; adverse weather conditions, such as hurricanes or blizzards; increased and changing
security measures; changing regulatory and governmental requirements; new or changing travel-related taxes; or the outbreak of disease;
any of which could have a material adverse effect on the Company’s business, results of operations and financial condition.
Like
other aviation companies, the Company’s business is affected by factors beyond its control, including air traffic congestion at
airports, airport slot restrictions, air traffic control inefficiencies, natural disasters, adverse weather conditions, increased and
changing security measures, changing regulatory and governmental requirements, new or changing travel-related taxes, or the outbreak
of disease. Factors that cause flight delays frustrate passengers and increase operating costs and decrease revenues, which in turn could
adversely affect profitability. In the United States, the federal government singularly controls all U.S. airspace, and aviation operators
are completely dependent on the FAA to operate that airspace in a safe, efficient and affordable manner. The air traffic control system,
which is operated by the FAA, faces challenges in managing the growing demand for U.S. air travel. U.S. air-traffic controllers often
rely on outdated technologies that routinely overwhelm the system and compel aviation operators to fly inefficient, indirect routes resulting
in delays and increased operational cost. In addition, there are currently proposals before Congress that could potentially lead to the
privatization of the United States’ air traffic control system, which could adversely affect the Company’s business.
Adverse
weather conditions and natural disasters, such as hurricanes, winter snowstorms or earthquakes, can cause flight cancellations or significant
delays. Cancellations or delays due to adverse weather conditions or natural disasters, air traffic control problems or inefficiencies,
breaches in security or other factors may affect the Company to a greater degree than its competitors who may be able to recover more
quickly from these events, and therefore could have a material adverse effect on the Company’s business, results of operations
and financial condition to a greater degree than other air carriers. Any general reduction in passenger traffic could have a material
adverse effect on the Company’s business, results of operations and financial condition.
The
operation of aircraft is subject to various risks, and failure to maintain an acceptable safety record may have an adverse impact on
our ability to obtain and retain customers.
The
operation of aircraft is subject to various risks, including catastrophic disasters, crashes, mechanical failures and collisions, which
may result in loss of life, personal injury and/or damage to property and equipment. The Company may experience accidents in the future.
These risks could endanger the safety of its customers, personnel, third parties, equipment, cargo and other property (both the Company’s
and that of third parties), as well as the environment. If any of these events were to occur, the Company could experience loss of revenue,
termination of customer contracts, higher insurance rates, litigation, regulatory investigations and enforcement actions (including potential
grounding of the Company’s fleet and suspension or revocation of its operating authorities) and damage to its reputation and customer
relationships. In addition, to the extent an accident occurs with an aircraft the Company operates or charters, the Company could be
held liable for resulting damages, which may involve claims from injured passengers and survivors of deceased passengers. There can be
no assurance that the amount of the Company’s insurance coverage available in the event of such losses would be adequate to cover
such losses, or that the Company would not be forced to bear substantial losses from such events, regardless of its insurance coverage.
Moreover,
any aircraft accident or incident, even if fully insured, and whether involving the Company or other private aircraft operators, could
create a public perception that the Company is less safe or reliable than other private aircraft operators, which could cause customers
to lose confidence and switch to other private aircraft operators or other means of transportation. In addition, any aircraft accident
or incident, whether involving the Company or other private aircraft operators, could also affect the public’s view of industry
safety, which may reduce the amount of trust by customers.
The
Company incurs considerable costs to maintain the quality of (i) its safety program, (ii) its training programs and (iii) its fleet of
aircraft. The Company cannot guarantee that these costs will not increase. Likewise, the Company cannot guarantee that its efforts will
provide an adequate level of safety or an acceptable safety record. If the Company is unable to maintain an acceptable safety record,
the Company may not be able to retain existing customers or attract new customers, which could have a material adverse effect on its
business, financial condition and results of operations.
The
supply of pilots to the airline industry is limited and may negatively affect the Company’s operations and financial condition.
Increases in labor costs may adversely affect the Company’s business, results of operations and financial condition.
The
Company’s pilots are subject to stringent pilot qualification and crew member flight training standards , which among other things
require minimum flight time for pilots and mandate strict rules to minimize pilot fatigue. The existence of such requirements effectively
limits the supply of qualified pilot candidates and increases pilot salaries and related labor costs. A shortage of pilots would require
the Company to further increase its labor costs, which would result in a material reduction in its earnings. Such requirements also impact
pilot scheduling, work hours and the number of pilots required to be employed for the Company’s operations.
In
addition, the Company’s operations and financial condition may be negatively impacted if it is unable to train pilots in a timely
manner. Due to an industry-wide shortage of qualified pilots, driven by the flight hours requirements under the FAA qualification standards
and attrition resulting from the hiring needs of other industry participants, pilot training timelines have significantly increased and
stressed the availability of flight simulators, instructors and related training equipment. As a result, the training of the Company’s
pilots may not be accomplished in a cost-efficient manner or in a manner timely enough to support the Company’s operational needs.
Pilot
attrition may negatively affect the Company’s operations and financial condition.
In
recent years, the Company has observed significant volatility in pilot attrition as a result of pilot wage and bonus increases at other
industry participants and the growth of cargo, low-cost and ultra-low-cost airlines. If attrition rates are higher than the availability
of replacement pilots, the Company’s operations and financial results could be materially and adversely affected.
The
Company is exposed to operational disruptions due to maintenance.
The
Company’s fleet requires regular maintenance work, which may cause operational disruption. The Company’s inability to perform
timely maintenance and repairs can result in its aircraft being underutilized which could have an adverse impact on its business, financial
condition and results of operations. On occasion, airframe manufacturers and/or regulatory authorities require mandatory or recommended
modifications to be made across a particular fleet which may mean having to ground a particular type of aircraft. This may cause operational
disruption to and impose significant costs on the Company. Moreover, as the Company’s aircraft base increases, maintenance costs
could potentially increase.
Significant
increases in fuel costs could have a material adverse effect on the Company’s business, financial condition and results of operations.
Fuel
is essential to the operation of the Company’s aircraft and to the Company’s ability to carry out its transport services.
Fuel costs are a key component of the Company’s operating expenses. A significant increase in fuel costs may negatively impact
the Company’s revenue, margins, operating expenses and results of operations. While the Company may be able to pass increases in
fuel costs on to its customers, increased fuel surcharges may affect the Company’s revenue and retention if a prolonged period
of high fuel costs occurs. To the extent there is a significant increase in fuel costs that affects the amount the Company’s customers
choose to fly, it may have a material adverse effect on the Company’s business, financial condition and results of operations.
If
efforts to continue to build a strong brand identity and improve member satisfaction and loyalty are not successful, the Company may
not be able to attract or retain members, and its operating results may be adversely affected.
The
Company must continue to build and maintain strong brand identity for its products and services, which have expanded over time. The Company
believes that strong brand identity will continue to be important in attracting members. If the Company’s efforts to promote and
maintain its brand are not successful, the Company’s operating results and our ability to attract members and other customers may
be adversely affected. From time to time, the Company’s members and other customers may express dissatisfaction with its products
and service offerings, in part due to factors that could be outside of the Company’s control, such as the timing and availability
of aircraft and service interruptions driven by prevailing political, regulatory, or natural conditions. To the extent dissatisfaction
with the Company’s products and services is widespread or not adequately addressed, the Company’s brand may be adversely
impacted and its ability to attract and retain members may be adversely affected. With respect to the Company’s planned expansion
into additional markets, the Company will also need to establish its brand and to the extent it is not successful, the Company’s
business in new markets would be adversely impacted.
Any
failure to offer high-quality customer support may harm the Company’s relationships with its customers and could adversely affect
the Company’s reputation, brand, business, financial condition and results of operations.
Through
the Company’s marketing, advertising, and communications with its customers, the Company sets the tone for its brand as aspirational
but also within reach. The Company’s strives to create high levels of customer satisfaction through the experience provided by
its team and representatives. The ease and reliability of its offerings, including its ability to provide high-quality customer support,
helps the Company attract and retain customers. The Company’s ability to provide effective and timely support is largely dependent
on its ability to attract and retain skilled employees who can support the Company’s customers and are sufficiently knowledgeable
about the Company’s product and services. As the Company continues to grow its business and improve its platform, it will face
challenges related to providing quality support at an increased scale. Any failure to provide efficient customer support, or a market
perception that the Company does not maintain high-quality support, could adversely affect the Company’s reputation, brand, business,
financial condition and results of operations.
The
demand for the Company’s services is subject to seasonal fluctuations.
Demand
for the Company’s services will fluctuate over the course of the year and is higher in the summer season and during holiday periods.
During periods of higher demand, the Company’s ability to provide agreed upon levels of service to its customers may deteriorate,
which could have a negative impact on the Company’s reputation and its ability to succeed.
Changes
in laws or regulations, or a failure to comply with any laws or regulations, may adversely affect our business, investments and results
of operations.
We
are subject to laws and regulations enacted by national, regional and local governments. The Company’s business is subject to significant
regulation by the FAA, the TSA (Transportation Security Administration) as well as “know your customer” obligations and other
laws and regulations. The laws and regulations concerning the selling of the Company’s product or services may change and if they
do then the selling of the Company’s product or service may no longer be possible or profitable. In addition, we are required to
comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult,
time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and
those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to
comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and our
results of operations.
The
Company’s failure to attract and retain highly qualified personnel in the future could harm its business.
The
Company believes that its future success will depend in large part on its ability to retain or attract highly qualified management, technical
and other personnel. The Company may not be successful in retaining key personnel or in attracting other highly qualified personnel.
If the Company is unable to retain or attract significant numbers of qualified management and other personnel, the Company may not be
able to grow and expand its business.
Risks
Relating to Ownership of Common Stock
The
Company has never paid cash dividends on its capital stock, and Jet.AI does not anticipate paying dividends in the foreseeable future.
The
Company has never paid cash dividends on its capital stock and currently intends to retain any future earnings to fund the growth of
its business, other than mandatory dividend payments on its preferred stock, subject to Delaware law. Any determination to pay dividends
in the future will be at the discretion of the Board and will depend on Jet.AI’s financial condition, operating results, capital
requirements, general business conditions and other factors that the Board may deem relevant. As a result, capital appreciation, if any,
of Jet.AI’s Common Stock will be the sole source of gain for the foreseeable future.
The
Company’s stock price may be volatile, and you may not be able to sell shares at or above the price at which you purchase shares
or realize any value on your warrants.
Fluctuations
in the price of the Common Stock could contribute to the loss of all or part of your investment. If an active market for our securities
develops and continues, the trading price of Common Stock could be volatile and subject to wide fluctuations in response to various factors,
some of which are beyond our control.
Factors
affecting the trading price of our Common Stock may include:
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the
realization of any of the risk factors presented in this prospectus; |
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actual
or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar
to Jet.AI; |
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failure
to meet or exceed financial estimates and projections of the investment community or that Jet.AI provides to the public; |
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issuance
of new or updated research or reports by securities analysts or changed recommendations for the industry in general; |
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announcements
of significant acquisitions, strategic partnerships, joint ventures, collaborations, financings, or capital commitments; |
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the
volume of shares of Common Stock available for public sale; |
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operating
and stock price performance of other companies that investors deem comparable to Jet.AI; |
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Jet.AI’s
ability to market new and enhanced products and technologies on a timely basis; |
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changes
in laws and regulations affecting Jet.AI’s business; |
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Jet.AI’s
ability to meet compliance requirements; |
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commencement
of, or involvement in, litigation involving Jet.AI; |
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changes
in financial estimates and recommendations by securities analysts concerning Jet.AI or the market in general; |
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the
timing and magnitude of investments in the growth of the business; |
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actual
or anticipated changes in laws and regulations; |
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additions
or departures of key management or other personnel; |
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increased
labor costs; |
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disputes
or other developments related to intellectual property or other proprietary rights, including litigation; |
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the
ability to market new and enhanced solutions on a timely basis; |
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sales
of substantial amounts of the Common Stock by Jet.AI’s directors, executive officers, significant stockholders or the perception
that such sales could occur, including as a result of transactions under the Share Purchase Agreement and the Forward Purchase Agreement; |
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trading
volume of our Common Stock, including as a result of transactions under the Share Purchase Agreement and the Securities Purchase
Agreement; |
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changes
in capital structure, including future issuances of securities or the incurrence of debt and the terms thereof; and |
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general
economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of
war or terrorism. |
Broad
market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock
market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the
operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities,
may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors
perceive to be similar to Jet.AI could depress our stock price regardless of our business, prospects, financial conditions or results
of operations. A decline in the market price of Jet.AI’s securities also could adversely affect its ability to issue additional
securities and its ability to obtain additional financing in the future.
Anti-takeover
provisions contained in the Company’s Certificate of Incorporation and applicable laws could impair a takeover attempt.
The
Company’s Certificate of Incorporation afford certain rights and powers to the Board that could contribute to the delay or prevention
of an acquisition that it deems undesirable. Any of the foregoing provisions and terms that have the effect of delaying or deterring
a change in control could limit the opportunity for stockholders to receive a premium for their shares of our securities, and could also
affect the price that some investors are willing to pay for our securities.
If
we fail to comply with the continued listing requirements of Nasdaq, we would face possible delisting, which would result in a limited
public market for our shares, limit our ability to access existing liquidity facilities and make obtaining future financing more difficult
for us.
Our
Common Stock is currently listed on Nasdaq under the symbol “JTAI”. On December 1, 2023, the Company received the Initial
Notice Letter from the Nasdaq Listing Qualifications Staff of Nasdaq notifying the Company that its amount of stockholders’
equity had fallen below the $10 million Minimum Stockholders’ Equity Requirement. The Company’s stockholders’
deficit as of December 31, 2023 was $(3,963,039). The Initial Notice Letter also noted that as of September 30, 2023, the Company
did not meet The Nasdaq Global Market alternative listing criteria for the “Market Value” standard or the “Total
Assets / Total Revenues” standard. The Initial Notice Letter further noted that the Company may consider applying
to transfer the Company’s securities to the Nasdaq Capital Market, which would require the Company to, among other
things, meet Nasdaq’s continued listing requirements. On August 14, 2024, the Nasdaq Hearings Panel
granted the Company’s request to transfer the Company’s securities from the Nasdaq Global Market to the Nasdaq Capital Market to be effective as
of the opening of trading on August 16, 2024.
On
April 14, 2024, the Company received an additional notification letter from Nasdaq (the “Second Notice Letter”)
stating that the Company is not in compliance with Nasdaq Listing Rule 5450(a)(1), as the minimum bid price of the Company’s
Class A Common Stock had been below $1.00 Minimum Bid Price Requirement for 30 consecutive business days. The notification
of noncompliance has no immediate effect on the listing or trading of the Company’s Common Stock on Nasdaq. The Company has 180
calendar days, or until October 14, 2024, to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the minimum
bid price of the Company’s Common Stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during
this 180-calendar day grace period. In the event the Company does not regain compliance with the Minimum Bid Price Requirement by October
14, 2024, the Company may be eligible for an additional 180-calendar day compliance period because it elected to transfer
to The Nasdaq Capital Market. To qualify, the Company would
be required to meet the continued listing requirements for market value of publicly held shares and all other initial listing standards
for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of its intention
to cure the bid price deficiency during the second compliance period. The Company’s failure to regain compliance during this period
could result in delisting. The Company intends to actively monitor the bid price of its Common Stock and may, if appropriate, consider
implementing available options to regain compliance with the Minimum Bid Price Requirement.
On May 30, 2024,
the Company received an additional notification letter from Nasdaq (the “Third Notice Letter”) stating that
the Company has not regained compliance with the Minimum Stockholders’ Equity Requirement for continued listing discussed
in the Initial Notice Letter, which it was required to meet by May 29, 2024 pursuant to its compliance plan. The Third Notice
Letter notified the Company that, unless the Company requested an appeal hearing before the Nasdaq Hearings Panel (the “Panel”)
by June 6, 2024, trading of the Company’s Common Stock would be suspended at the opening of business on June 10, 2024, and
a Form 25-NSE would be filed with the SEC, which would remove the Company’s securities from listing and registration
on Nasdaq (such notification, the “Delisting Notice”).
As directed in
the Third Notice Letter, the Company timely requested a hearing before the Panel and paid the applicable fee to appeal the Delisting
Notice. The Delisting Notice has no immediate effect on the listing or trading of the Company’s Common Stock.
The Company’s hearing request stayed the suspension of trading on the Company’s securities, and the Company’s securities
continue to trade on Nasdaq. On August 14, 2024, in connection the implementation of the Company’s compliance plan, the Nasdaq
Hearings Panel granted the Company’s request to transfer the Company’s securities from The Nasdaq Global Market to
The Nasdaq Capital Market to be effective as of the opening of trading on August 16, 2024. Further the Nasdaq Hearings Panel granted
the Company’s request to have until November 26, 2024 to demonstrate compliance with its previously submitted plan, a deadline
that the Company believes to be attainable. The Company is working diligently to cure the deficiencies set forth in the Delisting Notice and plans to regain compliance with
the continued listing requirements as soon as practicable.
Although
the Company believes it will be able to achieve compliance with Nasdaq’s continued listing requirements, there can be no assurance
that the Company will be able to regain compliance with all applicable requirements or maintain compliance with any other listing requirements
within the time frame required by Nasdaq or at all, particularly if the Company’s stock price trades below $1.00 for a sustained
period. Nasdaq’s determination that we fail to meet the continued listing standards of Nasdaq may result in our securities
being delisted from Nasdaq as set forth in the Delisting Notice.
A
delisting of our Common Stock and our inability to list on another national securities market could negatively impact
us by: (i) reducing the liquidity and market price of our Common Stock; (ii) reducing the number of investors willing
to hold or acquire our Common Stock, which could negatively impact our ability to raise equity financing; (iii) limiting
our ability to use certain registration statements to offer and sell freely tradable securities, thereby limiting our ability to access
the public capital markets; and (iv) impairing our ability to provide equity incentives to our employees. In addition, a delisting of
our Common Stock would prevent us from being able to access financing under the Share Purchase Agreement. Furthermore, the Company may
have to pay all or a portion of the $800,000 commitment fee due under the Share Purchase Agreement in cash if its shares are no longer
listed. The Company may not have sufficient funds to be able to pay such fee. See “Management’s Discussion and Analysis
of Financial Condition and Results of Operations – Liquidity and Capital Resources.”
Stockholders
may experience dilution of their ownership interest due to the issuance of additional shares of Common Stock upon the conversion of the
Series B Preferred Stock, especially since the Series B Preferred Stock has fluctuating conversion rates that are set at a discount to
the market price of our Common Stock during the period immediately following conversion.
We
have raised approximately $1.5 million in financing through the issuance of, among other securities, shares of Series B Preferred Stock
in the Selling Stockholder Transaction, and may issue additional shares of Series B Preferred Stock upon exercise of the Warrant
for up to $15,000,000. The shares of Series B Preferred Stock automatically convert into shares of our Common Stock, subject to certain
conditions and limitations, by the 10th trading day following their issuance at a conversion price based 90% of the trading
price of our Common Stock, or 80% in the event we are delisted from Nasdaq. See “Prospectus Summary – The Selling Stockholder
Transaction.” This could result in material dilution to existing stockholders of the Company. Because the conversion price
is based upon the trading price of our Common Stock at the time of conversion, the number of shares into which the Series B Preferred
Stock may be converted may increase without an upper bound. If the trading prices of our Common Stock is low when the conversion
price of the convertible debt is determined, we would be required to issue a greater number of shares of Common Stock to the Selling
Stockholder, which could cause substantial dilution to our stockholders. In addition, the holder of the Series B Preferred
Stock converts and then sells our Common Stock, this could result in an imbalance of supply and demand for our Common Stock and
reduce our stock price significantly. The further our stock price declines, the further the adjustment of the conversion price will fall
and the greater the number of shares of Common Stock we will have to issue upon conversion, resulting in further dilution to our
stockholders. Because a market price-based conversion formula can lead to dramatic stock price reductions and corresponding negative
effects on both a company and its stockholders, convertible security financings with market price-based conversion ratios have colloquially
been called “floorless,” “toxic,” and “death spiral,” convertibles.
The
issuances of additional shares of Common Stock under the Share Purchase Agreement and the GEM Warrant may result in dilution of future
Jet.AI stockholders and have a negative impact on the market price of Common Stock.
The
proceeds from the Business Combination, Forward Purchase Agreement and our existing cash and cash equivalents may not be sufficient to
meet our working capital needs and we intend to draw on the Share Purchase Agreement to meet our cash needs. Further, our estimates may
prove to be inaccurate, and we could spend our capital resources faster than we currently expect. Further, changing circumstances, some
of which may be beyond our control, could also cause us to spend capital significantly faster than we currently anticipate, and we may
need to seek additional funding sooner than planned. To the extent this occurs, it could impose significant dilution on the Company’s
stockholders.
In
addition to shares to be sold to GEM upon a drawdown, the Share Purchase Agreement entitles GEM to receive (i) payment of a commitment
fee of $800,000 payable in either cash or Common Stock and (ii) the GEM Warrant. The shares issuable pursuant to the GEM Warrant were
calculated on a fully diluted basis as of the closing of the Business Combination, which calculation included shares issuable upon exercise
of the then outstanding JTAIW Warrants, the Private Placement Warrants, the Merger Consideration Warrants, Jet Token options and
Jet Token RSU Awards. If the JTAIW Warrants, the Private Placement Warrants, Merger Consideration Warrants, Jet Token options and/or
Jet Token RSU Awards are not exercised in full or at all, and GEM exercises the GEM Warrant, then GEM could hold significantly more than
6% of the outstanding Common Stock of Jet.AI on a non-diluted basis.
If
the average closing price of Jet.AI’s Common Stock for the 10 trading days following the first anniversary of the date of listing
is less than 90% of the then current exercise price of the GEM Warrant, then the exercise price of the GEM Warrant is subject to adjustment
to 110% of our then current trading price.
The
issuances of Common Stock pursuant to the GEM Warrant and the Share Purchase Agreement would result in dilution of future Jet.AI stockholders
and could have a negative impact on the market price of Common Stock and Jet.AI’s ability to obtain additional financing. See “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Overview –
Share Purchase Agreement” for a description of the GEM Warrant.
Certain
existing stockholders purchased our securities at a price below the current trading price of such securities, and may experience a positive
rate of return based on the current trading price.
Given
the relatively lower purchase prices that some of our stockholders paid to acquire some of their securities compared to the current trading
price of our shares of common stock, these stockholders in some instances may earn a positive rate of return on their investment, which
may be a significant positive rate of return, depending on the market price of our shares of Common Stock at the time that such stockholders
choose to sell their shares of Common Stock.
Public
stockholders may not be able to experience the same positive rates of return on securities they purchase due to the low price at which
some of our stockholders, particularly the Sponsor and Meteora, acquired shares of our Common Stock or the prices at which GEM may receive
shares at the time of a drawdown under the Share Purchase Agreement.
Sales
of Common Stock, or the perception of such sales, by us, our significant stockholders or the Selling Stockholder in the public market
or otherwise could cause the market price for Common Stock to decline and the Selling Stockholder may receive significant proceeds.
The
sale of shares of Common Stock in the public market or otherwise, particularly sales by the Sponsor and our officers or directors following
the expiration of lock-up restrictions in August 2024, or by the Selling Stockholder, or the perception that such sales
could occur, could harm the prevailing market price of our Common Stock. These sales, or the possibility that these sales may occur,
also might make it more difficult for us to sell equity securities in the future at a time and at a price that is deemed appropriate.
Resales of Common Stock may cause the market price of our securities to drop significantly, even if our business is doing well.
Certain
stockholders purchased or were issued securities at prices that may be significantly below the trading price of our Common Stock:
| |
● |
Sponsor
paid approximately $0.009 per share, for 2,875,000 Class B Ordinary Shares; and |
| |
● |
Sponsor
and Maxim paid approximately $1.00 per warrant, for 5,760,000 Private Placement Warrants. |
In
connection with an extraordinary general meeting of Oxbridge shareholders in November 2022, in which Oxbridge asked its shareholders
to vote to extend the date by which Oxbridge had to consummate a business combination, the holders of 10,313,048 Class A Ordinary Shares
or approximately 90.0% of the shares with redemption rights at the time exercised their right to redeem their shares for cash at a redemption
price of approximately $10.22 per share, for an aggregate redemption amount of $105,424,960. Subsequently, in connection with the Business
Combination, holders of 1,144,215 of Oxbridge’s Class A Ordinary Shares, or approximately 96.4% of the shares with redemption rights
at the time, exercised their right to redeem their shares for cash at a redemption price of approximately $11.10 per share, for an aggregate
redemption amount of $12,655,017. On August 8, 2023, pursuant to the Forward Purchase Agreement, Meteora purchased 663,556 of the Class
A Ordinary Shares from third parties through a broker in open market transactions or by reversing previously submitted redemption requests
and waived its redemption rights with respect to these shares. Furthermore, Meteora purchased an additional 548,127 such shares.
We
have an effective registration statement (SEC File No. 333-274432) covering the resale of up to 32,330,074 shares of Common Stock held
by, or available upon exercise of warrants or other convertible securities by, certain of our stockholders, as well as the issuance by
us of shares of Common Stock upon exercise of our outstanding warrants. Given the substantial number of shares of Common Stock registered
for potential resale by these stockholders, the sale of shares by them, or the perception in the market that they intend to sell shares,
could increase the volatility of the market price of our Common Stock or result in a significant decline in the public trading price
of our Common Stock. Many of these stockholders have or may acquire their shares at a significant discount to the market price of our
Common Stock. This will create an incentive for such stockholders to sell shares of our Common Stock because they purchased the shares
at prices lower than the then-current trading price.
If
securities or industry analysts do not publish or cease publishing research or reports about Jet.AI, its business or its market, or if
they change their recommendations regarding the Common Stock adversely, the price and trading volume of the Common Stock could decline.
The
trading market for the Common Stock will be influenced by the research and reports that industry or securities analysts may publish about
Jet.AI, its business, its market or its competitors. If any of the analysts who may cover Jet.AI change their recommendation regarding
the Common Stock adversely, or provide more favorable relative recommendations about its competitors, the price of the Common Stock would
likely decline. If any analyst who may cover Jet.AI were to cease their coverage or fail to regularly publish reports on Jet.AI, we could
lose visibility in the financial markets, which could cause the stock price or trading volume of Jet.AI securities to decline.
The
JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements
applicable to other public companies that are not emerging growth companies.
We
qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act.
As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not
emerging growth companies, including (a) the exemption from the auditor attestation requirements with respect to internal control over
financial reporting under Section 404 of the Sarbanes-Oxley Act, (b) the exemptions from say-on-pay, say-on-frequency and say-on-golden
parachute voting requirements and (c) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy
statements. As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging
growth company until the earliest of (a) the last day of the fiscal year (i) following August 16, 2026, the fifth anniversary of our
Initial Public Offering of units, which closed on August 16, 2021 (“IPO”), (ii) in which we have total annual gross revenue
of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time) or (iii) in which we are deemed to be a
large accelerated filer, which means the market value of our the shares of Common Stock that are held by non-affiliates exceeds $700
million as of the last business day of our prior second fiscal quarter, and (b) the date on which we have issued more than $1.0 billion
in non-convertible debt during the prior three year period.
In
addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the exemption from complying with
new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company.
An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply
to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the
requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt
out of such extended transition period, which means that when a standard is issued or revised and it has different application dates
for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither
an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible
because of the potential differences in accounting standards used.
We
cannot predict if investors will find our Common Stock less attractive because we will rely on these exemptions. If some investors find
our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our share price may
be more volatile.
Risks
Related to This Offering
The
Selling Stockholder may choose to sell the Shares at prices below the current market price of our Common Stock.
The
Selling Stockholder is not restricted as to the prices at which they may sell or otherwise dispose of the Shares covered by this
prospectus. Sales or other dispositions of the Shares below the then-current market price of the Common Stock could adversely
affect the market price of our Common Stock.
We
will have broad discretion as to the proceeds that we receive from the cash exercise by any holder of the Warrant, and we may not
use the proceeds effectively.
We
will not receive any of the proceeds from the sale of the Shares by the Selling Stockholder pursuant to this prospectus. If we
receive stockholder approval to increase the number of authorized shares of Common Stock and file an additional registration statement,
we may receive up to approximately $15.0 million in aggregate gross proceeds from cash exercises of the Warrant, if any, and to
the extent that we receive such proceeds, we intend to use the net proceeds from cash exercises of the Warrant for working capital and
general corporate purposes. Our management will have broad discretion in the application of such proceeds, including for any of the purposes
described in the section entitled “Use of Proceeds,” and we could spend the proceeds in ways our stockholders may
not agree with or that do not yield a favorable return, if at all. You will not have the opportunity, as part of your investment decision,
to assess whether such proceeds are being used in a manner agreeable to you. You will be relying on the judgment of our management concerning
these uses and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used
appropriately. The failure of our management to apply these funds effectively could result in unfavorable returns and uncertainty about
our prospects, each of which could cause the price of our Common Stock to decline.
You
may experience future dilution as a result of issuance of certain of the securities issued in connection with the Selling Stockholder
Transaction, future equity offerings by us and other issuances of our Common Stock or other securities. In addition, the issuance
of such securities and future equity offerings and other issuances of our Common Stock or other securities may adversely affect
our Common Stock price.
The
Shares will be freely tradable without restriction or further registration under the Securities Act. As a result, a substantial number
of shares of our Common Stock may be sold in the public market following this offering. If there are significantly more shares of our
Common Stock offered for sale than buyers are willing to purchase, then the market price of our Common Stock may decline to a market
price at which buyers are willing to purchase the offered Common Stock and sellers remain willing to sell our Common Stock. The issuance
of the Shares or any future sales of a substantial number of shares of our Common Stock in the public market, or the perception
that such sales may occur, could also adversely affect the price of our Common Stock. We cannot predict the effect, if any, that market
sales of those shares of Common Stock or the availability of those shares for sale will have on the market price of our Common Stock.
In
addition, in order to raise additional capital, we may in the future offer additional shares of our Common Stock or other securities
convertible into or exchangeable for our Common Stock at prices that may not be the same as the price per share as prior issuances of
Common Stock. We may not be able to sell shares or other securities in any other offering at a price per share that is equal to or greater
than the price per share previously paid by investors, and investors purchasing shares or other securities in the future could have rights
superior to existing stockholders. The price per share at which we sell additional shares of our Common Stock or securities convertible
into Common Stock in future transactions may be higher or lower than the prices per share. In addition, the exercise price of the Warrant
for the Warrant Shares may be lesser or greater than the price per share previously paid by certain investors. You will incur dilution
upon exercise of any outstanding stock options, warrants or upon the issuance of shares of Common Stock under our stock incentive programs.
In addition, the issuance of the Shares and any future sales of a substantial number of shares of our Common Stock in the public
market, or the perception that such sales may occur, could adversely affect the price of our Common Stock. We cannot predict the effect,
if any, that market sales of those shares of Common Stock or the availability of those shares for sale will have on the market price
of our Common Stock.
Neither
we nor the Selling Stockholder have authorized any other party to provide you with information concerning us or this offering.
You
should carefully evaluate all of the information in this prospectus and the registration statement of which this prospectus forms a part.
We may receive media coverage regarding our Company, including coverage that is not directly attributable to statements made by our officers,
that incorrectly reports on statements made by our officers or employees, or that is misleading as a result of omitting information provided
by us, our officers or employees. Neither we nor the Selling Stockholder have authorized any other party to provide you with information
concerning us or this offering of Shares, and such recipients should not rely on this information.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. We have based these forward-looking statements on our current expectations and projections about future events. All statements,
other than statements of present or historical fact included in this prospectus, regarding the proposed the Company’s future financial
performance and the Company’s strategy, expansion plans, future operations, future operating results, estimated revenues, losses,
projected costs, prospects, plans and objectives of management are forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as “may,” “should,” “could,” “would,” “expect,”
“plan,” “anticipate,” “intend,” “believe,” “estimate,” “continue,”
“project,” “strive,” “might,” “possible,” “potential,” “predict”
or the negative of such terms or other similar expressions, but the absence of these words does not mean that a statement is not forward-looking.
These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about Jet.AI that may cause Jet.AI’s
actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by such forward-looking statements. Except as otherwise required by applicable law,
the Company disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this
section, to reflect events or circumstances after the date of this prospectus. The Company cautions you that these forward-looking statements
are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of the
Company.
In
addition, the Company cautions you that the forward-looking statements regarding the Company, which are included in this prospectus,
are subject to the following factors:
| |
● |
Jet.AI’s
ability to realize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition
and the ability of Jet.AI to grow and manage growth profitably; |
| |
|
|
| |
● |
the
ability to maintain the listing of the Company’s securities on Nasdaq; |
| |
|
|
| |
● |
our
public securities’ potential liquidity and trading; |
| |
|
|
| |
● |
our
ability to raise financing in the future; |
| |
|
|
| |
● |
Jet.AI’s
success in retaining or recruiting, or changes in, its officers, key employees or directors; |
| |
|
|
| |
● |
the
impact of the regulatory environment and complexities with compliance related to such environment, including compliance with restrictions
imposed by federal law on ownership of U.S. airlines; |
| |
|
|
| |
● |
actors
relating to the business, operations and financial performance of Jet.AI (or any of its subsidiaries), including: |
| |
○ |
the
ability to anticipate the impact of the COVID-19 pandemic and its effect on business and financial conditions; |
| |
● |
changes
in applicable laws or regulations; |
| |
|
|
| |
● |
the
risk that Jet.AI may fail to effectively build scalable and robust processes to manage the growth of its business; |
| |
|
|
| |
● |
the
risk that demand for Jet.AI’s products and services may decline; |
| |
● |
high
levels of competition faced by Jet.AI with numerous market participants having greater financial resources and operating experience
than Jet.AI; |
| |
|
|
| |
● |
the
possibility that Jet.AI’s business may be adversely affected by changes in government regulations; |
| |
|
|
| |
● |
the
possibility that Jet.AI may not be able to grow its client base; |
| |
|
|
| |
● |
the
failure to attract and retain highly qualified personnel; |
| |
● |
the
inability to finance aircraft or generate sufficient funds; |
| |
|
|
| |
● |
the
possibility that Jet.AI may not have enough capital and may be required to raise additional capital; |
| |
|
|
| |
● |
data
security breaches, cyber-attacks or other network outages; |
| |
|
|
| |
● |
the
volatility of the prices of blockchain currencies that the Company accepts as payment; |
| |
|
|
| |
● |
our
reliance on third parties; |
| |
|
|
| |
● |
our
inability to adequately protect our intellectual property interests or infringement on intellectual property interests of others; |
| |
|
|
| |
● |
the
possibility that Jet.AI may be adversely affected by other economic, business or competitive factors; and |
| |
|
|
| |
● |
other
factors detailed in the section entitled “Risk Factors.” |
Should
one or more of the risks or uncertainties described in this prospectus and in any document incorporated by reference in this prospectus
materialize, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed
in any forward-looking statements.
You
should read this prospectus with the understanding that our actual future results may be materially different from what we expect. We
do not assume any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise,
except as required by applicable law.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
The
following discussion and analysis provides information which Jet.AI’s management believes is relevant to an assessment and understanding
of its consolidated results of operations and financial condition. You should read the following discussion and analysis of Jet.AI’s
financial condition and results of operations together with Jet.AI’s consolidated financial statements, and the related notes
that are included elsewhere in this prospectus.
Certain
of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect
to plans and strategy for Jet.AI’s business, includes forward-looking statements that involve risks and uncertainties. As a result
of many factors, including those factors set forth in the section entitled “Risk Factors,” Jet.AI’s actual results
could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion
and analysis. Factors that could cause or contribute to such differences include, but are not limited to, capital expenditures, economic
and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this
prospectus. We assume no obligation to update any of these forward-looking statements. Please also see the section entitled “Cautionary
Note Regarding Forward-Looking Statements.”
Percentage
amounts included in this prospectus have not in all cases been calculated on the basis of such rounded figures, but on the basis of such
amounts prior to rounding. For this reason, percentage amounts in this prospectus may vary from those obtained by performing the same
calculations using the figures in the consolidated financial statements included elsewhere in this prospectus. Certain other amounts
that appear in this prospectus may not sum due to rounding.
Overview
Jet.AI,
a Delaware corporation, was founded in 2018 by Michael Winston, its Executive Chairman. The Company, directly and indirectly through
its subsidiaries, has been principally involved in (i) the sale of fractional and whole interests in aircraft, (ii) the sale of jet cards,
which enable holders to use certain of the Company’s and other’s aircraft at agreed-upon rates, (iii) the operation of a
proprietary booking platform, which functions as a prospecting and quoting platform to arrange private jet travel with third party carriers
as well as via the Company’s leased and managed aircraft, (iv) direct chartering of its HondaJet aircraft by Cirrus, (v) aircraft
brokerage, and (vi) service revenue from the monthly management and hourly operation of customer aircraft.
Beginning
in December 2023, we launched our Jet.AI Operator Platform to provide a B2B software platform for SaaS products. Currently we offer the
following SaaS software to aircraft owners and operators generally:
| |
● |
Reroute
AI: recycles aircraft waiting to embark to their next revenue flight into prospective new charter bookings to destinations within
specific operational parameters; and |
| |
● |
DynoFlight:
enables aircraft operators to estimate aircraft emissions then purchase carbon removal credits via our DynoFlight API |
Business
Combination
On
August 10, 2023, Oxbridge, consummated a business combination pursuant to the Business Combination Agreement among Oxbridge, the Merger
Subs and Jet Token. Pursuant to the Business Combination Agreement, Oxbridge redomiciled as a Delaware corporation and was immediately
renamed Jet.AI, Inc., and promptly thereafter, (a) First Merger Sub merged with and into Jet Token with Jet Token surviving the merger
as a wholly owned subsidiary of Jet.AI Inc.; and (b) Jet Token merged with and into Second Merger Sub (each merger and all other transactions
contemplated by the Business Combination Agreement, the “Business Combination”).
As
a result of the Business Combination:
| |
● |
the
then issued and outstanding Class A Ordinary Shares of Oxbridge were converted, on a one-for-one basis, into shares of Common Stock
of Jet.AI, Inc.; |
| |
● |
the
then issued and outstanding Class B Ordinary Shares of Oxbridge were converted, on a one-for-one basis, into shares of Common Stock
of Jet.AI, Inc.; |
| |
● |
the
then issued and outstanding Oxbridge warrants were converted into an equal number of warrants, each exercisable for one share of
Common Stock of Jet.AI, Inc. (“Jet.AI Warrants”); |
| |
● |
the
then issued and outstanding units sold in the IPO (“Oxbridge Units”) were converted into an equal number of Jet.AI Units,
each consisting of one share of Common Stock and one Jet.AI Warrant; |
| |
● |
the
outstanding shares of Jet Token common stock, including all shares of Jet Token preferred stock that converted into shares of Jet
Token common stock, were cancelled and converted into the right to receive the number of shares of Common Stock and the number of
Merger Consideration Warrants based on the respective exchange rations set forth in the Business Combination Agreement; |
| |
● |
all
outstanding Jet Token options for its common stock, whether or not exercisable and whether or not vested, were converted into options
to purchase Common Stock based on the applicable exchange ratio determined in accordance with the Business Combination Agreement; |
| |
● |
all
outstanding Jet Token warrants were converted into warrants to acquire the number of shares of Common Stock and Merger Consideration
Warrants based on the applicable exchange ratio set forth in the Business Combination Agreement; and |
| |
● |
the
outstanding Jet Token restricted stock unit awards were converted into Jet.AI restricted stock unit awards based on the applicable
exchange ratio determined in accordance with the Business Combination Agreement. |
As
a result of the Business Combination, Jet.AI Inc. has one class of Common Stock listed on Nasdaq under the ticker symbol “JTAI”,
and had two classes of warrants, the Jet.AI Warrants and the Merger Consideration Warrants, listed on Nasdaq under the ticker
symbols “JTAIW” and “JTAIZ” respectively.
The
Business Combination was accounted for as a reverse recapitalization in accordance with GAAP, whereby Oxbridge is treated as the acquired
company and Jet Token is treated as the acquirer (the “Reverse Recapitalization”). Accordingly, for accounting purposes,
the Reverse Recapitalization was treated as the equivalent of Jet Token issuing stock for the net assets of Oxbridge, accompanied by
a recapitalization. The net assets of Oxbridge were stated at historical cost, with no goodwill or other intangible assets recorded.
The
consolidated assets, liabilities, and results of operations prior to the Reverse Recapitalization are those of Jet Token. The shares
and corresponding capital amounts and losses per share, prior to the Reverse Recapitalization, have been retroactively restated based
on shares reflecting the exchange ratio established in the Business Combination.
References
in this MD&A to “Jet.AI” or “the Company” refer to Jet Token Inc. prior to the consummation of the Business
Combination.
Results
of Operations
The
following table sets forth our results of operations for the periods indicated:
| | |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| | |
| | |
| | |
| | |
| |
| Revenues | |
$ | 3,083,884 | | |
$ | 2,792,808 | | |
$ | 6,932,482 | | |
$ | 4,668,316 | |
| | |
| | | |
| | | |
| | | |
| | |
| Cost of revenues | |
| 3,500,880 | | |
| 2,993,631 | | |
| 7,473,834 | | |
| 4,944,157 | |
| | |
| | | |
| | | |
| | | |
| | |
| Gross loss | |
| (416,996 | ) | |
| (200,823 | ) | |
| (541,352 | ) | |
| (275,841 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Operating Expenses: | |
| | | |
| | | |
| | | |
| | |
| General and administrative (including stock-based compensation of $1,201,728, $1,348,043, $2,401,046,
and $2,755,087, respectively) | |
| 2,663,753 | | |
| 2,115,704 | | |
| 5,210,047 | | |
| 4,603,722 | |
| Sales and marketing | |
| 102,470 | | |
| 103,541 | | |
| 549,070 | | |
| 223,708 | |
| Research and development | |
| 37,396 | | |
| 28,636 | | |
| 69,942 | | |
| 64,955 | |
| Total operating expenses | |
| 2,803,619 | | |
| 2,247,881 | | |
| 5,829,059 | | |
| 4,892,385 | |
| | |
| | | |
| | | |
| | | |
| | |
| Operating loss | |
| (3,220,615 | ) | |
| (2,448,704 | ) | |
| (6,370,411 | ) | |
| (5,168,226 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Interest expense | |
| - | | |
| - | | |
| 79,314 | | |
| - | |
| Other expense | |
| (59 | ) | |
| - | | |
| (120 | ) | |
| - | |
| Total other (income) expense | |
| (59 | ) | |
| - | | |
| 79,194 | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | |
| Loss before provision for income taxes | |
| (3,220,556 | ) | |
| (2,448,704 | ) | |
| (6,449,605 | ) | |
| (5,168,226 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Provision for income taxes | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | |
| Net Loss | |
$ | (3,220,556 | ) | |
$ | (2,448,704 | ) | |
$ | (6,449,605 | ) | |
$ | (5,168,226 | ) |
| Less cumulative preferred stock dividends | |
| 29,727 | | |
| - | | |
| 59,455 | | |
| - | |
| Net Loss to common stockholders | |
$ | (3,250,283 | ) | |
$ | (2,448,704 | ) | |
$ | (6,509,060 | ) | |
$ | (5,168,226 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average shares outstanding - basic and diluted | |
| 12,906,283 | | |
| 4,520,625 | | |
| 12,224,502 | | |
| 4,511,751 | |
| Net loss per share - basic and diluted | |
$ | (0.25 | ) | |
$ | (0.54 | ) | |
$ | (0.53 | ) | |
$ | (1.15 | ) |
Three
Months Ended June 30, 2024 and 2023
Revenues
Revenues
for the second quarter of 2024 totaled approximately $3.1 million, a $0.3 million increase from $2.8 million
during the comparable period in 2023, which consisted of $914,000 in services revenue from the management of customers’
aircraft, $657,000 in software-related revenue, $559,000 in Jet Card revenue for hours flown and other charges based on hours
flown, and $954,000 in revenue from the chartering of our HondaJets by our operating partner Cirrus.
The
primary reason for this increase in revenue was due to additional service revenue of $500,000 arising from an additional management
agreement for customer aircraft in the second quarter of 2024 and increased chartering of the Company’s Citation
CJ4, offset by a $253,000 reduction in software revenue due to seasonality and the resulting reduced flying by the Company’s
Jet Card holders and ad hoc charter clients.
The
following table sets forth a breakout of revenue components by subcategory for the three months ended June 30, 2024 and 2023.
| | |
Three Months Ended | |
| | |
June 30, | |
| | |
2024 | | |
2023 | |
| | |
| | |
| |
| Software App and Cirrus Charter | |
$ | 1,610,898 | | |
$ | 1,558,697 | |
| Jet Card and Fractional Programs | |
| 558,561 | | |
| 811,140 | |
| Management and Other Services | |
| 914,425 | | |
| 422,971 | |
| | |
$ | 3,083,884 | | |
$ | 2,792,808 | |
The
Company recognized $657,000 in revenue related to App-generated services and software revenues related to charter bookings made through
its App in the second quarter of 2024, a decrease of $195,000 compared to the 2023 period and primarily reflected seasonality and a shift
in Spring-related charters from April to March. This compares to software revenues totaling $852,000 in the 2023 period.
During
the second quarter of 2024, the Company sold 55 prepaid flight hours under its jet card and fractional programs, amounting to $319,000,
and recognized $616,000 of revenue for 87 flight hours flown or forfeited, as well as additional charges. These additional charges primarily
represent charges for cost reimbursements such as a fuel component adjustment to adjust for changes in fuel prices relative to the jet
card and fractional contracts’ base fuel price and reimbursement of federal excise taxes. Prepaid flight hours are recognized as
revenue as the flight hours are used or forfeited. On June 30, 2024, the Company had recorded deferred revenue of $1.1 million
on its consolidated balance sheets representing prepaid flight hours for which the related travel had not yet occurred.
In the second quarter of 2023, the Company sold 122 prepaid flight hours, amounting to $713,000, and recognized $709,000
of revenue for 113 flight hours flown or forfeited, as well as additional charges.
The decrease in flight hours flown period over period is a direct result of a reduction in flying by the Company’s
Jet Card holders during this period.
The
following table details the flight hours sold and flown or forfeited, as well as the associated deferred revenues and recognized revenues,
respectively, and additional charges for the second quarter of 2024 and 2023:
| | |
For the three months ended
June 30, | |
| | |
2024 | | |
2023 | |
| Deferred revenue at the beginning of the period (1) | |
$ | 1,395,285 | | |
$ | 1,285,762 | |
| Prepaid flight hours sold | |
| | | |
| | |
| Amount | |
$ | 319,000 | | |
$ | 568,680 | |
| Total Flight Hours | |
| 55 | | |
| 104 | |
| | |
| | | |
| | |
| Prepaid flight hours flown | |
| | | |
| | |
| Amount | |
$ | 501,533 | | |
$ | 754,897 | |
| Total flight hours | |
| 87 | | |
| 125 | |
| | |
| | | |
| | |
| Additional charges | |
$ | 57,028 | | |
$ | 59,760 | |
| Total flight hour revenue | |
$ | 558,561 | | |
$ | 811,139 | |
| | |
| | | |
| | |
| Deferred revenue at the end of the period (2) | |
$ | 1,099,466 | | |
$ | 1,099,545 | |
| (1) |
Deferred
revenue at March 31, 2024 and 2023 also includes $187,811 and $47,081, respectively, with respect to customer prepayments associated
with software app transactions. |
| |
|
| (2) |
Deferred revenue at June 30, 2024 and 2023 also includes
$56,017 and $0, respectively, with respect to customer prepayments associated with software app transactions and $16,233 and $0 with
respect to customer prepayments associated with management and other services revenue. |
In addition to its software App and jet card revenues, the Company also generates revenue through the direct chartering
of its HondaJet and Citation CJ4 aircraft by Cirrus. During the second quarter of 2024 this revenue amounted to approximately $954,000,
an increase of $247,000, or 34.9% from the second quarter of 2023. The increased revenue was a direct result of increased availability
and chartering of the managed Citation CJ4.
Cost
of revenues
Our
cost of revenue is comprised of payments to Cirrus Aviation for the maintenance and management of our fleet aircraft,
commissions to Cirrus for their arranging for charters on our aircraft, aircraft lease expense, federal excise tax relating to jet
card and third-party charters, and payments to third -party aircraft operators for both charter flights booked through our
App, as well as the cost of subcharters for covering jet card flights when our HondaJets were unavailable. The management of
our aircraft by Cirrus covers all our aircraft regardless of whether the aircraft are used for program flight hours or charter
flights and includes expenses such as fuel, pilot wages and training costs, aircraft insurance, maintenance and other flight
operational expenses.
In the second quarter of 2024, the Company operated 3 HondaJets, 1 CJ4 and, in addition to the CJ4, managed a King
Air 350i.
As
a result, the increased Cirrus charter flight activity, costs related to the operation of these aircraft and payments
to Cirrus for their management increased $0.7 million from $1.6 million in the second quarter of 2023 to $2.3
million in the second quarter of 2024, and aircraft lease payments increased $31,000 from $346,000 in
the second quarter of 2023 to $377,000 in 2024. The Company also incurred third-party charter costs of approximately $623,000
in the second quarter of 2024, a $380,000 decrease over 2023, reflecting the reduction in the number of App-generated
charter bookings and a decrease in the number of subcharters required. Merchant fees and federal excise tax relating to charter
flights of $249,000 in the second quarter of 2024 were a $157,000 increase as compared to $92,000 in the
second quarter of 2023 as a result of increased charter activity.
In
total, it cost $3.5 million to operate five aircraft in the second quarter of 2024, compared to $3.0 million to operate four
aircraft in the second quarter of 2023.
Gross
loss
The
resulting gross loss totaled approximately $417,000 for the second quarter of 2024, compared to $201,000 for the
second quarter of 2023. The gross loss in the second quarter of 2024 was largely driven by reduced flights performed for our jet card customers without a corresponding reduction in fixed
costs.
Total
Operating Expenses
In
the second quarter of 2024, the Company’s operating expenses increased by approximately $556,000 over the prior year
period primarily due to an approximate $548,000 increase in general and administrative expenses, $9,000 increase in research and development
costs and slightly lower sales and marketing expenses. Excluding non-cash stock-based compensation of $1.2 million and $1.3
million in the second quarter of 2024 and 2023, respectively, general and administrative expenses rose by approximately $694,000
primarily due to an increase in professional service expenses of $364,000 resulting primarily from increased legal expenses
of $319,000 relating to the Company’s SEC filings and transactions the Company pursued during the quarter and $41,000 in payments
to our Board of Directors, as well as increased wages of $294,000, primarily due to increased headcount.
The
Company’s sales and marketing expenses declined by about $2,000 to $102,000 in the second quarter of
2024 from $104,000 in the second quarter of 2023, as the Company continued its sales and marketing spending for
its jet card inventory and charter app. These expenses are mainly linked to promoting the Company and its programs.
Research
and development expenses increased $9,000 to $37,000 in the second quarter of 2024 from $28,000 in the second
quarter of 2023, due to continuing refinement of the App, as well as continued development work on additional software offerings.
Operating
Loss
As
a result of all of the above, in the second quarter of 2024 the Company recognized an operating loss of approximately $3.2
million, which was an increase in loss of approximately $0.8 million. The increase in operating loss was primarily due to
the increase in general and administrative expenses resulting from the increase in professional service expenses and wages following the Business Combination.
Other
(Income) Expense
During
the second quarter of 2024, the Company recognized approximately $59 in interest income. There were no such other income or expenses in the second quarter of 2023.
Six Months
Ended June 30, 2024 and 2023
Revenues
Revenues
for the first six months of 2024 totaled approximately $6.9 million, a $2.3 million increase from revenues of approximately $4.7 million
during the 2023 period, primarily related to increases in Software App and Cirrus Charter revenue, as well as increased Management and
Other Services revenue of $1.4 million and $0.9 million, respectively. Revenues in the 2024 period were comprised of $1.7 million in
services revenue from the management of customers’ aircraft, $2.3 million in software-related revenue, $1.2 million in Jet Card
revenue for hours flown and other charges based on hours flown and $1.6 million in revenue from the chartering of our HondaJets and Citation
CJ4 by our operating partner Cirrus.
The
following table sets forth a breakout of revenue components by subcategory for the six months ended June 30, 2024 and 2023.
| | |
Six Months Ended | |
| | |
June 30, | |
| | |
2024 | | |
2023 | |
| | |
| | |
| |
| Software App and Cirrus Charter | |
$ | 3,981,989 | | |
$ | 2,552,950 | |
| Jet Card and Fractional Programs | |
| 1,235,881 | | |
| 1,358,685 | |
| Management and Other Services | |
| 1,704,612 | | |
| 756,681 | |
| | |
$ | 6,932,482 | | |
$ | 4,668,316 | |
The
Company began recognizing revenue in September 2020 reflecting services and software revenues related to charter bookings made through
its App and in the first six months of 2023, the Company recognized $1.3 million in revenue related to App-generated charter bookings.
During the 2024 period these revenues totaled $2.3 million, a $1.0 million or 71.8% increase from 2023 reflecting additional brokerage
staff, increased marketing and greater awareness of the Company.
The
Company recognized $1.7 million in service revenue in the first six months of 2024, an increase of $0.9 million, relating to an agreement
entered into during the fourth quarter of 2023 to manage a customer’s aircraft, as well as a second managed aircraft beginning
in April 2024. There was $0.8 million in service revenues in the first six months of 2023.
During
the first six months of 2024, the Company sold 110 prepaid flight hours under its jet card and fractional programs, amounting to $0.7
million, and recognized $1.2 million of revenue for 182 flight hours flown or forfeited, as well as additional charges. These additional
charges represent primarily charges for cost reimbursements such as a fuel component adjustment to adjust for changes in fuel prices
relative to the jet card and fractional contracts’ base fuel price and reimbursement of federal excise taxes. Prepaid flight hours
are recognized as revenue as the flight hours are used or forfeited. On June 30, 2024, the Company recorded deferred revenue of
$1.1 million on its consolidated balance sheets, which represents prepaid flight hours for which the related travel had not yet occurred.
In
the first six months of 2023, we sold 261 prepaid flight hours amounting to approximately $1.4 million and recognized approximately $1.4
million of revenue for 210 flight hours flown or forfeited, as well as additional charges.
The
increase in flight hours flown is a direct result of the increased number of aircraft.
The
following table details the flight hours sold and flown or forfeited, as well as the associated deferred revenues and recognized revenues,
respectively, and additional charges for the first six months of 2024 and 2023:
| | |
For the six months ended
June
30, | |
| | |
2024 | | |
2023 | |
| Deferred revenue at the beginning of the period (1) | |
$ | 1,779,794 | | |
$ | 933,361 | |
| Prepaid flight hours sold | |
| | | |
| | |
| Amount | |
$ | 652,000 | | |
$ | 1,420,250 | |
| Total Flight Hours | |
| 110 | | |
| 261 | |
| | |
| | | |
| | |
| Prepaid flight hours flown | |
| | | |
| | |
| Amount | |
$ | 1,138,810 | | |
$ | 1,254,066 | |
| Total flight hours | |
| 182 | | |
| 210 | |
| | |
| | | |
| | |
| Additional charges | |
$ | 100,070 | | |
$ | 94,207 | |
| Total flight hour revenue | |
$ | 1,235,880 | | |
$ | 1,358,685 | |
| | |
| | | |
| | |
| Deferred revenue at the end of the period (2) | |
$ | 1,099,466 | | |
$ | 1,099,545 | |
| (1) |
Deferred
revenue at December 31, 2023 and 2022 also includes $268,818 and $11,800, respectively, with respect to customer prepayments associated
with software app transactions. |
| (2) |
Deferred
revenue at June 30, 2024 and 2023 also includes $56,017 and $0, respectively, with respect to customer prepayments associated with
software app transactions and $16,233 and $0 with respect to customer prepayments associated with management and other services revenue. |
During
the first six months of 2024 revenue generated through the direct chartering of the Company’s HondaJet and Citation CJ4 aircraft
by Cirrus amounted to approximately $1.6 million, an increase of $0.4 million, or 37.8% from the prior year. The increased revenue was
a direct result of increased charter activity, both ad hoc and by Cirrus, as well as the addition of the managed Citation CJ4 and King
Air 350i.
Cost
of revenues
Our
cost of revenue is comprised of payments to Cirrus for the maintenance and management of our fleet aircraft, commissions to Cirrus for
their arranging for charters on our aircraft, aircraft lease expense, federal excise tax relating to jet card and second-party charters,
and payments to second-party aircraft operators for both charter flights booked through our App, as well as the cost of subcharters for
covering jet card flights when our HondaJets were unavailable. The management of our aircraft by Cirrus covers all our aircraft regardless
of whether the aircraft are used for program flight hours or charters and includes expenses such as fuel, pilot wages and training costs,
aircraft insurance, maintenance and other flight operational expenses.
As
a result of the increased ad hoc and Cirrus charter flight activity, as well as the startup expenses relating to the introduction of
the King Air 350i managed aircraft to its fleet, operating expenses related to the operation of the Company’s aircraft and payments
to Cirrus for their management increased $1.6 million from $2.8 million in the first six months of 2023 to $4.4 million in 2024 and aircraft
lease payments increased $151,000 from $544,000 in 2023 to $695,000 in the first six months of 2024. The Company also incurred third-party
charter costs of approximately $2.0 million in the first six months of 2024, a $0.5 million increase over 2023, in order to fulfill a
greater number of App-generated charter bookings, as well as subcharters used for covering jet card flights when our HondaJets were unavailable.
Federal excise tax and merchant fees relating to charter flights increased $250,000 in the first six months of 2024 to $409,000 from
$159,000 in 2023.
In
total, it cost $7.5 million to operate the Company’s 6 aircraft in the first six months of 2024, compared to $4.9 million during
the 2023 period for 5 aircraft.
Gross
loss
The
resulting gross loss totaled $541,000 for the first six months of 2024, compared to $276,000 for the 2023 period. The increased gross
loss in these operations was a result of increased maintenance costs, together with lower utilization on our HondaJets.
Total
Operating Expenses
In
the first six months of 2024, the Company’s operating expenses increased $0.9 million due to a $0.6 million increase in general
and administrative expenses, $325,000 in higher sales and marketing expenses, and $5,000 in higher research and development costs. Excluding
non-cash stock-based compensation of $2.4 million and $2.8 million in the first six months of 2024 and 2023, respectively, general and
administrative expenses rose by approximately $1.0 million primarily due to due to an increase in professional service expenses of $280,000
related to our software development and legal expenses relating to the Company’s SEC filings and various transactions the Company
closed or pursued, $117,000 in payments to our Board of Directors and increased wages of $450,000, primarily due to increased commissions
compensation payable on charter sales, as well as a greater number of software developers in 2024.
The
Company’s sales and marketing expenses increased by about $325,000 to $549,000 in the first six months of 2024 from $224,000 in
2023, as it reaccelerated its sales and marketing spending for software and jet card sales. These expenses are mainly linked to promoting
the Company and its programs.
Research
and development expenses increased approximately $5,000 to $70,000 in the first six months of 2024 from $65,000 in the comparable 2023
period, due to continuing refinement of the App, as well as some initial development work on additional software offerings.
Operating
Loss
As
a result of all of the above, in the first six months of 2024 the Company recognized an operating loss of approximately $6.4 million,
which was an increase in loss of nearly $1.2 million compared to the comparable 2023 period. The increase was primarily due to reduced
gross profits of $0.3 million, as well as a $0.6 million increase in general and administrative expenses.
Other
(Income) Expense
During
the first six months of 2024, the Company recognized approximately $79,000 in other expense due primarily to interest expense
related to the Company’s Bridge Agreement, compared to no other income or expense recorded for the first six months of 2023.
Liquidity
and Capital Resources
Overview
As
of June 30, 2024, the Company’s cash and equivalents were $528,117, including $500,000 of restricted cash under its
aircraft leasing arrangements, as described below. As of June 30, 2024, current liabilities exceeded current assets by approximately
$3.9 million, of which $1.1 million in liabilities represents deferred revenue that would be recorded as revenue once the
flight hours are flown or forfeited.
During
the six month period ended June 30, 2024, the Company raised (1) approximately $1,727,000 in funds from the issuance
of 3,200,000 shares of common stock under the Share Purchase Agreement discussed below, as well as $1,500,000 related to the sale of 150 shares of preferred stock, and (2) approximately $742,000 from
Jet.AI Warrant exercises.
The
Company also incurred negative cash flows from operating activities and significant losses from operations in the past as reflected in
its accumulated deficit of approximately $45.7 million as of June 30, 2024. While we expect to drive revenue and operating
profit growth from aircraft acquisitions, higher average hourly pricing of jet cards, increased charter activity through CharterGPT and
Reroute AI and SaaS revenues from DynoFlight, we expect to continue to incur operating losses to a greater or lesser extent for at least
the next 12 months, depending on the timing and success of these initiatives. To bridge the gap, we intend to rely on funds available
from share issuances under the Share Purchase Agreement and amounts received upon an exercise of the Warrant, if any, to meet our funding obligations. Additional funding
under the Share Purchase Agreement may be limited contractually and the Warrant may not be exercised by the holder. Furthermore, issuances
of additional shares of common stock under the Share Purchase Agreement or upon conversion of the Series B Preferred Stock outstanding
and underlying the Warrant may negatively impact the Company’s stock price and ability to raise additional funds. We will likely
require additional capital resources to grow our business. In the absence of external financing the Company is prepared to cut its cash
utilization by ceasing marketing and customer acquisition, suspending software development, streamlining operations, and servicing only
existing customers. Such a reduction would allow the Company to continue to operate for a year or more by management’s estimate.
During that time the Company would plan to arrange new financing and to then resume expansion.
Selling
Stockholder Transaction
General
On
March 28, 2024, Company entered into the Securities Purchase Agreement and certain other transaction documents described
below with the Selling Stockholder, in connection with a private placement which closed on March 29, 2024 (the “Closing
Date”). Under the Securities Purchase Agreement, the Company agreed to issue to the Selling Stockholder (a) 150 shares
of Series B Preferred Stock, which are convertible into shares of Common Stock, (b) the Warrant to purchase up to 1,500 shares
of Series B Preferred Stock at an exercise price of $10,000 per share, and (c) 250,000 shares of Common Stock.
The
Company received gross proceeds of approximately $1.5 million, not including customary placement fees and reimbursement of certain payables
to Maxim Group LLC as placement agent and other expenses payable by the Company, in connection with the Selling Stockholder
Transaction. This amount excludes the proceeds, if any, from the exercise of the Warrant. The Company intends to use the remainder
of the net proceeds for working capital, capital expenditures, product development, and other general corporate purposes. The Company
has not allocated specific amounts of net proceeds for any of these purposes.
Series
B Preferred Stock
On
March 28, 2024, we filed a Certificate of Designations of the Series B Convertible Preferred Stock with the Secretary of State
of the State of Delaware, which provides for the issuance of up to 5,000 shares of the Company’s Series B Preferred Stock. The
Series B Preferred Stock ranks pari passu with the Series A Preferred Shares and Series A-1 Preferred Shares and
senior to all other capital stock of the Company.
Each
share of Series B Preferred Stock converts into a number of shares of our common stock, subject to certain limitations, including a beneficial
ownership limitation of 4.99% (calculated in accordance with the rules promulgated under Section 13(d) of the Securities Exchange Act
of 1934), which can be adjusted to a beneficial ownership limitation of 9.99% upon 61 days prior written notice by the Selling Stockholder.
From time to time the Selling Stockholder may convert Series B Preferred Stock into Common Stock which it may liquidate
and thereafter receive additional shares of Common Stock pursuant to subsequent conversions of its Series B Preferred Stock. Although
the beneficial ownership limitation imposes a legally binding limitation on the Selling Stockholder’s beneficial ownership at any
point in time, it does not prohibit the Selling Stockholder from, over time, receiving shares of Common Stock upon separate conversions
of its shares of Series B Preferred Stock that, in the aggregate and over a period of time, exceed the beneficial ownership limitation.
Subject
to the limitations set forth in the preceding paragraph and provided there is an effective registration statement covering Selling
Stockholder’s potential resale of common stock underlying the Series B Preferred Stock, shares of Series B Preferred Stock
will automatically convert into shares of common stock on or prior to the tenth trading day after the issuance date of such shares of
Series B Preferred Stock. The number of shares of common stock issuable upon conversion of a share of Series B Preferred Stock is calculated
by dividing the conversion amount per share of Series B Preferred Stock by the then conversion price. The conversion amount is equal
to the stated value of the shares of Series B Preferred Stock, which is $10,000, plus any additional amounts and late charges calculated
in accordance with the Certificate of Designations. The conversion price is equal to 90% (or, in the case of a delisting, 80%) of the
lowest daily volume weighted average price of our common stock over a period beginning on the trading day after we deliver shares of
common stock upon such conversion to Selling Stockholder and ending on the trading day on which the aggregate dollar trading volume
of our common stock exceeds seven times the applicable conversion amount, subject to a five trading day minimum period for such calculation,
and subject to certain adjustments.
If
certain defined “triggering events” defined in the Certificate of Designations occur, such as a breach of the Registration
Rights Agreement, suspension of trading, or our failure to convert the Series B Preferred Stock into common stock when a conversion right
is exercised, then we may be required to redeem the Series B Preferred Stock for cash at 110% of the stated value.
Other
Transaction Documents
The
Warrant exercise price is initially set at $10,000
per share of Series B Preferred Stock, subject to adjustment for certain events, such as a stock split, issuance of additional shares
as a dividend or otherwise. If the entirety of the Warrant was exercised for cash, the Company would receive additional gross proceeds
of approximately $15.0 million. The Company cannot predict when or if the Warrant will be exercised. It is possible that the Warrant
may never be exercised. At any time when the Warrant is exercisable for less than 1,000 shares of Series B Preferred Stock, the Company
has the right to redeem all or a portion of the Warrant by paying to the Selling Stockholder in cash $100 per share of Series
B Preferred Stock that would otherwise be issuable pursuant to the Warrant.
The
Securities Purchase Agreement contains customary representations and warranties of the Company, on the one hand, and the Selling Stockholder,
on the other hand, and customary conditions to closing. Pursuant to the Securities Purchase Agreement, the Company agreed to submit
to its stockholders a proposal to approve the issuance of shares of Common Stock issuable upon exercise of the shares of Series B Preferred
Stock in accordance with Nasdaq Rules at a special meeting of stockholders at the earliest practicable date after the date of the Securities
Purchase Agreement, but in no event later than ninety (90) days after the Closing Date. The Company entered into a voting agreement (the
“Voting Agreement”) with Michael Winston, the Company’s Interim Chief Executive Officer, and the Sponsor, who together
hold approximately 43.6% of the voting power of the Company as of the date of this prospectus, agreeing to vote in favor of the proposal.
At its annual meeting of stockholders, which took place on September 24, 2024, the Company sought stockholder approval for the potential
issuance of shares of common stock pursuant to the Selling Stockholder Transaction in an amount that, upon issuance, could result in
the issuance of shares of common stock in an amount in excess of 20% of the Company’s outstanding shares of common stock at a price
less than the “minimum price” as defined by and in accordance with Nasdaq Listing Rule 5635(d). The Company’s stockholders
approved such potential issuance at the annual meeting. The Securities Purchase Agreement obligates the Company to reserve no less
than 200% of the maximum number of shares of Common Stock issuable upon conversion of the Series B Preferred Stock outstanding, using
an alternate conversion method (the “Required Reserve Amount”). The Company and the Selling Stockholder have agreed that
the Company Required Reserve Amount is 45,000,000 shares of Common Stock. In order to meet that obligation, the Company sought
stockholder approval to amend its certificate of incorporation to increase the number of authorized shares of Common Stock to 200,000,000
at its annual meeting of stockholders. The Company received such approval on September 24, 2024.
Additionally,
on March 29, 2024, the Company entered into the Registration Rights Agreement with the Selling Stockholder, which, among other things,
provides that the Company will register the resale of the 250,000 shares of Common Stock and the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock, including the Series B Preferred Stock issuable upon exercise of the Warrant. The Company
is required to prepare and file a registration statement with the SEC no later than 30 days following the filing of the Company’s
Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”), but in no event later than May 15, 2024
(the “Filing Failure”, and such deadline, the “Filing Deadline”), and to use its commercially reasonable efforts
to have the registration statement and any amendment declared effective no later than the earlier of the (a) 60th calendar day following
such the filing of the Form 10-K (or, if such registration statement is subject to a full review by the SEC, the 100th calendar day after
such filing) and (b) 2nd business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC
that such registration statement will not be reviewed or will not be subject to further review (the “Effectiveness Deadline”).
The Company filed a registration statement on Form S-1 pursuant to the foregoing obligation. In addition, because this registration statement
was not declared effective by the SEC by the Effectiveness Deadline, the Company was obligated to pay the Selling Stockholder
a $100,000 Effectiveness Fee. The Company issued to the Selling Stockholder 100,000 Effectiveness Shares in lieu of paying the
Effectiveness Fee in cash.
Share
Purchase Agreement
The
Company has access to an aggregate of up to $40 million from the Share Purchase Agreement, dated as of August 4, 2022, with GEM Yield
LLC SCS and GEM Yield Bahamas Limited (together with GEM Yield LLC SCS, “GEM”), less drawdowns of $1,110,000 to date. In
consideration for GEM’s services under the Share Purchase Agreement, the Company has agreed to pay GEM a commitment fee equal to
$800,000 payable in cash or freely tradable shares of common stock, at the option of the Company. Upon the Company’s issuance of
shares in connection with any drawdown purchase made by GEM, the Company is required to pay GEM a portion of such commitment fee in an
amount equal to 2% of the amount purchased in such drawdown; provided that the full $800,000 commitment fee is due on or before the first
anniversary of the closing of the Business Combination.
GEM
is not obligated to purchase shares under the Share Purchase Agreement if any purchase of shares would result in GEM and its affiliates
beneficially owning, directly or indirectly, at the time of the proposed issuance, more than 9.99% of the number of issued and outstanding
shares of common stock as of the date of such proposed issuance. GEM may waive the restriction under the Share Purchase Agreement by
providing the Company with sixty-one (61) days’ notice that the Purchaser would like to waive the restriction with regard to any
or all shares issuable pursuant to the Share Purchase Agreement.
On
August 10, 2023, the Company issued GEM a warrant (as subsequently amended, the “GEM Warrant”) granting it the right to purchase
up to 6% of the outstanding common stock of the Company on a fully diluted basis as of the date of listing. The GEM Warrant has a term
of three years. The exercise price of the GEM Warrant, as of March 31, 2024, was $5.81 per share; provided, that, if the average closing
price of Jet.AI’s common stock for the 10 trading days following the first anniversary of the date of listing is less than 90%
of the then current exercise price of the GEM Warrant, then the exercise price of the GEM Warrant will be adjusted to 110% of our then
current trading price. The warrant may be exercised by payment of the per share amount in cash or through a cashless exercise.
The
GEM Warrant provides that GEM can elect to limit the exercisability of the GEM Warrant such that it is not exercisable to the extent
that, after giving effect to the exercise, GEM and its affiliates, to the Company’s actual knowledge, would beneficially own in
excess of 4.99% of Jet.AI’s common stock outstanding immediately after giving effect to such exercise. GEM has made this election,
which makes funds available under the Share Purchase Agreement in excess of this 4.99% ownership limit up to the 9.99% ownership restriction
in the Share Purchase Agreement. GEM may revoke this election by providing written notice, which revocation will not be effective until
the sixty-first (61st) day thereafter.
Bridge
Agreement
On
September 11, 2023, the Company entered into a binding term sheet (“Bridge Agreement”) with eight investors to provide the
Company $500,000 of short-term bridge financing pending its receipt of funds from its other existing financing arrangements.
As
of December 31, 2023, the Bridge Agreement provided for the issuance of Notes, in an aggregate principal amount of $625,000, reflecting
a 20% original issue discount. The Notes bore interest at 5% per annum and matured on March 11, 2024. The Company was required to redeem
the Notes with 100% of the proceeds of any equity or debt financing at a redemption premium of 110% of the principal amount of the Notes.
In March 2024, the Company fully repaid the Bridge Agreement in the amount of approximately $683,000, representing principal, redemption
premium and interest.
Other
Equity Issuances and Settlement Arrangements
Maxim
Payment and Settlement Agreement
On
August 10, 2023, the Company entered into a settlement agreement (“Maxim Settlement Agreement”) with Maxim Group LLC, the
underwriter for the Company’s initial public offering (“Maxim”). Pursuant to the Maxim Settlement Agreement, the Company
issued to Maxim Partners (a) 270,000 shares of common stock to Maxim Partners to settle the payment obligations of the Company under
the underwriting agreement dated on or about August 11, 2021, by and between the Company and Maxim and (b) 1,127 Series A Preferred Shares
to Maxim Partners in an amount equal in value to $1,127,000. The Series A Preferred Shares accrue a dividend at the rate of 8% per
annum (which increases to 18% if the Company fails to meet certain obligations under the terms thereof), payable quarterly and, at the
Company’s option, in shares of common stock. The Series A Preferred Shares are convertible into 112,700 shares of common stock.
The Company also issued 115,000 shares of common stock to Maxim Partners on August 16, 2021 to meet a payment obligation under the underwriting
agreement in connection with Oxbridge’s IPO, representing a value of $9.00 per share reflecting an allocation of the $10.00 per
Unit IPO price. The above issued and issuable shares of common stock are subject to a registration rights agreement.
The
Company may, subject to certain conditions, redeem the outstanding Series A Preferred Shares in cash at the $1,000 original issue price,
subject to adjustment, plus accrued and unpaid dividends. The Company is required to redeem all the outstanding Series A Preferred Shares
on August 10, 2024, which will be automatically extended by an additional three (3) month period if the Company has not, as of such date,
closed upon one or more equity financings that, in total, result in gross proceeds to the Company of $10.0 million or greater (which amount has not been achieved as of the date of this report).
If the Company raises equity capital, 15% of the net proceeds will be used to redeem the Series A Preferred Shares if requested by the
holder.
In July 2024, the Company and Maxim entered into an amendment to the Maxim Settlement Agreement and agreed to, among
other things, amend the definition of the “Series A Conversion Price” for the Series A Preferred Shares and certain restrictions
with respect to shares of Company common stock Maxim may acquire upon the conversion of its Series A Preferred Shares.
Sponsor
Settlement Agreement
On
August 10, 2023, the Company entered into settlement agreement (“Sponsor Settlement Agreement”) with the Sponsor. Pursuant
to the Sponsor Settlement Agreement, the Company issued 575 Series A-1 Preferred Shares to settle the payment obligations of the Company
under a promissory note in the principal amount of $575,000 dated November 14, 2022 in favor of the Sponsor. The Series A-1 Preferred
Shares accrue interest at the rate of 5% per annum (which increases to 18% if the Company fails to meet certain obligations under the
terms thereof), payable quarterly in cash. The Series A-1 Preferred Shares are convertible into 57,500 shares of common stock.
The
Company may, subject to certain conditions, redeem the outstanding Series A-1 Preferred Shares in cash at the $1,000 original issue price,
subject to adjustment, plus accrued and unpaid dividends. The Company is required to redeem all the outstanding Series A-1 Preferred
Shares on August 10, 2024, automatically extended by an additional three (3) month period if the Company has not as of such date closed
upon one or more equity financings that, in total, result in gross proceeds to the Company of $10.0 million or greater (which amount has not been achieved as of the date of this report). If the
Company raises equity capital, 15% of the net proceeds will be used to redeem the Series A-1 Preferred Shares if requested by the holder.
Warrants
On
various dates at the end of December 2023 and through early 2024, we entered a number of separate warrant exchange agreements with various
unaffiliated second-party warrant holders with respect to warrants to purchase an aggregate of 1,486,217 shares of our common stock
(the “Exchanged Warrants”). Pursuant to these warrant exchange agreements, the Company issued an aggregate of 1,486,217 shares
of common stock to those warrant holders in exchange for the surrender and cancellation of the Exchanged Warrants.
In
December 2023 and January 2024, holders of an aggregate of 154,563 JTAIW warrants were exercised for an equal number of shares of our
common stock, generating net proceeds to us of $1,777,475.
Cash
Flows for the six Months Ended June 30, 2024 and 2023
As
of June 30, 2024, the Company’s cash and equivalents were approximately $528,000, including approximately $500,000 of
restricted cash under its aircraft leasing arrangements described below.
The
following table summarizes our cash flows for the six months ended June 30, 2024 and 2023:
| | |
For the six months ended
June 30, | |
| | |
2024 | | |
2023 | |
| Net cash used in operating activities | |
$ | (4,705,433 | ) | |
$ | (1,919,226 | ) |
| Net cash used in investing activities | |
| (13,021 | ) | |
| (121,649 | ) |
| Net cash provided by financing activities | |
| 3,146,028 | | |
| 1,151,726 | |
| Decrease in cash and cash equivalents | |
$ | (1,572,426 | ) | |
$ | (889,149 | ) |
Cash
Flow from Operating Activities
Net
cash used in operating activities for the six months ended June 30, 2024 was approximately $4.7 million compared
to approximately $1.9 million for the six months ended June 30, 2023 and was primarily driven by the increase in
operating loss discussed above, as well as a $439,000 increase in accounts receivable, a $142,000 reduction in accounts payable, a
$680,000 decrease in deferred revenue, partially offset by a $332,000 increase in accrued liabilities.
Cash
Flow from Investing Activities
Net
cash used in investing activities for the six months ended June 30, 2024 was $13,000 compared to approximately $122,000
for the six months ended June 30, 2023, primarily relating to the Company’s 2023 investment in 380 Software
LLC, a 50/50 joint venture subsidiary with Great Western Air LLC dba Cirrus Aviation Services as well as the purchase of the Jet.AI domain
name.
Cash
Flow from Financing Activities
Net
cash provided by financing activities for the six months ended June 30, 2024 was approximately $3.1 million. Cash
provided by financing activities was primarily driven by warrant exercises and proceeds from the sale of common stock under the Share
Purchase Agreement, sale of preferred stock, partially offset repayments of notes payable.
Aircraft
Financing Arrangements
In
November 2021 and April 2022, the Company entered into two separate five-year leasing arrangements for the acquisition of two of its
HondaJet Elite aircraft. At any time during their term, the Company has the option to purchase either aircraft from the lessor at the
aircraft’s fair market value at that time. The leasing arrangements also require the Company to hold a combined liquidity reserve
of $500,000 in a separate bank account pledged as security to the lessor, which the Company records as restricted cash on its balance
sheet, as well as a maintenance reserve of approximately $690,000 for each leased aircraft, which is held by the lessor in the event
the lessor determines that the relevant aircraft is not being maintained in accordance with the lease requirements or to prevent deterioration
of the aircraft. Events of default under the leasing arrangements include, among other things, failure to make the monthly payments (with
a 10-day cure period), default on other indebtedness, breaches of covenants related to insurance and maintenance requirements, change
of control or merger, insolvency and a material adverse change in the Company’s business, operations or financial condition. Please
see Note 5 to the Company’s consolidated financial statements for a further description of these leasing arrangements.
In
June 2022, the Company received an unsolicited offer for the outright purchase of one of its HondaJet Elite aircraft, which netted the
Company approximately $1.2 million of proceeds over the leased cost. After internal financial and legal review, the Company determined
that the sale of the aircraft would offer a net benefit to its stakeholders. The Company considered a number of factors in making this
decision, including but not limited to: (1) the availability of replacement aircraft, (2) pilot availability, (3) the time to register
the aircraft for commercial use, and (4) the risk-adjusted lifetime return on capital associated with operating the aircraft relative
to the purchase price offered.
Critical
Accounting Estimates
Going
Concern and Management Plans
The
Company has limited operating history and has incurred losses from operations since its inception. These matters raise concern about
the Company’s ability to continue as a going concern.
The
Company began ramping up its revenue-generating activities during the second half of the year ended December 31, 2021 and continuing
into 2024. During the next twelve months, the Company intends to fund its operations with funds from its operations, and drawdowns under
the Share Purchase Agreement, as well as proceeds from other financing arrangements. The Company also has the ability to reduce cash
burn to preserve capital. There are no assurances, however, that management will be able to raise capital on terms acceptable to the
Company. If the Company is unable to obtain sufficient amounts of additional capital, the Company may be required to reduce the near-term
scope of its planned development and operations, which could delay implementation of the Company’s business plan and harm its business,
financial condition and operating results. The consolidated balance sheets do not include any adjustments that might result from these
uncertainties.
Basis
of Presentation for the Business Combination
The
Business Combination was accounted for as a reverse recapitalization in accordance with GAAP, whereby Oxbridge is treated as the acquired
company and Jet Token is treated as the acquirer (the “Reverse Recapitalization”). Accordingly, for accounting purposes,
the Reverse Recapitalization was treated as the equivalent of Jet Token issuing stock for the net assets of Oxbridge, accompanied by
a recapitalization. The net assets of Oxbridge were stated at historical cost, with no goodwill or other intangible assets recorded.
Jet
Token has been determined to be the accounting acquirer in the Business Combination based on the following predominate factors:
| |
● |
Jet
Token’s existing stockholders have the greatest voting interest in the combined entity; |
| |
● |
Jet
Token existing stockholders have the ability to nominate a majority of the initial members of the combined entity board; |
| |
● |
Jet
Token’s senior management is the senior management of the combined entity; |
| |
● |
Jet
Token is the larger entity based on historical operating activity and has the larger employee base; and |
| |
● |
The
post-combination company has assumed a Jet Token branded name: “Jet.AI Inc.” |
Use
of Estimates
The
preparation of the consolidated 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
statement and the reported amounts of expenses during the reporting period. Making estimates requires management to exercise significant
judgement. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that
existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term
due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Material
estimates that are particularly susceptible to significant change in the near-term relate to the fair value of options granted. Although
considerable variability is likely to be inherent in these estimates, management believes that the amounts provided are reasonable. These
estimates are continually reviewed and adjusted if necessary. Such adjustment if reflected in current operations.
Revenue
Recognition
In
applying the guidance of ASC 606, the Company determines revenue recognition through the following steps:
| |
● |
Identification
of the contract, or contracts, with a customer; |
| |
● |
Identification
of the performance obligations in the contract; |
| |
● |
Determination
of the transaction price; |
| |
● |
Allocation
of the transaction price to the performance obligations in the contract; and |
| |
● |
Recognition
of revenue when, or as, a performance obligation is satisfied. |
Revenue
is derived from a variety of sources including, but not limited to, (i) fractional/whole aircraft sales, (ii) fractional ownership and
jet card programs, (iii) ad hoc charter through the Jet Token App (replaced by CharterGPT) and (iv) aircraft management.
Under
the fractional ownership program, a customer purchases an ownership share in a jet which guarantees the customer access to the jet for
a preset number of hours per year. The fractional ownership program consists of a down payment, one or more progress payments, a payment
on delivery, a monthly management fee and an occupied hourly fee based on usage. Revenues from the sale of fractional or whole interests
in an aircraft are recognized at the time title to the aircraft is transferred to the purchasers, which generally occurs upon delivery
or ownership transfer.
The
jet card program provides the customer with a preset number of hours of guaranteed private jet access over the agreement term (generally
a year) without the larger hourly or capital commitment of purchasing an ownership share. The jet card program consists of a fixed hourly
rate for flight hours typically paid 100% up front.
Revenue
is recognized upon transfer of control of the Company’s promised services, which generally occurs upon the flight hours being used.
Any unused hours for the fractional jet and jet card programs are forfeited at the end of the contract term and are thus immediately
recognized as revenue at that time.
Deferred
revenue is an obligation to transfer services to a customer for which the Company has already received consideration. Upon receipt of
a prepayment from a customer for all or a portion of the transaction price, the Company initially recognizes a contract liability. The
contract liability is settled, and revenue is recognized when the Company satisfies its performance obligation to the customer at a future
date.
The
Company also generates revenues from individual ad hoc charter bookings processed through the Company’s booking app, whereby the
Company will source, negotiate, and arrange travel on a charter basis for a customer based on pre-selected options and pricing provided
by the Company to the customer through the app. In addition, Cirrus markets charter on the Company’s aircraft for the Company’s
benefit. Deferred revenue with respect to bookings through the app was $56,000 as of June 30, 2024.
The
Company utilizes certificated independent third-party air carriers in the performance of a portion of flights. The Company evaluates
whether there is a promise to transfer services to the customer, as the principal, or to arrange for services to be provided by another
party, as the agent, using a control model. The nature of the flight services the Company provides to members is similar regardless of
which third-party air carrier is involved. The Company directs third-party air carriers to provide an aircraft to a member or customer.
Based on evaluation of the control model, it was determined that the Company acts as the principal rather than the agent within all revenue
arrangements. Owner charter revenue is recognized for flights where the owner of a managed aircraft sets the price for the trip. The
Company records owner charter revenue at the time of flight on a net basis for the margin we receive to operate the aircraft. If the
Company has primary responsibility to fulfill the obligation, then the revenue and the associated costs are reported on a gross basis
in the consolidated statements of operations.
Flights
Flights
and flight-related services, along with the related costs of the flights, are earned and recognized as revenue at the point in time in
which the service is provided. For round-trip flights, revenue is recognized upon arrival at the destination for each flight segment.
Fractional
and jet card members pay a fixed quoted amount for flights based on a contractual capped hourly rate. Ad hoc charter customers primarily
pay a fixed rate for flights. In addition, flight costs are paid by members through the purchase of dollar-denominated prepaid blocks
of flight hours (“Prepaid Blocks”), and other incidental costs such as catering and ground transportation are billed monthly
as incurred. Prepaid Blocks are deferred and recognized as revenue when the member completes a flight segment.
Aircraft
Management
The
Company manages aircraft for owners in exchange for a contractual fee. Revenue associated with the management of aircraft also includes
the recovery of owner-incurred expenses including maintenance coordination, cabin crew and pilots, as well as recharging of certain incurred
aircraft operating costs and expenses such as maintenance, fuel, landing fees, parking and other related operating costs. The Company
passes the recovery and recharge costs back to owners at either cost or a predetermined margin.
Aircraft
management-related revenue contains two types of performance obligations. One performance obligation is to provide management services
over the contract period. Revenue earned from management services is recognized over the contractual term, on a monthly basis. The second
performance obligation is the cost to operate and maintain the aircraft, which is recognized as revenue at the point in time such services
are completed.
Aircraft
Sales
The
Company acquires aircraft from vendors and various other second-party sellers in the private aviation industry. The Company’s
classifies the purchase as aircraft inventory on the consolidated balance sheets. Aircraft inventory is valued at the lower of cost or
net realizable value. Sales are recorded on a gross basis within revenues and cost of revenue in the consolidated statements of operations.
Pass-Through
Costs
In
applying the guidance of ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in
an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine
revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following
five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine
the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue
when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable
that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services
promised within each contract and determines those that are distinct performance obligations. The Company then assesses whether it is
acting as an agent or a principal for each identified performance obligation and includes revenue within the transaction price for second-party
costs when the Company determines that it is acting as the principal.
Cost
of Sales
The
cost of sales expenses includes costs incurred in providing air transportation services, such as chartering second-party aircraft,
aircraft lease expenses, pilot training and wages, aircraft fuel, aircraft maintenance, and other aircraft operating expenses.
| |
1. |
Chartering
Third-Party Aircraft: The cost of chartering second-party aircraft is recorded as a part of the cost of sales expense. These
expenses include the fees paid to second-party operators for providing aircraft services on behalf of the company. Expenses
are recognized in the income statement in the period when the service is rendered and are reported on an accrual basis. |
| |
|
|
| |
2. |
Aircraft
Lease Expenses: Aircraft lease expenses include the cost of leasing aircraft for the company’s operations. The lease expenses
are recognized as an operating expense in the income statement over the lease term on a straight-line basis. |
| |
|
|
| |
3. |
Pilot
Training and Wages: Pilot training costs are expensed as incurred and are included in the cost of sales expenses. This encompasses
expenses related to initial pilot training, recurrent training, and any additional required training programs. Pilot wages, including
salaries, bonuses, and benefits, are also recognized as a part of the cost of sales expenses and are reported on an accrual basis. |
| |
|
|
| |
4. |
Aircraft
Fuel: The cost of aircraft fuel is recognized as an expense in the cost of sales category based on the actual consumption during
flight operations. Fuel costs are recorded in the income statement in the period when the fuel is consumed and are reported on an
accrual basis. |
| |
|
|
| |
5. |
Aircraft
Maintenance: Aircraft maintenance expenses include both routine and non-routine maintenance. Routine maintenance costs are expensed
as incurred and are recorded as a part of the cost of sales expense. Non-routine maintenance expenses, such as major repairs and
overhauls, are capitalized and amortized over their expected useful life. The amortization expense is included in the cost of sales
expense and is recognized in the income statement on a straight-line basis over the asset’s useful life. |
| |
|
|
| |
6. |
Other
Aircraft Operating Expenses: Other aircraft operating expenses include costs such as insurance, landing fees, navigation charges,
and catering services. These expenses are recognized in the income statement as a part of the cost of sales expenses in the period
when they are incurred and are reported on an accrual basis. |
Stock-Based
Compensation
The
Company accounts for stock awards under ASC 718, Compensation–Stock Compensation. Under ASC 718, stock-based compensation
cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s
requisite vesting period or over the nonemployee’s period of providing goods or services. The fair value of each stock option or
warrant award is estimated on the date of grant using the Black-Scholes option valuation model.
Trend
Information
The
Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with
local, state, federal and foreign governmental policy decisions. A host of factors beyond Jet.AI’s control could cause fluctuations
in these conditions. Adverse conditions may include but are not limited to: changes in the airline industry, fuel and operating costs,
changes to corporate governance best practices for executive flying, general demand for private jet travel, regulations on carbon emissions
from aviation and market acceptance of the Company’s business model. These adverse conditions could affect the Company’s
financial condition and the results of operations.
Fiscal
Year Ended December 31, 2023 compared to December 31, 2022
Results
of Operations
The
following table sets forth our results of operations for the periods indicated:
| | |
For the Year Ended
December 31, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Revenues | |
$ | 12,214,556 | | |
$ | 21,862,728 | |
| | |
| | | |
| | |
| Cost of revenues | |
| 12,393,089 | | |
| 19,803,739 | |
| | |
| | | |
| | |
| Gross (loss) profit | |
| (178,533 | ) | |
| 2,058,989 | |
| | |
| | | |
| | |
| Operating Expenses: | |
| | | |
| | |
| General and administrative (including stock-based compensation of $6,645,891 and $6,492,653, respectively) | |
| 11,597,173 | | |
| 9,230,789 | |
| Sales and marketing | |
| 573,881 | | |
| 426,728 | |
| Research and development | |
| 160,858 | | |
| 137,278 | |
| Total operating expenses | |
| 12,331,912 | | |
| 9,794,795 | |
| | |
| | | |
| | |
| Operating loss | |
| (12,510,445 | ) | |
| (7,735,806 | ) |
| | |
| | | |
| | |
| Other expense (income): | |
| | | |
| | |
| Interest expense | |
| 103,615 | | |
| - | |
| Other income | |
| (116 | ) | |
| (3 | ) |
| Total other expense (income) | |
| 103,499 | | |
| (3 | ) |
| | |
| | | |
| | |
| Loss before provision for income taxes | |
| (12,613,944 | ) | |
| (7,735,803 | ) |
| | |
| | | |
| | |
| Provision for income taxes | |
| 2,464 | | |
| 2,400 | |
| | |
| | | |
| | |
| Net Loss | |
$ | (12,616,408 | ) | |
$ | (7,738,203 | ) |
| | |
| | | |
| | |
| Less cumulative preferred stock dividends | |
| 46,587 | | |
| - | |
| | |
| | | |
| | |
| Net Loss to common stockholders | |
$ | (12,622,995 | ) | |
$ | (7,738,203 | ) |
| | |
| | | |
| | |
| Weighted average shares outstanding - basic and diluted | |
| 6,326,806 | | |
| 4,409,670 | |
| Net loss per share - basic and diluted | |
$ | (2.00 | ) | |
$ | (1.75 | ) |
As
discussed more fully below, our results of operations in 2023 and 2022 were impacted significantly by $17.2 million of revenue and $2.1
million of gross profit from fractional sales of all of our then available aircraft in 2022 and the absence of aircraft sales in 2023.
Excluding the impact of these fractional sales and despite the increase in our aircraft fleet and charter and jet card/fractional program
flight activity, the significant drivers of the decline in gross profit and increase in operating losses resulted from three key factors:
| |
● |
High
pilot turnover at the beginning of 2023 that led to: |
| |
○ |
an
approximate 118% increase in pilot wages from 2022 to 2023 to reduce that turnover, reflected in higher payments to Cirrus. |
| |
|
|
| |
○ |
increased
time when pilots were not available to fly our aircraft due to several months of required onboarding pilot training, increasing our
training costs as well as our costs for subcharters to cover these flight hours, which we expect to normalize going forward with
the reduced turnover. |
| |
● |
Relatively
lower per hour pricing for jet cards that we offered from 2021 through June of 2022 to drive customer growth. As of June 2023, we
had raised our jet card pricing approximately 17% from our initial price point. However, jet card prices remain fixed for the year
term of the contract and, as a result, our two lowest pricing points were being recognized in revenues through June 2023. |
| |
|
|
| |
● |
An
increase in professional service expenses of $1.4 million in large part due to the expenses of our Business Combination in August
2023. While we would expect our professional services expenses to be somewhat more elevated as a public company, they should be significantly
lower than $1.4 million on a going forward basis. |
We
are cautiously optimistic that CharterGPT and ongoing improvement in its AI-powered features will continue to drive growth in our charter
revenues and will drive higher broker productivity going forward. Furthermore, at the end of 2023 and beginning of 2024, we launched
DynoFlight and Reroute AI, respectively, as part of the Jet.AI Operator Platform. We believe Reroute AI will generate increased revenue
for the Company by driving charter demand for repurposed empty flight legs with little incremental operational costs. We also believe
that, once the DynoFlight API has been integrated with FL3XX, a web and app-based aviation management platform, and future customers,
it will generate monthly and usage-based revenues with modest operating costs limited to server administration and maintenance of the
code base. Furthermore, the Company executed a non-binding letter of intent to acquire five new Challenger 3500 aircraft from Bombardier,
consisting of three prospective firm orders and two options. Subject to securing debt financing and the development of a plan with Cirrus
for these aircraft, the Company would then pre-sell fractional or whole interests in these aircraft.
Revenues
Revenues
for 2023 totaled $12.2 million, a $9.7 million decrease from 2022’s revenues of $21.9 million primarily related to $17.2 million
in aircraft sale proceeds in 2022 from the successful fractionalization of the Company’s last HondaJets.
The
following table sets forth a breakout of revenue components by subcategory for the year ended December 31, 2023 and 2022.
| | |
Year Ended
December 31, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Software App and Cirrus Charter | |
$ | 7,125,230 | | |
$ | 2,004,807 | |
| Jet Card and Fractional Programs | |
| 2,847,533 | | |
| 2,257,736 | |
| Management and Other Services | |
| 2,241,793 | | |
| 400,185 | |
| Fractional/Whole Aircraft Sales | |
| - | | |
| 17,200,000 | |
| | |
$ | 12,214,556 | | |
$ | 21,862,728 | |
Software
App revenue is the gross amount of charters booked through our app CharterGPT and Cirrus Charter revenue reflects the gross amount of
charters on our aircraft booked by Cirrus. Software App revenue was 3.9 million in 2023, compared to 1.0 million in 2022. Cirrus Charter
revenue was 3.2 million in 2023, compared to approximately 961,000 in 2022. The increase in Software App and Cirrus Charter revenue reflects
primarily a greater number of aircraft operated in 2023 compared to 2022 as well as increased booking through the CharterGPT app. We
took delivery of 1 HondaJet in November 2021 and the remaining 2 HondaJets in the third quarter of 2022. We also added a CJ4 aircraft
owned by a customer and managed by us to our available fleet of aircraft for charter booking in early 2023.
Under
our jet card program we charge an hourly rate for flight time. Under our fractional program we charge a monthly fee and hourly fees based
on usage. In both case, prepaid flight hours and usage fees are recognized as revenue as the flight hours are used or forfeited and monthly
fees are recognized monthly. Deferred revenue at the end of each period reflects prepaid flight hours for which the related travel had
not yet occurred. We also record revenue for additional charges, representing primarily charges for cost reimbursements such as a fuel
component adjustment to adjust for changes in fuel prices relative to the jet card and fractional contracts’ base fuel price and
reimbursement of federal excise taxes. All of these revenues are reflected as Jet Card and Fractional Program revenues. The increase
in revenue from Jet Card and Fractional Programs of approximately $590,000 in 2023 compared to 2022 is due to the increase in the number
of the Company’s aircraft and a greater number of Jet Card members.
The
following table details the flight hours sold and flown or forfeited, as well as the associated deferred revenues and recognized revenues,
respectively, and additional charges for the year ended December 31, 2023 and 2022:
| | |
For the year ended
December 31, | |
| | |
2023 | | |
2022 | |
| Deferred revenue at the beginning of the year (1) | |
$ | 933,361 | | |
| 436,331 | |
| Prepaid flight hours sold | |
| | | |
| | |
| Amount | |
$ | 3,045,769 | | |
| 2,322,950 | |
| Total Flight Hours | |
| 534 | | |
| 439 | |
| | |
| | | |
| | |
| Prepaid flight hours flown | |
| | | |
| | |
| Amount | |
$ | 2,456,354 | | |
| 1,837,720 | |
| Total flight hours | |
| 436 | | |
| 350 | |
| | |
| | | |
| | |
| Additional charges | |
$ | 391,179 | | |
| 420,016 | |
| Total flight hour revenue | |
$ | 2,847,533 | | |
| 2,257,736 | |
| | |
| | | |
| | |
| Deferred revenue at the end of the year (2) | |
$ | 1,779,794 | | |
| 933,361 | |
| (1) |
Deferred
revenue at December 31, 2023 and 2022 also includes $11,800 and $0, respectively, with respect to customer prepayments associated
with software app transactions. |
| (2) |
Deferred
revenue at December 31, 2023 and 2022 also includes $268,818 and $11,800, respectively, with respect to customer prepayments associated
with software app transactions. |
Management
and Other Services revenue reflects monthly fees and other expenses from our management of a customer’s CJ4 as well as approximately
$220,000 in 2022 from brokerage commissions from an aircraft sale. We began managing the CJ4 in mid-December of 2022.
Cost
of revenues
Our
cost of revenue is generally comprised of payments to Cirrus for the maintenance and management of our fleet of aircraft, including the
CJ4, commissions to Cirrus for their arranging for charters on our aircraft, aircraft lease expense, federal excise tax relating to jet
card and third-party charters, and payments to third-party aircraft operators for their aircraft chartered through our App, as well as
the cost of our subcharters for covering jet card flights when our aircraft were unavailable. The management of our aircraft by Cirrus
covers all our aircraft regardless of whether the aircraft are used for program flight hours or charter flights and includes expenses
such as fuel, pilot wages and training costs, aircraft insurance, maintenance and other flight operational expenses.
As
a result of primarily of our increased fleet, the increase in jet card hours flown and additional costs resulting from pilot turn over
discussed above, as well as the startup costs relating to the introduction of the CJ4 to our fleet, costs related to the operation of
our aircraft and payments to Cirrus for their management increased $3.4 million from $2.0 million in 2022 to $5.4 million in 2023 and
aircraft lease payments increased $337,000 from $855,000 in 2022 to $1.2 million in 2023. The Company also incurred third-party charter
costs of approximately $5.4 million in 2023, a $4.0 million increase over 2022 reflecting primarily lack of availability of our aircraft
due to pilot turnover and increased training time, combined with increased charter activity. Merchant fees and federal excise tax relating
to charter flights of $304,000 in 2023 were a $48,000 increase over in 2022.
In
total, it cost $12.4 million to operate our aircraft in 2023, compared to $4.4 million to operate fewer aircraft on average in 2022.
We also incurred $15.2 million in 2022 cost of revenue directly associated with our fractional and whole aircrafts sales.
Gross
(loss) profit
As
a result of the foregoing, the Company had a gross loss of approximately $179,000 for 2023, compared to a gross profit of approximately
$2.1 million for 2022. The 2022 results were positively affected by the fractionalization of the Company’s HondaJets. Excluding
the profit from these fractionalizations, gross profit for 2022 would have been approximately $216,000, with the decline primarily due
to increased pilot wages and training, offset by increased flight activity.
Total
Operating Expenses
In
2023, the Company’s operating expenses increased by approximately $2.4 million over the prior year due to an approximate $2.5 million
increase in general and administrative expenses. Excluding non-cash stock-based compensation of $6.6 million and $6.5 million in 2023
and 2022, respectively, general and administrative expenses rose by approximately $2.2 million, primarily due to an increase in professional
service expenses of $1.4 million in large part due to the expenses of our Business Combination. In addition our insurance expenses increased
$58,000 over the 2022 amount of $31,000 due to the significantly higher premiums for D&O insurance as a public company.
The
Company’s sales and marketing expenses increased by about $147,000 to approximately $574,000 in 2023 from approximately $427,000
in 2022, due to slightly increased marketing spend to promote the Company and its programs.
Research
and development expenses increased by approximately $24,000 in 2023 over 2022 due to the development and continuing refinement of CharterGPT
and our Jet.AI Operator Platform of software products.
Operating
Loss
As
a result of all of the above, in 2023 the Company recognized an operating loss of approximately $12.5 million, which was an increase
in loss of approximately $4.8 million over 2022. $2.1 million of this decrease is directly attributable to gross profit from fractionalization
of our HondaJets in 2022 that did not recur in 2023. The remainder of the decrease, excluding non-cash compensation expenses, resulted
from increased pilot wages and costs, increased subcharters, increased professional services expense from the Business Combination and
higher D&O insurance costs.
Other
Expense (Income)
During
2023, the Company recognized approximately $104,000 in other expense due primarily due to interest expense 2023 related to the Company’s
Bridge Agreement as defined and discussed below.
Net
Loss to Common Stockholders
After
deducting cumulative preferred stock dividends of approximately $47,000 in 2023, which have been accruing since the August 2023 issuance
date of the Series A Preferred Shares and Series A-1 Preferred Shares, net loss to common stockholders increased by $4.9
million.
Liquidity
and Capital Resources
Overview
As
of December 31, 2023, the Company’s cash and equivalents were approximately $2.1 million, including approximately $500,000 of restricted
cash under its aircraft leasing arrangements described below. As of December 31, 2023, current liabilities exceeded current assets by
$3.8 million, of which $1.8 million in liabilities represents deferred revenue that would be recorded as revenue once the flight hours
are flown or forfeited.
Subsequent
to December 31, 2023 and through March 31, 2024, the Company raised (1) approximately $1,110,000 in funds from the issuance of 1,500,000
shares of Common Stock under the Share Purchase Agreement discussed below, (2) approximately $742,000 from Jet.AI Warrant exercises and
(3) approximately $1.5 million in gross proceeds from the Selling Stockholder Transaction discussed below. Collectively, these
actions resulted in our receiving an additional $3,352,000 of cash subsequent to December 31, 2023. In addition, in March 2024, the Company
fully repaid approximately $683,000 of amounts due under the Bridge Agreement described below.
The
Company also incurred negative cash flows from operating activities and significant losses from operations in the past as reflected in
its accumulated deficit of $39.4 million as of December 31, 2023. While we expect to drive revenue and operating profit growth from aircraft
acquisitions, higher average hourly pricing of jet cards, increased charter activity through CharterGPT and Reroute AI and SaaS revenues
from DynoFlight, we expect to continue to incur operating losses to a greater or lesser extent for at least the next 12 months, depending
on the timing and success of these initiatives. To bridge the gap, we intend to rely on funds available from share issuances under the
Share Purchase Agreement and amounts received upon an exercise of the Warrant, if any, to meet our funding obligations. Additional funding
under the Share Purchase Agreement may be limited contractually and the Warrant may not be exercised by the holder. Furthermore, issuances
of additional shares of Common Stock under the Share Purchase Agreement or upon conversion of the Series B Preferred Stock outstanding
and underlying the Warrant may negatively impact the Company’s stock price and ability to raise additional funds. We will likely
require additional capital resources to grow our business. In the absence of external financing the Company is prepared to cut its cash
utilization by ceasing marketing and customer acquisition, suspending software development, streamlining operations, and servicing only
existing customers. Such a reduction would allow the Company to continue to operate for a year or more by management’s estimate.
During that time the Company would plan to arrange new financing and to then resume expansion.
Selling Stockholder
Transaction
General
On
March 28, 2024, Company entered into the Securities Purchase Agreement and certain other transaction documents described
below with the Selling Stockholder in connection with a private placement transaction which closed on March 29, 2024 (the
“Closing Date”), which we collectively refer to as the “Selling Stockholder Transaction”.
Pursuant
to the Securities Purchase Agreement, the Company agreed to issue to the Selling Stockholder (a) 150 shares of Series B Preferred
Stock, which are convertible into shares of Common Stock, (b) the Warrant to purchase up to 1,500 shares of Series B Preferred
Stock at an exercise price of $10,000 per share, and (c) 250,000 shares of Common Stock.
The
Company received gross proceeds of approximately $1.5 million, not including customary placement fees and reimbursement of certain amounts
payable to Maxim as placement agent and other expenses payable by the Company in connection with the Selling Stockholder Transaction.
This amount excludes the proceeds, if any, from the exercise of the Warrant. The Company expects to use a portion of the net proceeds
received upon execution of the Securities Purchase Agreement to partially redeem its Series A Preferred Shares and, potentially, its
Series A-1 Preferred Shares. The Company intends to use the remainder of the net proceeds for working capital, capital expenditures,
product development, and other general corporate purposes. The Company has not allocated specific amounts of net proceeds for any of
these purposes.
Series
B Preferred Stock
On
March 28, 2024, we filed a Certificate of Designations of the Series B Convertible Preferred Stock with the Secretary of State of the
State of Delaware, which provides for the issuance of up to 5,000 shares of the Company’s Series B Preferred Stock. The Series
B Preferred Stock ranks pari passu with the Series A Preferred Shares and Series A-1 Preferred Shares and senior
to all other capital stock of the Company.
Each
share of Series B Preferred Stock converts into a number of shares of our Common Stock, subject to certain limitations, including a beneficial
ownership limitation of 4.99% (calculated in accordance with the rules promulgated under Section 13(d) of the Securities Exchange Act),
which can be adjusted to a beneficial ownership limitation of 9.99% upon 61 days prior written notice by the Selling Stockholder. From time to time the Selling Stockholder may convert Series B Preferred Stock into Common Stock which it may liquidate
and thereafter receive additional shares of Common Stock pursuant to subsequent conversions of its Series B Preferred Stock. Although
the beneficial ownership limitation imposes a legally binding limitation on the Selling Stockholder’s beneficial ownership at any
point in time, it does not prohibit the Selling Stockholder from, over time, receiving shares of Common Stock upon separate conversions
of its shares of Series B Preferred Stock that, in the aggregate and over a period of time, exceed the beneficial ownership limitation.
Subject
to the limitations set forth in the preceding paragraph and provided there is an effective registration statement covering the Selling
Stockholder’s resale of Common Stock underlying the Series B Preferred Stock, shares of Series B Preferred Stock will automatically
convert into shares of Common Stock on or prior to the tenth trading day after the issuance date of such shares of Series B Preferred
Stock. The number of shares of Common Stock issuable upon conversion of a share of Series B Preferred Stock is calculated by dividing
the conversion amount per share of Series B Preferred Stock by the then conversion price. The conversion amount is equal to the stated
value of the shares of Series B Preferred Stock, which is $10,000, plus any additional amounts and late charges calculated in accordance
with the Certificate of Designations. The conversion price is equal to 90% (or, in the case of a delisting, 80%) of the lowest daily
volume weighted average price (“VWAP”) of our Common Stock over a period beginning on the trading day after we deliver shares
of Common Stock upon such conversion to the Selling Stockholder and ending on the trading day on which the aggregate dollar trading
volume of our Common Stock exceeds seven times the applicable conversion amount, subject to a five trading day minimum period for such
calculation, and subject to certain adjustments.
If
certain defined “triggering events” defined in the Certificate of Designations occur, such as a breach of the Registration
Rights Agreement, suspension of trading, or our failure to convert the Series B Preferred Stock into Common Stock when a conversion right
is exercised, then we may be required to redeem the Series B Preferred Stock for cash at 110% of the stated value.
The
foregoing description of the Series B Preferred Stock does not purport to be complete and is qualified in its entirety by reference to
the Certificate of Designations, a copy of which is filed as Exhibit 3.5 to the registration statement of which this prospectus forms
a part and is incorporated herein by reference.
Other
Transaction Documents
The
Warrant exercise price is initially set at $10,000 per share of Series B Preferred Stock of, subject to adjustment for certain events,
such as stock split, issuance of additional shares as a dividend or otherwise. If all of the Warrant was exercised for cash, the Company
would receive additional gross proceeds of approximately $15.0 million. The Company cannot predict when or if the Warrant will be exercised.
It is possible that the Warrant may never be exercised. At any time when the Warrant is exercisable for less than 1,000 shares of Series
B Preferred Stock, the Company has the right to redeem all or a portion of the Warrant by paying to the Selling Stockholder in
cash $100 per share of Series B Preferred Stock that would otherwise be issuable pursuant to the Warrant.
The
Securities Purchase Agreement contains customary representations and warranties of the Company, on the one hand, and the Selling Stockholder,
on the other hand, and customary conditions to closing. Pursuant to the Securities Purchase Agreement, the Company agreed to submit
to its stockholders a proposal to approve the issuance of shares of Common Stock issuable upon exercise of the shares of Series B Preferred
Stock in accordance with Nasdaq Stock Market Rules at a special meeting of stockholders at the earliest practicable date after the date
of the Securities Purchase Agreement, but in no event later than ninety (90) days after the Closing Date. The Company entered into a
voting agreement (the “Voting Agreement”) with Michael Winston, the Company’s Interim Chief Executive Officer, and
the Sponsor, who together held approximately 43.6% of the voting power of the Company as of the record date for the Company’s annual
meeting of stockholders, agreeing to vote in favor of the proposal. At its annual meeting of stockholders, which took place on September
24, 2024, the Company sought stockholder approval for the potential issuance of shares of common stock pursuant to the Selling Stockholder
Transaction in an amount that, upon issuance, could result in the issuance of shares of common stock in an amount in excess of 20% of
the Company’s outstanding shares of common stock at a price less than the “minimum price” as defined by and in accordance
with Nasdaq Listing Rule 5635(d). The Company’s stockholders approved such potential issuance at the annual meeting. The Securities
Purchase Agreement obligates the Company to reserve no less than 200% of the maximum number of shares of Common Stock issuable upon conversion
of the Series B Preferred Stock outstanding, using an alternate conversion method (the “Required Reserve Amount”). The Company
and the Selling Stockholder have agreed that the Required Reserve Amount is 45,000,000 shares of Common Stock. In order to meet that
obligation, the Company sought stockholder approval to amend its certificate of incorporation to increase the number of authorized
shares of Common Stock to 200,000,000 at its annual meeting of stockholders. The Company received such approval on September
24, 2024.
Additionally,
on March 29, 2024, the Company entered into the Registration Rights Agreement the Selling Stockholder, which, among other things, provides
that the Company will register the resale of the 250,000 shares of Common Stock and the shares of Common Stock issuable upon conversion
of the Series B Preferred Stock, including the Series B Preferred Stock issuable upon exercise of the Warrant. The Company is required
to prepare and file a registration statement with the SEC no later than 30 days following the filing of the Company’s Annual Report
on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”), but in no event later than May 15, 2024 (the “Filing
Failure”, and such deadline, the “Filing Deadline”), and to use its commercially reasonable efforts to have the registration
statement and any amendment declared effective no later than the earlier of the (a) 60th calendar day following the filing of the Form
10-K (or, if such registration statement is subject to a full review by the SEC, the 100th calendar day after such filing) and (b) 2nd
business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such registration statement
will not be reviewed or will not be subject to further review (the “Effectiveness Deadline”). The Company filed a registration
statement on Form S-1 pursuant to the foregoing obligation by the Filing Deadline, and does not owe the Selling Stockholder a fee of
$100,000. Because this registration statement was not declared effective by the SEC by the Effectiveness Deadline, the Company was obligated
pay to the Selling Stockholder a $100,000 Effectiveness Fee. On September 3, 2024 the Company issued to the Selling Stockholder
100,000 Effectiveness Shares in lieu of paying the Effectiveness Fee in cash.
The
Company has also agreed to, among other things, indemnify the Selling Stockholder, its members, managers, directors, officers,
partners, employees, agents, representatives and persons who control the Selling Stockholder under the registration statement
from certain liabilities and pay all fees and expenses (excluding any underwriting discounts and selling commissions) incident to the
Company’s obligations under the Registration Rights Agreement.
The
securities issued pursuant to the Securities Purchase Agreement were not registered under the Securities Act and were offered pursuant
to an exemption from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act and/or Rule
506(b) of Regulation D promulgated under the Securities Act. The securities may not be offered or sold in the United States absent registration
or an applicable exemption from registration requirements.
Copies
of the Securities Purchase Agreement, the Voting Agreement, the Warrant, the Registration Rights Agreement, and the Letter
Agreement are filed as Exhibits 10.30, 10.31, 4.5, 10.32, and 10.39, respectively, to the registration statement of which
this prospectus forms a part. The above summary of such agreements and documents does not purport to be complete and is qualified in
its entirety by reference such agreements and is incorporated herein by reference herein.
Share
Purchase Agreement
The
Company has access to an aggregate of $40 million from the Share Purchase Agreement with GEM less drawdowns of $1,110,000 to date. In
consideration for GEM’s services under the Share Purchase Agreement, the Company has agreed to pay GEM a commitment fee equal to
$800,000 payable in cash or freely tradable shares of Common Stock, at the option of the Company. Upon the Company’s issuance of
shares in connection with any drawdown purchase made by GEM, the Company is required to pay GEM a portion of such commitment fee in an
amount equal to 2% of the amount purchased in such drawdown; provided that the full $800,000 commitment fee shall be paid on or before
the first anniversary of the closing of the Business Combination. The Company is obligated to pay the commitment fee regardless of the
amount of funds it draws down under the Share Purchase Agreement.
GEM
is not obligated to purchase shares under the Share Purchase Agreement if any purchase of shares would result in GEM and its affiliates
beneficially owning, directly or indirectly, at the time of the proposed issuance, more than 9.99% of the number of issued and outstanding
shares of Common Stock as of the date of such proposed issuance. GEM may waive the restriction under the Share Purchase Agreement by
providing the Company with sixty-one (61) days’ notice that the Purchaser would like to waive the restriction with regard to any
or all shares issuable pursuant to the Share Purchase Agreement.
On
August 10, 2023, the Company issued the GEM Warrant, pursuant to an exemption from registration under Section 4(a)(2) of the Securities
Act, granting it the right to purchase up to 6% of the outstanding Common Stock of the Company on a fully diluted basis as of the date
of listing. The GEM Warrant has a term of three years. The exercise price of the GEM Warrant, as of December 31, 2024, was $8.40 per
share; provided, that, if the average closing price of Jet.AI’s Common Stock for the 10 trading days following the first anniversary
of the date of listing is less than 90% of the then current exercise price of the GEM Warrant, then the exercise price of the GEM Warrant
will be adjusted to 110% of our then current trading price. The warrant may be exercised by payment of the per share amount in cash or
through a cashless exercise.
The
GEM Warrant provides that GEM can elect to limit the exercisability of the GEM Warrant such that it is not exercisable to the extent
that, after giving effect to the exercise, GEM and its affiliates, to the Company’s actual knowledge, would beneficially own in
excess of 4.99% of Jet.AI’s Common Stock outstanding immediately after giving effect to such exercise. GEM has made this election,
which makes funds available under the Share Purchase Agreement in excess of this 4.99% ownership limit up to the 9.99% ownership restriction
in the Share Purchase Agreement. GEM may revoke this election by providing written notice, which revocation will not be effective until
the sixty-first (61st) day thereafter.
Meteora
Transactions
On
August 6, 2023, we entered into a Forward Purchase Agreement with Meteora for OTC Equity Prepaid Forward Transactions. The purpose of
our entering into this agreement and these transactions was to provide a mechanism whereby Meteora would purchase, and waive their redemption
rights with respect to, a sufficient number of Oxbridge Class A ordinary shares to enable Oxbridge to have at least $5,000,000 of net
tangible assets, a non-waivable condition to the Closing of the Business Combination and to provide the Company with cash to meet a portion
of the transaction costs associated with the Business Combination.
Pursuant
to the terms of the Forward Purchase Agreement, Meteora intended, but was not obligated to, purchase up to 1,186,952 (the
“Purchased Amount”) of Oxbridge’s Class A ordinary shares concurrently with the Closing. The shares initially
purchased by Meteora consisted of 663,556 Recycled Shares it purchased from third parties through a broker in open market
transactions and 247,000 Additional Shares it purchased directly from us in a private placement, pursuant to an exemption from
registration under Section 4(a)(2) of the Securities Act, for a per share price of $10.00 pursuant to an FPA Funding Amount PIPE
Subscription Agreement. Of these Recycled Shares, 50,000 Recycled Shares represented Share Consideration to Meteora under the
Forward Purchase Agreement and are not subject to the terms of the Forward Purchase Agreement, meaning that Meteora is free to sell
such shares and retain all proceeds therefrom. Netting out the Share Consideration, the total “Number of Shares”
initially subject to the terms of the Forward Purchase Agreement was 861,312. Following the Closing of the Business Combination, we
paid to Meteora $6,805,651 representing amounts payable by us to Meteora under the Forward Purchase Agreement, net of the aggregate
purchase price of the total number of Additional Shares issued to Meteora under the FPA Funding Amount PIPE Subscription Agreement;
and Meteora paid us ½ of the Prepayment Shortfall, or $625,000.
Pursuant
to the terms of the Forward Purchase Agreement, in December 2023, Meteora sent OET Notices to the Company informing
the Company that it had elected to terminate the transaction with respect to all outstanding shares and paid the Company an aggregate
$921,945. As a result of the foregoing transactions, the net proceeds received by the Company from the issuance of additional Common
Stock pursuant to the Forward Purchase Agreement and the FPA Funding Amount PIPE Subscription Agreement are $1,221,945 and the facility
was terminated.
Bridge
Agreement
On September 11, 2023, the Company entered into a binding term sheet (“Bridge
Agreement”) with eight investors to provide the Company $500,000 of short-term bridge financing pending its receipt of funds from
its other existing financing arrangements.
The
Bridge Agreement was entered into with, and funding was provided by, Michael Winston, the Executive Chairman of the Board and Interim
Chief Executive Officer, Wrendon Timothy, a member of the Board and all three Committees of the Board, William Yankus, a member of the
Board and two of its Committees, and Oxbridge RE Holdings Limited, a significant stockholder of the Company for which Mr. Timothy serves
as a director and officer, as well as the four other investors named in the Bridge Agreement.
Given
Mr. Winston’s dual role as a participant in the negotiations with third parties and his participation in the bridge financing itself,
for avoidance of doubt, he waived any right to receive accrued interest on the principal amount of his Note, as well as any redemption
premium or any increase in the principal amount of his Note in connection with an event of default (the “Waiver”). The Company’s
Audit Committee pursuant to its charter, and the full Board, including a majority of disinterested directors, unanimously approved
the Bridge Agreement, in each case finding that the Bridge Agreement was in the best interests of the Company and its stockholders.
As
of December 31, 2023, the Bridge Agreement provided for the issuance of Notes, in an aggregate principal amount of $625,000, reflecting
a 20% original issue discount. The Notes bore interest at 5% per annum and matured on March 11, 2024. The Company was required to redeem
the Notes with 100% of the proceeds of any equity or debt financing at a redemption premium of 110% of the principal amount of the Notes.
In March 2024, the Company fully repaid the Bridge Agreement in the amount of approximately $683,000, representing principal,
redemption premium and interest.
Other
Equity Issuances and Settlement Arrangements
Maxim
Payment and Settlement Agreement
On
August 10, 2023, the Company entered into a settlement agreement (“Maxim Settlement Agreement”) with Maxim, the underwriter
for the Company’s initial public offering. Pursuant to the Maxim Settlement Agreement, the Company issued to Maxim Partners in
a private placement pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act, (a) 270,000 shares of Common
Stock to Maxim Partners to settle the payment obligations of the Company under the underwriting agreement dated on or about August 11,
2021, by and between the Company and Maxim and (b) 1,127 Series A Preferred Shares to Maxim Partners in an amount equal in value to $1,127,000
(the “Series A Preferred Shares”). The Series A Preferred Shares accrue interest at the rate of 8% per annum (which increases
to 18% if the Company fails to meet certain obligations under the terms thereof), payable quarterly and, at the Company’s option,
in shares of Common Stock. The Series A Preferred Shares are convertible into 112,700 shares of Common Stock. The Company also issued
115,000 shares of Common Stock to Maxim Partners on August 16, 2021, in a private placement exempt from registration under Section 4(a)(2)
of the Securities Act, to meet a payment obligation under the underwriting agreement in connection with Oxbridge’s IPO, representing
a value of $9.00 per share reflecting an allocation of the $10.00 per Unit IPO price.
The
Company may, subject to certain conditions, redeem the outstanding Series A Preferred Shares in cash at the $1,000 original issue
price, subject to adjustment, plus accrued and unpaid dividends. The Company was required to redeem all the outstanding
Series A Preferred Shares on August 10, 2024, which was automatically extended by an additional three (3) month period because
the Company has not closed upon one or more equity financings that, in total, result in gross proceeds to the
Company of $10.0 million or greater. If the Company raises equity capital, 15% of the net proceeds will be used to redeem the Series
A Preferred Shares if requested by the holder.
In July 2024 the Company and Maxim entered into an amendment to the Maxim Settlement Agreement and agreed to, among
other things, amend the definition of the “Series A Conversion Price” for the Series A Preferred Shares and certain restrictions
with respect to shares of Company common stock Maxim may acquire upon the conversion of its Series A Preferred Shares.
Sponsor
Settlement Agreement
On
August 10, 2023, the Company entered into settlement agreement (“Sponsor Settlement Agreement”) with OAC Sponsor Ltd., a
Cayman Islands exempted company (the “Sponsor”), the sponsor of Oxbridge. Pursuant to the Sponsor Settlement Agreement, the
Company issued, in a private placement exempt from registration under Section 4(a)(2) of the Securities Act, 575 Series A-1 Preferred
Shares to settle the payment obligations of the Company under a promissory note in the principal amount of $575,000 dated November 14,
2022 in favor of Sponsor. The Series A-1 Preferred Shares accrue interest at the rate of 5% per annum (which increases to 18% if the
Company fails to meet certain obligations under the terms thereof), payable quarterly in cash. The Series A-1 Preferred Shares are convertible
into 57,500 shares of Common Stock. The shares of Common Stock issuable upon conversion of the Series A-1 Preferred Shares are subject
to a registration rights agreement between the Company and Sponsor.
The
Company may, subject to certain conditions, redeem the outstanding Series A-1 Preferred Shares in cash at the $1,000 original issue price,
subject to adjustment, plus accrued and unpaid dividends. The Company was required to redeem all the outstanding Series A-1 Preferred
Shares on August 10, 2024, which was automatically extended by an additional three (3) month period because the Company has
not closed upon one or more equity financings that, in total, result in gross proceeds to the Company of $10.0 million
or greater. If the Company raises equity capital, 15% of the net proceeds will be used to redeem the Series A-1 Preferred Shares if requested
by the holder.
Warrants
On
various dates at the end of December 2023 and through early 2024, we entered a number of separate warrant exchange agreements with various
unaffiliated third-party warrant holders with respect to warrants to purchase an aggregate of 1,486,217 shares of our Common Stock (the
“Exchanged Warrants”). Pursuant to these warrant exchange agreements, the Company issued an aggregate of 1,486,217 shares
of Common Stock to those warrant holders in exchange for the surrender and cancellation of the Exchanged Warrants, in
reliance upon the exemption from the registration requirements under Section 3(a)(9) under the Securities Act of 1933, as amended.
A
copy of the form of warrant exchange agreement is filed as Exhibit 10.28 to the registration statement of which this prospectus forms
a part.
In
December 2023 and January 2024, holders of an aggregate of 154,563 JTAIW warrants were exercised for an equal number of shares of our
Common Stock, generating net proceeds to us of $1,777,475.
Cash
Flows
As
of December 31, 2023, the Company’s cash and equivalents were approximately $2.1 million, including approximately $500,000 of restricted
cash under its aircraft leasing arrangements described below.
The
following table summarizes our cash flows for year ended December 31, 2023 and 2022:
| | |
For the year ended
December 31, | |
| | |
2023 | | |
2022 | |
| Net cash used in operating activities | |
$ | (3,783,473 | ) | |
$ | (96,042 | ) |
| Net cash (used in) provided by investing activities | |
| (190,998 | ) | |
$ | 290,488 | |
| Net cash provided by financing activities | |
| 4,547,623 | | |
$ | 689,451 | |
| Increase in cash and cash equivalents | |
$ | 573,152 | | |
$ | 883,897 | |
Cash
Flow from Operating Activities
The
increase in net cash used in operating activities for 2023 was primarily driven by increase in operating loss discussed above.
Cash
Flow from Investing Activities
Net
cash used in investing activities for the year ended December 31, 2023 was $190,998, primarily relating to the Company’s investment
in 380 Software LLC, a 50/50 joint venture subsidiary with Great Western Air LLC dba Cirrus Aviation Services as well as the purchase
of the Jet.AI domain name. This is compared to net cash provided by investing activities in 2022 of $290,488 driven by an increase in
aircraft deposit rebates.
Cash
Flow from Financing Activities
Net
cash provided by financing activities of $4.5 million for the year ended December 31, 2023, was primarily driven by net offering proceeds
(net of offering costs from the Company’s Regulation A offering) of $2.4 million. These net offering proceeds reflect (1) approximately
$1.2 million in proceeds from the Forward Purchase Agreement and (2) approximately $1.2 million of net proceeds from the latter part
of the Company’s Regulation A offering of non-voting Common Stock which terminated in January 2023. From June 2021 to January 2023,
the Company conducted an offering under Regulation A and issued 8,767,126 shares, or approximately 271,000 shares of Common Stock and
432,000 Merger Consideration Warrants following the Business Combination, and representing approximately $6.6 million in gross proceeds.
In addition, in 2023 the Company raised $500,000 under its Bridge Agreement, approximately $1.0 million from the exercise of warrants
and approximately $621,000 of proceeds from the Business Combination.
Aircraft
Financing Arrangements
In
November 2021 and April 2022, the Company entered into two separate five-year leasing arrangements for the acquisition of two of its
HondaJet Elite aircraft. At any time during their term, the Company has the option to purchase either aircraft from the lessor at the
aircraft’s fair market value at that time. The leasing arrangements also require the Company to hold a combined liquidity reserve
of $500,000 in a separate bank account pledged as security to the lessor, which the Company records as restricted cash on its balance
sheet, as well as a maintenance reserve of approximately $690,000 for each leased aircraft, which is held by the lessor in the event
the lessor determines that the relevant aircraft is not being maintained in accordance with the lease requirements or to prevent deterioration
of the aircraft. Events of default under the leasing arrangements include, among other things, failure to make the monthly payments (with
a 10-day cure period), default on other indebtedness, breaches of covenants related to insurance and maintenance requirements, change
of control or merger, insolvency and a material adverse change in the Company’s business, operations or financial condition. Please
see Note 5 to the Company’s financial statements for the year ended December 31, 2023 for a further description of these leasing
arrangements.
In
June 2022, the Company received an unsolicited offer for the outright purchase of one of its HondaJet Elite aircraft, which netted the
Company approximately $1.2 million of proceeds over the leased cost. After internal financial and legal review, the Company determined
that the sale of the aircraft would offer a net benefit to its stakeholders. The Company considered a number of factors in making this
decision, including but not limited to: (1) the availability of replacement aircraft, (2) pilot availability, (3) the time to register
the aircraft for commercial use, and (4) the risk-adjusted lifetime return on capital associated with operating the aircraft relative
to the purchase price offered.
Plan
of Operation
Aviation
The
Company contemplates acquiring addition aircraft to grow its business and it currently anticipates financing the acquisition of such
aircraft through the sale of fractional and whole interests, debt/lease financing and advanced sales of flight time.
In
the fourth quarter of 2022, we launched the Onboard Program to allow aircraft owners to contribute their aircraft to the Company’s
charter and jet card inventory. The Onboard Program requires one month FAA conformity of aircraft onto the Cirrus Aviation Part 135 certificate,
a one week pilot recertification course for charter operation and execution of a limited management agreement.
Software
CharterGPT
powered by Jet.AI: We plan to build a natural language interface charter app to replace the existing B2C app found in the iOS/Android
stores, respectively. We retained two individuals who act as external contractors, who collaborate with our CTO. We own, without restriction,
all rights to all intellectual property generated for the CharterGPT project by these external contractors. The nature of the work performed
by the external contractors relates to the design and implementation of the App’s front-end and back end, respectively. The front-end
contractor envisions and renders a visually appealing and intuitive workflow for the App compatible with the input requirements of the
back end. The App workflow includes but is not limited to registration, charter jet search, booking, and payment. The back-end developer
writes original computer code and integrates certain open-source software. For more information on the proposed features and benefits
see the section of this prospectus entitled “Business — Strategy – Artificial Intelligence.”
Jet.AI
Operator Platform: Jet.AI plans to reorganize and to recharacterize its B2B software development efforts under the banner of a new
suite of SaaS products termed “Jet.AI Operator Platform” as follows:
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Flight
Club API powered by Jet.AI: The Flight Club API, along with a specialty escrow provider and some limited filings with the Department
of Transportation, enables an FAA Part 135 operator to function simultaneously under FAA Part 380 which permits sale of private jet
service by the seat instead of by whole aircraft. The Flight Club software is expected to integrate front end ticketing and payment
collection with the scheduling systems of an FAA Part 135 operator. It automates the process of filing forms for each flight with
DOT and its refund processes are designed to be consistent with DOT escrow requirements around ticketing and movement of customer
funds. |
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Reroute
powered by Jet.AI: Reroute is software that enables FAA Part 135 operators to earn additional revenue on certain unoccupied flights.
It suggests to an operator if it may reroute aircraft waiting to return to base into new charter bookings to destinations within
specific distances. The system incorporates aircraft performance and third-party data to arrive at a profit estimate for each prospective
flight. The MVP has been successfully tested and our partner Cirrus Aviation has agreed to test Reroute on its fleet ahead of launch.
Launch is tentatively scheduled for the third quarter of 2023. |
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DynoFlight
API powered by Jet.AI: The DynoFlight API is being developed to enable aircraft operators to track and estimate emissions and then
purchase carbon offset credits in small quantities in an ad-hoc manner via our API. DynoFlight offers small to medium sized
operators a way to begin tracking and offsetting their carbon credits with advances estimation techniques, compliant practices, and
quality credits at prices usually only accessible to operators working at a much larger scale that are buying in bulk. In addition,
the DynoFlight API is expected to offer an advantage even to large organizations that wish to manage working capital more efficiently
(i.e. pay as they fly instead of buying in bulk). |
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Card
Management and Invoicing powered by Jet.AI: This system is our internally developed membership portal and we plan to enhance it and
offer it as a white label service to the combined market of over 5,000 FAA Part 135 and Part 91k operators. The Card Management and
Invoicing offering, when combined with the four products described above present an attractive solution, in our view, for Part 135
and 91k operators that seek to improve the customer experience, drive utilization and manage their carbon footprint, respectively. |
Critical
Accounting Estimates
Going
Concern and Management Plans
The
Company has limited operating history and has incurred losses from operations since its inception. These matters raise concern about
the Company’s ability to continue as a going concern.
The
Company began ramping up its revenue-generating activities during the second half of the year ended December 31, 2021 and continuing
into 2022 and 2023. During the next twelve months, the Company intends to fund its operations with funds from its operations, and drawdowns
under the Share Purchase Agreement, as well as proceeds from other financing arrangements. The Company also has the ability to reduce
cash burn to preserve capital. There are no assurances, however, that management will be able to raise capital on terms acceptable to
the Company. If the Company is unable to obtain sufficient amounts of additional capital, the Company may be required to reduce the near-term
scope of its planned development and operations, which could delay implementation of the Company’s business plan and harm its business,
financial condition and operating results. The consolidated balance sheets do not include any adjustments that might result from these
uncertainties.
Basis
of Presentation for the Business Combination
The
Business Combination was accounted for as a reverse recapitalization in accordance with GAAP, whereby Oxbridge is treated as the acquired
company and Jet Token is treated as the acquirer (the “Reverse Recapitalization”). Accordingly, for accounting purposes,
the Reverse Recapitalization was treated as the equivalent of Jet Token issuing stock for the net assets of Oxbridge, accompanied by
a recapitalization. The net assets of Oxbridge were stated at historical cost, with no goodwill or other intangible assets recorded.
Jet
Token has been determined to be the accounting acquirer in the Business Combination based on the following predominate factors:
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Jet
Token’s existing stockholders have the greatest voting interest in the combined entity; |
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Jet
Token existing stockholders have the ability to nominate a majority of the initial members of the combined entity board; |
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Jet
Token’s senior management is the senior management of the combined entity |
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Jet
Token is the larger entity based on historical operating activity and has the larger employee base; and |
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The
post-combination company has assumed a Jet Token branded name: “Jet.AI Inc.” |
Use
of Estimates
The
preparation of the consolidated 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
statement and the reported amounts of expenses during the reporting period. Making estimates requires management to exercise significant
judgement. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that
existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term
due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Material
estimates that are particularly susceptible to significant change in the near-term relate to the fair value of options granted. Although
considerable variability is likely to be inherent in these estimates, management believes that the amounts provided are reasonable. These
estimates are continually reviewed and adjusted if necessary. Such adjustment is reflected in current operations.
Revenue
Recognition
In
applying the guidance of ASC 606, the Company determines revenue recognition through the following steps:
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Identification
of the contract, or contracts, with a customer; |
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Identification
of the performance obligations in the contract; |
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Determination
of the transaction price; |
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Allocation
of the transaction price to the performance obligations in the contract; and |
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Recognition
of revenue when, or as, a performance obligation is satisfied. |
Revenue
is derived from a variety of sources including, but not limited to, (i) fractional/whole aircraft sales, (ii) fractional ownership and
jet card programs, (iii) ad hoc charter through the Jet Token App (replaced by CharterGPT) and (iv) aircraft management.
Under
the fractional ownership program, a customer purchases an ownership share in a jet which guarantees the customer access to the jet for
a preset number of hours per year. The fractional ownership program consists of a down payment,
one or more progress payments, a payment on delivery, a monthly management fee and an occupied hourly fee based on usage. Revenues
from the sale of fractional or whole interests in an aircraft are recognized at the time title to the aircraft is transferred to the
purchasers, which generally occurs upon delivery or ownership transfer.
The
jet card program provides the customer with a preset number of hours of guaranteed private jet access over the agreement term (generally
a year) without the larger hourly or capital commitment of purchasing an ownership share. The jet card program consists of a fixed hourly
rate for flight hours typically paid 100% up front.
Revenue
is recognized upon transfer of control of the Company’s promised services, which generally occurs upon the flight hours being used.
Any unused hours for the fractional jet and jet card programs are forfeited at the end of the contract term and are thus immediately
recognized as revenue at that time.
Deferred
revenue is an obligation to transfer services to a customer for which the Company has already received consideration. Upon receipt of
a prepayment from a customer for all or a portion of the transaction price, the Company initially recognizes a contract liability. The
contract liability is settled, and revenue is recognized when the Company satisfies its performance obligation to the customer at a future
date.
The
Company also generates revenues from individual ad hoc charter bookings processed through the Company’s booking app, whereby the
Company will source, negotiate, and arrange travel on a charter basis for a customer based on pre-selected options and pricing provided
by the Company to the customer through the app. In addition, Cirrus markets charter on the Company’s aircraft for the Company’s
benefit. Deferred revenue with respect to bookings through the app was $268,818 as of December 31, 2023.
The
Company utilizes certificated independent third-party air carriers in the performance of a portion of flights. The Company evaluates
whether there is a promise to transfer services to the customer, as the principal, or to arrange for services to be provided by another
party, as the agent, using a control model. The nature of the flight services the Company provides to members is similar regardless of
which third-party air carrier is involved. The Company directs third-party air carriers to provide an aircraft to a member or customer.
Based on evaluation of the control model, it was determined that the Company acts as the principal rather than the agent within all revenue
arrangements. Owner charter revenue is recognized for flights where the owner of a managed aircraft sets the price for the trip. The
Company records owner charter revenue at the time of flight on a net basis for the margin we receive to operate the aircraft. If the
Company has primary responsibility to fulfill the obligation, then the revenue and the associated costs are reported on a gross basis
in the consolidated statements of operations.
Flights
Flights
and flight-related services, along with the related costs of the flights, are earned and recognized as revenue at the point in time in
which the service is provided. For round-trip flights, revenue is recognized upon arrival at the destination for each flight segment.
Fractional
and jet card members pay a fixed quoted amount for flights based on a contractual capped hourly rate. Ad hoc charter customers primarily
pay a fixed rate for flights. In addition, flight costs are paid by members through the purchase of dollar-denominated prepaid blocks
of flight hours (“Prepaid Blocks”), and other incidental costs such as catering and ground transportation are billed monthly
as incurred. Prepaid Blocks are deferred and recognized as revenue when the member completes a flight segment.
Aircraft
Management
The
Company manages aircraft for owners in exchange for a contractual fee. Revenue associated with the management of aircraft also includes
the recovery of owner-incurred expenses including maintenance coordination, cabin crew and pilots, as well as recharging of certain incurred
aircraft operating costs and expenses such as maintenance, fuel, landing fees, parking and other related operating costs. The Company
passes the recovery and recharge costs back to owners at either cost or a predetermined margin.
Aircraft
management-related revenue contains two types of performance obligations. One performance obligation is to provide management services
over the contract period. Revenue earned from management services is recognized over the contractual term, on a monthly basis. The second
performance obligation is the cost to operate and maintain the aircraft, which is recognized as revenue at the point in time such services
are completed.
Aircraft
Sales
The
Company acquires aircraft from vendors and various other third-party sellers in the private aviation industry. The Company’s classifies
the purchase as aircraft inventory on the consolidated balance sheets. Aircraft inventory is valued at the lower of cost or net realizable
value. Sales are recorded on a gross basis within revenues and cost of revenue in the consolidated statements of operations.
Pass-Through
Costs
In
applying the guidance of ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in
an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine
revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following
five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine
the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue
when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable
that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services
promised within each contract and determines those that are distinct performance obligations. The Company then assesses whether it is
acting as an agent or a principal for each identified performance obligation and includes revenue within the transaction price for third-party
costs when the Company determines that it is acting as the principal.
Cost
of Sales
The
cost of sales expenses includes costs incurred in providing air transportation services, such as chartering third-party aircraft, aircraft
lease expenses, pilot training and wages, aircraft fuel, aircraft maintenance, and other aircraft operating expenses.
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1. |
Chartering
Third-Party Aircraft: The cost of chartering third-party aircraft is recorded as a part of the cost of sales expense. These expenses
include the fees paid to third-party operators for providing aircraft services on behalf of the Company. Expenses are recognized
in the income statement in the period when the service is rendered and are reported on an accrual basis. |
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2. |
Aircraft
Lease Expenses: Aircraft lease expenses include the cost of leasing aircraft for the Company’s operations. The lease expenses
are recognized as an operating expense in the income statement over the lease term on a straight-line basis. |
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3. |
Pilot
Training and Wages: Pilot training costs are expensed as incurred and are included in the cost of sales expenses. This encompasses
expenses related to initial pilot training, recurrent training, and any additional required training programs. Pilot wages, including
salaries, bonuses, and benefits, are also recognized as a part of the cost of sales expenses and are reported on an accrual basis. |
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4. |
Aircraft
Fuel: The cost of aircraft fuel is recognized as an expense in the cost of sales category based on the actual consumption during
flight operations. Fuel costs are recorded in the income statement in the period when the fuel is consumed and are reported on an
accrual basis. |
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5. |
Aircraft
Maintenance: Aircraft maintenance expenses include both routine and non-routine maintenance. Routine maintenance costs are expensed
as incurred and are recorded as a part of the cost of sales expense. Non-routine maintenance expenses, such as major repairs and
overhauls, are capitalized and amortized over their expected useful life. The amortization expense is included in the cost of sales
expense and is recognized in the income statement on a straight-line basis over the asset’s useful life. |
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6. |
Other
Aircraft Operating Expenses: Other aircraft operating expenses include costs such as insurance, landing fees, navigation charges,
and catering services. These expenses are recognized in the income statement as a part of the cost of sales expenses in the period
when they are incurred and are reported on an accrual basis. |
Stock-Based
Compensation
The
Company accounts for stock awards under ASC 718, Compensation – Stock Compensation. Under ASC 718, stock-based compensation cost
is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s
requisite vesting period or over the nonemployee’s period of providing goods or services. The fair value of each stock option or
warrant award is estimated on the date of grant using the Black-Scholes option valuation model.
Trend
Information
The
Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with
local, state, federal and foreign governmental policy decisions. A host of factors beyond Jet.AI’s control could cause fluctuations
in these conditions. Adverse conditions may include but are not limited to: changes in the airline industry, fuel and operating costs,
changes to corporate governance best practices for executive flying, general demand for private jet travel, regulations on carbon emissions
from aviation and market acceptance of the Company’s business model. These adverse conditions could affect the Company’s
financial condition and the results of operations.
BUSINESS
Overview
Our
business strategy combines concepts from fractional jet and charter jet programs with innovations in artificial intelligence, also referred
to herein is “AI.” Our purposeful enhancement of price discovery has the potential to produce fairer and more inclusive results
for aircraft owners and travelers alike.
We
formed the Company on June 4, 2018. We developed and, in September 2019, launched our booking platform represented by our iOS app JetToken
(the “App”), which originally functioned as a prospecting and quoting platform to arrange private jet travel with third party
carriers. Following our acquisition of HondaJets, we began selling jet cards and fractional ownership interests in our aircraft. In 2023,
we launched an AI-enhanced booking app called CharterGPT, as more fully discussed under “ – Our Software Platforms –
Our Booking Platform and CharterGPT” and “Strategy - Artificial Intelligence” below.
Beginning
in 2023, we launched our Jet.AI Operator Platform to provide a B2B software platform for SaaS products. Currently we offer the following
SaaS software to aircraft owners and operators generally:
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Reroute
AI: recycles aircraft waiting to return to base into prospective new charter bookings to destinations within specific distances;
and |
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DynoFlight:
enables aircraft operators to estimate aircraft emissions then purchase carbon removal credits via our DynoFlight API. |
We
have also established a specific version of a private jet by the seat booking tool called for the Las Vegas Golden Knights and Cirrus
Aviation via 380 Software LLC. 380 Software LLC is a by-the-seat charter joint venture between us and Cirrus Aviation.
Our
strategy involves expanding our fleet of aircraft with larger aircraft capable of traveling longer distances, developing a national jet
card program based on third party aircraft, further enhancing the AI functionality of Charter GPT, and expanding upon our B2B software
offerings. Our strategy involves expanding our fleet of aircraft with larger aircraft capable of traveling longer distances, further
enhancing the AI functionality of Charter GPT, expanding upon Reroute AI and DynoFlight.
The
Business Combination
General
On
August 10, 2023, Jet.AI Inc., a Delaware corporation (f/k/a Oxbridge Acquisition Corp.), consummated a “Business Combination”
pursuant to the Business Combination Agreement and Plan of Reorganization, dated February 24, 2023, as amended by Amendment No. 1 to
the Business Combination Agreement, dated as of May 11, 2023, by and among Oxbridge Acquisition Corp. (“Oxbridge”), the Merger
Subs and Jet Token. Pursuant to the Business Combination Agreement, Oxbridge redomiciled as a Delaware corporation and was immediately
renamed Jet.AI, Inc., and promptly thereafter, (a) First Merger Sub merged with and into Jet Token with Jet Token surviving the merger
as a wholly owned subsidiary of Jet.AI Inc., and (b) Jet Token merged with and into Second Merger Sub (each merger and all other transactions
contemplated by the Business Combination Agreement, the “Business Combination”).
As
a result of the Business Combination:
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the
then issued and outstanding Class A Ordinary Shares of Oxbridge were converted, on a one-for-one basis, into shares of Common Stock
of Jet.AI, Inc.; |
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the
then issued and outstanding Class B Ordinary Shares of Oxbridge were converted, on a one-for-one basis, into shares of Common Stock
of Jet.AI, Inc.; |
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the
then issued and outstanding Oxbridge warrants were converted into an equal number of warrants, each exercisable for one share of
Common Stock of Jet.AI, Inc. (“Jet.AI Warrants”); |
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the
then issued and outstanding Oxbridge Units were converted into an equal number of Jet.AI Units, each consisting of one share of Common
Stock and one Jet.AI Warrant; |
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the
outstanding shares of Jet Token common stock, including all shares of Jet Token preferred stock that converted into shares of Jet
Token common stock, were cancelled and converted into the right to receive the number of shares of Common Stock and the number of
Merger Consideration Warrants based on the respective exchange rations set forth in the Business Combination Agreement; |
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all
outstanding Jet Token options for its common stock, whether or not exercisable and whether or not vested, were converted into options
to purchase Common Stock based on the applicable exchange ratio determined in accordance with the Business Combination Agreement; |
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all
outstanding Jet Token warrants were converted into warrants to acquire the number of shares of Common Stock and Merger Consideration
Warrants based on the applicable exchange ratio set forth in the Business Combination Agreement; and |
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the
outstanding Jet Token restricted stock unit awards were converted into Jet.AI restricted stock unit awards based on the applicable
exchange ratio determined in accordance with the Business Combination Agreement. |
As
a result of the Business Combination, Jet.AI Inc. has one class of Common Stock, listed on Nasdaq under the ticker symbol “JTAI”,
and had two classes of warrants the Jet.AI Warrants and the Merger Consideration Warrants, listed on Nasdaq under the ticker symbols
“JTAIW” and “JTAIZ” respectively.
Certain
Financing Arrangements
Prior
to and in connection with the Business Combination, we entered into financing arrangements intended to provide us with equity-based financing.
In
August 2022, Jet Token entered into a Share Purchase Agreement, dated as of August 4, 2022 (the “Share Purchase Agreement”),
with GEM Yield LLC SCS and GEM Yield Bahamas Limited (together with GEM Yield LLC SCS, “GEM”), which was automatically assigned
to the Company upon the Closing of the Business Combination. Under the Share Purchase Agreement, the Company has the right to periodically
issue and sell to GEM, and GEM has agreed to purchase, up to $40,000,000 aggregate value of shares of the Company’s Common Stock
(the “Aggregate Limit”) during the 36-month period following the date of the Closing of the Business Combination. GEM is
not obligated to purchase shares under the Share Purchase Agreement if any purchase of shares would result in GEM and its affiliates
beneficially owning, directly or indirectly, at the time of the proposed issuance, more than 9.99% of the number of issued and outstanding
shares of Common Stock as of the date of such proposed issuance. In consideration for these services, the Company has agreed to pay GEM
a commitment fee equal to $800,000 payable in cash or freely tradable shares of Common Stock at the “Daily Closing Price”
of the Common Stock, at the option of the Company. Pursuant to the Share Purchase Agreement, on August 10, 2023, the Company issued GEM
a warrant (as subsequently amended, the “GEM Warrant”) granting it the right to purchase up to 6% of the outstanding Common
Stock of the Company on a fully diluted basis as of the date of listing, with exercisability currently limited to 4.99% of the Company’s
Common Stock outstanding immediately after giving effect to such exercise. The GEM Warrant has a term of three years from the date of
issuance and, as of December 31, 2024, had an exercise price of $8.40 per share (subject to potential reduction in August 2024).
On
August 6, 2023, we entered into an agreement with (i) Meteora Capital Partners, LP (“MCP”), (ii) Meteora Select Trading Opportunities
Master, LP (“MSTO”), and (iii) Meteora Strategic Capital, LLC (“MSC” and, collectively with MCP and MSTO, “Meteora”)
(as amended on August 31, 2023 and October 2, 2023, the “Forward Purchase Agreement”) for OTC Equity Prepaid Forward Transactions.
The primary purpose of our entering into the Forward Purchase Agreement and these transactions was to provide a mechanism whereby Meteora
would purchase, and waive their redemption rights with respect to, a sufficient number of Oxbridge Class A ordinary shares to enable
Oxbridge to have at least $5,000,000 of net tangible assets, a non-waivable condition to the Closing of the Business Combination and
to provide the Company with cash to meet a portion of the transaction costs associated with the Business Combination. Following the Closing
of the Business Combination, we paid to Meteora $6,805,651, representing amounts payable by us to Meteora under the Forward Purchase
Agreement, net of the aggregate purchase price of the total number of Additional Shares (as defined and discussed below) issued to Meteora
under the FPA Funding Amount PIPE Subscription Agreement; and Meteora paid us ½ of the Prepayment Shortfall (as defined below),
or $625,000. The Forward Purchase Agreement was amended to provide payment to the Company of an additional $550,000, reflecting payment
in full of the amended Prepayment Shortfall of $1,175,000. The Company also received approximately $1.2 million from the issuance of
Common Stock under the Forward Purchase Agreement, including due to early termination of the facility.
In
connection with the Business Combination, we also entered into settlement agreements with Maxim,
the underwriter for the Company’s initial public offering, and with OAC Sponsor Ltd.,
a Cayman Islands exempted company (the “Sponsor”), the sponsor of Oxbridge, each providing for the issuance of equity in
satisfaction of Oxbridge payment obligations.
Please
see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital
Resources – Overview” for a further discussion of the terms of these financing arrangements and other recent financing
transactions.
Recent
Events
Nasdaq Compliance
Our
Common Stock is currently listed on Nasdaq under the symbol “JTAI”. On December 1, 2023, the Company received a notification
letter (the “Initial Notice Letter”) from the Nasdaq Listing Qualifications Staff of Nasdaq notifying the Company
that its amount of stockholders’ equity has fallen below the $10 million required minimum for continued listing on The Nasdaq Global
Market set forth in Nasdaq Listing Rule 5450(b)(1)(A) (the “Minimum Stockholders’ Equity Requirement”). The Company’s
stockholders’ deficit as of December 31, 2023 was $(3,963,039). The Initial Notice Letter also noted that as of September
30, 2023, the Company did not meet The Nasdaq Global Market alternative listing criteria for the “Market Value”
standard or the “Total Assets / Total Revenues” standard. The Initial Notice Letter further noted
that the Company may consider applying to transfer the Company’s securities to The Nasdaq Capital Market, which would require
the Company to, among other things, meet The Nasdaq Capital Market’s continued listing requirements. On August 14, 2024,
the Nasdaq Hearings Panel granted the Company’s request to transfer the Company’s securities from The Nasdaq Global
Market to The Nasdaq Capital Market to be effective as of the opening of trading on August 16, 2024.
On
April 14, 2024, the Company received an additional notification letter from Nasdaq (the “Second Notice Letter”)
stating that the Company is not in compliance with Nasdaq Listing Rule 5450(a)(1), as the minimum bid price of the Company’s
Common Stock has been below $1.00 per share for 30 consecutive business days (the “Minimum Bid Price Requirement”). The notification
of noncompliance has no immediate effect on the listing or trading of the Company’s Common Stock on Nasdaq. The Company has 180
calendar days, or until October 14, 2024, to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the minimum
bid price of the Company’s Common Stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during
this 180-calendar day grace period. In the event the Company does not regain compliance with the Minimum Bid Price Requirement by October
14, 2024, the Company may be eligible for an additional 180-calendar day compliance period because it elected to transfer
to The Nasdaq Capital Market. To qualify, the Company would be required to meet the continued listing requirements for market value of
publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement,
and would need to provide written notice of its intention to cure the bid price deficiency during the second compliance period. The Company’s
failure to regain compliance during this period could result in delisting. The Company intends to actively monitor the bid price of its
Common Stock and may, if appropriate, consider implementing available options to regain compliance with the Minimum Bid Price Requirement.
On May 30, 2024,
the Company received an additional notification letter from Nasdaq (the “Third Notice Letter”) stating that the Company has
not regained compliance with the Minimum Stockholders’ Equity Requirement for continued listing discussed in the Initial Notice
Letter, which it was required to meet by May 29, 2024 pursuant to its compliance plan. The Third Notice Letter notified the Company that,
unless the Company requested an appeal hearing before the Nasdaq Hearings Panel (the “Panel”) by June 6, 2024, trading of
the Company’s Common Stock would be suspended at the opening of business on June 10, 2024, and a Form 25-NSE would be filed with
the SEC, which would remove the Company’s securities from listing and registration on Nasdaq (such notification, the “Delisting
Notice”).
As directed in
the Third Notice Letter, the Company timely requested a hearing before the Panel and paid the applicable fee to appeal the Delisting
Notice. The Delisting Notice has no immediate effect on the listing or trading of the Company’s Common Stock. The Company’s
hearing request stayed the suspension of trading on the Company’s securities, and the Company’s securities continue to trade
on Nasdaq. On August 14, 2024, in connection the implementation of the Company’s compliance plan, the Nasdaq Hearings Panel granted
the Company’s request to transfer the Company’s securities from The Nasdaq Global Market to The Nasdaq Capital Market to
be effective as of the opening of trading on August 16, 2024. Further the Nasdaq Hearings Panel granted the Company’s request to
have until November 26, 2024 to demonstrate compliance with its previously submitted plan, a deadline that the Company believes to be
attainable. The Company is working diligently to cure the deficiencies set forth in the Delisting Notice and plans to regain compliance
with the continued listing requirements as soon as practicable.
Although
the Company believes it will be able to achieve compliance with Nasdaq’s continued listing requirements, there can be no
assurance that the Company will be able to regain compliance with such requirements, or maintain compliance with any other listing
requirements within the time frame required by Nasdaq or at all, particularly if the Company’s stock price trades below $1.00
for a sustained period. Nasdaq’s determination that we fail to meet the continued listing standards of Nasdaq may result in
our securities being delisted from Nasdaq as set forth in the Delisting Notice.
Letter
Agreements
On
September 24, 2024, the Company and the Selling Stockholder entered into the Letter Agreement that set forth certain understandings and
agreements among the Company and the Selling Stockholder. Pursuant to the Letter Agreement, the Selling Stockholder agreed to refrain
from taking action to protect its legal rights under the transaction documents, related to certain actions and transactions identified
in the Letter Agreement that the Company has undertaken or effected prior to the date of the Letter Agreement. As consideration for the
waiver, the Company agreed to a release of the Selling Stockholder and its affiliates and issued an additional 50 shares of Series
B Preferred Stock to the Selling Stockholder.
On
October 10, 2024, the Company and the Selling Stockholder entered into the Second Letter Agreement that set forth certain understandings
and agreements among the Company and the Selling Stockholder. Pursuant to the Second Letter Agreement, the Selling Stockholder agreed
to refrain from taking action to protect its legal rights under the transaction documents, related to certain actions and transactions
identified in the Second Letter Agreement. Such actions include the Company’s filing of an amendment to the registration statement
on Form S-1 (File No. 333-281911) with the SEC and a registered direct offering. As consideration for the waiver, the Company agreed
to change the Conversion Measurement Period (as defined in the Certificate of Designations) for the previously issued 200 shares of Series
B Preferred Stock to begin on March 28, 2024 and to end in accordance with the Certificate of Designations.
Registered
Direct Offering
On
October 10, 2024, the Company entered into Securities Purchase Agreements (the “RDO Purchase Agreements”) with institutional
investors for the sale by the Company of 26,666,666 shares (the “RDO Shares”) of the Company’s Common Stock at a per
share price of $0.09. The closing of the offering occurred on October 11, 2024. The gross proceeds to the Company from the offering was
approximately $2.4 million, before deducting the placement agent’s fees and other estimated offering expenses payable by the Company.
The offering of the RDO Shares was made pursuant to a shelf registration statement on Form S-3 (File No. 333-281578), which was originally
filed by the Company with the SEC on August 15, 2024, and declared effective on September 9, 2024. The Company filed a prospectus supplement
dated October 11, 2024 with the SEC in connection with the offer and sale of the RDO Shares on October 11, 2024.
Also
on October 10, 2024, the Company entered into a placement agency agreement with Maxim (the “RDO Placement Agency Agreement”),
pursuant to which the Company agreed to pay the Maxim an aggregate fee equal to 7.0% of the aggregate gross proceeds received by the
Company from the sale of the RDO Shares in the offering. The Company also agreed to reimburse Maxim for certain expenses in an amount
up to $100,000.
In
connection with the offer and sale of the RDO Shares, the Company’s directors and executive officers entered into lock-up agreements,
pursuant to which they agreed, for a period of 90 days after the closing and subject to certain exceptions, not to directly or indirectly
offer, sell, or otherwise transfer or dispose of, directly or indirectly, any common stock of the Company or any securities convertible
into or exercisable or exchangeable for common stock of the Company.
Our
Aircraft Operations
In
July 2021, we leased a HondaJet aircraft under a short-term lease arrangement, which terminated in February 2022, to accelerate our aircraft
operations and sales of jet card memberships. We have acquired four HondaJet Elite aircraft under our 2020 Purchase Agreement with Honda
Aircraft Company, discussed under “– Our Aircraft” below, all four of which have been sold, but three of which
remain part of our fleet, as discussed below, with three of the four aircraft having been delivered in 2022. Great Western Air, LLC (DBA
Cirrus Aviation Services, LLC) (“Cirrus”) is managing, operating, and maintaining our aircraft and has a growing team of
pilots that have been specially trained on the HondaJet at the Flight Safety facility on the Honda Aircraft Company campus in Greensboro,
NC. Cirrus has additionally developed a safety co-pilot training program in coordination with the FAA and a local flight training academy
for licensed pilots already skilled with the Garmin 1000 avionics suite.
We
offer the following programs for our HondaJet Elite aircraft:
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Fractional
ownership program: This program provides potential owners the ability to purchase a share in a jet at a fraction of the cost of acquiring
an entire aircraft. Each 1/5 share guarantees 75 occupied hours of usage per year with 24 hours of notice. The fractional ownership
program consists of a down payment, one or more progress payments, a payment on delivery, a monthly management fee and an hourly
usage fee. As part of the aircraft purchase agreement, the buyer enters into an aircraft management agreement which lasts three years
and, at the end of the contract period, the aircraft is typically sold, and the owners are given their pro-rata share of the sale
proceeds. The three-year term is not renewable. Our current contracts do not contemplate the re-fractioning of the aircraft to other
buyers at the end of the term, but rather a whole aircraft sale to a single buyer. Monthly management fees are in general subject
to an annual CPI-W based step-up. CPI-W is a measure of cost inflation commonly used in long term aviation service contracts with
OEMs and engine manufacturers. |
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Jet
card program: A membership in our jet card program generally includes 10, 25 or 50 occupied hours of usage per year with 24 hours
of notice. Members generally pay 100% upfront and then fly for a fixed hourly rate over the next twelve months. Those who require
guaranteed availability may pay a membership fee for an additional charge. Jet card program members may interchange as a set ratio
per aircraft onto any one of twenty jets operated by our partner, Cirrus. |
In
addition to servicing members, fractional owners and third-party charter clients, our HondaJets are available to address unexpected cancellations
or delays on brokered charters. Unlike most of our brokerage competitors, as well as many business jet management companies which require
owner approval before their aircraft can be used for third party charter, we believe maintaining a fleet of readily available aircraft
to back fill third party charter services provides more reliability and is an attractive selling point for potential clients.
In
2022, we entered into agreements with Cirrus under which we will sell jet cards for Cirrus’s aircraft, for a commission for sales
and client management services, and we make Cirrus’s aircraft available to our customers for charter bookings at preferred rates
and with certain service guarantees. As a result, our jet card members and charter customers have access to twenty of Cirrus’s
aircraft in the light, mid, super-mid, heavy, and ultra-long-range categories, comprising the following aircraft: CJ3+, CJ4, Lear 45XR,
Citation XLS+, Lear 60, Hawker 900XP, Challenger 300, Challenger 604, Falcon 900EX, Challenger 850, Gulfstream V and Gulfstream G550.
In
the fourth quarter of 2022, we launched the Onboard Program to allow aircraft owners to contribute their aircraft to the Company’s
charter and jet card inventory. The Onboard Program requires one month FAA conformity of aircraft onto the Cirrus Aviation Part 135 certificate,
a one-week pilot recertification course for charter operation and execution of a limited management agreement. To date we have a CJ4
customer aircraft managed pursuant to our OnBoard Program.
Our
Software Platforms
Our
Booking Platform CharterGPT
Our
booking platform displays a variety of options across private aircraft types in addition to the pricing of our own aircraft, with a range
of prices drawn from a list of thousands of aircraft for hire. We offer users the ability to request a jet and to simultaneously task
us with seeking a lower-cost otherwise superior alternative. Our App (or CharterGPT) is directly connected via our application programming
interface (API) to Avinode, the major centralized database in private aviation. Through Avinode we can electronically and automatically
correspond with operators of private jets who have posted their aircraft for hire. We envision a time when CharterGPT draws upon resources
other than Avinode for private aircraft inventory, in particular we contemplate a connection between the inventory found in Reroute AI
and CharterGPT.
The
CharterGPT app, which we released in the iOS and Android stores in 2023 to replace the charter booking function of our Jet Token App,
automates certain of these manual steps involved in charter bookings, and we believe this automation will enable us to scale charter
activity with fewer persons than would be normally required. In particular, CharterGPT is designed to do the following: (1) intake travel
requirements in natural language and then interact with customers to provide substantive replies and actionable suggestions with quality
indistinguishable from an experienced charter professional; (2) power the content behind outbound calls to smaller charter operators
to confirm electronic indications of interest communicated via the Avinode centralized booking database of private aircraft; (3) reconcile
the natural language terms in a third party jet operator contract with the terms and conditions in the contract the customer signs with
us (4) verify that payment for the charter has cleared.
Jet.AI
Operator Platform
Jet.AI
provides and continues to develop a B2B software platform for a suite of SaaS products termed “Jet.AI Operator Platform”
which currently consists of:
Reroute
AI
In
2024 we launched Reroute AI. Reroute AI software is web based and enables FAA Part 135 operators to earn revenue on otherwise empty flight
legs. When prompted with basic travel itinerary information such as city pair and date of travel, Reroute AI searches its database of
empty flight legs and proposes novel combinations of those legs that meet these constraints it has been given. Its database of empty
flight legs comes from API integrations with certain other databases and a ChatGPT enhanced scrape of publicly available empty leg lists
published by Part 135 operators. An operator may upload its own aircraft tail numbers and empty leg list if for any reason one or both
have not already been uploaded into the system. Jet.AI generates revenue from Reroute AI when an operator wishes to book an itinerary
proposed by the software that involves the use of aircraft outside that operator’s fleet. In that instance, Jet.AI acts as broker
to the operator using Reroute AI’s proposed itinerary and a human in the loop to negotiate the new pricing and new routing of the
third party operator’s aircraft.
DynoFlight
DynoFlight
is a software API that we launched at the end of 2023. It enables aircraft operators to track and estimate emissions and then purchase
carbon offset credits. DynoFlight offers small to medium sized operators a way to begin tracking and offsetting their carbon credits
with advances estimation techniques, compliant practices, and quality credits at prices usually only accessible to operators working
at a much larger scale that are buying in bulk. In February, 2024, the Company announced a collaboration with FL3XX, a web and app-based
aviation management platform, to introduce the DynoFlight carbon offset platform to FL3XX customers. We believe the DynoFlight API may
offer an advantage even to large organizations that wish to manage working capital more efficiently (i.e. pay as they fly instead of
buying in bulk). We are currently in the process of integrating the DynoFlight API with the FL3XX systems. We believe that, once the
DynoFlight API has been integrated with FL3XX and future customers, it will generate monthly and usage-based revenues with modest operating
costs limited to server administration and maintenance of the code base.
FlightClub
– Cirrus Specific
The
Flight Club API is designed to enable FAA Part 135 operators to function simultaneously under FAA Part 380 which permits sale of private
jet service by the seat instead of by whole aircraft. The Flight Club software integrates front end ticketing and payment collection
with the flight management systems of an FAA Part 135 operator. It automates the process of filing forms for each flight with DOT and
conforms with DOT escrow requirements around ticketing and movement of customer funds. Our initial use case of the Flight Club is through
380 Software LLC, a 50% owned subsidiary founded in co-operation with our operating partner and 50% owner of 380 Software LLC, Cirrus
Aviation. The Company retains all rights to the technology powering 380 Software LLC and has granted 380 Software LLC a perpetual non-transferrable
license. This initial implementation of the Flight Club permits the owners of Cirrus Aviation-managed aircraft to fly on one another’s
planes at a significantly reduced cost when those planes are otherwise flying empty. The operating costs of these flights are typically
borne by the previous charter customer who is typically obliged to pay not only the cost of an outbound leg but also the cost of the
return leg. The charter customer is typically obliged to pay the cost of the return because the sale of the empty return is an inherently
low probability event based on historical industry experience.
We
are currently focused on our partnership with the Las Vegas Golden Knights and on integrating with their systems to generate seat sales.
Once we learn more from the Cirrus and Las Vegas Golden Knight partnerships we will decide whether to expand the availability of Flight
Club.
Strategy
Aircraft
Operations
Having
successfully executed the HondaJet four aircraft fleet deal and further having sold through all four aircraft, three of which remain
part of our fleet, as discussed below, we plan to gradually expand our fleet with super-mid-size aircraft and the help of our operating
partner, Cirrus. Cirrus manages a fleet of 30 jets in Las Vegas, where we are headquartered. We have executed a non-binding letter of
intent to acquire five new Challenger 3500 aircraft from Bombardier, consisting of three prospective firm orders and two options. Subject
to (1) our securing of debt financing to fund the initial fleet purchase down payment and (2) the development of a management, interchange
and support plan with our partner Cirrus, we would then plan to execute a formal fleet purchase agreement, and anticipate being able
to secure the first Challenger 3500 delivery in the second quarter of 2026. Once a fleet purchase agreement is in force, we would then
look to pre-sell fraction interests in these aircraft with a bias toward larger fractions. Upon delivery, the jets would in turn be managed
by Cirrus and listed on their Part 135 certificate. Customers would be expected to make a down payment and progress payments, consistent
with fractional industry norms.
Given
the two-year timeframe prior to delivery, the Company may consider independent development of Part 135 operations, subject to management’s
internal return on capital targets and, depending on the level of scale, the prospective benefits of enhanced operational control on
customer service.
Because
all major manufacturers of super-mid or large cabin aircraft such as Gulfstream, Falcon, Bombardier, Embraer, and Textron each have one
to three year waiting lists for super-mid-size jets, many of our fractional competitors can only pre-sell, and remain otherwise unable
to offer the related service. Our strategy is to allow customers, in advance of delivery, to fly on Cirrus’s managed Challenger
300/350, 604/605 and 850 model Bombardier aircraft. In return the customer would pay a monthly management fee (MMF) and an occupied hourly
fee (OHF) at rates substantially similar to those for their Challenger 3500. We believe this “buy and fly” approach may resonate
with market participants who may appreciate the convenience of a fractional program without the extraordinarily long wait.
Conventional
wisdom in private aviation has been that a light jet FAA Part 135 operation presents financial challenges because the lower hourly rate
of a light jet leaves little margin to pay a second pilot and remain profitable. Thanks to our partnership with Cirrus, we have addressed
this concern by having a typed pilot in command with at least 1,500 hours in jets, 1,000 of which must have been in the HondaJet specifically,
fly alongside a co-pilot who has been through an FAA approved ground school developed by Cirrus and Chennault Flying Service. This “safety
co-pilot” is permitted to operate the aircraft in the unlikely event the pilot in command is incapacitated or otherwise unable
to act. The HondaJet, which has been designated by the FAA for single pilot operation, integrates the Garmin 3000 flight system and by
law does not require a second pilot to fly. This safety co-pilot program brings trained pilots who are already schooled in either the
Garmin 1000 or Garmin 3000 flight system, gives them additional training on the HondaJet and Garmin 300 system, and then allows them
to develop their skills alongside a mentor. Importantly, the presence of this safety co-pilot is regarded by our insurer as sufficient
to maintain our present level of premium. The safety pilot does not require a full wage because of their status as a trainee and the
professional value they gain from accruing jet flight hours. This lower cost of labor helps the Company overcome the traditional costs
of paying a second pilot and helps bring a stream of prospective pilot in command candidates. Some safety pilots are newer to aviation
while others have had many years of flight training and thousands of hours of flight time on civilian (or military) jet or turboprop
aircraft. We believe that the comparatively low cost of entry of the HondaJet and the proven capabilities of the Challenger 3500 are
attractive to new and seasoned traveler alike, particularly given our ability to offer interchange between the two aircraft and onto
any one of twenty of the thirty aircraft managed by Cirrus. In addition, while some customers have shorter mission profiles and lower
passenger loads better suited to the HondaJet others have longer mission profiles with higher passenger loads – and so the HondaJet
and the Challenger 3500 (plus Cirrus’s fleet) again make an excellent combination in our view. We have taken a gradual approach
to fleet expansion given the capital-intensive nature of aviation and our view that customers should bear the risk (and related tax reward)
of owning and maintaining airplanes.
Jet.AI
Operator Platform
Jet.AI
provides and continues to develop a B2B software platform for a suite of SaaS products termed “Jet.AI Operator Platform.”
In addition to continuing to develop and enhance Reroute AI and DynoFlight, we may further develop our Flight Club API described above
to make it available to Part 135 operators more broadly. We also plan to further enhance our internally developed membership portal.
Artificial
Intelligence
We
operate an app in the iOS and Android stores. The app functions as a prospecting and quoting tool for those interested in chartering
a private jet. In 2023, we released an enhanced booking app called CharterGPT to automate much of the manual labor in charter bookings
for all of the steps between a customer’s firm indication of interest and their arrival at ultimate destination. We believe this
automation will enable us to scale charter activity with fewer persons than would be normally required. In particular, CharterGPT is
designed to do the following: (1) intake travel requirements in natural language and then interact with customers to provide substantive
replies and actionable suggestions with quality indistinguishable from an experienced charter professional; (2) power the content behind
outbound calls to smaller charter operators to confirm electronic indications of interest communicated via the Avinode centralized booking
database of private aircraft; (3) reconcile the natural language terms in a third party jet operator contract with the terms and conditions
in the contract the customer signs with us (4) verify that payment for the charter has cleared.
In
addition, in 2024, we incorporated the following AI-powered features to offer a continually improving unique and personalized experience
to customers:
Aircraft
Recommendation Engine: Our This feature provides customers greater transparency and understanding of the characteristics of charter
relevant to their trips, making it easier for them to make an informed decision. The recommendation engine analyzes a list of available
jets based on the travelers request, and considers factors such as budget, preferred aircraft size, age of aircraft, distance of the
trip compared with non-stop/range capability, number of passengers, ages and weights of passengers and their respective bags compared
with cargo capacity, basic take-off weight limitations, operator safety audit (Argus/Wyvern), cabin amenities such as a fully enclosed
lavatory, WiFi availability and years since last interior refurbishment.
Customer
service: This feature provides intelligent customer service by using natural language processing and machine learning algorithms
to understand and respond to initial booking requests. Untrained call center staff and brittle chat bots characterize much of the customer
facing experience today in the US. With the advent of AI, we believe that even for high ticket items, consumers will come to expect a
natural language interface trained on terabytes of data that relate specifically to their respective purchases.
Charter
brokerage is labor intensive, and most customers are highly price sensitive. We believe these two factors explain why no charter broker
has acquired more than 3-5% of the one million brokered flights that land each year in North America. The back end of the App is expected
to provide three features that may address the labor intensity (and hence scalability) of our charter brokerage business. First, each
charter operator has its own form of legal contract for carriage and that contract must be reconciled with the terms found in the charter
brokers’ agreement with the passenger. Our AI is expected to perform this reconciliation automatically, improving the speed to
close with the client and reducing labor costs. Second, many charter operators do not initially respond to electronic requests delivered
through the Avinode charter database that powers our app. Our generative chat AI is expected to perform outbound voice calls to prompt
aircraft operators to respond to quotes we have requested via the web interface to their Avinode account. Third, we expect to develop
our AI to integrate with Schedero (an Avinode based scheduling application) to generate a trip sheet for a given charter and then to
further integrate with Stripe to invoice and confirm payment via credit card, wire, or ACH.
In
addition, we are developing the following AI-powered features to incorporate into the AI functionality of CharterGPT:
Predictive
Destination Optimization: CharterGPT is expected to initially make use of information such as airport closures, fuel prices, historical
traffic patterns, landing fees, and traveler preferences to then recommend which private airport to select when a traveler’s destination
address is serviced by multiple airstrips. For example, Los Angeles is serviced by Los Angeles International Airport (LAX), Van Nuys
Airport (KVNY), Burbank Bob Hope Airport (KBUR), John Wayne Airport (KSNA). Landing at an airport farther from one’s ultimate destination
may save time if doing so enables faster ground transportation.
Predictive
Departure Date: CharterGPT is expected to analyze historical pricing data and forward-looking event data related to a given itinerary
to predict the best date to book a flight to obtain the lowest price for their desired charter itinerary. Although approximately thirty-five
blackout days a year are widely understood to absorb most domestic private aviation capacity, a variety of lesser appreciated grey-out
days centered around key sporting events or entirely new happenings can affect both regional and national pricing.
Predictive
Departure Time: CharterGPT is expected to use machine learning algorithms to recommend the optimal departure time based on both historical
and live weather conditions, air traffic, and other factors, to help customers more reliably arrive at their destination on time.
Predictive
Ground Transportation: CharterGPT is expected to recommend ground transportation. For example, some airports run out of rental cars
at certain times each year because of an annual conference or other recurring special event. Some of our competitors have taken steps
to remedy the shortage at some airports by positioning in their own vehicles for customer use.
Sales
and Marketing
Our
marketing and advertising efforts are focused on high-net-worth individuals. We have observed that many first-time private flyers came
to market beginning in 2020 in an effort to avoid commercial travel and thereby curtail their prospective exposure to COVID-19. We intend
to continue to expand our marketing and advertising through the following channels: online marketing, television advertising and event
marketing. Paid social media and search engine advertising drive our online marketing. In the past we have launched 15 and 30 second
advertising spots that are targeted at high-net-worth individuals and corporate executives through several channels, including CNBC,
Fox Business, and The Golf Channel, as well as online through Facebook and Linked-In. We intend to expand social media and event marketing
in particular, provided those meet our internal return targets. With respect to event marketing we intend to have a presence at sporting
events, business jet industry gatherings and Company hosted aircraft static displays.
Market
Opportunity
Over
the past 30 years, the market for private jet travel has transformed significantly. First the model of full aircraft ownership transformed
into fractional ownership with companies such as NetJets and FlexJet. This was followed by operators offering jet cards and on-demand
service through their fleet of aircraft. The latest iteration of private jet travel provides even more flexibility by providing an on-demand
service to travelers while leveraging the flight availability of one or more third party carriers. The result of this transformation
is a highly segmented industry with numerous market participants offering varying levels of ownership.
We
believe that by combining the private jet on-demand model with commercial airline flight availability and prospectively the underutilized
flight hours of private jet operators, our Company will be positioned to provide optimum flexibility and cost efficiency for our clients.
Our
Aircraft
The
Company’s aircraft fleet consists of five aircraft – three HondaJet HA-420 aircraft (the “HondaJet Elites”),
one Citation CJ4 Gen 2 aircraft, and one King Air 350i. The Company acquired the three HondaJet Elites pursuant to a Purchase
Agreement with Honda Aircraft Company for a multi-aircraft deal for four HondaJet Elites. One of the HondaJet Elites in our current fleet
was sold and is now leased by the Company from Western Finance Company. The other two HondaJet Elites in our current fleet were purchased
and subsequently financed through the sale of all fractional interests in each of these aircraft. We also acquired a fourth HondaJet
Elite pursuant to the Purchase Agreement with Honda Aircraft Company, but we sold this aircraft in June 2022, after we determined, based
on our internal financial and legal review, that the sale of the aircraft would offer a net benefit to our stakeholders. The Citation
CJ4 Gen 2 and King Air 350i in our fleet are owned by customers and managed through our OnBoard Program, which allows aircraft
owners to contribute their aircraft to our charter and jet-card inventory after they have completed certain FAA certifications
and requirements.
Under the terms of our management agreement, which has a term of one year that automatically renews unless otherwise
terminated by either party upon 30 days prior notice, the customer pays us a monthly management fee for services, including aircraft
management services, flight crew services, such as pilot hiring, flight operations services, aircraft maintenance management and other
administrative services.
HondaJet
Elite aircraft are ideally suited for trips under 3 hours carrying 2-4 passengers plus two pilots. We believe the HondaJet Elite aircraft
is one of the most spacious and cost-efficient light jets on the market with ample baggage and interior room (including an enclosed lavatory).
The wing mounted engines allow for a tranquil, spacious interior. Engines on the wings mean less weight on the tail and more room in
the cabin.
As
discussed above in “Business – Strategy – Aircraft Operations” above we have executed a non-binding letter
of intent to acquire five new Challenger 3500 aircraft from Bombardier, consisting of three prospective firm orders and two options.
Subject to (1) our securing of debt financing to fund the initial fleet purchase down payment and (2) the development of a management,
interchange and support plan with our partner Cirrus, we would then plan to execute a formal fleet purchase agreement, and anticipate
being able to secure the first Challenger 3500 delivery in the second quarter of 2026. once a fleet purchase agreement is in force, we
would then look to pre-sell one quarter, one half or full interest in these aircraft. Upon delivery, the jets would in turn be managed
by Cirrus and listed on their Part 135 certificate. Customers would be expected to make a down payment and progress payments, consistent
with fractional industry norms.
If
we include its predecessors the Challenger 300 and Challenger 350, Bombardier has sold over 1,000 serial numbers in the Challenger 3500
line, which in our view remains one of the most popular and reliable super-mid-size jets in the world. The aircraft requires no major
scheduled maintenance overhaul in its first two years of service, a testament to the depth of historical experience the manufacturer
has developed with this model of aircraft since the Challenger 300 was introduced in 1999. The spacious 8-9 seat stand-up cabin, 43,000
foot flight ceiling and Mach 0.83 capability, make it a leading choice for travelers. After twenty-four years in service the Challenger
300/350/3500 airframe has attracted a sizable community of typed pilots and Bombardier has constructed 41 worldwide service centers (11
in the US) to support utilization.
We
currently base our fleet at Harry Reid International airport in Las Vegas, NV, a top ten private jet destination and may relocate the
fleet based on seasonal travel patterns and the travel patterns of our membership.
Based
on our experience, and in light of many of our competitors restricting charters on certain “blackout dates,” we estimate
that thirty calendar days per year (due to holidays, major sporting events, etc.) it is extremely difficult to fly private without the
guaranteed access provided by a jet membership program such as ours. The ability to safely offer guaranteed capacity, on demand, is one
of the most important features one can deliver in private aviation. Also, our aircraft give us the ability to attract online visitors
with dynamically priced offers.
We
have entered into an Executive Aircraft Management and Charter Services Agreement with Cirrus. Under this agreement, Cirrus provides
management services to us with respect to the marketing, operation, maintenance and administration of our aircraft. Specifically, following
the initial set-up services, Cirrus provides Flight Crew Services, including selection, training, employment and management of the pilots
necessary for operating the Company’s Aircraft; Flight Operation Services, including flight scheduling, following and support services;
Aircraft Maintenance Services, including maintenance of the Aircraft and/or management of maintenance of the Aircraft performed by third
parties, related maintenance support functions and the administration of the Aircraft’s log books, manuals, data, records, reports
and subscriptions; Administrative Services, including budgeting, accounting and reporting services; Facility Services, including providing
and/or arranging for aircraft hangar and support facilities at the Aircraft’s Operating Base and other locations at which the Aircraft
may be situated from time to time; and Insurance Services, including providing insurance policies for the Aircraft.
Cirrus
is the largest private jet charter company based in Las Vegas. The Cirrus team has been managing and operating aircraft – commercially
and privately – for more than 40 years. In addition, Cirrus is:
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FAA
Eligible On-Demand Approved |
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ARG/US
Platinum Rated |
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Wyvern
Recommended |
Cirrus
maintains, services and operates our aircraft on our behalf and in compliance with all applicable FAA regulations and certification requirements.
Cirrus has the capability to provide substitute aircraft at competitive rates in periods of excess demand for our aircraft.
Competition
The
private air travel industry is extraordinarily competitive. We will compete against private jet charter and fractional jet companies.
Established private jet brokerage and fractional companies include but are not limited to, NetJets, FlexJet, VistaGlobal (including JetSmarter
powered by XO), SentientJet, WheelsUp, JetSuite, Flight Options, Nicholas Air, Jet Alliance, Executive Air Share, Plane Sense, One Sky
Jets, StarJets, Jet Aviation, Volato and Luxury Aircraft Solutions. All compete for passengers with a variety of pricing plans, aircraft
types, blackout periods, booking terms, flyer programs and other products and services, including seating, food, entertainment and other
on-board amenities.
Both
the private jet charter companies and the legacy airlines and low-cost carriers have numerous competitive advantages that enable them
to attract both business and leisure travelers. Our competitors may have corporate travel contracts that direct large numbers of employees
to fly with a preferred carrier. The enormous route networks operated by our competitors, combined with their marketing and partnership
relationships with regional airlines and international alliance partner carriers, allow them to generate increased passenger traffic
from domestic and international cities. Our access to smaller aircraft fleet networks and lack of connecting traffic and marketing alliances
puts us at a competitive disadvantage, particularly with respect to our appeal to higher-fare business travelers.
The
fractional private jet companies and the legacy airlines and low-cost carriers each operate larger fleets of aircraft and have greater
financial resources, which would permit them to add service in response to our entry into new markets. Due to our relatively small size,
we are more susceptible to fare wars or other competitive activities, which could prevent us from attaining the level of traffic or maintaining
the level of sales required to sustain profitable operations.
In
2018 and 2019, respectively, VistaJet acquired XOJET and JetSmarter, combining its heavy jet subscription-based service targeting multinational
corporations and ultra-high net worth individuals with XOJET’s super-midsize jet on demand service and JetSmarter’s digital
booking platform for business aviation. In addition, during 2020, Wheels Up acquired Delta Private Jets as well as Gama Aviation, a business
jet services company and in 2021 Vista Jet acquired a number of smaller players as well as Apollo Jets. Increased consolidation in our
industry could further intensify the competitive environment we face.
Intellectual
Property
We
registered a trademark on our brand name, Jet Token, and our logo, with the United States Patent and Trademark Office. We have also purchased
our domain name, jettoken.com and operate our website under that domain. We have an application pending with the United States Patent
and Trademark Office for Jet.AI. We are the sole owner of the copyrights in and to the software code underlying our App, CharterGPT and
the software code underlying our Jet.AI Operator Platform offerings.
Employees
We
have eight (8) full-time employees, including our Executive Chairman and Interim Chief Executive Officer, our Interim Chief Financial
Officer, our Chief Operating Officer, and our Chief Marketing Officer.
Regulation
Regulations
Applicable to the Ownership and Operation of Our Aircraft
Once
we have leased our aircraft, Cirrus, which will maintain and manage our aircraft, is subject to a high degree of regulation that affects
our business, including regulations governing aviation activity, safety standards and environmental standards.
U.S.
Department of Transportation (“DOT”)
The
DOT primarily regulates economic issues affecting air transportation such as the air carrier’s financial and management fitness,
insurance, consumer protection and competitive practices. The DOT has the authority to investigate and bring proceedings to enforce its
regulations and may assess civil penalties, revoke operating authority, and seek criminal sanctions. Our operating as an air charter
carrier is regulated and certificated by the DOT. The DOT authorizes the carrier to engage in on-demand air transportation within the
United States, its territories, and possessions. The DOT can suspend or revoke that authority for cause, essentially stopping all operations.
Federal
Aviation Administration (“FAA”)
The
FAA primarily regulates flight operations, in particular matters affecting air safety, such as airworthiness requirements for aircraft
and pilot, mechanic, dispatcher and flight attendant certification. The FAA regulates:
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aircraft
and associated equipment (and all aircraft are subject to ongoing airworthiness standards), |
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maintenance
and repair facility certification |
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certification
and regulation of pilots and cabin crew, and |
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management
of airspace. |
In
order to engage in air transportation for hire, each air carrier is required to obtain an FAA operating certificate authorizing the airline
to operate using specified equipment in specified types of air service. In the case of our leased aircraft, it is a Part 135 license.
The FAA has the authority to modify, suspend temporarily or revoke permanently the authority to provide air transportation for failure
to comply with FAA regulations. The FAA can assess civil penalties for such failures or institute proceedings for the imposition and
collection of monetary fines for the violation of certain FAA regulations. The FAA can revoke authority to provide air transportation
on an emergency basis, without notice and hearing, where significant safety issues are involved. The FAA monitors compliance with maintenance,
flight operations and safety regulations, maintains onsite representatives and performs inspections of a carrier’s aircraft, employees
and records.
The
FAA also has the authority to issue maintenance/airworthiness directives and other mandatory orders relating to aircraft and engines,
fire retardant and smoke detection devices, collision and windshear avoidance systems, navigational equipment, noise abatement and the
mandatory removal and replacement of aircraft parts that have failed or may fail in the future. FAA enforcement authority over aircraft
includes the power to ground aircraft or limit their usage.
Transportation
Security Administration (“TSA”)
The
TSA is responsible for oversight of passenger and baggage screening, cargo security measures, airport security, assessment and distribution
of intelligence and security research and development. Air carriers are subject to TSA mandates and oversight in connection with screening
passenger identities and screening baggage. TSA regulations governing passenger identification, which we will apply at the time of the
Company purchase as well as at the time of travel, requires all passengers to provide identification using a valid verifying identity
document. In addition, all passengers must provide their full name, date of birth, and gender, which is screened against the travel ban
watch list in effect at the time of initial screening and at the time of travel.
All
air carriers are also subject to certain provisions of the Communications Act of 1934 because of their extensive use of radio and other
communication facilities and are required to obtain an aeronautical radio license from the Federal Communications Commission, or the
FCC.
Property
We
lease space for our corporate headquarters in Las Vegas, Nevada and a satellite office in San Francisco, consisting of office space and
the use of shared conference facilities.
DIRECTORS
AND EXECUTIVE OFFICERS
The
following is a list of our directors and executive officers.
| Name |
|
Age |
|
Position |
| Michael
D. Winston, CFA |
|
47 |
|
Executive
Chairman and Interim Chief Executive Officer, Director |
| George
Murnane |
|
66 |
|
Interim
Chief Financial Officer, Director |
| William
Yankus(1)(3) |
|
63 |
|
Director |
| Wrendon
Timothy(1)(2)(3) |
|
43 |
|
Director |
| Patrick
McNulty |
|
40 |
|
Chief
Operating Officer |
| Lt.
Col. Ran David(2) |
|
48 |
|
Director |
| Donald
Jeffrey Woods(3) |
|
47 |
|
Director |
| Ehud
Talmor(1)(2) |
|
48 |
|
Director |
| |
(1) |
Member
of the audit committee. |
| |
(2) |
Member
of the compensation committee. |
| |
(3) |
Member
of the nominating and corporate governance committee. |
Effective
upon the closing of the Business Combination, Michael D. Winston was appointed to serve as Jet.AI’s Executive Chairman and as Jet.AI’s
interim Chief Executive Officer (“CEO”) and George Murnane was appointed to serve as Jet.AI’s interim Chief Financial
Officer (“CFO”) until Jet.AI completes its ongoing search for a long-term CFO, at which point Mr. Winston will step down
from his role as interim CEO and Mr. Murnane will transition from Jet.AI’s interim CFO to its CEO.
Executive
Officers
Michael
D. Winston, CFA founded Jet Token in 2018 and has served Executive Chairman for Jet Token and Jet.AI since Jet Token’s
founding. Upon completion of the Business Combination, he is serving as Interim Chief Executive Officer until such time as the Company
hires a permanent Chief Financial Officer. Mr. Winston began his career in 1999 with Credit Suisse First Boston Corporation and later
worked as a portfolio manager at Millennium Partners LP. In 2012, Mr. Winston formed the Sutton View group of companies, an alternative
asset management platform where he advised one of the largest academic endowments in the world. Mr. Winston received an MBA in Finance
and Real Estate from Columbia Business School in 2005, and a BA in Economics from Cornell University in 1999. While at Cornell he studied
for a year at the London School of Economics and at age 18 won a $1 million prize from IBM for his first startup company. Mr. Winston
is a CFA Charterholder, and a member of the Economic Club of New York. We believe Mr. Winston is qualified to serve as a director because
of his operational and historical expertise gained from serving as Jet Token’s Founder and Executive Chairman.
George
Murnane served as Jet Token’s Chief Executive Officer since September 2019. Upon completion of the Business Combination,
he was named Interim Chief Financial Officer until such time as the Company hires a permanent Chief Financial Officer, at which time
he will again assume the role of Chief Executive Officer. Mr. Murnane has over 20 years of senior executive experience, including 14
years as a Chief Operating Officer and/or Chief Financial Officer in the air transportation and aircraft industry, including as Chief
Executive Officer for ImperialJet S.a.l from 2013 to 2019, Chief Operating Officer and Acting Chief Financial Officer of VistaJet Holdings,
S.A. in 2008, Chief Financial Officer of Mesa Air Group from 2002 to 2007, Chief Operating Officer and Chief Financial Officer of North-South
Airways from 2000 to 2002, Executive Vice President, Chief Operating Officer and Chief Financial Officer of International Airline Support
Group from 1996 to 2002 and Executive Vice President and Chief Operating Officer of Atlas Air, Inc. from 1995 to 1996. From 2009 until
he joined Jet Token, Mr. Murnane was a managing partner of Barlow Partners, a consulting services firm providing operational and financial
management, merger and acquisition, financing and restructuring expertise to industrial and financial companies. Mr. Murnane received
an MBA from The Wharton School of the University of Pennsylvania and a BA in Economics from the University of Pennsylvania in 1980. We
believe Mr. Murnane is qualified to serve as a director because of his expertise gained from serving as Jet Token’s Chief Executive
Officer and his extensive financial experience.
Patrick
McNulty has served as Jet Token’s Chief Operating Officer since June 2021. Prior to joining Jet Token, Mr. McNulty served
as a manager of Sales Operations and Business Development with Honda Aircraft Company. While with Honda Aircraft, Mr. McNulty led the
development of a robust sales engineering team and was instrumental in product development and market analysis for the manufacturer.
Prior to Honda Aircraft Company, Mr. McNulty worked in the aircraft engine division of Rolls-Royce North America and at light jet manufacturer
Eclipse Aviation. Mr. McNulty is a graduate of the Embry-Riddle Aeronautical University (BS Aerospace Engineering, MBA Aviation).
Non-Employee
Directors
Wrendon
Timothy has been a director of our company since August 2023. He served as Oxbridge’s Chief Financial Officer, Treasurer,
Secretary and director since April 2021 until the completion of the Business Combination. He has served as a director, chief financial
officer and corporate secretary of Oxbridge Re Holdings Limited (NASDAQ: OXBR), a Cayman Islands based NASDAQ-listed reinsurance holding
company. He has served in the positions of chief financial officer and corporate secretary since August 2013 and as a director since
November 2021. In his role, he has provided financial and accounting consulting services with a focus on technical and SEC reporting,
compliance, internal auditing, corporate governance, mergers & acquisitions analysis, risk management, and CFO and controller services.
Mr. Timothy also serves as an executive and director of Oxbridge Reinsurance Limited and Oxbridge Re NS, the wholly-owned licensed reinsurance
subsidiaries of Oxbridge Re Holdings Limited. Mr. Timothy also serves as a director of Oxbridge’s Sponsor, OAC Sponsor Ltd, and
as a director of SurancePlus Inc., a British Virgin Islands wholly-owned Web3 subsidiary of Oxbridge Re Holdings Limited.
Mr.
Timothy started his financial career at PricewaterhouseCoopers (Trinidad) in 2004 as an Associate in their assurance division, performing
external and internal audit work, and tax-related services. Throughout his career progression and transitions through KPMG Trinidad and
PricewaterhouseCoopers (Cayman Islands), Mr. Timothy has successfully delivered services across both the public and private sectors,
spanning insurance and reinsurance, banking, hedge funds, trusts, investment management, manufacturing, beverage, construction, glass,
healthcare, retail, construction, marketing, restaurant, software, sports, and tourism industries. Mr. Timothy management roles allowed
him to be heavily involved in the planning, budgeting, and leadership of engagement teams, serving as a liaison for senior client management,
and advising on technical accounting matters. Mr. Timothy is a Fellow of the Association of Chartered Certified Accountants (ACCA), a
Fellow Chartered Corporate Secretary and also holds a Postgraduate Diploma in Business Administration and a Master of Business Administration,
with Distinction (with a Specialism in Finance (with Distinction), from Heriot Watt University in Edinburg, Scotland. Mr. Timothy holds
directorship and leadership roles with a number of privately-held companies, and also serves on various not-for-profit organizations,
including his governance role as Chairman of Audit & Risk Committee of The Utility Regulation & Competition Office of the Cayman
Islands, and Audit Committee Chairman of the Cayman Islands Conference of SDA. Mr. Timothy is an active Fellow Member of the ACCA, an
active member of the Cayman Islands Institute of Professional Accountants (CIIPA), an active Fellow Member of the Chartered Governance
Institute (formerly the Institute of Chartered Secretaries and Administrators) and a member of the Cayman Islands Directors Association.
We
believe that Mr. Timothy is qualified to serve as a director because of his extensive capital markets experience and significant expertise
across a wide array of corporate matters.
William
L. Yankus has been a director of our company since August 2023. He served as one of Oxbridge’s independent directors
since August 2021. Mr. Yankus is an experienced investment banking specialist with a demonstrated history of working in the insurance
industry. Since July 2015, Mr. Yankus has served as Founder and Principal of Pheasant Hill Advisors, LLC, a New York based advisor firm
that provides various research, advisory, private equity capital raising and M&A services primarily to the insurance industry and
insurance industry investors. Since March 2016, Mr. Yankus has served on the board of directors of Kingstone Companies, Inc. (NASDAQ:
KINS), a New York based NASDAQ-listed property and casualty insurance company. He has also served as the Chairman of Kingstone’s
Compensation Committee since April 2017, and as the Chairman of Kingstone’s Investment Committee since February 2020. Mr. Yankus
is also a Senior Advisor at Independent Insurance Analysts LLC, which provides investment analysis, credit research and investment banking
services related to the life insurance industry.
From
September 2011 to June 2015, Mr. Yankus served as Managing Director for Sterne Agee, one of the oldest privately owned financial services
firm in the USA. Sterne Agee offered wealth management and investment services to a diverse client base and custodies nearly $26 billion
in client assets. Prior to Sterne Agee, Mr. Yankus also held executive and leadership roles with other reputable financial services and
investment banking firms, including serving as Head of Insurance Research at Macquarie Group from December 2009 to November 2010, Managing
Director-Insurance Research for Fox-Pitt, Kelton from May 1993 to November 2009, and Vice President, Insurance Research at Conning &
Company from June 1985 to Apr 1993. He completed the CFA program in 1989 and passed the CT uniform CPA exam in 1984. He received his
B.A. degree in Economics and Accounting from The College of the Holy Cross.
Mr.
Yankus brings significant leadership, insurance, public company, mergers & acquisitions, corporate governance and investment banking
experience to our Board of Directors.
Ehud
Talmor (Maj. IAF Ret.) has been a director of our company since August 2023. He is a decorated, retired, senior officer from
the Israeli Air Force with over twenty-five years of experience in all aspects of air combat and aircraft logistics. He began his career
in 1995 as a fighter pilot and later, flight instructor. He subsequently took on a variety of supervisory roles, including F-16 deputy
squadron commander. In 2007, he joined the Acquisitions Department of the Israeli Ministry of Defense and later held the position of
Project Manager for three separate Air Force jet acquisition projects. The jet acquisition projects were: (1) the Beechcraft T-6II, (2)
the Leonardo M-346, and (3) the Lockheed Martin F-35A. In addition to serving as Project Manager for the F-35 program, Mr. Talmor was
also the Israeli Air Force’s Chief Instructor for the F-35. Mr. Talmor graduated from I.D.C. Herzliya with a B.A. in Psychology.
We believe Mr. Talmor is qualified to serve as a director because of his considerable aviation industry, business and project management
experience.
Lt.
Col. Ran David (IAF) has been a director of our company since August 2023. He is a decorated combat pilot in the Israeli Air
Force. He has served as a deputy squadron commander and spent ten years as a flight instructor. One of Lt. Col David’s primary
responsibilities has been to train, test and approve new IAF fighter pilots. Lt. Col David is a graduate of the USAF Air Command and
Staff College and the University of Haifa. Lt. Col David is qualified to serve as a director because of his considerable aviation industry
and pilot training experience.
Donald
Jeffrey Woods has been a director of our company since August 2023. He
is currently the Co-Founder and Chief Product Officer of Puzl LLC, a company using artificial intelligence to transform retail. He also
currently serves as President and Board Member of Woods Supermarket, Inc., a mid-sized family-owned chain of supermarkets operating across
Missouri, which has been serving its communities for over 75 years. Prior to these roles, from 2011 to 2019, Mr. Woods served in roles
of Vice President of Marketing Strategy and Chief Product Strategist with SAP SE (NYSE: SAP) in London and New York. From 2001 to 2011,
Mr. Woods served as Vice President of Enterprise Applications Research at Gartner Inc (NYSE: IT) where he was the global lead for enterprise
applications. Prior to this, Mr. Woods built and sold his own logistics company. Mr. Woods is a graduate of Cornell University in Applied
Economics and holds an MBA from Columbia Business School. Mr. Woods is qualified to serve as a director because of his considerable technology
development, artificial intelligence, business and marketing experience.
Family
Relationships
There
are no familial relationships among the Jet.AI directors and executive officers.
Board
Composition
The
Board is comprised of seven directors and is divided into three classes with staggered three-year terms. At each annual meeting of stockholders,
the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third
annual meeting following election. Jet.AI’s directors are among the three classes as follows:
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● |
the
Class I directors are Lt. Col. Ran David and Donald Jeffrey Woods and their terms will expire at the 2027 annual meeting of
stockholders; |
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|
|
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● |
the
Class II directors are William Yankus and Wrendon Timothy and their terms will expire at the 2025 annual meeting of stockholders;
and |
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|
|
| |
● |
the
Class III directors are Michael Winston, George Murnane and Ehud Talmor and their terms will expire at the 2026 annual meeting
of stockholders. |
Directors
in a particular class are elected for three-year terms at the annual meeting of stockholders in the year in which their terms
expire. As a result, only one class of directors is elected at each annual meeting of Jet.AI stockholders, with the other classes
continuing for the remainder of their respective three-year terms. Each director’s term continues until the election and qualification
of his or her successor, or the earlier of his or her death, resignation or removal. This classification of the Board may have the effect
of delaying or preventing changes in Jet.AI’s control or management.
The
Company’s Certificate of Incorporation and Bylaws provide that only the Board can fill vacant directorships, including newly-created
seats. Any additional directorships resulting from an increase in the authorized number of directors would be distributed pro rata among
the three classes so that, as nearly as possible, each class would consist of one-third of the authorized number of directors. The Certificate
of Incorporation and Bylaws also provide that Jet.AI’s directors may only be removed for cause and by the affirmative vote of the
holders of at least two-thirds of the voting power of the then-outstanding shares entitled to vote in the election of directors, voting
together as a single class.
Director
Independence
The
Board determined that each of the directors serving on the Board, other than Michael Winston and George Murnane, qualifies as an independent
director, as defined under the listing rules of Nasdaq, and the Board consists of a majority of “independent directors,”
as defined under the applicable rules of the SEC and Nasdaq relating to director independence requirements. In addition, Jet.AI is subject
to certain rules of the SEC and Nasdaq relating to the membership, qualifications and operations of the audit committee, as discussed
below.
Board
Leadership Structure
The
Board does not have a policy requiring the positions of the Chairperson of the board of directors and Chief Executive Officer to be separate
or held by the same individual. The members of the Board believe that this determination should be based on circumstances existing from
time to time, based on criteria that are in Jet.AI’s best interests and the best interests of its stockholders, including the composition,
skills and experience of the board and its members, specific challenges faced by Jet.AI or the industry in which it operates and governance
efficiency. The Board adopted Corporate Governance Guidelines, which provide for the appointment of a lead independent director at any
time when the Chairperson is not independent. Wrendon Timothy serves as the lead independent director.
Board
Committees
The
Board has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which
have the composition and responsibilities described below. The Board and its committees will set schedules for meeting throughout the
year and can also hold special meetings and act by written consent from time to time, as appropriate. The Board will delegate various
responsibilities and authority to its committees and the committees will regularly report on their activities and actions to the full
board of directors. Members will serve on these committees until their resignation or until otherwise determined by the Board. The Board
may establish other committees to facilitate the management of the Company’s business as it deems necessary or appropriate from
time to time.
Each
committee of the Board will operate under a written charter approved by the Board. Copies of each charter are posted on the Investor
Relations section of Jet.AI’s website at investors.jet.ai. The inclusion of the Company’s website address or the reference
to Jet.AI’s website in this prospectus does not include or incorporate by reference the information on the Company’s website
into this prospectus.
Audit
Committee
Jet.AI’s
audit committee is comprised of Wrendon Timothy, William Yankus and Ehud Talmor, with Mr. Timothy serving as audit committee chairperson.
The Board determined that Messrs. Timothy, Yankus and Talmor each meet the requirements for independence and financial literacy under
the current Nasdaq listing standards and SEC rules and regulations, including Rule 10A-3. In addition, the Board determined that each
of Messrs. Timothy and Yankus is an “audit committee financial expert” within the meaning of Item 407(d) of Regulation S-K
promulgated under the Securities Act. This designation does not impose any duties, obligations or liabilities that are greater than are
generally imposed on members of the audit committee and the Board. The audit committee will be responsible for, among other things:
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selecting
a qualified firm to serve as the independent registered public accounting firm to audit Jet.AI’s financial statements; |
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|
|
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● |
helping
to ensure the independence and overseeing the performance of the independent registered public accounting firm; |
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● |
reviewing
and discussing the results of the audit with the independent registered public accounting firm and reviewing, with management and
that firm, Jet.AI’s interim and year-end operating results; |
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● |
reviewing
Jet.AI’s financial statements and critical accounting policies and estimates; |
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● |
reviewing
the adequacy and effectiveness of Jet.AI’s internal controls; |
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● |
developing
procedures for employees to submit concerns anonymously about questionable accounting, internal accounting controls or audit matters; |
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● |
overseeing
Jet.AI’s policies on risk assessment and risk management; |
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● |
overseeing
compliance with Jet.AI’s code of business conduct and ethics; |
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reviewing
related party transactions; and |
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approving
or, as permitted, pre-approving all audit and all permissible non-audit services (other than de minimis non-audit services) to be
performed by the independent registered public accounting firm. |
The
audit committee operates under a written charter, which satisfies the applicable rules of the SEC and the listing standards of Nasdaq,
and which is available on Jet.AI’s website. All audit services to be provided to Jet.AI and all permissible non-audit services,
other than de minimis non-audit services, to be provided to Jet.AI by Jet.AI’s independent registered public accounting firm will
be approved in advance by the audit committee.
Compensation
Committee
Jet.AI’s
compensation committee is comprised of Lt. Col. Ran David, Wrendon Timothy and Ehud Talmor, and Mr. Talmor is the chairperson of the
compensation committee. The Board determined that each member of the compensation committee meets the requirements for independence under
the current Nasdaq listing standards and SEC rules and regulations. Each member of the committee is a non-employee director, as defined
in Rule 16b-3 promulgated under the Exchange Act. The compensation committee is responsible for, among other things:
| |
● |
reviewing,
approving and determining, or making recommendations to the Board regarding, the compensation of Jet.AI’s executive officers,
including the Chief Executive Officer; |
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|
|
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● |
making
recommendations regarding non-employee director compensation to the full Board; |
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● |
administering
Jet.AI’s equity compensation plans and agreements with Jet.AI executive officers; |
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● |
reviewing,
approving and administering incentive compensation and equity compensation plans; and |
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● |
reviewing
and approving Jet.AI’s overall compensation philosophy. |
The
compensation committee operates under a written charter, which satisfies the applicable rules of the SEC and Nasdaq listing standards,
and is available on Jet.AI’s website.
Nominating
and Corporate Governance Committee
The
nominating and corporate governance committee is comprised of William Yankus, Wrendon Timothy and Jeff Woods, and Mr. Woods is the chairperson
of the nominating and corporate governance committee. The Board determined that each member of the nominating and corporate governance
committee meets the requirements for independence under the current Nasdaq listing standards and SEC rules and regulations. The nominating
and corporate governance committee is responsible for, among other things:
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● |
identifying,
evaluating and selecting, or making recommendations to the Board regarding nominees for election to the Board and its committees; |
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|
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● |
considering
and making recommendations to the Board regarding the composition of the Board and its committees; |
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● |
developing
and making recommendations to the Board regarding corporate governance guidelines and matters; |
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● |
overseeing
Jet.AI’s corporate governance practices; |
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● |
overseeing
the evaluation and the performance of the Board and individual directors; and |
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● |
contributing
to succession planning. |
The
nominating and corporate governance committee operates under a written charter, which satisfies the applicable rules of the SEC and Nasdaq
listing standards and is available on Jet.AI’s website.
Code
of Business Conduct and Ethics
The
Board adopted a Code of Business Conduct and Ethics that applies to all of Jet.AI’s directors, officers and employees, including
Jet.AI’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing
similar functions. The Code of Business Conduct and Ethics is available on the Corporate Governance section of Jet.AI’s website.
In addition, Jet.AI intends to post on the Corporate Governance section of Jet.AI’s website all disclosures that are required by
law or the listing standards of Nasdaq concerning any amendments to, or waivers from, any provision of the Code of Business Conduct and
Ethics.
Compensation
Committee Interlocks and Insider Participation
None
of the members of the Jet.AI compensation committee is or has been at any time one of Jet.AI’s officers or employees. None of Jet.AI’s
executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee
(or other board of directors committee performing equivalent functions or, in the absence of any such committee, the entire board of
directors) of any entity that has or has had one or more executive officers serving as a member of the Board or compensation committee.
Limitation
on Liability and Indemnification of Directors and Officers
The
Certificate of Incorporation limits Jet.AI’s directors’ liability to the fullest extent permitted under the DGCL. The DGCL
provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors,
except for liability:
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for
any transaction from which the director derives an improper personal benefit; |
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for
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
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for
any unlawful payment of dividends or redemption of shares; or |
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