Jet.AI Inc 8-K/A, filed Aug 21, 2023
Jet.AI Inc. (JTAI)
About this 8-K/A
Jet.AI Inc filed this 8-K/A on August 21, 2023, reporting on events of August 10, 2023.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): August 21, 2023 (
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction | (Commission | (I.R.S. Employer | ||
| of incorporation) | File No.) | Identification No.) |
(Address of Principal Executive Offices)
(Registrant’s Telephone Number)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Introductory Note
On August 10, 2023 (the “Closing”), the registrant, Jet.AI Inc., a Delaware corporation (f/k/a Oxbridge Acquisition Corp.) (the “Company”) consummated the previously announced transaction pursuant to that certain 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 (the “Business Combination Agreement”), by and among the Company, OXAC Merger Sub I, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of the Company (“First Merger Sub”), Summerlin Aviation LLC (f/k/a OXAC Merger Sub II, LLC), a Delaware limited liability company and a direct, wholly-owned subsidiary of the Company (“Second Merger Sub” and, together with First Merger Sub, the “Merger Subs”), and Jet Token Inc., a Delaware corporation (“Jet Token”). Unless the context otherwise requires, “Oxbridge” refers to the registrant prior to the Closing, and “we”, “us,” “our” and “Jet.AI” and the “Company” refer to the registrant and its subsidiaries, including Jet Token, following the Closing.
This Amendment No. 1 to Current Report on Form 8-K/A (the “Amendment No. 1”) amends the Current Report on Form 8-K of the Company, filed on August 14, 2023 (the “Original Form 8-K”), in which the Company reported, among other events, the consummation of the Business Combination (as defined in the Original Form 8-K). This Amendment No. 1 is being filed to include the financial statements of Jet Token for the six months ended June 30, 2023, including pro forma financial statements as of such time period.
This Amendment No. 1 does not amend any other item of the Original Form 8-K or purport to provide an update or a discussion of any developments at the Company or its subsidiaries subsequent to the filing date of the Original Form 8-K. The information previously reported in or filed with the Original Form 8-K is hereby incorporated by reference into this Form 8-K/A.
| Item 9.01 | Financial Statements and Exhibits. |
(a) Financial Statements of Business Acquired.
The audited financial statements of Jet Token as of and for the years ended December 31, 2022 and 2021 and the related notes are included in the final prospectus and definitive proxy statement, dated July 28, 2023 and filed with the Securities and Exchange Commission on July 28, 2023 (the “Proxy Statement”) beginning on page F-44 of the Proxy Statement and are incorporated herein by reference.
The unaudited consolidated financial statements of Jet Token for the three months ended March 31, 2023 and 2022 are included in the Proxy Statement beginning on page F-44 of the Proxy Statement and are incorporated herein by reference.
The unaudited consolidated financial statements of Jet Token for the three and six months ended June 30, 2023 and 2022 are attached hereto as Exhibit 99.1 and are incorporated herein by reference.
Also included herewith as Exhibit 99.2 and incorporated by reference herein is the related Management’s Discussion and Analysis of Financial Condition and Results of Operations of Jet Token.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined financial information of the Company as of June 30, 2023 and for the six months ended June 30, 2023 and the year ended December 31, 2023 is attached hereto as Exhibit 99.3 and is incorporated herein by reference.
(c) Exhibits.
| Exhibit Number | Description | |
| 99.1* | Unaudited consolidated financial statements of Jet Token for the three and six months ended June 30, 2023 and 2022 | |
| 99.2* | Management’s Discussion and Analysis of Financial Condition and Results of Operations of Jet Token | |
| 99.3* | Unaudited pro forma condensed financial information of for the three and six months ended June 30, 2023 and for the year ended December 31, 2022. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed herewith. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| JET.AI INC. | ||
| By: | /s/ Michael Winston | |
| Name: | Michael Winston | |
| Title: | Executive Chairman and Interim Chief | |
| Executive Officer | ||
| Date: August 21, 2023 | ||
Exhibit 99.1
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| June 30, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 638,242 | $ | 1,527,391 | ||||
| Other current assets | 185,985 | 357,861 | ||||||
| Total current assets | 824,227 | 1,885,252 | ||||||
| Property and equipment, net | 9,313 | 5,814 | ||||||
| Intangible assets, net | 105,832 | 155,009 | ||||||
| Right-of-use asset | 1,828,882 | 2,081,568 | ||||||
| Investment in joint venture | 100,000 | - | ||||||
| Other assets | 748,111 | 762,976 | ||||||
| Total assets | $ | 3,616,365 | $ | 4,890,619 | ||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 497,706 | $ | 242,933 | ||||
| Accrued liabilities | 763,529 | 951,689 | ||||||
| Deferred revenue | 1,099,543 | 933,361 | ||||||
| Lease liability, current portion | 502,450 | 494,979 | ||||||
| Total current liabilities | 2,863,228 | 2,622,962 | ||||||
| Lease liability, net of current portion | 1,278,257 | 1,531,364 | ||||||
| Total liabilities | 4,141,485 | 4,154,326 | ||||||
| Commitments and contingencies (Note 5) | - | - | ||||||
| Stockholders’ Equity | ||||||||
| Series Seed Preferred stock, 10,000,000 shares authorized, $0.0000001 par value, 683,333 issued and outstanding | 20,500 | 20,500 | ||||||
| Series CF Non-voting Preferred stock, 25,000,000 shares authorized, 18,813,002 issued and outstanding | 704,396 | 704,396 | ||||||
| Preferred Stock, 15,000,000 shares authorized, $0.0000001 par value, 0 issued and outstanding | - | - | ||||||
| Common stock, 300,000,000 shares authorized, par value $0.0000001, 78,353,333 issued and outstanding | 8 | 8 | ||||||
| Non-voting Common Stock, 200,000,000 shares authorized, par value $0.0000001, 48,221,393 and 46,089,886 issued and outstanding, respectively | 4 | 4 | ||||||
| Subscription receivable | (25,479 | ) | (15,544 | ) | ||||
| Additional paid-in capital | 30,599,657 | 26,682,909 | ||||||
| Accumulated deficit | (31,824,206 | ) | (26,655,980 | ) | ||||
| Total stockholders’ equity (deficit) | (525,120 | ) | 736,293 | |||||
| Total liabilities and stockholders’ equity | $ | 3,616,365 | $ | 4,890,619 | ||||
See accompanying notes to the consolidated financial statements
| 1 |
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | 2,792,808 | $ | 7,009,542 | $ | 4,668,316 | $ | 7,740,979 | ||||||||
| Cost of revenues | 2,993,631 | 6,120,638 | 4,944,157 | 6,927,960 | ||||||||||||
| Gross profit (loss) | (200,823 | ) | 888,904 | (275,841 | ) | 813,019 | ||||||||||
| Operating Expenses: | ||||||||||||||||
| General and administrative (including stock-based compensation of $1,407,044, $1,151,092, $2,755,087, and $2,371,247, respectively) | 2,115,704 | 1,706,247 | 4,603,722 | 3,419,978 | ||||||||||||
| Sales and marketing | 103,541 | 77,489 | 223,708 | 163,141 | ||||||||||||
| Research and development | 28,636 | 27,061 | 64,955 | 46,172 | ||||||||||||
| Total operating expenses | 2,247,881 | 1,810,797 | 4,892,385 | 3,629,291 | ||||||||||||
| Operating loss | (2,448,704 | ) | (921,893 | ) | (5,168,226 | ) | (2,816,272 | ) | ||||||||
| Other (income) expense: | ||||||||||||||||
| Other income | - | (2 | ) | - | (3 | ) | ||||||||||
| Total other (income) expense | - | (2 | ) | - | (3 | ) | ||||||||||
| Loss before provision for income taxes | (2,448,704 | ) | (921,891 | ) | (5,168,226 | ) | (2,816,269 | ) | ||||||||
| Provision for income taxes | - | - | - | 800 | ||||||||||||
| Net Loss | $ | (2,448,704 | ) | $ | (921,891 | ) | $ | (5,168,226 | ) | $ | (2,817,069 | ) | ||||
| Weighted average shares outstanding - basic and diluted | 126,287,952 | 121,855,571 | 126,287,952 | 121,855,571 | ||||||||||||
| Net loss per share - basic and diluted | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.02 | ) | ||||
See accompanying accountants’ review report and notes to financial statements
| 2 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(UNAUDITED)
| Series Seed Preferred Stock | Series CF Non-Voting Preferred Stock | Common Stock | Non-voting Common Stock | Subscription | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Receivable | Capital | Deficit | Equity | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 983,333 | $ | 29,500 | 18,826,385 | $ | 704,396 | 78,353,333 | $ | 8 | 42,169,330 | $ | 4 | $ | (96,600 | ) | $ | 19,177,938 | $ | (18,917,777 | ) | $ | 897,469 | ||||||||||||||||||||||||||
| Stock option compensation | - | - | - | - | - | - | - | - | - | 1,151,092 | - | 1,151,092 | ||||||||||||||||||||||||||||||||||||
| Sale of Non-Voting Common Stock for cash | - | - | - | - | - | - | 1,562,860 | - | - | 1,163,998 | - | 1,163,998 | ||||||||||||||||||||||||||||||||||||
| Offering costs | - | - | - | - | - | - | - | - | - | (551,310 | ) | - | (551,310 | ) | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | (1,895,178 | ) | (1,895,178 | ) | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 (unaudited) | 983,333 | $ | 29,500 | 18,826,385 | $ | 704,396 | 78,353,333 | $ | 8 | 43,732,190 | $ | 4 | $ | (96,600 | ) | $ | 20,941,718 | $ | (20,812,955 | ) | $ | 766,071 | ||||||||||||||||||||||||||
| Stock option compensation | - | - | - | - | - | - | - | - | - | 1,220,155 | - | 1,220,155 | ||||||||||||||||||||||||||||||||||||
| Sale of Non-Voting Common Stock for cash | - | - | - | - | - | - | 646,823 | - | - | 485,118 | - | 485,118 | ||||||||||||||||||||||||||||||||||||
| Offering costs | - | - | - | - | - | - | - | - | - | (393,646 | ) | - | (393,646 | ) | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | (921,891 | ) | (921,891 | ) | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 (unaudited) | 983,333 | $ | 29,500 | 18,826,385 | $ | 704,396 | 78,353,333 | $ | 8 | 44,379,013 | $ | 4 | $ | (96,600 | ) | $ | 22,253,345 | $ | (21,734,846 | ) | $ | 1,155,807 | ||||||||||||||||||||||||||
| Series Seed Preferred Stock | Series CF Non-Voting Preferred Stock | Common Stock | Non-voting Common Stock | Subscription | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Receivable | Capital | Deficit | Equity | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 683,333 | $ | 20,500 | 18,826,385 | $ | 704,396 | 78,353,333 | $ | 8 | 46,089,886 | $ | 4 | $ | (15,544 | ) | $ | 26,682,909 | $ | (26,655,980 | ) | $ | 736,293 | ||||||||||||||||||||||||||
| Stock option compensation | - | - | - | - | - | - | - | - | - | 1,407,044 | - | 1,407,044 | ||||||||||||||||||||||||||||||||||||
| Sale of Non-Voting Common Stock for cash | - | - | - | - | - | - | 2,131,507 | - | (86,370 | ) | 1,598,630 | 1,512,260 | ||||||||||||||||||||||||||||||||||||
| Receipt of subscription receivable | - | - | - | - | - | - | - | - | 76,435 | - | - | 76,435 | ||||||||||||||||||||||||||||||||||||
| Share cancellation | - | - | (13,383 | ) | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Offering costs | - | - | - | - | - | - | - | - | - | (436,969 | ) | - | (436,969 | ) | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | (2,719,522 | ) | (2,719,522 | ) | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 (unaudited) | 683,333 | $ | 20,500 | 18,813,002 | $ | 704,396 | 78,353,333 | $ | 8 | 48,221,393 | $ | 4 | $ | (25,479 | ) | $ | 29,251,614 | $ | (29,375,502 | ) | $ | 575,541 | ||||||||||||||||||||||||||
| Stock option compensation | - | - | - | - | - | - | - | - | - | 1,348,043 | - | 1,348,043 | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | (2,448,704 | ) | (2,448,704 | ) | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 (unaudited) | 683,333 | $ | 20,500 | 18,813,002 | $ | 704,396 | 78,353,333 | $ | 8 | 48,221,393 | $ | 4 | $ | (25,479 | ) | $ | 30,599,657 | $ | (31,824,206 | ) | $ | (525,120 | ) | |||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements
| 3 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (5,168,226 | ) | $ | (2,817,069 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Amortization and depreciation | 67,192 | 67,192 | ||||||
| Stock-based compensation | 2,755,087 | 2,371,247 | ||||||
| Non-cash operating lease costs | 252,686 | 245,435 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Other current assets | 171,876 | (707,949 | ) | |||||
| Accounts payable | 254,773 | 47,001 | ||||||
| Accrued liabilities | (173,160 | ) | (44,313 | ) | ||||
| Deferred revenue | 166,182 | 946,882 | ||||||
| Lease liability | (245,636 | ) | (238,385 | ) | ||||
| Net cash used in operating activities | (1,919,226 | ) | (129,959 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (4,340 | ) | - | |||||
| Purchase of intangible assets | (17,174 | ) | - | |||||
| Investment in joint venture | (100,000 | ) | - | |||||
| Deposits and other assets | (135 | ) | (89,418 | ) | ||||
| Net cash provided by (used in) investing activities | (121,649 | ) | (89,418 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds - related party advances | - | 42,000 | ||||||
| Repayments - related party advances | - | (242,196 | ) | |||||
| Payments on line of credit | - | (194,727 | ) | |||||
| Offering costs | (436,969 | ) | (944,956 | ) | ||||
| Proceeds from sale of Non-Voting Common Stock | 1,588,695 | 1,649,116 | ||||||
| Net cash provided by financing activities | 1,151,726 | 309,237 | ||||||
| Increase (decrease) in cash and cash equivalents | (889,149 | ) | 89,860 | |||||
| Cash and cash equivalents, beginning of period | 1,527,391 | 643,494 | ||||||
| Cash and cash equivalents, end of period | $ | 638,242 | $ | 733,354 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | - | $ | - | ||||
| Cash paid for income taxes | $ | - | $ | 800 | ||||
| Non cash investing and financing activities: | ||||||||
| Subscription receivable from sale of Non-Voting Common Stock | $ | 25,479 | $ | 2,506,711 | ||||
See accompanying notes to the consolidated financial statements
| 4 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
Jet Token Inc. was formed on June 4, 2018 (“Inception”) in the State of Delaware. The consolidated financial statements of Jet Token Inc. (the “Company” or “Jet Token”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company is headquartered in Las Vegas, Nevada.
In September 2020, the Company formed a wholly-owned subsidiary Galilee LLC, a Delaware limited liability company. In November 2020, the Company formed a wholly-owned subsidiary Jet Token Management Inc., a Delaware corporation, and later changed its name to Jet Token Software Inc. In November 2020, the Company formed another wholly-owned subsidiary, Jet Token Management Inc. a California corporation. In June 2021, the Company formed a wholly-owned subsidiary Galilee 1 SPV LLC, a Delaware limited liability company. In March and June 2022, the Company formed two wholly owned subsidiaries, Galilee II SPV LLC and Galilee III SPV LLC, respectively. Both are Delaware limited liability companies. These were both sold during the year as part of the Company’s fractional ownership program. To date, all subsidiaries have had no operations.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern and Management Plans
The Company has limited operating history and has incurred losses from operations since 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 capital from its operations, prior and its most recent Regulation A campaign and prospectively, additional equity offerings. 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 balance sheets do not include any adjustments that might result from these uncertainties.
Basis of Presentation
The accounting and reporting policies of the Company conform with generally accepted accounting principles in the United States (“GAAP”).
Unaudited Interim Financial Statements
Certain information and disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these unaudited consolidated interim financial statements have been included. Such adjustments consist of normal recurring adjustments. The results of operations for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Jet Token Inc. and its wholly owned subsidiaries, Jet Token Software Inc., Jet Token Management Inc., Galilee LLC, Galilee 1 SPV LLC, Galilee II SPV LLC and Galilee III SPV LLC. All intercompany accounts and transactions have been eliminated in consolidation.
| 5 |
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported amount of revenues and expenses during the reporting period. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term.
Fair Value of Financial Instruments
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.
Level 3 - Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company does not have any financial instruments as of June 30, 2023.
Risks and Uncertainties
The Company has a limited operating history and has only recently begun generating revenue from intended operations. The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with local, state, and federal governmental policy decisions. A host of factors beyond the Company’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, market acceptance of the Company’s business model and COVID-19 issues more fully described below. These adverse conditions could affect the Company’s financial condition and the results of its operations.
On January 30, 2020, the World Health Organization declared the COVID-19 coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial effect will be to the Company, it is known that the travel industry in which we operate has been severely impacted. The Company is monitoring the situation and exploring opportunities in regard to travel behavior for when travel restrictions ease.
Cash and Cash Equivalents
For purpose of the consolidated statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
| 6 |
Offering Costs
The Company complies with the requirements of Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) 340 with regards to offering costs. Prior to the completion of an offering, offering costs will be capitalized as deferred offering costs on the consolidated balance sheet. The deferred offering costs will be charged to stockholders’ equity upon the completion of an offering or to expense if the offering is not completed.
Other Current Assets
Other current assets include security deposits, which relate primarily to contractual prepayments to third-parties for future services, prepaid expenses and customer receivables for additional expenses incurred in their charter trips.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. As of June 30, 2023 and December 31, 2022, property and equipment consisted entirely of equipment which is being depreciated over a three-year period.
Internal Use Software
The Company incurs software development costs to develop software programs to be used solely to meet its internal needs and cloud-based applications used to deliver its services. In accordance with ASC 350-40, Internal-Use Software, the Company capitalizes development costs related to these software applications once a preliminary project stage is complete, funding has been committed, and it is probable that the project will be completed, and the software will be used to perform the function intended. As of June 30, 2023 and December 31, 2022, the Company has capitalized approximately $398,000 of internal software related costs, which is included in intangible assets in the accompanying consolidated balance sheets. The software officially launched on December 31, 2020. Amortization expense for the six months ended June 30, 2023 and 2022 was $66,351 and $66,351, respectively. Accumulated amortization as of June 30, 2023 was $331,750.
Investments in Joint Ventures
In January 2023, the Company formed a 50/50 joint venture subsidiary with Great Western Air LLC dba Cirrus Aviation Services, 380 Software LLC, a Nevada limited liability company. Costs and profits are to be shared equally. The Company accounts for these investments using the equity method whereby the initial investment is recorded at cost and subsequently adjusted by the Company’s share of income or loss from the joint venture. The Company has made investments in the joint venture totaling $100,000 during the six months ended June 30, 2023. There is currently no financial activity or material assets to report for this joint venture beyond this initial investment.
Leases
The Company determines if an arrangement is a lease at inception on an individual contract basis. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, current and operating lease liabilities, non-current on the consolidated balance sheets. Operating lease right-of-use assets represent the right to use an underlying asset for the lease term. Operating lease right-of-use assets are recognized at lease commencement date based on the present value of the future minimum lease payments over the lease term. The interest rate implicit in each lease was readily determinable to discount lease payments.
The operating lease right-of-use assets include any lease payments made, including any variable amounts that are based on an index or rate, and exclude lease incentives. Lease terms may include options to extend or terminate the lease. Renewal option periods are included within the lease term and the associated payments are recognized in the measurement of the operating right-of-use asset when they are at the Company’s discretion and considered reasonably certain of being exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
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The Company has elected the practical expedient not to recognize leases with an initial term of 12 months or less on the Company’s consolidated balance sheets and lease expense is recognized on a straight-line basis over the term of the short-term lease.
Impairment of Long-Lived Assets
The Company follows ASC 360, Accounting for Impairment or Disposal of Long-Lived Assets. ASC 360 requires that if events or changes in circumstances indicate that the carrying value of long-lived assets or asset groups may be impaired, an evaluation of recoverability would be performed by comparing the estimated future undiscounted cash flows associated with the asset to the asset’s carrying value to determine if a write-down to market value would be required. Long-lived assets or asset groups that meet the criteria in ASC 360 as being held for sale are reflected at the lower of their carrying amount or fair market value, less costs to sell.
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 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 (MMF) and an Occupied Hourly Fee (OHF). 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% upfront.
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. As of June 30, 2023 and December 31, 2022, the Company deferred $1,099,543 and $933,361, respectively, related to prepaid flight hours under the jet card program for which the related travel had not yet occurred.
The Company also generates revenues from individual ad hoc charter bookings processed through the Company’s 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.
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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.
The following is a breakout of revenue components by subcategory for the three and six months ended June 30, 2023 and 2022.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Software App and Cirrus Charter | $ | 1,558,697 | $ | 337,376 | $ | 2,552,950 | $ | 735,643 | ||||||||
| Jet Card and Fractional Programs | 811,140 | 472,166 | 1,358,685 | 805,336 | ||||||||||||
| Management and Other Services | 422,971 | - | 756,681 | - | ||||||||||||
| Fractional/Whole Aircraft Sales | - | 6,200,000 | - | 6,200,000 | ||||||||||||
| $ | 2,792,808 | $ | 7,009,542 | $ | 4,668,316 | $ | 7,740,979 | |||||||||
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. The Company recorded aircraft sales of $0 and $6,200,000 for the six months ended June 30, 2023 and 2022, respectively.
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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.
| 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. | |
| 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. |
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Advertising Costs
The Company expenses the cost of advertising and promoting the Company’s services as incurred. Such amounts are included in sales and marketing expense in the consolidated statements of operations and totaled $223,708 and $163,141 for the six months ended June 30, 2023 and 2022, respectively.
Research and Development
The Company incurs research and development costs during the process of researching and developing its technologies and future offerings. The Company’s research and development costs consist primarily of payments for third party software development that is not capitalizable. The Company expenses these costs as incurred until the resulting product has been completed, tested, and made ready for commercial use.
Stock-Based Compensation
The Company accounts for stock awards under ASC 718, Compensation – Stock Compensation. Under ASC 718, share-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.
Income Taxes
The Company applies ASC 740 Income Taxes (“ASC 740”). Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial statement reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax expense for the period, if any and the change during the period in deferred tax assets and liabilities.
ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. A tax benefit from an uncertain position is recognized only if it is “more likely than not” that the position is sustainable upon examination by the relevant taxing authority based on its technical merit.
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Cares Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act retroactively suspends the 80% income limitation on use of NOL carryovers for taxable years beginning before January 1, 2021, and allows 100% of any such taxable income to be offset by the amount of such NOL carryforward. This 80% income limitation is reinstated (with slight modifications) for tax years beginning after December 31, 2021.
The Company is subject to tax in the United States (“U.S.”) and files tax returns in the U.S. Federal jurisdiction and Nevada state jurisdiction. The Company is subject to U.S. Federal, state, and local income tax examinations by tax authorities for all periods since Inception. The Company currently is not under examination by any tax authority.
Loss per Common Share
The Company presents basic loss per share (“EPS”) and diluted EPS on the face of the consolidated statements of operations. Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. For periods in which the Company incurs a net loss, the effects of potentially dilutive securities would be antidilutive and would be excluded from diluted EPS calculations. For the six months ended June 30, 2023 and 2022, there were 72,573,357 and 66,823,357 options, 1,666,667 and 1,666,667 warrants, and 19,496,335 and 19,809,718 convertible preferred shares, respectively, excluded.
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Concentration of Credit Risk
The Company maintains its cash with several major financial institutions located in the United States of America which it believes to be creditworthy. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits.
Segment Reporting
The Company identifies operating segments as components of the Company for which discrete financial information is available and is regularly reviewed by the chief operating decision maker, or decision-making group, in making decisions regarding resource allocation and performance assessment. The chief operating decision maker is the chief executive officer. The Company determined that the Company operates in a single operating and reportable segment, private aviation services, as the chief operating decision maker reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenue, for purposes of making operating decisions, allocating resources, and assessing performance. All of the Company’s long-lived assets are located in the U.S. and revenue from private aviation services is substantially earned from flights throughout the U.S.
New Accounting Standards
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), specifying the accounting for leases, which supersedes the leases requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less. Lessors’ accounting is largely unchanged from the previous accounting standard. In addition, Topic 842 expands the disclosure requirements of lease arrangements. Lessees and lessors will use a modified retrospective transition approach, which includes several practical expedients. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The Company adopted the provisions of the new standard starting January 1, 2022 using the modified retrospective approach. As a result, the comparative financial information prior to the date of adoption has not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 resulted in the recognition of operating lease ROU assets and lease liabilities for operating leases of $2,506,711 as of January 1, 2022 (the present value of the remaining lease payments), and those accounts will be amortized over the remaining lease term of 59 months.
The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact on the Company’s consolidated financial statements.
NOTE 3 – OTHER ASSETS
Other assets consisted of the following:
June 30, 2023 | December 31, 2022 | |||||||
| Deposits | $ | 58,361 | $ | 73,226 | ||||
| Lease Maintenance Reserve | 689,750 | 689,750 | ||||||
| Total Other Assets | $ | 748,111 | $ | 762,976 | ||||
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During 2020, the Company entered and executed an Aircraft purchase agreement with certain terms and conditions under which it made two payments in the amounts of $450,000 and $150,000 as purchase deposits for Aircrafts. The terms of the agreement specify that $250,000 of this amount shall be considered nonrefundable. During the year ended December 31, 2021, $250,000 of this amount was applied to the lease maintenance reserve required under the aircraft lease discussed in Note 5.
The Company also entered and executed an Aircraft management and charter service agreement. The Company made an operating deposit of $50,000 into a segregated operating account as part of the service agreement. The Company is to maintain a $50,000 operating deposit for the length of the agreement.
NOTE 4 – NOTE PAYABLE
In May 2020, the Company received a loan in the amount of $121,000 pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. Subject to the terms of the Note, the PPP Loan bore interest at a fixed rate of one percent (1%) per annum, with the first six months of interest and principal payments deferred, had an initial term of two years, and was unsecured and guaranteed by the Small Business Administration. The Company may apply to the Lender for forgiveness of the PPP Loan, with the amount which may be forgiven equal to the sum of payroll costs, covered rent, and covered utility payments incurred by the Company during the 24-week period beginning on April 13, 2020, calculated in accordance with the terms of the CARES Act. The Note provided for customary events of default including, among other things, cross-defaults on any other loan with the Lender. The PPP Loan may be accelerated upon the occurrence of an event of default. The PPP loan proceeds were used for payroll, covered rent and other covered payments. The PPP Loan was formally forgiven effective January 2021.
On February 2021, the Company received a loan in the amount of $86,360 pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. Subject to the terms of the Note, the PPP Loan bore interest at a fixed rate of one percent (1%) per annum, with the first six months of interest and principal payments deferred, had an initial term of two years, and was unsecured and guaranteed by the Small Business Administration. The Company may apply to the Lender for forgiveness of the PPP Loan, with the amount which may be forgiven equal to the sum of payroll costs, covered rent, and covered utility payments incurred by the Company during the 24-week period beginning on February 18, 2021, calculated in accordance with the terms of the CARES Act. The Note provided for customary events of default including, among other things, cross-defaults on any other loan with the Lender. The PPP Loan may be accelerated upon the occurrence of an event of default. The PPP loan proceeds were used for payroll, covered rent and other covered payments. The PPP Loan was formally forgiven effective July 2021.
In July 2021, the Company entered into a loan agreement with StartEngine Primary, LLC, a service provider of the Company. The agreement allows for advances up to an aggregate amount of $500,000 to pay for advertising and promotion services in connection with the Company’s equity offerings. The advances are non-interest bearing and shall be repaid on the date of the closing of the Company’s equity offering from the proceeds of the offering. During the year ended December 31, 2021, approximately $452,000 had been drawn on the loan, with a balance of $194,727 due as of December 31, 2021. During the year ended December 31, 2022, the Company repaid this remaining balance in full.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
Operating Lease
In November 2021, the Company entered into a leasing arrangement with a third party for an aircraft to be used in the Company’s operations. The lease term is for 60 months, expiring November 2026, and requires monthly lease payments. At any time during the lease term, the Company has the option to purchase the aircraft from the lessor at the aircraft’s fair market value at that time.
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The lease agreement also requires the Company to hold a liquidity reserve of $500,000 in a separate bank account as well as a maintenance reserve of approximately $690,000 for the duration of the lease term. The liquidity reserve is held in a bank account owned by the Company. As such, this is classified as restricted cash in the accompanying balance sheet. The maintenance reserve are funds held by the lessor to be used for reasonable maintenance expenses in excess of those covered by the airframe and engine maintenance programs maintained by the Company. These maintenance programs are designed to fully cover the Company’s aircraft’s maintenance costs, both scheduled and unscheduled, and therefore the Company does not expect these funds will be drawn upon. If funds from the maintenance reserve are expended by the lessor, the Company is required to replenish the maintenance reserve account up to the required reserve amount. Any funds remaining at the end of the Lease term will be returned to the Company. In connection with this leasing arrangement, the Company agreed to pay an arrangement fee of $70,500 to a separate third party. Upon adopting ASC 842 effective January 1, 2022 as discussed in Note 2, the Company elected to adopt the package of practical expedients, which include the option to not reassess whether initial direct costs meet the new definition under ASC 842 at the initial application date. As such, the unamortized balance of the arrangement fee has been included within the right-of-use asset in the accompanying balance sheet and is being amortized to lease expense over the remaining term of the lease.
On April 4, 2022, the Company entered into an additional leasing arrangement with a third party for an aircraft to be used in the Company’s operations, substantially identical to the terms of the November 2021 agreement. The lease term was for 60 months, expiring April 4, 2027, and required monthly lease payments. At any time during the lease term, the Company had the option to purchase the aircraft from the lessor at the aircraft’s fair market value at that time. The lease agreement also required the Company to maintain its existing liquidity reserve of $500,000 in a separate bank account as well as an additional maintenance reserve of approximately $690,000 for the duration of the lease term. The liquidity reserve is required to be held in a bank account owned by the Company. Any funds remaining at the end of the Lease term would be returned to the Company. In May 2022, the Company exercised the option to purchase the aircraft from the lessor and in June 2022 sold the aircraft.
Total lease expense for the six months ended June 30, 2023 and 2022 was $550,634 and $37,234, respectively, which is included within cost of revenues in the accompanying statement of operations.
Right-of-use lease assets and lease liabilities for our operating lease was recorded in the balance sheet as follows:
| June 30, 2023 | ||||
| Operating lease right-of-use asset | $ | 2,576,036 | ||
| Accumulated amortization | (747,154 | ) | ||
| Net balance | $ | 1,828,882 | ||
| Lease liability, current portion | $ | 502,450 | ||
| Lease liability, long-term | 1,278,257 | |||
| Total operating lease liabilities | $ | 1,780,707 | ||
As of June 30, 2023, the weighted average remaining lease term was 3.4 years, and the weighted average discount rate was 3%.
As of June 30, 2023, future minimum required lease payments due under the non-cancellable operating lease are as follows:
| 2023 | $ | 274,500 | ||
| 2024 | 549,000 | |||
| 2025 | 549,000 | |||
| 2026 | 503,250 | |||
| Total future minimum lease payments | 1,875,750 | |||
| Less imputed interest | (95,043 | ) | ||
| Maturities of lease liabilities | $ | 1,780,707 |
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Share Purchase Agreement
The Company executed a 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”). Upon the Company’s common stock being publicly listed on a U.S. securities exchange, such as the NYSE or NASDAQ, the Company will have 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 during the 36-month period following the date of listing.
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 the Company’s common stock, payable on or prior to the first anniversary of the date of listing. On the date of listing, the Company will also issue to GEM warrants 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 warrant will have a term of three years.
The Company has also entered into a Registration Rights Agreement with GEM, obligating the Company to file a Registration Statement with respect to resales of the shares of common stock issued to GEM under the Share Purchase Agreement and upon exercise of the warrant.
NOTE 6 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has authorized the issuance of 50,000,000 shares of its preferred stock with par value of $0.0000001. Of the authorized number of preferred shares, 10,000,000 shares have been designated as Series Seed Preferred Stock, 25,000,000 have been designated Series CF Non-Voting Preferred Stock (“Series CF”), and 15,000,000 are undesignated. Each share of preferred stock can be converted to one share of common stock.
In October 2021, the Company redeemed 300,000 shares of its outstanding Series Seed Preferred Stock for a total purchase price of approximately $225,000.
Common Stock
The Company has authorized the issuance of 500,000,000 shares of its common stock, of which 300,000,000 are designated as common stock and 200,000,000 are non-voting common stock, all par value of $0.0000001. Shares of non-voting common stock will convert automatically into fully paid and nonassessable shares of the Company’s voting common stock upon the closing of the sale of shares of voting common stock to the public in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, or upon the merger of the Company with and into another entity. The conversion rate is currently one share of voting common stock per share of non-voting common stock.
In February 2020, the Company undertook a Regulation A, Tier 2 offering for which it is selling up to 33,333,333 non-voting common stock at $0.30 per share for a maximum of $10,000,000. During the six months ended June 30, 2022, the Company also collected on the sale of an additional 45,065 shares of non-voting common stock for gross proceeds of $13,550 under this offering.
In June 2021, the Company undertook another Regulation A, Tier 2 offering for which it is selling up to 29,173,333 non-voting common stock at $0.75 per share for a maximum of $21,880,000. During the six months ended June 30, 2022, the Company issued an additional 2,164,648 shares of non-voting common stock under this offering for aggregate gross proceeds of $1,635,566. During the six months ended June 30, 2023, the Company collected on the escrow funds and issued an additional 2,131,507 shares of non-voting common stock under the Regulation A, Tier 2 campaign for aggregate gross proceeds of $1,598,630, with $25,479 of these proceeds pending release from escrow at June 30, 2023. This offering closed on January 18, 2023.
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Warrants
In connection with the Regulation A, Tier 2 offerings noted above, the Company engaged StartEngine Primary, LLC (“StartEngine”) to act as its placement agent. For such, StartEngine received 7% commissions on proceeds from the offering, and the Company issued warrants to StartEngine up to a percentage specified within the agreements of the non-voting common stock sold through StartEngine at exercise price consistent with the selling price of the shares in the offering.
In December 2020, the Company issued the 1,666,667 warrants owed to StartEngine in connection with this arrangement for the offering that began in February 2020. The warrants had an exercise price of $0.30 and a term of three years. The warrants allowed for adjustments to the exercise price and number of shares based on future stock dividends, stock splits, and subsequent non-exempt equity sales. The Company accounts for these warrants in accordance with ASU 2017-11, which changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. Accordingly, the value of these warrants is contained within equity, both increasing and decreasing additional paid-in capital for a net zero effect. The Company valued the warrants earned during the year ended December 31, 2020 at approximately $184,000, using the Black-Scholes model, with similar inputs to those disclosed in the stock option section below, with the exception that the expected life was three years. The warrants issued to StartEngine expired unexercised.
Stock Options
On June 4, 2018, the Company’s Board of Directors adopted the Jet Token, Inc. 2018 Stock Option and Grant Plan (the “2018 Plan”). The 2018 Plan provides for the grant of equity awards to employees, and consultants, to purchase shares of the Company’s common stock. As of December 31, 2020, up to 25,000,000 shares of its common stock could be issued pursuant to awards granted under the 2018 Plan. During the year ended December 31, 2021, the 2018 Plan was amended three times to increase the total number of shares reserved for issuance thereunder. As of June 30, 2023 and December 31, 2022, the total number of shares reserved for issuance under the 2018 Plan was 75,000,000 shares, consisting of (i) 25,000,000 shares of common stock and (ii) 50,000,000 shares of non-voting common stock. The 2018 Plan is administered by the Company’s Board of Directors.
In August 2021, the Company’s Board of Directors adopted the Jet Token Inc. 2021 Stock Plan (the “2021 Plan”). The 2021 plan provides for the grant of equity awards to employees, outside directors, and consultants, including the direct award or sale of shares, stock options, and restricted stock units to purchase shares. Up to 5,000,000 shares of non-voting common stock may be issued pursuant to awards granted under the 2021 Plan. During the year ended December 31, 2022, the 2021 Plan was amended to increase the number of shares of non-voting common stock authorized under the 2021 Plan to 15,000,000. In the event that shares of non-voting common stock subject to outstanding options or other securities under the Company’s 2018 Stock Open and Grant Plan expire or become exercisable in accordance with their terms, such shares shall be automatically transferred to the 2021 Plan and added to the number of shares then available for issuance under the 2021 Plan. The 2021 Plan is administered by the Company’s Board of Directors, and expires ten years after adoption, unless terminated by the Board.
During the six months ended June 30, 2022, the Company granted a total of 5,628,000 stock options to purchase common stock to various advisors and consultants. The options have a ten-year life and are exercisable at $0.75. 128,000 of the options were immediately vested on the grant date while the remaining options vest in monthly tranches over a three-year period. The options had a grant date fair value of approximately $2,943,000, which will be recognized over the vesting period.
During the six months ended June 30, 2023, the Company granted a total of 2,200,000 stock options to purchase common stock to various employees, advisors and consultants. The options have a ten-year life and are exercisable at $0.75. 200,000 of the options vest over a period of two months, while the remaining options vest in monthly tranches over a three-year period. The options had a grant date fair value of approximately $1,271,040, which will be recognized over the vesting period.
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The Company estimates the fair value of stock options that contain service and/or performance conditions using the Black-Scholes option pricing model. The range of input assumptions used by the Company were as follows:
| June 30, 2023 | December 31, 2022 | |||||||
| Expected life (years) | 6 to 10 | 6 to 10 | ||||||
| Risk-free interest rate | 3.55% - 3.94 | % | 1.43% - 4.10 | % | ||||
| Expected volatility | 90 | % | 80 | % | ||||
| Annual dividend yield | 0 | % | 0 | % | ||||
The Company recognizes stock option forfeitures as they occur as there is insufficient historical data to accurately determine future forfeitures rates.
The risk-free interest rate assumption for options granted is based upon observed interest rates on the United States government securities appropriate for the expected term of the Company’s stock options.
The expected term of stock options is calculated using the simplified method which takes into consideration the contractual life and vesting terms of the options.
The Company determined the expected volatility assumption for options granted using the historical volatility of comparable public company’s common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future stock option grants, until such time that the Company’s common stock has enough market history to use historical volatility.
The dividend yield assumption for options granted is based on the Company’s history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.
During the six months ended June 30, 2023 and 2022, stock-based compensation expense of $2,755,087 and $2,371,247, respectively, was recognized for the vesting of these options. As of June 30, 2023, there was approximately $6,743,000 in unrecognized stock-based compensation, which will be recognized through December 2025.
Restricted Stock Units
In August 2021, the Company granted Restricted Stock Units (RSUs) to a contractor. The grant allows the contractor to earn up to 4,813,333 shares of non-voting common stock and contains both service-based vesting requirements and liquidity event requirements. Service-based requirements are such that the contractor needs to continue to provide service through August 2022. In addition to the service-based requirements, in order for the RSUs to vest, the Company will need to undertake an IPO or a sale as defined by the grant notice. The RSUs expire in seven years. As of June 30, 2023, the Company has determined that it is not yet probable that these RSUs will vest, and accordingly, have not yet recorded expense related to these RSUs.
NOTE 7 – RELATED PARTY TRANSACTIONS
From time to time, related parties make payments on the Company’s behalf or advance cash to the Company for operating costs which require repayment. Such transactions are considered short-term advances and non-interest bearing. During the six months ended June 30, 2023 and 2022, the Company’s Founder and Executive Chairman advanced a total of $0 and $72,000, respectively, to the Company in the form of a non-interest-bearing loan, and repaid $0 and $242,196 of these advances, respectively. As of June 30, 2023 and December 31, 2022, the Company owed $0, and $0, respectively, to the Company’s Founder and Executive Chairman related to such advances.
| 17 |
NOTE 8 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events that occurred after June 30, 2023 through August 21, 2023, the date of these consolidated financial statements were available to be issued.
Business Combination Agreement
On August 10, 2023 (the “Closing Date”), Jet.AI Inc., a Delaware corporation (f/k/a Oxbridge Acquisition Corp.) (“Jet.AI”), consummated the previously announced transaction (the “Business Combination”) pursuant to that certain 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 (the “Business Combination Agreement”), by and among the Company, OXAC Merger Sub I, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of the Company (“First Merger Sub”), Summerlin Aviation LLC (f/k/a OXAC Merger Sub II, LLC), a Delaware limited liability company and a direct, wholly-owned subsidiary of the Company (“Second Merger Sub” and, together with First Merger Sub, the “Merger Subs”), and Jet Token Inc., a Delaware corporation (“Jet Token”). Terms used shall have the meaning given to such terms in the final prospectus and definitive proxy statement, dated July 28, 2023 and filed with the Securities and Exchange Commission (the “Commission”) on July 28, 2023 (the “Proxy Statement”) in the section entitled “Certain Defined Terms” beginning on page 2 thereof, and such definitions are incorporated herein by reference.
On August 10, 2023, as contemplated by the Business Combination Agreement and described in the section titled “The Domestication Proposal” beginning on page 145 of the Proxy Statement, the Company filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which the Company was domesticated and continues as a Delaware corporation (the “Domestication”).
On August 10, 2023, as a result of the Business Combination and the other transactions contemplated by the Business Combination Agreement, following the consummation of the Domestication (a) First Merger Sub merged with and into Jet Token, with Jet Token surviving the merger as a wholly-owned subsidiary of the Company (the “First Merger”) and (b) after the effectiveness of the First Merger, Jet Token merged with and into Second Merger Sub, with Second Merger Sub surviving the merger as a wholly-owned subsidiary of the Company (the “Second Merger”).
Following the closing of the Business Combination, the Company owns, directly or indirectly, all of the issued and outstanding equity interests in the Second Merger Sub and its subsidiaries, and the stockholders of Jet Token as of immediately prior to the effective time of the First Merger (the “Jet Token Stockholders”) hold a portion of the Company’s common stock, par value $0.0001 per share (the “Jet.AI Common Stock”).
As a result of and upon the effective time of the Domestication: (a) each then issued and outstanding Class A Ordinary Share of Oxbridge was converted automatically, on a one-for-one basis, into a share of Jet.AI Common Stock; (b) each then issued and outstanding Class B Ordinary Share of Oxbridge was converted automatically, on a one-for-one basis, into a share of Jet.AI Common Stock; (c) each then issued and outstanding Oxbridge Warrant was converted automatically into a warrant to purchase one share of Jet.AI Common Stock pursuant to the Warrant Agreement (“Jet.AI Warrant”); and (d) each then issued and outstanding Oxbridge Unit was converted automatically into a Jet.AI Unit, each consisting of one share of Jet.AI Common Stock and one Jet.AI Warrant.
At the effective time of the Business Combination (the “Effective Time”), (i) each outstanding share of Jet Token Common Stock, including each share of Jet Token Preferred Stock that was converted into shares of Jet Token Common Stock immediately prior to the Effective Time, was cancelled and automatically converted into the right to receive (x) the number of shares of Jet.AI Common Stock equal to the Stock Exchange Ratio of 0.03094529, and (y) the number of warrants (“Merger Consideration Warrants”) equal to the Warrant Exchange Ratio of 0.04924242; (ii) each Jet Token Option, whether or not exercisable and whether or not vested, that was outstanding immediately prior to the Effective Time was automatically converted into an option to purchase a number of Jet.AI Options based on the Option Exchange Ratio (determined in accordance with the Business Combination Agreement and as further described in the Proxy Statement); (iii) each Jet Token Warrant issued and outstanding immediately prior to the Effective Time was automatically converted into a warrant to acquire (x) a number of shares of Jet.AI Common Stock equal to the Stock Exchange Ratio and (y) a number of Merger Consideration Warrants equal to the Warrant Exchange Ratio; and (iv) each Jet Token RSU Award that was outstanding immediately prior to the Effective Time was converted into a Jet.AI RSU Award with respect to a number of RSUs based on the applicable exchange ratio (determined in accordance with the Business Combination Agreement and as further described in the Proxy Statement).
As a result of the business combination, all outstanding equity awards were exchanged for equity awards for equity of the new parent company based upon exchange ratios and pricing agreed upon within the Acquisition Agreement.
In connection with the consummation of the Business Combination (the “Closing”), the registrant changed its name from Oxbridge Acquisition Corp. to Jet.AI Inc.
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Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF JET TOKEN
The following discussion and analysis provides information which Jet Token’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 Token’s financial condition and results of operations together with the section entitled “Summary of the Proxy Statement/Prospectus — Selected Historical Financial Data of Jet Token” and Jet Token’s audited consolidated financial statements and the related notes thereto included elsewhere in the Form 8-K. This discussion and analysis should also be read together with the unaudited pro forma condensed combined financial information as of and for the year ended June 30, 2023 and the accompanying notes thereto included elsewhere in this Form 8-K/A. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”
Certain of the information contained in this discussion and analysis or set forth elsewhere in this proxy statement/prospectus, including information with respect to plans and strategy for Jet Token’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 Token’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 proxy statement/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 proxy statement/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 proxy statement/prospectus may vary from those obtained by performing the same calculations using the figures in the audited consolidated financial statements included elsewhere in this proxy statement/prospectus. Certain other amounts that appear in this proxy statement/prospectus may not sum due to rounding.
Overview
Jet Token, a Delaware corporation, was founded in 2018 by Michael Winston, its Executive Chairman. Jet Token, 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 Jet Token’s and other’s aircraft at agreed-upon rates, (iii) the operation of a proprietary booking platform (the “App”), which functions as a prospecting and quoting platform to arrange private jet travel with third party carriers as well as via Jet Token’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.
Under Jet Token’s 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 typically consists of a down payment, one or more progress payments, a payment on delivery, and in future periods will include a Monthly Management Fee (MMF) and an Occupied Hourly Fee (OHF) during the term of the fractional owner’s management agreement. The sale of a fractional interest or whole aircraft is recognized at the time of aircraft delivery, MMF revenue is generally fixed and would be recognized monthly over the life of the management agreement, while OHF revenue is typically variable and would be recognized monthly based on the number of hours flown by the customer in the period. Jet Token’s jet card program provides the customer with a preset number of hours of private jet access at a fixed hourly rate over the agreement term (generally a year), typically paid 100% upfront. Jet Token also receives commission-based revenue for sales of jet cards on behalf of Cirrus and engages in whole aircraft brokerage. Jet Token recognizes revenue from sales of its own jet cards and from third-party charters generated through the Company’s App, upon transfer of control of its promised services, which generally occurs upon completion of a flight, or, in the case of unused hours under the jet card program, at the end of the contract term. Jet Token recognizes its share of the revenue from the sales of Cirrus jet cards upon payment by the program member.
| ~ 1 ~ |
Results of Operations
The following table sets forth our results of operations for the periods indicated:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | 2,792,808 | $ | 7,009,542 | $ | 4,668,316 | $ | 7,740,979 | ||||||||
| Cost of revenues | 2,993,631 | 6,120,638 | 4,944,157 | 6,927,960 | ||||||||||||
| Gross profit (loss) | (200,823 | ) | 888,904 | (275,841 | ) | 813,019 | ||||||||||
| Operating Expenses: | ||||||||||||||||
| General and administrative (including stock-based compensation of $1,407,044, $1,151,092, $2,755,087, and $2,371,247, respectively) | 2,115,704 | 1,706,247 | 4,603,722 | 3,419,978 | ||||||||||||
| Sales and marketing | 103,541 | 77,489 | 223,708 | 163,141 | ||||||||||||
| Research and development | 28,636 | 27,061 | 64,955 | 46,172 | ||||||||||||
| Total operating expenses | 2,247,881 | 1,810,797 | 4,892,385 | 3,629,291 | ||||||||||||
| Operating loss | (2,448,704 | ) | (921,893 | ) | (5,168,226 | ) | (2,816,272 | ) | ||||||||
| Other (income) expense: | ||||||||||||||||
| Other income | - | (2 | ) | - | (3 | ) | ||||||||||
| Total other (income) expense | - | (2 | ) | - | (3 | ) | ||||||||||
| Loss before provision for income taxes | (2,448,704 | ) | (921,891 | ) | (5,168,226 | ) | (2,816,269 | ) | ||||||||
| Provision for income taxes | - | - | - | 800 | ||||||||||||
| Net Loss | $ | (2,448,704 | ) | $ | (921,891 | ) | $ | (5,168,226 | ) | $ | (2,817,069 | ) | ||||
| Weighted average shares outstanding - basic and diluted | 126,287,952 | 121,855,571 | 126,287,952 | 121,855,571 | ||||||||||||
| Net loss per share - basic and diluted | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.02 | ) | ||||
Three Months Ended June 30, 2023 and 2022
Revenues
Revenues for the second quarter of 2023 totaled $2,793,000, a $4,217,000 decrease from 2022’s second quarter revenues of $7,010,000 and were comprised of $423,000 in services revenue from the management of customers’ aircraft, $852,000 in software-related revenue, $811,000 in Jet Card revenue for hours flown and other charges based on hours flown, and $707,000 in revenue from the chartering of our HondaJets by our operating partner Cirrus.
Jet Token took delivery of a second HondaJet in April 2022 which was subsequently sold in June generating aircraft sale proceeds of $6.2 million in the second quarter of 2022. There were no such sales during the second quarter of 2023.
| ~ 2 ~ |
During the fourth quarter of 2022, the Company entered into an agreement to manage a customer’s aircraft and generated $423,000 in service revenue during the second quarter of 2023. There was no such revenue during the second quarter of 2022.
Jet Token booked $852,000 in revenue related to App-generated Services and software revenues related to charter bookings made through Jet Token’s App in the second quarter of 2023, an increase of $676,000 and reflected increased marketing and greater awareness of the Company. This compares to revenues totaling $176,000 in the 2022 period.
During the second quarter of 2023, Jet Token sold 225 prepaid flight hours under its jet card and fractional programs, amounting to $569,000, and recorded $811,000 of revenue for 57 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 booked as revenue as the flight hours are used or forfeited. At June 30, 2023, the Company had recorded deferred revenue of $1,100,000 on its balance sheet representing prepaid flight hours for which the related travel had not yet occurred.
In the second quarter of 2022, Jet Token sold 87 prepaid flight hours, amounting to $453,000, and recorded $472,000 of revenue for 78 flight hours flown or forfeited, as well as additional charges. At June 30, 2022, the Company had recorded deferred revenue of $1,383,000.
The increase in flight hours flown period over period is a direct result of the increased number of Jet Token’s 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 second quarter of 2023 and 2022:
| For the 3 months ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Deferred revenue at the beginning of the period | $ | 1,285,762 | $ | 1,310,321 | ||||
| Prepaid flight hours sold | ||||||||
| Amount | $ | 568,680 | $ | 453,475 | ||||
| Total Flight Hours | 104 | 87 | ||||||
| Prepaid flight hours flown | ||||||||
| Amount | $ | 754,897 | $ | 380,583 | ||||
| Total flight hours | 125 | 78 | ||||||
| Additional charges | $ | 56,242 | $ | 91,582 | ||||
| Total flight hour revenue | $ | 811,139 | $ | 472,165 | ||||
| Deferred revenue at the end of the period | $ | 1,099,545 | $ | 1,383,213 | ||||
In addition to its software App and jet card revenues, Jet Token also generates revenue through the direct chartering of its HondaJet aircraft by Cirrus. During the second quarter of 2023 this revenue amounted to approximately $707,000, an increase of $546,000, or 338.8% from the prior year. The increased revenue was a direct result of the greater number of HondaJets operated in the second quarter of 2023 as a well as the management of a customer’s aircraft.
| ~ 3 ~ |
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 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 2022, Jet Token operated 1 HondaJets as compared to the 3 HondaJets and 1 CJ4 that it operated in the 2023 period.
As a result of its increased fleet and the increase in jet card and Cirrus charter flight activity, as well as the startup costs relating to the introduction of the CJ4 to its fleet, costs related to the operation of these aircraft and payments to Cirrus for their management increased $0.9 million from $0.4 million in the second quarter of 2022 to $1.2 million in 2023 and aircraft lease payments increased $113,000 from $232,000 in the second quarter of 2022 to $346,000 in 2023. The Company also incurred third-party charter costs of approximately $1.3 million in the second quarter of 2023, a $1.1 million increase over 2022, 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. Merchant fees and federal excise tax relating to charter flights increased $34,000 in the second quarter of 2023 to $92,000 from $58,000 in 2022.
In total, it cost $3.0 million to operate these aircraft in the second quarter of 2023, compared to $0.8 million in the second quarter of 2022.
Gross profit (loss)
The resulting gross profits totaled ($164,000) for the second quarter of 2023, compared to $926,000 for the second quarter of 2022. The loss in the second quarter of 2023 was largely driven by the startup expenses of putting the CJ4 into operation, despite the greater utilization of the Company’s aircraft, as well as increased subcharter costs relating to flights performed by third-party operators for certain of our jet card customers. The 2022 results were positively affected by the sale of one of the Company’s 4 HondaJets in June 2022.
Total Operating Expenses
In the second quarter of 2023, Jet Token’s operating expenses increased $437,000 over the prior year comparable period due to a $409,000 increase in general and administrative expenses, a $26,000 increase in sales and marketing expenses and slightly higher research and development costs. Excluding non-cash stock-based compensation of $1.4 million and $1.2 million in the second quarter of 2023 and the second quarter of 2022, respectively, general and administrative expenses rose by approximately $154,000 primarily due to an increase in professional service expenses of $97,000 related to our Business Combination, Directors and Officers Insurance costs of $15,000, $16,000 in higher rent and increased wages of $33,000, primarily due to increased commissions compensation payable on jet card sales.
Jet Token’s sales and marketing expenses increased by about $27,000 to $104,000 in the second quarter of 2023 from $77,000 in the second quarter of 2022, as the company continued the acceleration of its sales and marketing spending upon aircraft delivery and the associated increase in marketable jet card inventory. These expenses are mainly linked to promoting Jet Token and its programs.
Research and development expenses were essentially unchanged at $29,000 in the second quarter of 2023 from $27,000 in the second quarter of 2022, due to continuing refinement of the App, as well as continued development work on additional software offerings.
| ~ 4 ~ |
Operating Loss
As a result of all of the above, in the second quarter of 2023 Jet Token recorded an operating loss of approximately $2.4 million, which was an increase in loss of approximately $1.5 million. The increase was primarily due to the increase in gross profit loss of $1.1 million and the increase in general and administrative expenses, from around $1.7 million in the second quarter of 2022 to approximately $2.1 million in the second quarter of 2023, including non-cash stock-based compensation expense that resulted from the non-cash vesting of employee stock options.
Other Income
During the second quarter of 2022, Jet Token recorded $2 in other income due to interest income. There were no such earnings in the second quarter of 2023.
Six Months Ended June 30, 2023 and 2022
Revenues
Revenues for the first six months of 2023 totaled $4.7 million, a $3.1 million increase from 2022’s revenues of $7.7 million and were comprised of $757,000 in services revenue from the management of customers’ aircraft, $1,364,000 in software-related revenue, $1,359,000 in Jet Card revenue for hours flown and other charges based on hours flown and $1,189,000 in revenue from the chartering of our HondaJets by our operating partner Cirrus.
Jet Token began recording revenue in September 2020 reflecting services and software revenues related to charter bookings made through its App and in the first six months of 2022, Jet Token booked $282,000 in revenue related to App-generated charter bookings. During 2023 these revenues totaled $1.4 million, a $1.1 million, or 383.8%, increase from 2022 reflecting accelerated marketing efforts in 2023 and greater awareness of Jet Token.
Jet Token acquired its first HondaJet Elite in November 2021 and took delivery of a second HondaJet in April 2022 which was subsequently sold in June generating aircraft sale proceeds of $6.2 million in the first six months of 2022.
We also recorded $757,000 in service revenue relating to an agreement entered into during the fourth quarter of 2022 to manage a customer’s aircraft. There were no such service revenues in the first six months of 2022.
During the first six months of 2023, Jet Token sold 261 prepaid flight hours under its jet card and fractional programs, amounting to $1,420,000, and recorded $1,359,000 of revenue for 210 hours 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 booked as revenue as the flight hours are used or forfeited. At June 30, 2023, the Company recorded deferred revenue of $1.1 million on its balance sheet, which represents prepaid flight hours for which the related travel had not yet occurred.
In the first six months of 2022, Jet Token sold 304 prepaid flight hours amounting to approximately $0.6 million and recorded approximately $0.8 million of revenue for 135 flight hours flown or forfeited, as well as additional charges. At June 30, 2022, the Company recorded deferred revenue of $1.4 million on its balance sheet.
The increase in flight hours flown is a direct result of the increased number of aircraft.
| ~ 5 ~ |
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 2023 and 2022:
| For the 6 months ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Deferred revenue at the beginning of the period | $ | 933,361 | $ | 436,331 | ||||
| Prepaid flight hours sold | ||||||||
| Amount | $ | 1,420,250 | $ | 1,575,325 | ||||
| Total Flight Hours | 261 | 304 | ||||||
| Prepaid flight hours flown | ||||||||
| Amount | $ | 1,254,066 | $ | 628,443 | ||||
| Total flight hours | 210 | 135 | ||||||
| Additional charges | $ | 94,207 | $ | 201,397 | ||||
| Total flight hour revenue | $ | 1,358,685 | $ | 805,336 | ||||
| Deferred revenue at the end of the period | $ | 1,099,545 | $ | 1,383,213 | ||||
During the first six months of 2023 revenue generated through the direct chartering of Jet Token’s HondaJet aircraft by Cirrus amounted to approximately $1.2 million, an increase of $0.7 million, or 162.0% from the prior year. The increased revenue was a direct result of the greater number of HondaJets operated.
Jet Token also generated aircraft sale proceeds of $6.2 million from the fractionalization and outright sale of aircraft in the first six months of 2022. There were no such revenues in 2023.
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 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 charters and includes expenses such as fuel, pilot wages and training costs, aircraft insurance, maintenance and other flight operational expenses.
As a result of its increased fleet and the increase in jet card and Cirrus charter flight activity, as well as the startup expenses relating to the introduction of the managed aircraft to its fleet, operating expenses related to the operation of these aircraft and payments to Cirrus for their management increased $1.9 million from $1.1 million in the first six months of 2022 to $2.9 million in 2023 and aircraft lease payments increased $0.2 million from $0.4 million in 2022 to $0.5 million in the first six months of 2023. Jet Token also incurred third-party charter costs of approximately $1.8 million in the first six months of 2023, a $1.3 million increase over 2022, 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 $63,000 in the first six months of 2023 to $138,000 from $74,000 in 2022.
In total, excluding aircraft sales costs and as disclosed above, it cost $2.9 million to operate Jet Token’s aircraft in the first six months of 2023, compared to $1.1 million in 2022.
Gross profit (loss)
The resulting gross profits totaled ($202,000) for the first six months of 2023, compared to $886,000 for 2022. The decrease of $1.1 million was largely driven by $1.0 million in gross profits attributed to aircraft sales. App, jet card and Cirrus charter gross profits showed a loss of $202,000 in the first six months of 2023 compared to a loss of ($78,000) in 2022. The reduced gross profit in these operations was a result of higher utilization of our aircraft by our jet card customers and higher bookings on our behalf by Cirrus, together with increased cost of operations, as well as increased subcharter costs relating to flights performed by third-party operators for certain of our jet card customers when our aircraft was unavailable.
| ~ 6 ~ |
Total Operating Expenses
In the first six months of 2023, Jet Token’s operating expenses increased $1.3 million due to a $1.2 million increase in general and administrative expenses, $61,000 in higher sales and marketing expenses, and slightly higher research and development costs. Excluding non-cash stock-based compensation of $2.8 million and $2.4 million in the first six months of 2023 and 2022, respectively, general and administrative expenses rose by approximately $800,000 primarily due to an increase in professional service expenses of $322,000 related to our Business Combination, Directors and Officers Insurance costs of $32,000, $27,000 in higher rent and increased wages of $245,000, primarily due to increased commissions compensation payable on jet card sales.
Jet Token’s sales and marketing expenses increased by about $60,000 to $224,000 in the first six months of 2023 from $163,000 in 2022, as Jet Token reaccelerated its sales and marketing spending upon aircraft delivery and the associated increase in marketable jet card inventory. These expenses are mainly linked to promoting Jet Token and its programs.
Research and development expenses increased approximately $19,000 to $65,000 in the first six months of 2023 from $46,000 in 2022, 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 2023 Jet Token recorded an operating loss of approximately $5.2 million, which was an increase in loss of nearly $2.2 million compared to 2022. The increase was primarily due to reduced gross profits of $1.1 million, as well as an increase in non-cash stock-based compensation that resulted from the non-cash vesting of employee stock options, which rose from around $2.4 million in 2022 to approximately $2.8 million in the first six months of 2023.
Other Income
During the first six months of 2022, Jet Token recorded $3 in interest income. There was no such income in 2023.
Liquidity and Capital Resources.
Overview
To date, Jet Token has funded its operations through a combination of cash from operations, the issuance of equity securities, and, to a lesser extent, loans and advances from its Executive Chairman.
Three Months Ended June 30, 2023 and 2022
As of June 30, 2023, Jet Token’s cash and equivalents were approximately $1.4 million, including approximately $500,000 of restricted cash under its aircraft leasing arrangements described below.
| ~ 7 ~ |
Cash Flows
The following table summarizes our cash flows for the three months ended June 30, 2023 and 2022:
| For the 3 months ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in) operating activities | $ | (727,179 | ) | $ | (427,584 | ) | ||
| Net cash provided by (used in) investing activities | (28,016 | ) | 674,182 | |||||
| Net cash provided by financing activities | - | (93,738 | ) | |||||
| Increase (decrease) in cash and cash equivalents | $ | (755,195 | ) | $ | 152,860 | |||
Cash Flow from Operating Activities
Net cash used in operating activities for the three months ended June 30, 2023 was $0.7 million compared to $0.1 million of net cash provided by operating activities for the three months ended June 30, 2022. The cash outflow from operating activities in the second quarter of 2023 primarily consisted of our net loss, net of non-cash charges of $0.9 million, offset by a $503,000 decrease in operating assets, and a $19,000 increase in operating liabilities. The increase in operating liabilities was primarily driven by a $166,000 decrease in deferred jet card revenue relating to the sale of jet card hours not yet flown and a $233,000 increase in Jet Token’s accounts payable relating to the operation of the Company’s aircraft. The increase in net cash used in operating activities for 2023 was primarily driven by a $1.4 million increase in our net loss, net of non-cash charges resulting from startup expenses associated with the entry into service of the Company’s third and fourth HondaJet aircraft as well as the one customer managed aircraft partially offset by the $1.4 million changes in operating assets and liabilities.
Cash Flow from Investing Activities
Net cash used in investing activities for the three months ended June 30, 2023 was 28,000, primarily relating to additional investment in the Company’s software platform and increased deposits and other assets.
Cash Flow from Financing Activities
Ther was no net cash provided by financing activities for the three months ended June 30, 2023 as Jet Token’s Regulation A+ offering of Non-Voting Common Stock ended in January of 2023.
Six Months Ended June 30, 2023 and 2022
As of June 30, 2023, Jet Token’s cash and equivalents were approximately $0.6 million, including approximately $500,000 of restricted cash under its aircraft leasing arrangements described below.
Cash Flows
The following table summarizes our cash flows for the years ended June 30, 2023, and 2021:
| For the 6 months ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in) operating activities | $ | (1,919,226 | ) | $ | (129,959 | ) | ||
| Net cash provided by (used in) investing activities | (121,649 | ) | (89,418 | ) | ||||
| Net cash provided by financing activities | 1,151,726 | 309,237 | ||||||
| Increase (decrease) in cash and cash equivalents | $ | (889,149 | ) | $ | 89,860 | |||
| ~ 8 ~ |
Cash Flow from Operating Activities
Net cash used in operating activities for the six months ended June 30, 2023 was $1.9 million compared to $0.1 million for 2022. The cash outflow from operating activities in 2023 primarily consisted of our net loss, net of non-cash charges of $2.1 million and a $0.2 million reduction in operating liabilities, which were offset by an $0.4 million decrease in operating assets. The decrease in operating liabilities was primarily driven by an $0.2 million decrease in Jet Token’s accrued liabilities relating to the operation of the Company’s aircraft and a $0.2 million increase in deferred jet card revenue relating to the sale of jet card hours not yet flown. The increase in net cash used in operating activities for 2023 was primarily driven by a $2.1 million increase in our net loss, net of non-cash charges resulting from the Company’s higher level of operations during 2023 as a result of operating a greater number of operational aircraft and startup expenses incurred during 2023 partially offset by the $0.3 million changes in operating assets and liabilities.
Cash Flow from Investing Activities
Net cash used in investing activities for the six months ended June 30, 2023 was 122,000, 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.
Cash Flow from Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2023 was $1.2 million. Cash provided by financing activities was primarily driven by net offering proceeds from Jet Token’s Regulation A+ offering of Non-Voting Common Stock. In February 2020, Jet Token commenced an offering under Regulation A+ for a maximum amount of $10 million, which was terminated on December 31, 2020. Jet Token issued 32,959,185 shares of Non-Voting Common Stock in this offering representing approximately $9.9 million in gross proceeds. From June 2021 to January of 2023, Jet Token commenced another offering under Regulation A+ and issued 8,767,126 shares representing approximately $6.6 million in gross proceeds. Jet Token’s Regulation A+ offering of Non-Voting Common Stock ended in January of 2023
Aircraft Financing Arrangements
In November 2021 and April 2022, Jet Token entered into two separate five-year leasing arrangements for the acquisition of two of its HondaJet Elite aircraft. At any time during their term, Jet Token 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 Jet Token to hold a combined liquidity reserve of $500,000 in a separate bank account pledged as security to the lessor, which Jet Token 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 Jet Token’s business, operations or financial condition. Please see Note 5 to Jet Token’s financial statements for the fiscal year ended December 31, 2022 for a further description of these leasing arrangements.
In June 2022, Jet Token received an unsolicited offer for the outright purchase of one of its HondaJet Elite aircraft, which netted Jet Token approximately $1.2 million of proceeds over the leased cost. After internal financial and legal review, Jet Token determined that the sale of the aircraft would offer a net benefit to its stakeholders. Jet Token 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.
Advances and Long-Term Debt
In May 2020, Jet Token received a loan in the amount of $121,000 which has been forgiven in its entirety. The loan was made pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. In February 2021, Jet Token received a second loan in the amount of $86,360 pursuant to the PPP program under the revised CARES Act, which has also been forgiven in its entirety. In July 2021, Jet Token entered into a loan agreement with StartEngine Primary, LLC, which allows for advances up to an aggregate amount of $500,000 to pay for advertising and promotion services in connection with Jet Token’s equity offering. The advances are non-interest bearing and are repaid from the proceeds of Jet Token’s offering. As of December 31, 2021, Jet Token had a balance of $194,727 due on this loan which has subsequently been repaid in full. See Note 4 to Jet Token’s audited financial statements for the fiscal year ended December 31, 2022, for a description of these loans.
In 2020, Jet Token’s Founder and Executive Chairman, Mike Winston, advanced approximately $80,000 in the form of a non-interest-bearing loan, which was repaid in full during 2020. In 2021, he advanced approximately $200,000 in the form of a non-interest-bearing loan, all of which was repaid in full during 2022.
| ~ 9 ~ |
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Defined terms included below have the same meaning as terms defined and included elsewhere in this Current Report on Form 8-K/A and if not defined in the Form 8-K/A, in the Proxy Statement/Prospectus, which is incorporated by reference. Unless the context otherwise requires, the “Company” refers to Jet.AI Inc., a Delaware Corporation (“Jet.AI”) (f/k/a Oxbridge Acquisition Corp., a Cayman Islands exempted company, “OXAC”) and its consolidated subsidiaries after the Closing, and OXAC prior to the Closing.
The following unaudited pro forma condensed combined balance sheet as of June 30, 2023 and the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2023 and for the year ended December 31, 2022 present the combination of the historical financial information of Jet.AI Inc. (f./k/a Oxbridge Acquisition Corp.) and Jet Token after giving effect to the Business Combination, and related adjustments described in the accompanying notes. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.
The unaudited pro forma condensed combined balance sheet as of June 30, 2023 combines the historical unaudited condensed balance sheet of Jet.AI as of June 30, 2023 and the historical unaudited condensed consolidated balance sheet of Jet Token as of June 30, 2023 on a pro forma basis as if the Business Combination had been consummated on June 30, 2023. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2023 and the audited pro forma condensed statement of operations for the year ended December 31, 2022 combines the historical condensed statement of operations of Jet.AI for the six months ended June 30, 2023 and the year ended December 31, 2022 and the historical condensed consolidated statement of operations of Jet Token for the same periods on a pro forma basis as if the Business Combination had been consummated on January 1, 2022.
The historical financial information of Jet.AI was derived from the audited financial statements of Jet.AI as of and for the year ended December 31, 2022 and the unaudited financial statements for the three and six months ended June 30, 2023, included elsewhere in this proxy statement/prospectus. The historical financial information of Jet Token was derived from the audited financial statements of Jet Token as of and for the year ended December 31, 2022 and the six months ended June 30, 2023, included elsewhere in this Form 8-K/A. This information should be read together with Jet.AI’s and Jet Token’s audited financial statements and related notes, the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Oxbridge,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Jet Token” and other financial information included elsewhere in this Form 8-K/A.
Introduction
On August 10, 2023, as a result of the previously announced Business Combination Agreement dated February 24, 2023, as amended, Oxbridge domesticated as a Delaware corporation, First Merger Sub merged with and into Jet Token, with Jet Token surviving the First Merger as a wholly owned subsidiary of Jet.AI, and Jet Token (as the surviving entity of the First Merger) merged with and into Second Merger Sub, with Second Merger Sub surviving the Second Merger as a wholly owned subsidiary of Jet.AI. In connection with the Business Combination, security holders of Jet.AI and Jet Token immediately prior to the Closing became security holders of Jet.AI. Following the Business Combination, on August 11, 2023, the Jet.AI Common Stock, the Jet.AI Warrants and the Merger Consideration Warrants began trading on Nasdaq under the new symbols “JTAI,” “JTAIW” and “JTAIZ,” respectively.
Prior to completion of the Business Combination, Jet.AI was a blank check company incorporated on April 12, 2021 as a Cayman Islands exempted company for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar transaction with one or more businesses or entities. On August 16, 2021, Jet.AI completed its IPO of 11,500,000 Oxbridge Units, including 1,500,000 Oxbridge Units that were issued pursuant to the underwriters’ exercise of their over-allotment option in full, with each Oxbridge Unit consisting of one Class A Ordinary Share and one warrant, where each whole warrant is exercisable to purchase one Class A Ordinary Share at a price of $11.50 per share, generating gross proceeds to Jet.AI of $115,000,000.
Simultaneously with the closing of its IPO, Jet.AI consummated the private placement of 5,760,000 Private Placement Warrants to the Sponsor and Maxim Group, LLC, the representative to the underwriters in its initial public offering, at an average purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to Jet.AI of $5,760,000. The Private Placement Warrants are identical to the Public Warrants sold as part of the Units in the IPO, except that the Sponsor and Maxim agreed not to transfer, assign or sell any of the Private Placement Warrants (except to certain permitted transferees) until 30 days after the completion of the Company’s initial Business Combination. Additionally, the Private Placement Warrants are not redeemable by the Company and are exercisable on a cashless basis so long as they are held by the Sponsor and Maxim or their respective permitted transferees, whereas the public warrants are redeemable and may only be exercised on a cashless basis if the Company calls the public warrants for redemption and elects to require holders to exercise their public warrants on a cashless basis.
Jet.AI also issued an aggregate of 2,875,000 Class B ordinary shares to the Sponsor for an aggregate purchase price of $25,000, or approximately $0.009 per share.
Upon the closing of the IPO and the sale of the Private Placement Warrants, an aggregate of $116,725,000 was placed in the Trust Account with Continental Stock Transfer & Trust Company acting as trustee and was available to be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by Jet.AI, until the earlier of: (a) the completion of an Initial Business Combination and (b) the distribution of the Trust Account.
Jet Token, a Delaware corporation, was founded in 2018 by Michael Winston, its Executive Chairman. Jet Token, directly and indirectly through its subsidiaries, is 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 Jet Token’s and other’s aircraft at agreed-upon rates, (iii) the operation of a proprietary booking platform (the “App”), which functions as a prospecting and quoting platform to arrange private jet travel with third party carriers as well as via Jet Token’s leased and managed aircraft, for Part 135 (whole aircraft charter) and (iv) since January 2023, joint ownership, alongside its existing operating partner, Cirrus, of 380 Software LLC, which supplies the technology to sell charter under Part 380 (individual seats) on the Cirrus fleet of aircraft.
Description of the Business Combination
Jet Token is considered to be the accounting acquirer, as further discussed in “Note 1 — Basis of Presentation” of this unaudited pro forma condensed combined financial information.
In connection with the Domestication and prior to the Effective Time, the total issued and outstanding 799,120 Class A Ordinary Shares and 2,875,000 Class B Ordinary Shares as of June 23, 2023 were converted automatically, on a one-for-one basis, into shares of Jet.AI Common Stock. Each issued and outstanding public warrant and private placement warrant were converted automatically into a Jet.AI Warrant pursuant to the Warrant Agreement, entitling the holder to purchase one share of Jet.AI Common Stock at an exercise price of $11.50.
Each outstanding share of Jet Token Common Stock, including each share of Jet Token Preferred Stock that was converted into shares of Jet Token Common Stock immediately prior to the Effective Time, was cancelled and automatically converted into the right to receive (x) the number of shares of Jet.AI Common Stock equal to the Stock Exchange Ratio, and (y) the number of Merger Consideration Warrants equal to the Warrant Exchange Ratio. Each Jet Token Option, whether or not exercisable and whether or not vested, that was outstanding immediately prior to the Effective Time was automatically converted into an option to purchase a number of Jet.AI Options based on the Option Exchange Ratio. Each Jet Token Warrant issued and outstanding immediately prior to the Effective Time was automatically converted into a warrant to acquire (x) a number of shares of Jet.AI Common Stock equal to the Stock Exchange Ratio and (y) a number of Merger Consideration Warrants equal to the Warrant Exchange Ratio. Each Jet Token RSU Award that was outstanding immediately prior to the Effective Time was converted into a Jet.AI RSU Award with respect to a number of RSUs based on the applicable exchange ratio. Upon the consummation of the Business Combination, Oxbridge was immediately renamed “Jet.AI Inc.”
Upon the consummation of the Business Combination, 4,523,167 shares of Jet.AI Common Stock and 7,196,375 Merger Consideration Warrants were issued to the Historical Rollover Shareholders in exchange for all outstanding shares of Jet Token Common Stock (including shares of Jet Token Preferred Stock converted in the Conversion). The Company also reserved for issuance up to 3,284,488 shares of Jet.AI Common Stock in respect of Jet.AI Options issued in exchange for outstanding pre-merger Jet Token Options, and 148,950 shares of Jet.AI Common Stock and 237,030 Merger Consideration Warrants in respect of Jet.AI RSU Awards issued in exchange for outstanding pre-merger Jet Token RSU Awards.
In addition, in connection with the Business Combination, Jet.AI proposed and approved the 2023 Jet.AI Omnibus Incentive Plan, which became effective upon closing of the Business Combination, in place of the existing Jet Token Option Plans. The purpose of the Omnibus Incentive Plan is to provide eligible employees, directors, consultants and the founders the opportunity to receive stock-based incentive awards in order to encourage them to contribute materially to Jet.AI’s growth and to align the economic interests of such persons with those of its stockholders. The financial impact of the Omnibus Incentive Plan has not been included in the unaudited pro forma condensed combined financial statement as it cannot be reliably estimated at this stage. See “Proposal No. 5 — The Omnibus Incentive Plan Proposal” contained elsewhere in this proxy statement/prospectus for further information.
Forward Purchase Agreements
As previously disclosed, on August 6, 2023, Oxbridge 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, “Seller”) (the “Forward Purchase Agreement”) for OTC Equity Prepaid Forward Transactions. For purposes of the Forward Purchase Agreement, Oxbridge is referred to as the “Counterparty” prior to the consummation of the Business Combination, while Jet.AI is referred to as the “Counterparty” after the consummation of the Business Combination. Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Forward Purchase Agreement.
Pursuant to the terms of the Forward Purchase Agreement, the Seller intended, but was not obligated, to purchase up to 1,186,952 (the “Purchased Amount”) Class A ordinary shares, par value $0.0001 per share, of Oxbridge (“Oxbridge Shares”) concurrently with the Closing pursuant to the Seller’s FPA Funding Amount PIPE Subscription Agreement (as defined below), less the number of Oxbridge Shares purchased by the Seller separately from third parties through a broker in the open market (“Recycled Shares”). No Seller was required to purchase an amount of Oxbridge Shares such that following such purchase, that Seller’s ownership would exceed 9.9% of the total Oxbridge Shares outstanding immediately after giving effect to such purchase, unless the Seller, at its sole discretion, waived such 9.9% ownership limitation. The Number of Shares subject to the Forward Purchase Agreement was subject to reduction following a termination of the Forward Purchase Agreement with respect to such shares as described under “Optional Early Termination” in the Forward Purchase Agreement.
The Forward Purchase Agreement provided for a prepayment shortfall in an amount in U.S. dollars equal to $1,250,000 (the “Prepayment Shortfall”); provided that Seller shall pay one half (1/2) of the Prepayment Shortfall to Counterparty on the Prepayment Date (which amount shall be netted from the Prepayment Amount) (the “Initial Shortfall”) and, at the request of Counterparty, the other one half (1/2) of the Prepayment Shortfall (the “Future Shortfall”) on the date that the SEC declares the Registration Statement effective (the “Registration Statement Effective Date”), provided the VWAP Price is greater than $6.00 for any 45 trading days during the prior 90 consecutive trading day period and average daily trading value over such period equals at least four times the Future Shortfall. Seller in its sole discretion may sell Recycled Shares at any time following the Trade Date and at any sales price, without payment by Seller of any Early Termination Obligation until such time as the proceeds from such sales equal 100% of the Initial Shortfall and 100% of the Future Shortfall actually paid to Counterparty (as set forth under Shortfall Sales in the Forward Purchase Agreement) (such sales, “Shortfall Sales,” and such Shares, “Shortfall Sale Shares”). A sale of Shares is only (a) a “Shortfall Sale,” subject to the terms and conditions herein applicable to Shortfall Sale Shares, when a Shortfall Sale Notice is delivered under the Forward Purchase Agreement, and (b) an Optional Early Termination, subject to the terms and conditions of the forward Purchase Agreement applicable to Terminated Shares, when an OET Notice is delivered under the Forward Purchase Agreement, in each case the delivery of such notice in the sole discretion of the Seller (as further described in the “Optional Early Termination” and “Shortfall Sales” sections in the Forward Purchase Agreement).
FPA Funding Amount PIPE Subscription Agreement
In connection with the Business Combination, on August 6, 2023, Oxbridge entered into a subscription agreement (the “FPA Funding Amount PIPE Subscription Agreement”) with Seller.
Pursuant to the FPA Funding PIPE Subscription Agreement, Seller agreed to subscribe for and purchase, and Oxbridge agreed to issue and sell to Seller, on the Closing Date, an aggregate of up to 1,186,952 Oxbridge Shares, less the Recycled Shares in connection with the Forward Purchase Agreement. At the Effective Time, 247,756 shares of Jet.AI were issued to Seller under the PIPE Subscription Agreement.
Maxim 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 270,000 shares of Jet.AI Common Stock to settle the payment obligations of the Company under the underwriting agreement dated on or about August 11, 2011, by and between the Company and Maxim, which shares of Jet.AI Common Stock are subject to a Registration Rights Agreement. The Company also issued 1,127 shares of Series A Convertible Preferred Stock in an amount equal in value to $1,127,000 (the “Series A Preferred Shares”). The shares of Jet.AI Common Stock issuable upon conversion of the Series A Preferred Shares are subject to the Registration Rights Agreement.
The following table summarizes the pro forma shares of Jet.AI Common Stock outstanding on August 10, 2023 immediately following the Effective Time, excluding the potential dilutive effect of exercise of Jet.AI Warrants and Merger Consideration Warrants:
| No. of Shares of Jet.AI Common Stock | % of total Jet.AI Common Stock | |||||||
| Historical Rollover Shareholders | 4,523,167 | 51.9 | ||||||
| Public Shareholders (1) | 799,120 | 9.2 | ||||||
| Initial Shareholders (2) | 2,875,000 | 33.0 | ||||||
| PIPE Investors (3) | 247,756 | 2.8 | ||||||
| Maxim (4) | 270,000 | 3.1 | ||||||
| Total | 8,715,043 | 100.0 | ||||||
| (1) | Reflects actual redemptions of 502,832 shares of OXAC Class A Ordinary Shares in connection with the Business Combination. | |
| (2) | Reflects shares of OXAC’s Class B Ordinary Shares held by the Sponsor that converted on a one-for-one basis into shares of Jet.AI Common Stock in connection with the Business Combination and Domestication. | |
| (3) | Reflects the issuance of 247,756 shares of Jet.AI Common Stock to Seller under that certain FPA Funding Amount PIPE Subscription Agreement dated August 6, 2023. | |
| (4) | Reflects the issuance of 270,000 shares of Jet.AI Common Stock to settle the payment obligations of the Company under the underwriting agreement with Maxim. |
The following unaudited pro forma condensed combined balance sheet as of June 30, 2023 and the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2023 and for the year ended December 31, 2022, are based on the historical financial statements of Jet.AI (as restated) and Jet Token. The unaudited pro forma adjustments are based on information currently available, and assumptions and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JUNE 30, 2023
(in thousands, except share and per share amounts)
| Jet Token, Inc. (Historical) | Jet.AI Inc. (f/k/a Oxbridge Acquisition Corp.) (Historical) | Transaction Accounting Adjustments | Pro Forma Combined | |||||||||||||||
| Assets | ||||||||||||||||||
| Current assets: | ||||||||||||||||||
| Cash and cash equivalents | $ | 638 | $ | 20 | $ | 13,125 | A | $ | 6,344 | |||||||||
| 248 | J | |||||||||||||||||
| (2,192 | ) | C | ||||||||||||||||
| (5,496 | ) | H | ||||||||||||||||
| Other current assets | 186 | 37 | - | 222 | ||||||||||||||
| Total current assets | 824 | 56 | 5,686 | 6,566 | ||||||||||||||
| Property and equipment, net | 9 | - | - | 9 | ||||||||||||||
| Intangible assets, net | 106 | - | - | 106 | ||||||||||||||
| Right-of-use asset | 1,829 | - | - | 1,829 | ||||||||||||||
| Investment in joint venture | 100 | - | - | 100 | ||||||||||||||
| Other assets | 748 | - | - | 748 | ||||||||||||||
| Cash held in trust account | - | 13,215 | (13,125 | ) | - | |||||||||||||
| Total assets | $ | 3,616 | $ | 13,182 | $ | (7,440 | ) | $ | 9,358 | |||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||
| Current liabilities: | ||||||||||||||||||
| Accounts payable | $ | 498 | $ | - | $ | - | $ | 498 | ||||||||||
| Accrued liabilities | 764 | 411 | 1,174 | |||||||||||||||
| Deferred revenue | 1,100 | - | - | 1,100 | ||||||||||||||
| Lease liability, current portion | 502 | - | - | 502 | ||||||||||||||
| Due to affiliates | - | - | - | |||||||||||||||
| Total current liabilities | 2,863 | 411 | - | 3,274 | ||||||||||||||
| Lease liability, net of current portion | 1,278 | 1,278 | ||||||||||||||||
| Promissory note payable | - | 575 | (575 | ) | B | - | ||||||||||||
| Deferred underwriting commissions | - | 4,025 | (4,025 | ) | B | - | ||||||||||||
| Derivative liabilities | - | 576 | (576 | ) | I | 5 | ||||||||||||
| Total liabilities | 4,141 | 5,587 | (5,354 | ) | 4,552 | |||||||||||||
| Commitments and contingencies | - | - | - | - | ||||||||||||||
| Class A ordinary shares; 1,186,952 shares subject to possible redemption (at redemption value) | 13,125 | (13,125 | ) | D | - | |||||||||||||
| Stockholders’ Equity | ||||||||||||||||||
| Series Seed Preferred stock | 21 | - | (21 | ) | E | - | ||||||||||||
| Series CF Non-voting Preferred stock | 704 | - | (704 | ) | E | - | ||||||||||||
| Series A Convertible Preferred Stock | - | - | 1,127 | B | 1,127 | |||||||||||||
| Series A-1 Convertible Preferred Stock | 575 | B | 575 | |||||||||||||||
| Subscription receivable | (25 | ) | - | - | (25 | ) | ||||||||||||
| Additional paid-in capital | 30,600 | - | 13,125 | D | 34,954 | |||||||||||||
| 725 | E | |||||||||||||||||
| 60,000 | F | |||||||||||||||||
| (60,000 | ) | F | ||||||||||||||||
| (2,192 | ) | C | ||||||||||||||||
| (5,496 | ) | H | ||||||||||||||||
| 2,700 | B | |||||||||||||||||
| 198 | B | |||||||||||||||||
| 576 | I | |||||||||||||||||
| 248 | J | |||||||||||||||||
| (5,530 | ) | G | ||||||||||||||||
| Accumulated deficit | (31,824 | ) | (5,530 | ) | 5,530 | G | (31,824 | ) | ||||||||||
| Total stockholders’ equity | (525 | ) | (5,530 | ) | 11,039 | 4,806 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 3,616 | $ | 13,182 | $ | (7,440 | ) | $ | 9,358 | |||||||||
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2023
| Jet Token, Inc. (Historical) | Jet.AI Inc. (f/k/a Corp.) | Transaction Accounting Adjustments | Pro Forma Combined | |||||||||||||||
| Revenues | $ | 4,668 | $ | - | $ | - | $ | 4,668 | ||||||||||
| Cost of revenues | 4,944 | - | 4,944 | |||||||||||||||
| Gross profit | (276 | ) | - | - | (276 | ) | ||||||||||||
| Operating Expenses: | ||||||||||||||||||
| General and administrative | 4,604 | 470 | - | 5,073 | ||||||||||||||
| Sales and marketing | 224 | - | - | 224 | ||||||||||||||
| Research and development | 65 | - | - | 65 | ||||||||||||||
| Total operating expenses | 4,892 | 470 | - | 5,362 | ||||||||||||||
| Operating loss | (2,719 | ) | (363 | ) | - | (3,082 | ) | |||||||||||
| Other (income) expense: | ||||||||||||||||||
| Other interest income | (2 | ) | - | (2 | ) | |||||||||||||
| Interest earned on marketable securities held in trust account | - | (291 | ) | 291 | AA | - | ||||||||||||
| Change in fair value of warrant liabilities | - | 206 | - | 206 | ||||||||||||||
| Total other (income) expense | - | (87 | ) | 291 | 204 | |||||||||||||
| Loss before provision for income taxes | (5,168 | ) | (383 | ) | (291 | ) | (5,842 | ) | ||||||||||
| Provision for income taxes | - | - | - | - | ||||||||||||||
| Net Income (Loss) | $ | (5,168 | ) | $ | (383 | ) | $ | (291 | ) | $ | (5,842 | ) | ||||||
| Weighted average shares outstanding - basic and diluted | 126,287,952 | 4,176,952 | 8,715,043 | |||||||||||||||
| Net loss per share - basic and diluted | $ | (0.04 | ) | $ | (0.09 | ) | $ | (0.67 | ) | |||||||||
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022
(in thousands, except share and per share amounts)
| Jet Token, Inc. (Historical) | Jet.AI Inc. (f/k/a Oxbridge Acquisition Corp.) (Historical) | Transaction Accounting Adjustments | Pro Forma Combined | |||||||||||||||
| Revenues | $ | 21,863 | $ | - | $ | - | $ | 21,863 | ||||||||||
| Cost of revenues | 19,804 | - | - | 19,804 | ||||||||||||||
| Gross profit | 2,059 | - | - | 2,059 | ||||||||||||||
| Operating Expenses: | ||||||||||||||||||
| General and administrative | 9,231 | 487 | - | 9,718 | ||||||||||||||
| Sales and marketing | 427 | - | - | 427 | ||||||||||||||
| Research and development | 137 | - | - | 137 | ||||||||||||||
| Total operating expenses | 9,795 | 487 | - | 10,282 | ||||||||||||||
| Operating loss | (7,736 | ) | (487 | ) | - | (8,223 | ) | |||||||||||
| Other (income) expense: | ||||||||||||||||||
| Interest income | - | (964 | ) | 964 | AA | - | ||||||||||||
| Change in fair value of warrant liabilities | - | (6,699 | ) | - | (6,699 | ) | ||||||||||||
| Total other income | - | (7,663 | ) | 964 | (6,699 | ) | ||||||||||||
| Loss before provision for income taxes | (7,736 | ) | 7,176 | (964 | ) | (1,524 | ) | |||||||||||
| Provision for income taxes | 2 | - | - | 2 | ||||||||||||||
| Net (loss) income | $ | (7,738 | ) | $ | 7,176 | $ | (964 | ) | $ | (1,524 | ) | |||||||
| Weighted average shares outstanding – basic and diluted | 122,747,555 | 13,133,764 | 17,154,099 | |||||||||||||||
| Net (loss) income per share - basic and diluted | $ | (0.06 | ) | $ | 0.55 | $ | (0.09 | ) | ||||||||||
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Basis of Presentation
The Business Combination is expected to be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, Jet.AI Inc. (f/k/a Oxbridge Acquisition Corp, Inc.) (“Jet.AI”) has been treated as the “accounting acquiree” and Jet Token, Inc. (“Jet Token”) as the “accounting acquirer” for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination has been treated as the equivalent of Jet Token issuing shares for the net assets of Jet.AI, followed by a recapitalization. The net assets of Jet Token will be stated at historical cost. Operations prior to the Business Combination will be those of Jet Token.
The unaudited pro forma condensed combined balance sheet as of June 30, 2023 gives pro forma effect to the Business Combination as if it had occurred on June 30, 2023. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022 gives pro forma effect to the Business Combination as if it had been completed on January 1, 2022. These periods are presented on the basis of Jet Token as the accounting acquirer.
The pro forma adjustments reflecting the consummation of the Business Combination and related transactions are based on certain currently available information and certain assumptions and methodologies that the Company believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the difference may be material. The Company believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination and related transactions based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination. The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination and related transactions taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the Company. They should be read in conjunction with the historical financial statements and notes thereto of Jet Token, Inc. and Jet.AI included in the Form 8-K, and other financial information included elsewhere.
Note 2. Accounting Policies
Upon consummation of the Business Combination, management is performing a comprehensive review of the two entities’ accounting policies. As a result of the review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on the financial statements of the Company. Based on its initial analysis, management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.
Note 3. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information
The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and has been prepared for informational purposes only.
The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). The Company has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the following unaudited pro forma condensed combined financial information.
The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the post-combination company filed consolidated income tax returns during the periods presented. The pro forma basic and diluted loss per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of the Company’s shares outstanding, assuming the Business Combination and related transactions occurred as of the beginning of the period presented.
Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
The adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2023 are as follows:
| A. | Reflects the reclassification of marketable securities held in the Trust Account to cash and cash equivalents. | |
| B. | Reflects classification adjustments in relation to the repayment of the promissory note and deferred underwriting commissions both of which become payable upon the completion of a business combination. | |
| C. | Represents acquisition-related transaction costs totaling $2,192,000 (all of which is expected to be classified as equity issuance costs). The transaction costs are $2,192,000 for Jet.AI. | |
| D. | Represents the conversion of Jet.AI’s 799,120 Ordinary Shares to shares of common stock of the Domesticated Acquiror, par value $0.0001 per share, pursuant to the Business Combination Agreement. | |
| E. | Represents the conversion of 683,333 shares of Jet Token’s Series Seed Preferred Stock and 18,813,002 shares of its Series CF Non-Voting Preferred Stock to 21,029.56 and 578,969.85 shares, respectively, of Jet.AI common stock, par value $0.0000001 per share, pursuant to the Business Combination Agreement. | |
| F. | Represents recapitalization of Jet Token’s outstanding equity and the issuance of 4,523,167 shares of common stock and warrants exercisable into 7,196,375 shares of Jet.AI common stock to Jet Token shareholders as consideration for the reverse recapitalization. The number of Merger Consideration Warrants to be issued at closing are based on a value of $60,000,000 using the Black-Scholes model and are considered equity issuance costs associated with the Business Combination, and thus are contained within additional paid-in capital. | |
| G. | Reflects the reclassification of Jet.AI’s historical accumulated deficit. | |
| H. | Reflects the redemption of 502,832 public shares for aggregate redemption payments of $5.6 million allocated to common stock and additional paid-in capital using par value $0.0001 per share and at a redemption price of approximately $11.10 per share. | |
| I. | Reflects the change of classification of the Public Warrants from liability to equity upon closing of the Business Combination. Upon closing of the Business Combination, shares underlying the Public Warrants are not redeemable and Jet. AI will have a single class of voting stock, which does not preclude the Public Warrants from being considered indexed to Jet.AI’s equity and allows the Public Warrants to meet the criteria for equity classification. | |
| J. | Reflects the issuance of 247,756 shares of Jet.AI Common Stock to Seller under that certain FPA Funding Amount PIPE Subscription Agreement dated August 6, 2023. |
Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations
The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for year ended December 31, 2022 and for the six month period ended June 30, 2023 are as follows:
AA. Reflects elimination of investment income on the Trust Account.
Note 4. Net Loss per Share
Net loss per share was calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2022. As the Business Combination and related transactions are being reflected as if they had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net income (loss) per share assumes that the shares issuable in the Business Combination have been outstanding for the entirety of all periods presented.
The unaudited pro forma condensed combined financial information has been prepared based on the following information:
| For the Six Months Ended | For the Year Ended | |||||||
| June 30, 2023 | December 31, 2022 | |||||||
| Pro forma net loss | $ | (5,842 | ) | $ | (1,522 | ) | ||
| Weighted average shares outstanding of common stock | $ | 8,715,043 | $ | 17,154,099 | ||||
| Net loss per share - basic and diluted | (0.67 | ) | (0.09 | ) | ||||
| Excluded securities: (1) | ||||||||
| Assumed options | 3,284,488 | 3,284,488 | ||||||
| Merger Consideration Warrants issued to Jet Token Shareholders | 7,196,375 | 7,196,375 | ||||||
| Public Warrants | 11,489,334 | 11,489,334 | ||||||
| Private Warrants | 5,760,000 | 5,760,000 | ||||||
| Shares issued to Restricted Stock Unit Awards | 148,950 | 148,950 | ||||||
| Merger Consideration Warrants issued to Restricted Stock Unit Awards | 237,020 | 237,020 | ||||||
(1) The potentially dilutive outstanding securities were excluded from the computation of pro forma net loss per share, basic and diluted, because their effect would have been anti-dilutive, issuance or vesting of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the periods presented.