JetAI Inc

Previous wording

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 the historical unaudited consolidated financial statements as of March 31, 2024 and December 31, 2023, and the three months ended March 31, 2024 and 2023, and the related notes that are included elsewhere in this report.

Current wording

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 the historical unaudited consolidated financial statements as of June 30, 2024 and December 31, 2023, and the three and six months ended June 30, 2024 and 2023, and the related notes that are included elsewhere in this report.

Previous wording

Certain of the information contained in this discussion and analysis or set forth elsewhere in this report, 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 “Item 1A – Risk Factors” in Jet.AI’s Annual Report on Form 10-K filed with the SEC on April 1, 2024, 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 report. We assume no obligation to update any of these forward-looking statements.

Current wording

Certain of the information contained in this discussion and analysis or set forth elsewhere in this report, 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 “Item 1A – Risk Factors” in Jet.AI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on April 1, 2024, 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 report. We assume no obligation to update any of these forward-looking statements.

Previous wording

Percentage amounts included in this report 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 report may vary from those obtained by performing the same calculations using the figures in the consolidated financial statements included elsewhere in this report. Certain other amounts that appear in this report may not sum due to rounding.

Current wording

Percentage amounts included in this report have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. Certain other amounts that appear in this report may not sum due to rounding.

Previous wording

Jet.AI, a Delaware corporation (“Jet.AI”, “Company”, “we” or “us”), 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.

Current wording

Jet.AI, a Delaware corporation (“Jet.AI”, “Company”, “we” or “us”), 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 Aviation, (v) aircraft brokerage and (vi) service revenue from the monthly management and hourly operation of customer aircraft.

Previous wording

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:

Current wording

Currently we offer the following SaaS software to aircraft owners and operators generally:

Previous wording

On August 10, 2023, Oxbridge Acquisition Corp. (“Oxbridge”), consummated a business combination pursuant to a Business Combination Agreement and Plan of Reorganization, as amended by Amendment No. 1 to the Business Combination Agreement, dated as of May 11, 2023 (the “Business Combination Agreement”) among Oxbridge, OXAC Merger Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary of Oxbridge (“First Merger Sub”), Summerlin Aviation LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Oxbridge (“Second Merger Sub”), and Jet Token, Inc., a Delaware corporation (“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”).

Current wording

On August 10, 2023, Oxbridge Acquisition Corp. (“Oxbridge”) consummated a business combination pursuant to a Business Combination Agreement and Plan of Reorganization, as amended by Amendment No. 1 to the Business Combination Agreement, dated as of May 11, 2023 (the “Business Combination Agreement”) among Oxbridge, OXAC Merger Sub I, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Oxbridge (“First Merger Sub”), Summerlin Aviation LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of Oxbridge (“Second Merger Sub”), and Jet Token Inc., a Delaware corporation (“Jet Token”). Pursuant to the Business Combination Agreement, Oxbridge redomiciled as a Delaware corporation and was immediately renamed Jet.AI Inc., and promptly thereafter, (i) 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”).

Previous wording

As a result of the Business Combination, Jet.AI has one class of common stock, listed on Nasdaq under the ticker symbol “JTAI”, and two classes of warrants, the Jet.AI Warrants and the Merger Consideration Warrants, listed on Nasdaq under the ticker symbols “JTAIW” and “JTAIZ,” respectively.

Current wording

As a result of the Business Combination, Jet.AI has one class of common stock, listed on The Nasdaq Global Market (“Nasdaq”) under the ticker symbol “JTAI,” and two classes of warrants, the Redeemable Warrants and the Merger Consideration Warrants, listed on Nasdaq under the ticker symbols “JTAIW” and “JTAIZ,” respectively.

Previous wording

Revenues for the first quarter of 2024 totaled $3.8 million, a $1.9 million increase from 2023’s first quarter revenues of $1.9 million, and were comprised of $1.7 million in software-related revenue, $684,000 in charter revenue from the chartering of our Citation CJ4 and HondaJets by our operating partner Cirrus, $677,000 in Jet Card revenue for hours flown and other charges based on hours flown and $800,000 in management and other service revenue from the management of customers’ aircraft.

Current wording

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.

Previous wording

The primary reason for this increase in revenue was due to primarily to significant increases in Software App and Management and Other Services revenues.

Current wording

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.

Previous wording

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 cases, 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 $129,775 in the first quarter of 2024 compared to the first quarter of 2023 is due to higher utilization by our Jet Card clients as well as higher average revenues per flight hour.

Current wording

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. At 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.

Previous wording

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 quarter of 2024 and 2023:

Current wording

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:

Previous wording

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.

Current wording

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.

Previous wording

As a result of our increased fleet utilization, the increase in jet card hours flown and additional costs resulting from pilot turn over, costs related to the operation of our aircraft and payments to Cirrus for their management increased $218,000 from $1.2 million in the first quarter of 2023 to $1.4 million in the first quarter of 2024 and aircraft lease payments increased $120,000 from $201,000 in the first quarter of 2023 to $321,000 in the first quarter of 2024. The Company also incurred third-party charter costs of approximately $2.1 million in the first quarter of 2024, a $1.6 million increase over the first quarter of 2023 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 $161,000 in the first quarter of 2024 were a $94,000 increase over in the first quarter of 2023.

Current wording

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.

Previous wording

In total, it cost $4.0 million to operate our aircraft in the first quarter of 2024, compared to $2.0 million to operate our aircraft in the first quarter of 2023.

Current wording

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.

Previous wording

The resulting gross loss totaled approximately $124,356 for the first quarter of 2024, compared to a gross loss of $75,018 for the first quarter of 2023. The gross loss in the first quarter of 2024 was largely driven by increased subcharter costs.

Current wording

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.

Previous wording

In the first quarter of 2024, the Company’s operating expenses increased by $380,936 over the prior year comparable period primarily due to increased sales and marketing expenses. Excluding non-cash stock-based compensation of $1.2 million and $1.4 million in the first quarter of 2024 and 2023, respectively, general and administrative expenses rose by $266,000 primarily due to increases in professional service expense as well as increased insurance costs as a result of our public company directors’ and officers’ insurance.

Current wording

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.

Previous wording

As a result of all of the above, in the first quarter of 2024 the Company recognized an operating loss of approximately $3.1 million, which was an increase in loss of approximately $0.4 million. The increase in operating loss was primarily due to increased subcharters, increased professional services expense and higher D&O insurance costs.

Current wording

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.

Previous wording

During the first quarter of 2024, the Company recognized $79,253 in other expense due primarily to interest expense related to the Company’s Bridge Agreement as defined and discussed below.

Current wording

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.

Previous wording

As of March 31, 2024, the Company’s cash and equivalents were $595,555, including $500,000 of restricted cash under its aircraft leasing arrangements, as described below. As of March 31, 2024, current liabilities exceeded current assets by approximately $4.0 million, of which $1.4 million in liabilities represents deferred revenue that would be recorded as revenue once the flight hours are flown or forfeited.

Current wording

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.

Previous wording

During the period ended March 31, 2024, the Company raised (1) approximately $1,110,000 in funds from the issuance of 1,000,000 shares of common stock under the Share Purchase Agreement discussed below and (2) approximately $742,000 from Jet.AI Warrant exercises. Collectively, these actions resulted in our receiving an additional $1,852,000 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.

Current wording

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.

Previous wording

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 $42.5 million as of March 31, 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 Ionic Warrant (as defined below), if any, to meet our funding obligations. Additional funding under the Share Purchase Agreement may be limited contractually and the Ionic 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 Ionic 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.

Current wording

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 Ionic Warrant (as defined below), if any, to meet our funding obligations. Additional funding under the Share Purchase Agreement may be limited contractually and the Ionic 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 Ionic 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.

Previous wording

Pursuant to the Securities Purchase Agreement, the Company agreed to issue to Ionic (a) 150 shares of the Company’s Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), which are convertible into shares of the Company’s common stock, (b) a warrant to purchase up to 1,500 shares of Series B Preferred Stock (the “Ionic Warrant”), at an exercise price of $10,000 per share, and (c) 250,000 shares of the Company’s common stock.

Current wording

On March 28, 2024, Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) and a number of other transaction documents described below for a private placement with Ionic Ventures, LLC (“Ionic”), which closed on March 29, 2024 (the “Closing Date”), which we collectively refer to as the “Ionic Transaction.” Under the Securities Purchase Agreement, the Company agreed to issue to Ionic (a) 150 shares of the Company’s Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), which are convertible into shares of the Company’s common stock, (b) a warrant to purchase up to 1,500 shares of Series B Preferred Stock (the “Ionic Warrant”), at an exercise price of $10,000 per share, and (c) 250,000 shares of the Company’s common stock.

Previous wording

The Ionic 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 Ionic 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 Ionic Warrant will be exercised. It is possible that the Ionic Warrant may never be exercised. At any time when the Ionic 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 Ionic Warrant by paying to Ionic in cash $100 per share of Series B Preferred Stock that would otherwise be issuable pursuant to the Ionic Warrant.

Current wording

Ionic 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 Ionic 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 Ionic Warrant will be exercised. It is possible that the Ionic Warrant may never be exercised. At any time when the Ionic 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 Ionic Warrant by paying to Ionic in cash $100 per share of Series B Preferred Stock that would otherwise be issuable pursuant to the Ionic Warrant.

Previous wording

The Securities Purchase Agreement contains customary representations and warranties of the Company, on the one hand, and Ionic, on the other hand, and customary conditions to closing. Pursuant to the Securities Purchase Agreement, the Company has 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 OAC Sponsor Ltd. (the “Sponsor”), who together hold approximately 40% of the voting power of the Company as of the date of this report, agreeing to vote in favor of the proposal.

Current wording

Pursuant to the Securities Purchase Agreement, the Company has 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 OAC Sponsor Ltd. (the “Sponsor”), who together hold approximately 40% of the voting power of the Company as of the date of this report, agreeing to vote in favor of the proposal.

Previous wording

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. During the month of September, the Company engaged in discussions with numerous third parties to secure short-term bridge funding but was not offered terms it found acceptable. Rather, certain related parties of the Company and other parties agreed to provide the Company with this financing on substantially better material terms than it had received from unaffiliated third parties.

Current wording

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.

Previous wording

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 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 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.

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

Cash Flows for the Three Months Ended March 31, 2024 and 2023

Current wording

Cash Flows for the six Months Ended June 30, 2024 and 2023

Previous wording

As of March 31, 2024, the Company’s cash and equivalents were $595,555, including $500,000 of restricted cash under its aircraft leasing arrangements described below.

Current wording

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.

Previous wording

The following table summarizes our cash flows for the three months ended March 31, 2024 and 2023:

Current wording

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

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 was approximately $2.5 million compared to approximately $1.2 million for the three months ended March 31, 2023 and was primarily driven by the increase in operating loss discussed above.

Current wording

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.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 was $13,000 compared to approximately $94,000 for the three months ended March 31, 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.

Current wording

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.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2024 was approximately $1.0 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, partially offset repayments of notes payable.

Current wording

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.

Previous wording

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.

Current wording

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

Previous wording

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 $1,215,710 as of March 31, 2024.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

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.