VJET 10-Q
Flyte Aviation, Inc. (VJET)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
Commission File No.
| Catheter Precision, Inc. |
| (Exact name of registrant as specified in its charter) |
| | | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
| | | |
| (Address of principal executive offices) | (Zip Code) |
| ( |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities Registered under 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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| | ☒ | Smaller reporting company | |
| Emerging growth company | |
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes
As of the close of business on May 8, 2026, the registrant had
CATHETER PRECISION, INC.
QUARTERLY REPORT ON FORM 10-Q
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
| March 31, 2026 | December 31, 2025 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash and cash equivalents | $ | $ | ||||
| Accounts receivable, net | ||||||
| Inventories | ||||||
| Prepaid expenses and other current assets | ||||||
| Total current assets | ||||||
| Property and equipment, net | ||||||
| Operating lease right-of-use assets, net | ||||||
| Other non-current assets | ||||||
| Intangible assets, net | ||||||
| Goodwill | ||||||
| TOTAL ASSETS | $ | $ | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Current Liabilities | ||||||
| Accounts payable | $ | $ | ||||
| Accrued expenses | ||||||
| Deferred revenue | ||||||
| Short-term notes payable, net of discount | ||||||
| Convertible notes payable, at fair value | ||||||
| Short-term notes payable of variable interest entities due to related parties | ||||||
| Deferred consideration | ||||||
| Current portion of royalties payable due to related parties | ||||||
| Current portion of operating lease liabilities | ||||||
| Total current liabilities | ||||||
| Royalties payable due to related parties | ||||||
| Operating lease liabilities | ||||||
| Notes payable of variable interest entities, net of discount | ||||||
| Notes payable due to related parties | ||||||
| Notes payable | ||||||
| Deferred tax liability | ||||||
| Total liabilities | ||||||
| Commitments and Contingencies (see Note 17) | ||||||
| Stockholders' Equity | ||||||
| Preferred Stock, $ par value, shares authorized | ||||||
| Series B Convertible Preferred Stock, $ par value, shares designated; and shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||
| Series C-1 Convertible Preferred Stock, $ par value, shares designated; and shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||
| Series J Convertible Preferred Stock, $ par value, shares designated; shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||
| Series X Convertible Preferred Stock, $ par value, shares designated; shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||
| Additional paid-in capital | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||
| Total stockholders' equity attributable to Catheter Precision, Inc. | ||||||
| Non-controlling interest | ( | ) | ( | ) | ||
| Total stockholders' equity | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
| For the Three Months Ended March 31, |
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| 2026 |
2025 |
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| Revenues: |
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| Product revenue |
$ | $ | ||||||
| Service revenue, net |
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| Total revenues, net |
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| Cost of revenues: |
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| Cost of product revenue |
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| Cost of service revenue |
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| Total cost of revenues |
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| Gross profit |
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| Operating expenses |
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| Selling, general and administrative |
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| Research and development |
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| Acquired in-process research and development |
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| Total operating expenses |
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| Operating loss |
( |
) | ( |
) | ||||
| Other income (expense), net |
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| Interest income |
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| Interest expense |
( |
) | ( |
) | ||||
| Interest expense due to related parties |
( |
) | ( |
) | ||||
| Change in fair value of royalties payable due to related parties |
( |
) | ||||||
| Change in fair value of minority equity interest |
( |
) | ||||||
| Change in fair value of deferred consideration |
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| Other expenses, net |
( |
) | ||||||
| Total other income (expense), net |
( |
) | ||||||
| Loss from operations before income tax benefit |
( |
) | ( |
) | ||||
| Income tax benefit |
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| Net loss |
( |
) | ( |
) | ||||
| Less: Net loss attributable to non-controlling interest |
( |
) | ||||||
| Net loss attributable to Catheter Precision, Inc. |
$ | ( |
) | $ | ( |
) | ||
| Deemed dividend on warrant inducement offer |
( |
) | ||||||
| Net loss attributable to Catheter Precision, Inc. common stockholders |
$ | ( |
) | $ | ( |
) | ||
| Net loss per share attributable to Catheter Precision, Inc. common stockholders, basic and diluted |
$ | ( |
) | $ | ( |
) | ||
| Weighted-average common shares used in computing net loss per share, basic and diluted |
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See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except share data)
(Unaudited)
| Total |
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| Series B Convertible Preferred Stock | Series C-1 Convertible Preferred Stock | Series J Convertible Preferred Stock | Series X Convertible Preferred Stock | Common Stock |
Additional Paid-In |
Accumulated |
Catheter Precision Inc. Stockholders' |
Non-controlling |
Total Stockholders' |
||||||||||||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Equity |
Interest |
Equity |
|||||||||||||||||||||||||||||||
| Balance at December 31, 2025 |
$ | $ | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||
| Issuance of common stock and other equity-classified contracts (see Note 12) |
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| Issuance of common stock upon exercise of warrants (see Note 12) |
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| Conversion of preferred stock |
( |
) | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Balance at March 31, 2026 |
$ | $ | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||
| Total |
||||||||||||||||||||||||||||||||||||||||||||||
| Series B Convertible Preferred Stock | Series C-1 Convertible Preferred Stock | Series J Convertible Preferred Stock | Series X Convertible Preferred Stock | Common Stock |
Additional Paid-In |
Accumulated |
Catheter Precision Inc. Stockholders' |
Non-controlling |
Total Stockholders' |
|||||||||||||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Equity |
Interest |
Equity |
||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 |
$ | $ | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for vested restricted stock awards |
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| Issuance of common stock for asset acquisition (see Note 15) |
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| Issuance of common stock upon release of Prepaid Series Warrants (see Note 12) |
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| Net loss |
— | — | — | — | — | ) | ) | |||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 |
$ | $ | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Amortization of operating right-of-use assets | ||||||||
| Change in fair value of minority equity interest | ||||||||
| Change in fair value of deferred consideration | ( | ) | ||||||
| Change in fair value of royalties payable due to related parties | ||||||||
| Deferred income tax provision (benefit) | ( | ) | ( | ) | ||||
| Acquired in-process research and development | ||||||||
| Accretion of discount on note payable | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Operating lease right-of-use assets and lease liabilities | ( | ) | ( | ) | ||||
| Current portion of royalties payable due to related parties | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ( | ) | ||||||
| Interest payable due to related parties | ||||||||
| Interest accrued on notes payable of variable interest entities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Consideration paid for acquired in-process research and development | ( | ) | ||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Acquisition, net of cash acquired | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of common stock and equity-classified contracts, net of issuance costs | ||||||||
| Proceeds from exercise of warrants (see Note 12) | ||||||||
| Payments on short-term notes payable | ( | ) | ( | ) | ||||
| Proceeds from notes payable | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS, beginning of period. | ||||||||
| CASH AND CASH EQUIVALENTS, end of period. | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest | $ | $ | ||||||
| SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES | ||||||||
| Deemed dividend on warrant inducement offer | $ | $ | ||||||
| Fair value of common stock issued in connection with asset acquisitions | $ | $ | ||||||
| Fair value of deferred consideration payable for initial minority equity interest | $ | $ | ||||||
| Acquisition date fair value of previously held minority equity interest of step acquiree | $ | $ | ||||||
| Fair value of deferred consideration payable in connection with acquisition | $ | $ | ||||||
| Short-term note payable issued in connection with acquisition | $ | $ | ||||||
| Property and equipment included in accrued expenses | $ | $ | ||||||
| Property and equipment reclassified from inventories | $ | $ | ||||||
| Operating right-of-use asset obtained in exchange for new operating lease liabilities | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Organization and Nature of Operations
The Company
Catheter Precision, Inc. ("Catheter" or the "Company”) was incorporated in California on September 4, 2002, and reincorporated in Delaware in July 2018. On January 9, 2023, Catheter entered into the Amended and Restated Agreement and Plan of Merger (the "Merger Agreement") with Catheter Precision, Inc. (“Old Catheter”), a privately held Delaware corporation. Under the terms of the Merger Agreement, Old Catheter became a wholly owned subsidiary of Catheter, together referred to as the Company, in a stock-for-stock merger transaction (the "Merger"). The Company's operating activities primarily related to Old Catheter's historical business, which comprises the design, manufacture and sale of new and innovative medical technologies in the field of cardiac electrophysiology (“EP”).
On February 6, 2026, the Company entered into an Acquisition Purchase Agreement with SEG Jets LLC ("SEG Jets"), whereby the Company agreed to acquire
After the Acquisition, the Company's operations are organized and managed under two reportable segments: (i) cardiac electrophysiology and (ii) private aviation.
One of the Company’s two primary products under the cardiac electrophysiology segment is the VIVO System, which is an acronym for View into Ventricular Onset (“VIVO” or “VIVO System”). VIVO is a non-invasive imaging system that offers 3D cardiac mapping to help with localizing the sites of origin of idiopathic ventricular arrhythmias in patients with structurally normal hearts prior to EP procedures. The VIVO System is commercially available in the European Union and has been placed at several hospitals in Europe. United States Food and Drug Administration ("FDA") 510(k) clearance was received, and the Company began commercial sales of VIVO in 2021 in the United States.
The Company’s second primary product, LockeT® (“LockeT”), is a suture retention device indicated for wound healing by distributing suture tension over a larger area in the patient in conjunction with a figure of eight suture closure and is intended to temporarily secure sutures and aid clinicians in locating and removing sutures efficiently. In addition, LockeT is a sterile, Class I product that was registered with the FDA in February 2023, at which time initial shipments began to distributors. Clinical studies for LockeT began during the year ended December 31, 2023. These studies are planned to show the product’s effectiveness and benefits, including faster wound closure and patient ambulation/discharge, potentially resulting in higher procedural volumes and lower costs for the healthcare provider and/or insurance payor. This information is intended to provide crucial data that will improve marketability by establishing the effectiveness of the medical device and a competitive advantage. The Company recorded its first commercial sale of LockeT to distributors in May 2024. In April 2025, a U.S. patent for the product was granted by the United States Patent and Trademark Office. In April 2025, the Company also obtained the CE Mark approval for LockeT, permitting the marketing and sale of LockeT in the European Union, Switzerland and Turkey. Since receipt of the CE Mark, the Company has signed agreements with new distributors in the United Kingdom, Italy, Spain, Portugal, Switzerland, the Middle East, South Africa and Brunei.
The Company’s product portfolio also includes the Amigo® Remote Catheter System (the "AMIGO" or "AMIGO System"), a robotic arm that serves as a catheter control device. The Company owns the intellectual property related to AMIGO, and this product is under consideration for future research and development of a second generation product.
Through its wholly owned subsidiary, the Company operates a private aviation platform supported by a mobile application that facilitates access to private air travel at competitive price points. The Company offers regional and long-range private jet charter services throughout the United States through a combination of leased aircraft and third-party operator relationships. Customers are able to book flights directly or place bids on available empty-leg flights in real time. The Company is also developing a local and regional air-taxi service intended to expand access to private aviation for middle-market travelers by offering shorter-distance flights at lower price points relative to traditional charter services, and has begun the regulatory approval process to operate in Canada, Mexico and the Caribbean.
Reverse Stock Split
On January 13, 2025, at a Special Meeting of Stockholders of the Company, the stockholders approved an amendment to the Amended and Restated Certificate of Incorporation of the Company, which included an increase in the authorized capital stock to
On July 25, 2025, at the Annual Meeting of Stockholders of the Company, the stockholders approved an amendment to the Amended and Restated Certificate of Incorporation of the Company to effect a reverse stock split within specified parameters. The Board approved the Amendment and set the ratio of the reverse stock split at 1-for-19. The Amendment was effective August 15, 2025, effecting a reverse stock split in which each nineteen (
No fractional shares were issued as a result of the reverse stock split. Stockholders who would otherwise have been entitled to receive a fractional share were entitled to receive their pro rata portion of the net proceeds obtained from the aggregation and sale by the exchange agent of the fractional shares resulting from the reverse stock split (reduced by any customary brokerage fees, commissions and other expenses). All references to share and per share amounts for all periods presented in the unaudited condensed consolidated financial statements have been retrospectively restated to reflect this reverse stock split. All rights to receive shares of common stock under outstanding securities, including but not limited to, warrants and options, were adjusted to give effect to the reverse stock split. Furthermore, proportionate adjustments were made to the per share exercise price and the number of shares of common stock that may be purchased upon exercise of outstanding warrants and stock options granted by the Company, and the number of shares of common stock reserved for future issuance under the Company’s Equity Incentive Plan.
Going Concern
The unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from uncertainty related to its ability to continue as a going concern.
The Company has incurred recurring net losses from operations and negative cash flows from operating activities since inception. For the three months ended March 31, 2026, the Company incurred $
Management expects operating losses and negative cash flows to continue for the foreseeable future. The Company needs to raise additional capital until it is able to generate revenues from operations sufficient to fund its research, development, and commercial operations.
On February 6, 2026, the Company entered into a Securities Purchase Agreement with certain accredited investors for a private placement financing and issued an aggregate of (i)
On February 6, 2026, the Company also agreed to lower the exercise price of existing warrants and the conversion price of the Series B Convertible Preferred Stock to $
On March 9, 2026, the Company entered into an additional Securities Purchase Agreement with certain accredited investors for a private placement financing pursuant to which the investors agreed to purchase
On April 21, 2026, pursuant to the Securities Purchase Agreements dated February 6, 2026 and March 9, 2026, the Company issued an aggregate of
Based on the Company's liquidity resources, there is substantial doubt about the Company’s ability to continue as a going concern within 12 months from the date of issuance of the unaudited condensed consolidated financial statements. The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of the Company continuing to operate in the normal course of business and do not reflect any adjustments to the assets and liabilities related to the substantial doubt of its ability to continue as a going concern.
Management plans to raise additional capital through public or private equity or debt financing, or other innovative and specialty finance strategies, in order to fulfill its operating and capital requirements for at least 12 months from the date of the issuance of the unaudited condensed consolidated financial statements. However, the Company may not be able to secure such financing in a timely manner or on favorable terms, if at all. Furthermore, if the Company issues equity securities to raise additional funds, its existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
The unaudited condensed consolidated financial statements of the Company include the accounts of the Company, Old Catheter, Cardionomix, KardioNav, FLYTE, and Ponderosa. All intercompany transactions have been eliminated in consolidation.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP") applicable to interim financial statements. The Financial Accounting Standards Board (“FASB”) establishes these principles to ensure financial condition, results of operations, and cash flows are consistently reported. Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative nongovernmental GAAP as found in the FASB Accounting Standards Codification ("ASC"). Certain footnotes and other financial information normally required by U.S. GAAP have been condensed or omitted in accordance with instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, such statements include all adjustments which are considered necessary for fair presentation of the unaudited condensed consolidated financial statements of the Company. The operating results presented herein are not necessarily an indication of the results that may be expected for the year. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission (“SEC”) on March 31, 2026.
Reclassifications
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The Company’s unaudited condensed consolidated financial statements are based upon a number of estimates including, but not limited to, the allowance for credit losses, evaluation of impairment of long-lived assets, valuation of long-lived assets and their associated estimated useful lives, reserves for warranty costs, evaluation of probable loss contingencies, fair value of royalties payable due to related parties, fair value of contingent consideration recorded in connection with an asset acquisition, fair value of assumed liabilities, acquired assets, and consideration transferred in connection with a business combination, fair value of preferred stock issued, including valuation of the deemed dividend, fair value of warrants issued, and fair value of equity awards granted.
Concentrations of Credit Risk
The Company's financial instruments held during the three months ended March 31, 2026 and 2025 that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company generally maintains cash and cash equivalent balances in various operating accounts at financial institutions with high quality credit ratings in amounts in excess of federally insured limits of $250,000. The Company has not experienced any losses related to its cash and cash equivalents and does not believe that it is subject to significant or unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The Company has no significant off-balance sheet risk, such as foreign exchange contracts, option contracts, or other hedging arrangements.
The Company extends credit to customers in the normal course of business. Concentrations of credit risk with respect to accounts receivable exist to the full extent of amounts presented in the condensed consolidated balance sheets. The Company does not require collateral from its customers to secure accounts receivable.
The Company had four customers that individually accounted for 10% or more of total revenues included in the condensed consolidated statements of operations for the three months ended March 31, 2026 and 2025, respectively. Four customers represented
The Company had three and
The Company is not dependent on any single supplier for critical components.
Reclassifications
Certain prior period financial statement amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the Company's previously reported results of operations or accumulated deficit. In the current period, the Company (i) separately discloses interest expense due to related parties in the condensed consolidated statements of operations. For comparative purposes, amounts in the prior periods have been reclassified to conform to current period presentations.
Segment Reporting
Following the acquisition of FLYTE, the Company determined that it operates in reportable segments: (i) cardiac electrophysiology and (ii) private aviation. The Company’s cardiac electrophysiology segment includes all activities related to the marketing, sales, and development of medical technologies in the cardiac electrophysiology field. While the commercial efforts that coordinate the marketing, sales, and distribution of the cardiac electrophysiology products are organized by geographic region and product, all of these activities are supported by a single corporate team and distribution channel. The Company’s private aviation segment includes all activities related to the marketing, sales, and delivery of private aviation services to customers through FLYTE. All of its operations are centrally managed within the United States by a single corporate team. The determination of reportable segments is consistent with the condensed consolidated financial information available and regularly reviewed by the Company’s chief operating decision maker (“CODM”).
The CODM is the Company’s Chief Executive Officer, who reviews and evaluates net loss for each reportable segment, for purposes of assessing performance, making operating decisions, allocating resources and planning and forecasting for future periods. Segment asset measures are not used as a basis for the CODM to evaluate the performance of or to allocate resources to the segments.
The following table summarizes the segment revenues and significant segment expenses included in the measure of segment profit or loss (segment net loss) reviewed by the CODM (in thousands):
| For the Three Months Ended March 31, | ||||||||||||
| 2026 | 2025 | |||||||||||
| Cardiac Electrophysiology | Private Aviation | Total | Total | |||||||||
| Revenues: | ||||||||||||
| Product revenue | ||||||||||||
| VIVO | $ | $ | $ | $ | ||||||||
| LockeT | ||||||||||||
| Total product revenues | ||||||||||||
| Service revenue, net | ||||||||||||
| Luxe | ||||||||||||
| Hops | ||||||||||||
| Total service revenues, net | ||||||||||||
| Total revenues | ||||||||||||
| Less: | ||||||||||||
| Cost of revenues: | ||||||||||||
| Cost of product revenue | ||||||||||||
| Cost of service revenues | ||||||||||||
| Total cost of revenues | ||||||||||||
| Acquired in-process research and development expense | ||||||||||||
| Depreciation and amortization expense | ||||||||||||
| Stock-based compensation expense | ||||||||||||
| Salaries and benefits expense | ||||||||||||
| Professional fees | ||||||||||||
| Research and development expense | ||||||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ||||||
| Interest expense | ||||||||||||
| Change in fair value of royalties payable due to related parties | ||||||||||||
| Change in fair value of minority equity interest | ||||||||||||
| Change in fair value of deferred consideration | ( | ) | ( | ) | ||||||||
| Income tax benefit | ( | ) | ( | ) | ( | ) | ||||||
| Other segment items (1) | ||||||||||||
| Segment net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||
| Reconciliation of net loss | ||||||||||||
| Adjustments and reconciling items | ||||||||||||
| Consolidated net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(1) Other segment items include other income (expense), net, consulting fees, investor relations and SEC fees, insurance fees, and other selling, general, and administrative expenses. Other selling, general, and administrative expenses primarily consist of travel expenses, computer and information technology expenses, and rent expenses.
In connection with the FLYTE acquisition, including the associated tax implications of the acquisition, the Company recognized $
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity date of ninety days or less at the date of purchase to be cash equivalents. Cash and cash equivalents primarily represent funds invested in readily available checking and money market accounts.
Fair Value Measurements
Fair value represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants and is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to identify inputs used in measuring fair value as follows:
Level 1 - Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;
Level 2 - Inputs other than the quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and
Level 3 - Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.
Cash equivalents, prepaid expenses, accounts receivable, accounts payable, accrued expenses, and short-term notes payable are reported on the condensed consolidated balance sheets at carrying value, which approximate fair value due to the short-term maturities of these instruments. Deferred consideration approximates fair value as it is reported at the amount of cash that would be paid if settlement occurred as of March 31, 2026. Similarly, the carrying value of the notes payable of variable interest entities, notes payable due to related parties, and notes payable approximate their fair value due to the associated effective interest rates of the debt instruments.
Fair Value on a Recurring Basis
The following table details the fair value measurements within the fair value hierarchy of the Company’s financial instruments (in thousands):
| March 31, 2026 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets: | ||||||||||||||||
| Cash Equivalents | ||||||||||||||||
| Mutual funds | $ | $ | $ | $ | ||||||||||||
| Money market funds | ||||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Royalties payable due to related parties | $ | $ | $ | $ | ||||||||||||
| Deferred consideration | ||||||||||||||||
| Convertible notes payable | ||||||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
| December 31, 2025 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets: | ||||||||||||||||
| Cash Equivalents | ||||||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Royalties payable due to related parties | $ | $ | $ | $ | ||||||||||||
| Convertible notes payable | ||||||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
Convertible Notes Payable
The Company elected the fair value option to measure the convertible notes payable. The fair value of the convertible notes payable is determined using a probability weighted expected return model ("PWER model”) that values the convertible notes payable based on the discounted cash flows of three potential settlement outcomes: (i) the convertible notes payable will be converted into and settled in shares of common stock, (ii) the convertible notes payable’s principal and accrued interest will be paid in cash, and (iii) a dissolution scenario wherein the investor receives a partial payment based on a recovery rate. The conversion outcome incorporates a Monte Carlo simulation to estimate the Company’s common stock price at the expected conversion date and the number of shares issuable based on the variable conversion price. Aside from the probability of the three potential settlement outcomes, the fair value measurement incorporates several significant unobservable inputs, including the recovery rate, implied equity volatility, expected term assumptions, simulated conversion price, and credit-risk adjusted discount rate.
Royalties Payable Due to Related Parties
The fair value measurement of royalties payable due to related parties includes significant unobservable inputs that are not supported by any market data. Royalties payable due to related parties reflect the present value of estimated future royalty payments. The Company applies an internally developed, revenue adjusted discount rate ("RADR”) to discount back the forecasted royalty payments. The RADR is based on the Company’s weighted average cost of capital ("WACC”) adjusted for the product revenue’s risk profile. The risk-free rate used to determine the cost of equity for the RADR is adjusted to be commensurate with the term of the royalty agreements. Furthermore, the Beta and Risk Premium used to determine the cost of equity are also adjusted to reflect the product revenue's volatility. All other inputs for the RADR and the Company’s WACC are the same. See Note 9, Royalties Payable, for additional information over royalties payable due to related parties.
Deferred Consideration
The deferred consideration consists of two components. The first deferred consideration component arose from the Company's initial
The deferred consideration has been classified as a Level 3 recurring liability because the valuation utilizes certain unobservable inputs that are supported by little or no market data. The fair value of the Series D Convertible Preferred Stock is measured using the if converted method, which included contractual terms such as the number of units issued, the $
The fair value of the first component of deferred consideration initially recorded on February 6, 2026 was approximately $
The following tables summarize the significant unobservable inputs used in Level 3 financial instruments as of March 31, 2026:
| Instrument | Valuation Technique | Unobservable Input | Input Range | ||
| Royalties payable due to related parties | Discounted future cash flows | Share price | % | ||
| Deferred consideration | If converted method | Discount for lack of marketability | % | ||
The significant unobservable inputs used for royalties payable due to related parties as of December 31, 2025 are the same as those displayed above for March 31, 2026. The deferred consideration did not exist as of December 31, 2025 and therefore no significant unobservable inputs are disclosed for deferred consideration as of December 31, 2025.
The table below summarizes the change in account balance for Level 3 financial instruments for the three months ended March 31, 2026 (in thousands):
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||
| Royalties Payable due to Related Parties | Deferred Consideration | Convertible Notes Payable | ||||||
| Balance at January 1, 2026 | $ | | $ | — | $ | | ||
| Fair value at issuance | — | | — | |||||
| Change in fair value | — |
| — | |||||
| Balance at March 31, 2026 | $ | | $ | | $ | | ||
The table below summarizes the change in account balance for Level 3 financial instruments for the three months ended March 31, 2025 (in thousands):
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | |||||||||
| Royalties Payable due to | Deferred Consideration | Convertible Notes Payable | |||||||
| Balance at January 1, 2025 | $ | | $ | — | $ | — | |||
| Change in fair value | | — | — | ||||||
| Balance at March 31, 2025 | $ | | $ | — | $ | — | |||
Increases or decreases in the fair value of royalties payable due to related parties, convertible notes payable, and deferred consideration can result from updates to assumptions. Judgment is used in determining these assumptions as of the initial valuation date and at each subsequent reporting period. Changes or updates to assumptions could have a material impact on the reported fair value, the change in fair value, and the results of operations in any given period.
Accounts Receivable and Allowances for Credit Losses
Accounts receivable consists of trade receivables recorded at invoiced amounts. Accounts receivable is presented net of any discounts and allowance for credit losses, is unsecured and does not bear interest. Accounts receivable is evaluated for collectability based on historical credit loss experience, adjusted for asset-specific risk characteristics, current economic conditions, and reasonable forecasts, including the probability of future collection and estimated loss rates based on aging schedules.
Changes in the estimated collectability of accounts receivable are recorded in the condensed consolidated statements of operations in the period in which the estimate is revised. Accounts receivable are written off as uncollectible after all means of collection are exhausted. Any subsequent recoveries are credited to the allowance for credit losses. As of March 31, 2026 and December 31, 2025, the allowance for credit losses related to accounts receivable was immaterial.
Inventories
Inventories are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. The Company reduces the carrying value of inventories for those items that are potentially in excess, obsolete or slow-moving based on changes in customer demand, technological developments or other economic factors.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Property and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:
| Machinery and equipment | ||||
| Computer hardware and software | ||||
| LockeT animation video | ||||
| VIVO DEMO/Clinical Systems |
The Company periodically reviews the residual values and estimated useful lives of each class of its property and equipment for ongoing reasonableness, considering the long-term views of their intended use and the level of planned improvements to maintain and enhance those assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from their respective account balances, and any resulting gain or loss is recognized in the Company’s condensed consolidated statements of operations. The cost of repairs and maintenance is expensed as incurred, whereas significant renewals and betterments are capitalized.
Business Combination
The Company accounts for business combinations using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations ("ASC Topic 805"). The purchase price of an acquisition is allocated to the underlying tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair value of the identifiable net assets acquired is recorded as goodwill. Transaction costs related to business combinations, such as legal, accounting, valuation, and other professional or consulting fees, are expensed as incurred and included in selling, general and administrative expenses in the condensed consolidated statements of operations.
The Company may adjust the preliminary purchase price allocation, as necessary, for up to one year after the acquisition closing date (the “measurement period”) as it obtains more information regarding asset valuations and liabilities assumed that existed at the acquisition date. Measurement period adjustments are recorded in the period in which the adjustments are determined.
Deferred tax assets and liabilities are recognized for the tax effects of temporary differences between the tax bases and the recognized amounts of assets acquired and liabilities assumed in accordance with ASC Topic 740, Income Taxes ("ASC Topic 740").
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and indefinite-lived intangible assets are not amortized. Goodwill and indefinite-lived intangible assets are tested for impairment annually during the fourth quarter, or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company has the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. If the Company elects to bypass the qualitative assessment, or if the qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative test is performed. An impairment charge for goodwill is recognized for the amount by which the carrying amount of the reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. An impairment charge for indefinite-lived intangible assets is recognized for the amount by which the carrying amount of the indefinite-lived intangible asset exceeds its fair value.
The Company completed a qualitative assessment and determined that there was
Impairment of Long-lived Assets
The Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that such assets might be impaired and the carrying value of the long-lived assets may not be recoverable. If events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the expected undiscounted future cash flows attributable to the asset are less than the carrying amount of the asset, an impairment loss equal to the excess of the assets carrying value over its fair value is recorded in the Company’s condensed consolidated statements of operations at that date.
There were no impairment charges recorded as of March 31, 2026 and March 31, 2025.
Royalties Payable Due to Related Parties
The Company is obligated to pay royalties related to the sales of LockeT and AMIGO System under various royalty agreements executed by Old Catheter. The Company recognizes a liability for royalty fees incurred and payable based on actual sales of products under current portion of royalties payable due to related parties in the condensed consolidated balance sheets. The Company recognizes a liability for future, estimated royalty payments at fair value under current portion of royalties payable due to related parties in the condensed consolidated balance sheets if it is payable within the next 12 months and under royalties payable due to related parties in the condensed consolidated balance sheets if it is payable 12 months after the balance sheet date. The royalties payable due to related parties is remeasured at each reporting period. Changes in fair value of royalties payable due to related parties are recorded in the condensed consolidated statements of operations in the period in which they occur. See Note 9, Royalties Payable for additional information.
Asset Acquisitions and In-process Research and Development
The Company accounts for acquisitions of assets or a group of assets that do not meet the definition of a business as asset acquisitions based on the cost to acquire the asset or group of assets, which includes certain transaction costs. In an asset acquisition, the cost to acquire is allocated to the identifiable assets acquired and liabilities assumed based on their relative fair values as of the acquisition date. No goodwill is recorded in an asset acquisition.
Assets that are acquired in an asset acquisition for use in research and development activities that have an alternative future use are capitalized as in-process research and development (“IPR&D”) in the condensed consolidated balance sheets. Acquired IPR&D that has no alternative future use as of the acquisition date is recognized as acquired-in-process research and development expense in the condensed consolidated statements of operations as of the acquisition date.
Contingent consideration in asset acquisitions that is not accounted for as a derivative is measured and recognized when payment becomes probable and reasonably estimable. Subsequent changes in the accrued amount of contingent consideration are measured and recognized at the end of each reporting period and upon settlement as an adjustment to the cost basis of the acquired asset or group of assets, or, if related to IPR&D with no alternative future use, recognized as expense. Contingent consideration that is in the form of a sales or usage-based royalty payment is recognized as an expense as incurred.
Convertible Notes Payable
Convertible notes payable represent debt-host financial instruments whose embedded features must be assessed for bifurcation and separate accounting as derivative liabilities under ASC Topic 815, unless the fair value option is elected to measure certain financial assets and liabilities at fair value under ASC Topic 825, Financial Instruments ("ASC Topic 825”). The fair value option may be elected on a financial instrument-by- financial instrument basis and is irrevocable, unless a new election date occurs. The fair value option simplifies the accounting by requiring the entire financial instrument to be measured at fair value.
As permitted under ASC Topic 825, the Company elected the fair value option to account for the convertible notes payable issued on December 26, 2025 (see Note 8, Notes Payable). The Company records convertible notes payable at fair value with any changes in fair value recorded as a component of other income (expense), net in the consolidated statements of operations. The change in fair value of convertible notes payable includes interest expense accrued for the convertible notes payable. Any portion of the change in fair value that is attributed to a change in the convertible note payables’ credit risk is recognized as a component of other comprehensive income.
As a result of applying the fair value option, any debt issuance costs related to the convertible notes payable were expensed as incurred and were not deferred.
Variable Interest Entity
A variable interest entity ("VIE") is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains or losses of the entity. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
The Company evaluates its ownership, contractual relationships and other interests in entities to determine the nature and extent of the interests, whether such interests are variable interests and whether the entities are VIEs in accordance with ASC Topic 810, Consolidation ("ASC Topic 810"). These evaluations can be complex and judgmental, involving the use of estimates and assumptions based on available information among other factors. Based on these evaluations, if the Company determines it is the primary beneficiary of a VIE, the Company consolidates the accounts of that VIE. The equity owned by other stockholders is presented, as applicable, as non-controlling interests in the accompanying condensed consolidated balance sheets, statements of operations, and statements of stockholders’ equity.
If a reconsideration event occurs under ASC Topic 810, the Company performs an assessment to determine whether the entity continues to be a VIE, whether the Company still contains a variable interest in the VIE, and whether the Company continues to be or has become the primary beneficiary of the VIE.
Cardionomix
Cardionomix is a legal entity that was solely created to hold the assets of and to clinically develop and commercialize the CPNS System. The Company holds
As of March 31, 2026, Cardionomix only had a note payable with a carrying value of $
The minority equity interest holders are presented as non-controlling interests in the accompanying condensed consolidated balance sheets, statements of operations, and statements of stockholders’ equity.
KardioNav
KardioNav is a legal entity that was solely created to hold the assets of and to clinically develop and commercialize certain intellectual property related to new cardiac technology. The Company holds
As of March 31, 2026, KardioNav's only assets or liabilities relate to accrued expenses of $
The minority equity interest holders are presented as non-controlling interests in the accompanying condensed consolidated balance sheets, statements of operations, and statements of stockholders’ equity.
Distinguishing Liabilities from Equity
The Company evaluates equity or liability classification for freestanding financial instruments, including convertible preferred stock, warrants, and options, pursuant to the guidance under ASC Topic 480, Distinguishing Liabilities from Equity (“ASC Topic 480”). The Company classifies as liabilities all freestanding financial instruments that are (i) mandatorily redeemable, (ii) represent an obligation to repurchase the Company’s equity shares by transferring assets, or (iii) represent an unconditional obligation (or conditional obligation if the financial instrument is not an outstanding share) to issue a variable number of shares predominantly based on a fixed monetary amount, variations in something other than the fair value of the Company’s equity shares, or variations inversely related to changes in fair value of the Company’s equity shares.
If a freestanding financial instrument does not represent an outstanding equity share and does not meet liability classification under ASC Topic 480, the Company then assesses whether the freestanding financial instrument is indexed to its own stock and meets equity classification pursuant to ASC Topic 815-40. The Company further assesses whether the freestanding financial instruments should be classified as temporary equity. Freestanding financial instruments that are redeemable for cash or other assets at a fixed or determinable date, at the option of the holder, or upon the occurrence of an event are classified in temporary equity in accordance with ASC Topic 480. Otherwise, the freestanding financial instruments are classified in permanent equity.
See Note 12, Equity Offerings and Note 13, Preferred Stock for additional information on the freestanding financial instruments assessed under ASC Topic 480 and ASC Topic 815-40 for equity or liability classification.
Revenue Recognition
In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), the Company accounts for contracts with customers when there is a legally enforceable contract, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. Revenue is measured as the amount of consideration expected to be received in exchange for transferring promised goods or services. The amount of consideration to be received and revenue recognized may vary due to discounts. A performance obligation is a promise in a contract to transfer a distinct good or service. If there are multiple performance obligations in the customer contract, the Company allocates the transaction price in the contract to each performance obligation based on the relative standalone selling price. The Company does not adjust revenue for the effects of a significant financing component for contracts if the period between the transfer of control and corresponding payment is expected to be one year or less. Revenue is recognized when performance obligations in the customer contract are satisfied. This generally occurs when the customer obtains control of a promised good at a point in time or when a customer receives a promised service over time.
Pursuant to ASC Topic 606, the Company applies the following five steps to each customer contract:
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the Company satisfies a performance obligation
The Company has elected as a practical expedient to expense as incurred any costs incurred to obtain a contract as the related amortization period would be one year or less.
VIVO System
The VIVO System offers 3D cardiac mapping to help localize the sites of origin of idiopathic ventricular arrhythmias in patients with structurally normal hearts prior to electrophysiology studies. Customers are provided with VIVO Positioning Patch Sets, which are custom patches, that are used in conjunction with the VIVO System. The VIVO Positioning Patch Sets are integral to the functionality of the VIVO System. The VIVO System, including the VIVO Positioning Patch Sets, represents the Company’s primary performance obligation. The Company recognizes revenue when physical possession and control of the VIVO System is transferred to the customer upon delivery. The Company also offers customers software upgrades for the VIVO System, which may be purchased and paid in advance at contract inception. Software upgrades represent stand-ready services, whereby the Company promises to provide software upgrades to the customer when and as upgrades are available. Software upgrade services may be offered for initial contract terms of one to multiple years. Customers have the option to renew software upgrades services at the end of each term. The software upgrade services represent the Company's second performance obligation, which is recognized evenly over time over the contract term.
The Company invoices the customer for the VIVO System and related software upgrades after physical possession and control of the VIVO System has been transferred to the customer. Subsequent renewals for software upgrades are invoiced at inception of the renewed term. The timing of payment for the corresponding invoices depends on the credit terms identified in each customer contract. There were software upgrade services revenues during the three months ended March 31, 2026 and 2025.
LockeT
LockeT was launched by the Company in February 2023 and is a suture retention device indicated for wound healing by distributing suture tension over a larger area in the patient in conjunction with a figure of eight suture closure. LockeT is intended to temporarily secure sutures and aid clinicians in locating and removing sutures efficiently. The LockeT device represents a performance obligation in the customer contract. The Company recognizes revenue when it transfers control of the LockeT device to the customer, which happens when the Company delivers the product to the customer.
Private Aviation Charter Services
The Company generates revenue through two primary private aviation services: Hops and Luxe.
Hops refers to Flyte’s short-haul private charter service, through which Flyte arranges charter routes using leased jets and pilots dedicated to Flyte’s operations. These flights are conducted on Company-managed aircraft and typically service high-demand regional routes throughout the New York Metro Area, Long Island, New England and the Eastern seaboard, to any destination within 400 nautical miles of the Company’s base in Farmingdale, New York. Each flight represents a performance obligation. For Hops arrangements, the Company acts as the principal because it controls the specified flight service before it is transferred to the customer, is primarily responsible for operating and fulfilling the flight, and has discretion in establishing pricing. Accordingly, Hops revenue is presented on a gross basis in the condensed consolidated statements of operations. Revenue is recognized at a point in time upon completion of each flight and includes base charter rates, repositioning fees, and ancillary charges. Customer payments received in advance are recorded as deferred revenue until the related performance obligation is satisfied.
Luxe is the Company’s brokerage division, offering clients access to on-demand charters through a vetted network of independent third-party aircraft operators. For Luxe arrangements, the Company evaluates whether it controls the specified flight service before it is transferred to the customer or whether the Company’s performance obligation is to arrange for a third-party operator to provide the flight service. The Company has determined that it acts as an agent in Luxe arrangements because the third-party aircraft operator is primarily responsible for operating and fulfilling the flight, and the Company does not control the underlying flight service before it is provided to the customer. Accordingly, Luxe revenue is presented on a net basis in the condensed consolidated statements of operations and represents the commission, brokerage fee, or other net amount retained by the Company after amounts payable to the third-party aircraft operator.
For both Hops and Luxe, flights are earned and recognized as revenue at the point in time in which the service is provided, representing the satisfaction of the performance obligation. The Company generally does not issue refunds for flights unless there is a failure to meet its service obligations. For roundtrip flights, revenue is recognized upon arrival at the destination for each flight.
Disaggregation of Revenue
The following table summarizes disaggregated revenue by geographic area (in thousands):
| For the Three Months Ended March 31, | |||||||
| 2026 | 2025 | ||||||
| Revenue - Product | |||||||
| US | $ | $ | |||||
| Europe | |||||||
| Total Revenue - Product | |||||||
| Revenue - Services | |||||||
| US | |||||||
| Europe | |||||||
| Total Revenue - Services | $ | $ | |||||
Deferred Revenue
Deferred revenues primarily consist of contract liabilities and represent amounts billed to, or collected from, customers in advance of the Company satisfying the related performance obligations. Deferred revenue is recognized as revenue when, or as, the related performance obligations are satisfied in accordance with the terms of the underlying customer arrangements.
The Company’s contract liabilities were assumed in connection with the acquisition of FLYTE and relate to customer arrangements of the acquired business for which consideration had been received, or amounts had been billed, prior to the satisfaction of the related performance obligations. The Company had de minimis contract liabilities prior to the acquisition of FLYTE. As of March 31, 2026, the Company had
Deferred revenue is presented as a current liability in the condensed consolidated balance sheets to the extent the Company expects to recognize the related revenue within the next twelve months. The Company recognizes revenue from deferred revenue as the related products or services are transferred to customers.
The following table summarizes the changes in the deferred revenue balance as follows (in thousands):
| For the Three Months Ended March 31, | |||||||
| 2026 | 2025 | ||||||
| Deferred revenue, beginning of period | $ | $ | |||||
| Deferred revenue assumed as part of acquisition (see Note 3) | |||||||
| Revenue recognized during the period related to amounts included in the deferred revenue assumed | ( | ) | |||||
| Revenue deferred, net of revenue recognized during the period | |||||||
| Deferred revenue, end of period | $ | $ | |||||
Shipping and Handling Costs
Shipping and handling costs charged to customers are included in net product sales, while all other shipping and handling costs are included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.
Advertising and Marketing
Advertising costs are expensed as incurred and included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations. Advertising costs were $
Patents
The Company expenses patent costs, including related legal costs, as incurred and records such costs as selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.
Research and Development
Major components of research and development costs include consulting, research grants, supplies and clinical trial expenses. Research and development expenses are charged to operations in the period incurred.
Stock-based Compensation
The Company recognizes stock-based compensation expense associated with stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) issued to employees, members of the Company’s board of directors and consultants in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC Topic 718”). The Company evaluates whether stock-based awards should be classified and accounted for as liability or equity awards on the date of grant. Furthermore, the Company measures all stock-based awards granted based on their fair value on the date of grant. Stock options are measured at fair value using the Black-Scholes option pricing valuation model (the “Black-Scholes model”), which incorporates various assumptions, including expected term, volatility and risk-free interest rate. The expected term of the options is the estimated period of time until exercise and was determined using the SEC’s safe harbor rules, using an average of vesting and contractual terms, as the Company did not have sufficient historical experience of similar awards. Expected stock price volatility is based on historical volatilities of certain “guideline” companies, as the Company does not have sufficient historical stock price data. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent term. Stock-based compensation expense for all stock-based awards is recognized over the requisite service period, which is generally the vesting period of the respective stock award. Stock-based compensation expense for stock-based awards with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not probable or is not met, no stock-based compensation expense is recognized, and any previously recognized compensation expense is reversed. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Any resulting net deferred tax assets are evaluated for recoverability and, accordingly, a valuation allowance is provided when it is more likely than not that all or some portion of the deferred tax asset will not be realized.
The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be sustained on an audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense and other income (expense), net respectively.
On July 4, 2025, the One Big Beautiful Bill Act, was signed into law. The legislation did not have a material impact on our income tax expense for the three months ended March 31, 2026.
Basic and Diluted Net Loss per Share
Earnings per share attributable to Catheter Precision, Inc. common stockholders is calculated using the two-class method, which is an earnings allocation formula that determines earnings per share for the holders of the Company’s common shares and participating securities. The Company’s Series X Convertible Preferred Stock, of which
Diluted net loss per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted method and treasury stock method, as applicable. In periods in which the Company reports a net loss attributable to Catheter Precision, Inc. common stockholders, diluted net loss per share attributable to Catheter Precision, Inc. common stockholders is the same as basic net loss per share attributable to Catheter Precision, Inc. common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Diluted net loss per share is equivalent to basic net loss per share for the periods presented herein because common stock equivalent shares from outstanding warrants, stock options, convertible notes payable, Series B Convertible Preferred Stock, Series C-1 Convertible Preferred Stock, and Series J Convertible Preferred Stock were anti-dilutive (see Note 11, Net Loss per Share).
Net loss attributable to Catheter Precision, Inc. common stockholders consists of net income or loss attributable to Catheter Precision, Inc., as adjusted for actual and deemed dividends declared, if applicable.
Recently Announced Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"). In January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), Clarifying the Effective Date ("ASU 2025-01"). ASU 2024-03 requires the disaggregation of certain costs and expenses in the notes to the financial statements to provide enhanced transparency into the expense captions presented on the face of the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2027 and for interim periods beginning in 2028. The guidance may be applied on a prospective or retrospective basis and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2024-03 on its condensed consolidated financial statements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU 2025-05"), which provides a practical expedient for entities to estimate expected credit losses on current accounts receivable and current contract assets arising from revenue transactions accounted for under ASC Topic 606. ASU 2025-05 is effective for the Company for annual periods beginning after December 15, 2025, and interim periods within those annual periods. The adoption of this standard did not have a material effect on the Company’s condensed consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements ("ASU 2025-11"), which is intended to clarify and improve certain aspects of interim financial reporting, including the requirements for interim disclosures and the application of recognition and measurement guidance in interim periods. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. Adoption can be applied prospectively or retrospectively. The Company is currently evaluating the potential impact that ASU 2025-11 may have on its condensed consolidated financial statements and related disclosures. The Company does not expect this update to have a material effect on the Company's condensed consolidated financial statements.
Note 3. Business Combination
On February 6, 2026, the Company entered into an Acquisition Purchase Agreement with SEG Jets, whereby the Company agreed to acquire
On March 9, 2026, the Company entered into an Acquisition Purchase Agreement with Creatd and acquired the remaining
After obtaining a controlling interest in FLYTE, the Company remeasured its previously held minority equity interest to fair value as of the Acquisition date and recorded a change in fair value of minority equity interest of $
In consideration for the Acquisition, the Company paid cash at closing, settled certain indebtedness on behalf of the seller, issued a short-term promissory note, and recorded the deferred consideration obligation to issue
| Description | Fair Value | |||
| Cash proceeds to seller | $ | |||
| Fair value of promissory note | ||||
| Payment of indebtedness | ||||
| Fair value of previously held minority equity interest of step acquiree | ||||
| Fair value of deferred consideration | ||||
| Total purchase price | $ | |||
The Acquisition is being accounted for as a business combination in accordance with ASC Topic 805. The Company estimated the fair values of the assets acquired and liabilities assumed in the Acquisition. These values have been prepared based on preliminary estimates of the fair value of the consideration paid, assets acquired and liabilities assumed. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could be material.
The following table summarizes the preliminary purchase price allocations relating to the Acquisition (in thousands):
| Description | Fair Value | |||
| Assets acquired: | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Prepaid expenses and other current assets | ||||
| Property and equipment | ||||
| Operating lease right-of-use assets | ||||
| Intangible assets | ||||
| Goodwill | ||||
| Other non-current assets | ||||
| Total assets acquired | $ | |||
| Liabilities assumed: | ||||
| Accounts payable | $ | |||
| Accrued expenses | ||||
| Current portion of operating lease liabilities | ||||
| Deferred revenue | ||||
| Short-term notes payable | ||||
| Notes payable | ||||
| Operating lease liabilities | ||||
| Total liabilities assumed | ||||
| Total purchase price | $ | |||
The Company recognized $
| Estimated | Estimated | ||||||
| Intangible Assets | Fair Value | Useful Life | |||||
| Licensing agreements/ vendor and supplier contracts | $ | ||||||
| Applications | |||||||
| Technology | |||||||
| FAA Part 135 Operating Certificate | Indefinite | ||||||
| Trademarks/ trade names | |||||||
| Customer list/ relationships | |||||||
| $ | |||||||
The impact of the acquisition’s preliminary purchase price allocations on the Company’s consolidated balance sheet and the acquisition date fair value of the total consideration transferred is depicted in the table below. Due to the timing of the closing of the transaction in the first quarter of 2026, the Company has not yet completed its evaluation and determination of certain assets acquired and liabilities assumed, primarily the final valuation of goodwill and intangible assets; therefore, the final fair value of the assets acquired and liabilities assumed, which will be completed within the measurement period of up to one year from the acquisition date, may vary from the Company’s preliminary estimates.
Transaction costs incurred in connection with this business combination amounted to approximately $
Pro Forma Financial Information
The following table represents the revenue and net loss, of the acquired entities, as reported on a pro forma basis as if the Acquisition occurred on January 1, 2025. These pro forma results are not necessarily indicative of the results that would have occurred if the Acquisition had occurred on the first day of the period presented, nor does the pro forma financial information purport to represent the results of operations for future periods. The following information for three months ended March 31, 2026 and 2025 is presented in thousands except for the per share data:
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenue associated with the cardiac electrophysiology business | $ | $ | ||||||
| Revenue associated with the acquired FLYTE business | ||||||||
| Total revenues, net | $ | $ | ||||||
| Net loss associated with the cardiac electrophysiology business | $ | ( | ) | $ | ( | ) | ||
| Net loss associated with the acquired FLYTE business | ( | ) | ( | ) | ||||
| Total net loss | $ | ( | ) | $ | ( | ) | ||
Note 4. Inventories
Inventories consisted of the following (in thousands):
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Inventories | $ | $ | ||||||
There were
Note 5. Property and Equipment
Property and equipment, net consisted of the following (in thousands):
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Machinery and equipment | $ | $ | ||||||
| Computer hardware and software | ||||||||
| LockeT animation video | ||||||||
| VIVO DEMO/Clinical Systems | ||||||||
| Property and equipment, gross | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense was $
Note 6. Goodwill and Other Intangible Assets
The Company's carrying amount of goodwill in the condensed consolidated balance sheet as of March 31, 2026 represents the excess fair value of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed in the acquisition of FLYTE. See Note 3, Business Combinations, for additional information.
The following table summarizes the Company’s intangible assets as of March 31, 2026 (in thousands):
| Estimated | ||||||||||||||||
| Useful Life | Gross Carrying | Accumulated | Net Carrying | |||||||||||||
| ( Years) | Amount | Amortization | Value | |||||||||||||
| Amortized intangible assets: | ||||||||||||||||
| Cardiac electrophysiology segment | ||||||||||||||||
| Developed technology ‐ VIVO | $ | $ | ( | ) | $ | |||||||||||
| Developed technology ‐ LockeT | ( | ) | ||||||||||||||
| Customer relationships | ( | ) | ||||||||||||||
| Trademarks/trade names ‐ VIVO | ||||||||||||||||
| Trademarks/trade names ‐ LockeT | ( | ) | ||||||||||||||
| $ | $ | ( | ) | $ | ||||||||||||
| Private aviation segment | ||||||||||||||||
| Licensing agreements/ vendor and supplier contracts | ( | ) | ||||||||||||||
| Applications | ( | ) | ||||||||||||||
| Technology | ( | ) | ||||||||||||||
| Trademarks/ trade names | ( | ) | ||||||||||||||
| Customer list/ relationships | ( | ) | ||||||||||||||
| $ | $ | ( | ) | $ | ||||||||||||
| $ | $ | ( | ) | $ | ||||||||||||
| Indefinite life intangible assets: | ||||||||||||||||
| Private aviation segment | ||||||||||||||||
| Goodwill | — | — | ||||||||||||||
| FAA Part 135 Operating Certificate | — | — | ||||||||||||||
| Total | $ | $ | ( | ) | $ | |||||||||||
The following table summarizes the Company’s intangible assets as of December 31, 2025 (in thousands):
| Estimated | ||||||||||||||||
| Useful Life | Gross Carrying | Accumulated | Net Carrying | |||||||||||||
| ( Years) | Amount | Amortization | Value | |||||||||||||
| Amortized intangible assets: | ||||||||||||||||
| Cardiac electrophysiology segment | ||||||||||||||||
| Developed technology ‐ VIVO | $ | $ | $ | |||||||||||||
| Developed technology ‐ LockeT | ( | ) | ||||||||||||||
| Customer relationships | ( | ) | ||||||||||||||
| Trademarks/trade names ‐ VIVO | ||||||||||||||||
| Trademarks/trade names ‐ LockeT | ( | ) | ||||||||||||||
| $ | $ | ( | ) | $ | ||||||||||||
The estimated future amortization expense for the next five years and thereafter is as follows (in thousands):
| Future | ||||
| Amortization | ||||
| Years ending December 31, | Expense | |||
| Remainder of 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
The Company uses the straight-line method to determine amortization expense for its definite lived intangible assets. Amortization expense, included within selling, general and administrative expenses in the condensed consolidated statements of operations, for the Company's intangible assets was $
Note 7. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Legal expenses | $ | $ | ||||||
| Offering costs | ||||||||
| Accrued interest payable | ||||||||
| Compensation and related benefits | ||||||||
| Other accrued expenses | ||||||||
| Accrued expenses | $ | $ | ||||||
Note 8. Notes Payable
Note Payable - Director and Officer Liability Insurance
The Company purchased director and officer liability insurance coverage on September 26, 2024 for $
The Company purchased director and officer liability insurance coverage on October 1, 2025 for $
The Company purchased director and officer liability insurance coverage on January 31, 2026 for $
Note Payable Issued for the Cardionomic Asset Acquisition
In connection with the asset acquisition of the CPNS System previously held by Cardionomic, on May 5, 2025, Cardionomix issued a promissory note with a face amount of $
The Note Payable was initially measured at its present value of $
Interest expense on this note was $
Promissory Notes (Collectively, the “Related Party Notes”)
On May 30, 2024, David A. Jenkins loaned $
On June 25, 2024, an entity controlled by Mr. Jenkins loaned $
On July 1, 2024 and July 18, 2024, the Company entered into two short-term promissory notes with an affiliate of Mr. Jenkins, wherein the affiliate loaned $
On July 25, 2024, the Company entered into a short-term promissory note with a Trust, of which Mr. Jenkins’ adult daughter is the trustee, wherein the Trust loaned $
All of these short-term promissory notes (the “Related Party Notes”) had a maturity date of August 30, 2024 and interest of
On August 23, 2024, the Company entered into the first amendment of the Related Party Notes, which extended the maturity date to January 31, 2026 and increased the interest rate to
On December 31, 2025, the Company entered into the second amendment of the Related Party Notes, which extended the maturity date of the notes payable to the Jenkins Family Charitable Institute to January 31, 2028, and the notes payable to FatBoy Capital, L.P. and Mr. Jenkins to January 31, 2029. As part of the second amendment, the Company issued
The Related Party Notes, including all principal and interest, accelerate and become immediately due and payable upon the occurrence of certain customary events of default, including failure to pay amounts owed when due, material breach of the Company’s representations or warranties (unless waived by the holders of the Related Party Notes or cured within 10 days following notice), certain events involving the discontinuation of the Company’s business and/or certain types of proceedings involving insolvency, bankruptcy, receivership and the like.
Interest expense on the Related Party Notes was $
The Related Party Notes and related accrued interest totaled $
Notes Payable Issued by KardioNav
On July 11, 2025, two short-term promissory notes with a face amount of $
The Notes Payable, including all principal and interest, accelerate and become immediately due and payable upon the occurrence of certain customary events of default, including failure to pay amounts owed when due, material breach of the Company’s representations or warranties (unless waived by the holders or cured within 10 days following notice), certain events involving the discontinuation of the Company’s business and/or certain types of proceedings involving insolvency, bankruptcy, receivership and the like.
Interest expense on this note was $
Convertible Notes Payable
On December 26, 2025, the Company issued an unsecured convertible note payable with a principal amount of $
The outstanding balance is convertible, in whole or in part, at any time, during the period beginning on the date that is 180 days after the issuance date and ending on the later of (i) the maturity date or (ii) the date of payment of the Default Amount (as defined below). The number of shares to be issued is based on the conversion amount (i.e., the total amount of principal, accrued but unpaid interest, default interest, and other payable amounts to be converted) divided by the conversion price, which equals
The Company has the right to prepay the outstanding balance of the convertible notes payable, which is defined as the sum of the outstanding principal amount, accrued and unpaid interest, default interest, and any other amounts due and payable, with three days’ prior written notice. If the Company pays within 90 days of the issuance date, the Company must pay
The convertible notes payable are immediately due and payable upon an event of default, including the Company’s failure to pay the principal amount or interest when due, failure to issue shares upon conversion, breach of covenants, bankruptcy or insolvency proceedings, delisting of its common stock, failure to comply with reporting requirements under the Securities Exchange Act, liquidation, cessation of operations, financial statement restatement, and cross-default. Upon an event of default, the Company shall pay
In connection with the acquisition of FLYTE, the Company assumed a loan payable to the United States’ Small Business Administration (“SBA Loan”). The SBA Loan was issued on June 13, 2020, with an original principal amount of $
Note Payable Issued in Connection with the FLYTE Acquisition
In connection with the acquisition of FLYTE, on March 9, 2026, the Company issued a promissory note to Creatd, Inc. with a principal balance of $
The FLYTE Note Payable was initially measured at its fair value of $
Future maturities for long-term debts as of March 31, 2026 were as follows (in thousands):
| March 31, | ||||
| 2025 | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total principal | $ | |||
| Plus: accrued interest | ||||
| Plus: premium | ||||
| Less: discount | ( | ) | ||
| Total | $ | |||
Note 9. Royalties Payable
LockeT Royalty
On January 9, 2023, prior to the consummation of the Merger, Old Catheter entered in an agreement with its Convertible Promissory Noteholders (“Noteholders”), which substantially consisted of amounts due to David A. Jenkins, previously Old Catheter's Chairman of the Board of Directors prior to the Merger, and, currently, the Company’s Executive Chairman of the Board of Directors and Chief Executive Officer, to forgive all accrued interest and future interest expense in exchange for a future royalty right. Under these agreements, the Company is obligated to pay the Noteholders a total royalty equal to
In April 2025, a US patent was granted by the United States Patent and Trademark Office, after which the Company is obligated to pay an additional royalty of
On December 31, 2025, the Company entered into the Series J Exchange Agreement ("Exchange Agreement") with Mr. Jenkins and FatBoy Capital, L.P. to exchange future and accrued royalty rights of $
All other royalties payable remain outstanding and are included under current portion of royalties payable due to related parties and royalties payable due to related parties in the condensed consolidated balance sheets. As of March 31, 2026 and December 31, 2025, the fair value of the royalty payable related to the agreement with the Noteholders was $
The Company accrued $
During 2006 and 2007, Old Catheter entered into
| Until Royalty Payment | ||||
| Royalty Percentage | Reaches a Total of | |||
|
| $ | |||
|
| $ | |||
|
| In perpetuity | |||
The Company is not actively marketing and selling the AMIGO System, such that there was
Note 10. Leases
The Company determines if an arrangement contains a lease at contract inception based on its ability to control a physically distinct asset in exchange for consideration. If the arrangement contains a lease, the Company then determines the classification of the lease as either operating or finance. For the three months ended March 31, 2026, and the year ended December 31, 2025, the Company only had operating leases.
For operating leases, right-of-use (“ROU”) assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The present values of future lease payments are discounted using the interest rate implicit in the lease if it is readily determinable. As most leases do not provide an implicit rate, the Company applies an incremental borrowing rate based on the information available at commencement date to determine the present value of future lease payments over the lease term. The Company benchmarked itself against other companies with similar credit ratings and of comparable quality to derive an incremental borrowing rate. Lease expense is recognized on a straight-line basis over the lease term in the condensed consolidated statements of operations.
The Company elected to utilize the short-term lease exemption to exclude recognition of ROU assets and lease liabilities from the condensed consolidated balance sheet for leases with an initial term of 12 months or less, with payments instead being expensed on a straight-line basis over the lease term. If a lease includes options to extend the lease term, the Company does not assume the option will be exercised in its initial lease term assessment unless there is reasonable certainty that the Company will renew based on an assessment of economic factors present as of the lease commencement date. The Company monitors its plans to renew its material lease each reporting period.
The Company enters into contracts that contain both lease and non-lease components. Non-lease components include costs that do not provide a right-to-use a leased asset but instead provide a service such as maintenance costs. The Company has elected to account for the lease and non-lease components together as a single component for all classes of underlying assets. Variable costs associated with the lease, such as maintenance and utilities, are not included in the measurement of ROU assets and liabilities. Variable costs are expensed when the events determining the amount of variable consideration to be paid have occurred.
FLYTE Leases
In connection with the acquisition of FLYTE, the Company assumed or entered into certain operating leases related to FLYTE’s aviation operations, including hangar, office space and aircraft leases. The Company evaluated each assumed or newly executed lease arrangement upon acquisition or commencement and recognized operating lease right-of-use-assets and operating lease liabilities for leases with remaining terms greater than 12 months. For leases acquired in connection with the FLYTE acquisition, the Company measured the lease liabilities as if the acquired leases were new leases of the Company at the acquisition date, using the Company’s incremental borrowing rate when the rate implicit in the lease was not readily determinable. The FLYTE lease agreements generally require fixed monthly payments, payable in advance, and do not include residual value guarantees or purchase options that the Company is reasonably certain to exercise.
Hangar and Office Space Lease
In connection with the acquisition of FLYTE, the Company assumed a lease for hangar and office space with Stratosphere Development Co LLC DBA Republic Jet Center. The leased space is used to support FLYTE’s aviation operations, including hangar and office use. The lease commenced on August 18, 2021, and was amended on August 27, 2024, with a remaining lease term of 17 months. The lease does not contain a purchase option or residual value guarantee. The Company did not include any renewal option in the lease term because the Company was not reasonably certain to exercise any renewal option as of the lease commencement date.
Aircraft Leases
In connection with the acquisition of FLYTE, the Company assumed two aircraft leases with SEG Jets LLC and entered into one additional aircraft lease with SEG Jets LLC in March 2026. The aircraft leases commenced on September 9, 2025, February 11, 2026, and March 16, 2026, and have remaining lease terms ranging from 18 months to 24 months. The aircraft leases do not transfer ownership of the aircraft to the Company, do not contain purchase options that the Company is reasonably certain to exercise, and do not contain residual value guarantees. The Company did not include renewal options in the lease terms because the Company was not reasonably certain to exercise any renewal options as of the respective lease commencement dates.
South Carolina Office Lease Agreement
On September 27, 2022, Old Catheter entered into a lease agreement for office space located in Fort Mill, South Carolina. The space is used for office and general use. The lease term began on October 1, 2022 for
As of March 31, 2026, the Company does not intend to exercise the second extension option and the second option is therefore excluded from operating right-of-use assets and operating lease liabilities in the condensed consolidated balance sheet as of March 31, 2026.
New Jersey Office Lease Agreement
On December 7, 2022, Old Catheter entered into a lease agreement for office space located in Augusta, New Jersey. The space is used for office and general use. The lease term began on January 1, 2023 for
On July 8 2025, the Company entered into a second lease extension agreement to extend the lease for an additional 24-month period through the end of December 31, 2027. Accordingly, the Company remeasured the lease liability on the basis of the revised lease payments and lease term, such that the extension option of 24 months has been included in operating right-of-use-assets and operating lease liabilities in the condensed consolidated balance sheet as of March 31, 2026.
Park City Office Lease Agreement
On March 19, 2023, the Company entered into a lease agreement for office space located in Park City, Utah. The space is used for office and general use. The lease term began on May 1, 2023 for
On March 4, 2026, the Company entered into the first amendment to the lease, which extended the lease termination date from April 30, 2026 to April 30, 2027. The lease contains one 36-month renewal period, which requires 180 days’ notice of the Company's intention to exercise. As of March 31, 2026, the Company does not intend to exercise the 36-month renewal option and the option is therefore excluded from operating right-of-use assets and operating lease liabilities in the condensed consolidated balance sheet as of March 31, 2026.
The following tables present supplemental condensed consolidated balance sheet information related to operating leases for the three months ended March 31, 2026 and 2025 (in thousands):
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Operating lease expense | $ | $ | ||||||
| Cash paid for leases | $ | $ | ||||||
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Weighted average remaining lease term (in years) - operating leases | ||||||||
| Weighted average discount rate - operating leases | % | % | ||||||
Future minimum lease payments for all lease obligations for the following five fiscal years and thereafter are as follows (in thousands):
| Years ending December 31: | Operating Leases | |||
| Remainder of 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| Total minimum lease payments | ||||
| Less effects of discounting | ( | ) | ||
| Present value of future minimum lease payments | $ | |||
Operating lease right-of-use assets and lease liabilities were recorded in the condensed consolidated balance sheets as follows (in thousands):
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Operating lease right-of-use assets, net | $ | $ | ||||||
| Current portion of operating lease liabilities | $ | $ | ||||||
| Operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
Note 11. Net Loss per Share
The Company’s outstanding Series X Convertible Preferred Stock, of which
As a result of the net loss attributable to Catheter Precision, Inc.'s common stockholders for all periods presented herein, the following common stock equivalents were excluded from the computation of diluted net loss per share of common stock for the three months ended March 31, 2026 and 2025 because including them would have been antidilutive:
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Warrants for common stock | ||||||||
| Employee stock options | ||||||||
| Series B Convertible Preferred Stock | ||||||||
| Series C-1 Convertible Preferred Stock | ||||||||
| Series J Convertible Preferred Stock | ||||||||
| Series X Convertible Preferred Stock | ||||||||
| Restricted stock awards | ||||||||
| Convertible notes payable | ||||||||
| Total common stock equivalents | ||||||||
Note 12. Equity Offerings
In the event of certain transactions resulting in a change in control, at the option of the holder, the Company shall repurchase the Series L Warrants for an amount of cash equal to the Black Scholes Value of the unexercised portion of the Series L Warrants. However, if the change of control is not within the Company’s control, then the holders shall receive the same type of consideration offered to the Company’s common stockholders at the Black Scholes Value of the unexercised portion of the Series L Warrant. If the Company’s common stockholders can choose the type of consideration (i.e., cash, stock, or other assets) to be received, then the Holders shall have the same choice. If the Company’s common stockholders do not receive any consideration, they are deemed to receive common stock of the successor entity.
In the event of certain restructuring or disposal events, then upon the subsequent exercise of the Series L Warrants, for each share of common stock that would have been issuable upon exercise immediately prior to the event, the holders shall receive the number of shares of common stock of the successor entity and any alternate consideration given to common stockholders. The exercise price shall be adjusted to apply to such alternate consideration based on the amount of alternate consideration issuable for
Subject to limited exceptions, the holders of Series L Warrants, will not have the right to exercise any portion of the warrant if the holder (together with such holder’s affiliates) would beneficially own a number of shares of common stock in excess of
The Company assessed the Series L Warrants and Placement Agent Warrants issued in connection with the May 2025 PIPE Financing and determined that they do not require liability classification pursuant to ASC Topic 480. Furthermore, the Series L Warrants and Placement Agent Warrants do not have any net cash settlement provisions that would preclude equity classification under ASC Topic 815-40. Accordingly, the Series L Warrants and Placement Agent Warrants were recorded to additional paid-in capital in the condensed consolidated balance sheets.
See Note 13, Preferred Stock for additional information on the Series B Convertible Preferred Stock issued by the Company in connection with the May 2025 PIPE Financing.
In addition, the Company entered into a registration rights agreement with the investors requiring the Company to register for resale the shares of common stock issuable upon the conversion of the Series B Convertible Preferred Stock and Series L Warrants. Failure to timely maintain the registration shall lead to an obligation to pay to the investors cash liquidated damages equal to
On May 21, 2025, the Company filed the registration statement on Form S-3 for the resale of shares of common stock issuable upon the conversion of the Series B Convertible Preferred Stock and Series L Warrants, and it was declared effective on May 30, 2025. It is not probable that the Company will be obligated to make payments under the registration rights agreement as of March 31, 2026.
The Company has no obligation to sell, and Ladenburg is not obligated to buy or sell, any of the Shares under the ATM Agreement and may at any time suspend offers under the ATM Agreement. The ATM Agreement will terminate upon the earlier of (i) the issuance and sale of all of the shares through Ladenburg on the terms and subject to the conditions set forth in the ATM Agreement or (ii) termination of the ATM Agreement as otherwise permitted thereby. The ATM Agreement may be terminated at any time by either party upon five (5) business days’ prior notice, or by Ladenburg at any time in certain circumstances, including the occurrence of a material adverse effect on the Company.
February 2026 Private Placement
In February 2026, the Company entered into a Securities Purchase Agreement (the “February 2026 SPA”) with certain accredited investors for a private placement financing. Pursuant to the February 2026 SPA, the Company completed the first closing and issued an aggregate of (i)
Pursuant to the February 2026 SPA, the investors agreed to purchase
Furthermore, under the February 2026 SPA, the investors have the right, but not the obligation, to purchase up to an aggregate of $
The Company determined that, except as described in Note 13, Preferred Stock, with respect to certain contingent payment provisions embedded in the Series C-1 Convertible Preferred Stock, these instruments do not require liability classification pursuant to ASC 480 and do not contain net cash settlement provisions that would preclude equity classification under ASC 815-40. Accordingly, these instruments were recorded to additional paid-in capital in the consolidated balance sheets. See Note 13, Preferred Stock, for additional information on the convertible preferred stock issued in connection with the February 2026 SPA.
In connection with the February 2026 Private Placement, the Company also entered into a registration rights agreement with the investors requiring the Company to register for resale the shares of common stock issuable upon conversion of the Series C-1, Series C-2 and Series C-3 Convertible Preferred Stock. Failure to timely comply with certain registration obligations may require the Company to make cash payments to the investors. As of March 31, 2026, the Company concluded that the estimated amount of potential payments under the registration rights agreement was de minimis, and accordingly, no liability was recorded related to the registration rights agreement.
February 2026 Letter Agreement - Series L Warrants
On February 6, 2026, the Company entered into a letter agreement (the “Letter Agreement”) with the holders of the Company’s Series B Convertible Preferred Stock and Series L Warrants, which were originally issued pursuant to the Securities Purchase Agreement dated May 12, 2025. Pursuant to the Letter Agreement, the Company agreed to reduce the exercise price of the Series B Convertible Preferred Stock and the Series L Warrants to $
Pursuant to the Letter Agreement, the Company and the holders also agreed that the beneficial ownership limitation applicable to the Series L Warrants would be increased from
The Company accounted for the reduction in the exercise price of the Series L Warrants as a modification of equity-classified warrants. The incremental fair value of the Series L Warrants resulting from the modification, which was measured as of the modification date using a Black-Scholes valuation model, was recognized as an equity issuance cost within additional paid-in capital in the condensed consolidated balance sheets. The Company accounted for the settlement of the Series L Warrants pursuant to the Letter Agreement as an induced exercise of equity-classified warrants. The incremental fair value of the additional consideration provided to the holders in connection with the settlement, including the incremental fair value attributable to the modified Series B Convertible Preferred Stock, was recognized as a deemed dividend within additional paid-in capital in the condensed consolidated balance sheets. See Note 13, Preferred Stock, for additional information.
March 2026 Private Placement
Pursuant to the March 2026 SPA, the investors agreed to purchase
Furthermore, under the March 2026 SPA, the investors have the right, but not the obligation, to purchase up to an aggregate of $
The Company evaluated the Series C-1 Convertible Preferred Stock, the additional closing rights related to the Series C-2 and Series C-3 Convertible Preferred Stock, and the additional investment right related to the Series C-4 Convertible Preferred Stock. The Company determined that, except as described in Note 13, Preferred Stock, with respect to certain contingent payment provisions embedded in the Series C-1 Convertible Preferred Stock, these instruments do not require liability classification pursuant to ASC Topic 480 and do not contain net cash settlement provisions that would preclude equity classification under ASC Topic 815-40. Accordingly, these instruments were recorded to additional paid-in capital in the consolidated balance sheets. See Note 13, Preferred Stock, for additional information on the convertible preferred stock issued in connection with the March 2026 SPA.
In connection with the March 2026 Private Placement, the Company also entered into a registration rights agreement with the investors requiring the Company to register for resale the shares of common stock issuable upon conversion of the Series C-1, Series C-2 and Series C-3 Convertible Preferred Stock. Failure to timely comply with certain registration obligations may require the Company to make cash payments to the investors. As of March 31, 2026, the Company concluded that the estimated amount of potential payments under the registration rights agreement was de minimis, and accordingly, no liability was recorded related to the registration rights agreement.
Warrants
The following table presents the number of common stock warrants outstanding:
| Warrants outstanding, December 31, 2025 | ||||
| Issued | ||||
| Exercised | ( | ) | ||
| Expired | ( | ) | ||
| Warrants outstanding, March 31, 2026 |
As of March 31, 2026 and December 31, 2025, all warrants outstanding are recorded in additional paid-in capital in the condensed consolidated balance sheets. The following table presents the number and type of common stock purchase warrants outstanding, their exercise price, and expiration dates as of March 31, 2026:
| Warrants | ||||||||||||
| Warrant Type | Outstanding | Exercise Price | Expiration Date | |||||||||
| August 2021 Pharos Banker Warrants | |
|
| |||||||||
| February 2022 Series B Warrants | |
|
| |||||||||
| July 2022 Series C Warrants | |
|
| |||||||||
| September 2024 Series J Warrants | |
|
| |||||||||
| September 2024 Representative Warrants | |
|
| |||||||||
| October 2024 Series K Warrants | |
|
| |||||||||
| October 2024 Placement Agent Warrants | |
|
| |||||||||
| Placement Agent Warrants May 2025 | |
|
| |||||||||
| December 2025 Series M Warrants | |
| ** | |||||||||
| 1,136,595 | ||||||||||||
**The December 2025 Series M Warrants expire
As of March 31, 2026, the warrants issued by the Company had a weighted average exercise price of $
| Number of shares | Exercise Price | Expiration | |||
| $ |
| ||||
| $ |
| ||||
Note 13. Preferred Stock
Series X Convertible Preferred Stock
Pursuant to the Merger Agreement, all Old Catheter common stock shares issued and outstanding and Convertible Promissory Notes, representing an aggregate principal balance of $
Series X Convertible Preferred Stock has no voting rights prior to the conversion into common stock. While there are generally no voting rights of the Series X Convertible Preferred Stock, there are protective rights regarding the sales of the Company, change of control, etc. The remaining Series X Preferred Stock may convert into common stock only if the Company’s common stock has been delisted from the NYSE American or has been approved for initial listing on the NYSE American or another stock exchange, at a rate of
Other than dividends payable in shares of common stock, Holders of Series X Convertible Preferred Stock will be entitled to receive dividends on shares of Series X Convertible Preferred Stock equal, on an as-if-converted-to-common stock basis, and in the same form as dividends actually paid on shares of common stock.
Upon consummation of the Merger, each holder of Old Catheter Convertible Promissory Notes received, in exchange for discharge of the principal of their Notes, a number of shares of the Company's Series X Convertible Preferred Stock representing a potential right to convert into the Company's common stock in an amount equal to one common share for each $
| Date of Conversion | Series X Shares Converted | Common Shares Issued | |||||
| December 5, 2025 | |||||||
As of March 31, 2026 and December 31, 2025, the Company had no shares of Series X Convertible Preferred Stock outstanding.
Series B Convertible Preferred Stock
On May 12, 2025, pursuant to the May 2025 PIPE Financing, the Company issued
Subject to certain ownership limitations as described below, the Series B Convertible Preferred Stock was convertible into an aggregate of
The holders could convert all of the Series B Convertible Preferred Stock upon the date stockholder approval was obtained (“Stockholder Approval”). Stockholder Approval was obtained on July 25, 2025. Prior to Stockholder Approval, the Series B Convertible Stock could only be converted into up to
Holders of Series B Convertible Preferred Stock are entitled to receive dividends and distributions on shares of Series B Convertible Preferred Stock equal to, on an as-if-converted-to-common stock basis, and in the same form as dividends and distributions actually paid on shares of common stock.
The Series B Convertible Preferred Stockholders do not have a preference upon any liquidation, dissolution, or winding-up of the Company. In the event of certain restructuring or disposal events, then upon any subsequent conversion of the Series B Convertible Preferred Stock, for each convertible share that would have been issuable upon conversion immediately prior to the event, the holders shall receive the number of shares of common stock of the successor entity and any alternate consideration given to common stockholders. The conversion price shall be adjusted to apply to such alternate consideration based on the amount of alternate consideration issuable for one share of common stock. If holders of common stock are given any choice as to the securities, cash, or property received for alternate consideration, the holders of Series B Convertible Preferred Stock shall be given the same choice.
The Series B Convertible Preferred Stock includes certain contingent payment provisions that should be bifurcated and accounted for as a derivative under ASC Topic 815. The estimated fair value of these embedded derivatives was deemed to be de minimis at issuance and at March 31, 2026.
Except as otherwise required by law, the Series B Convertible Preferred Stock do not have any voting rights.
On February 6, 2026, the Company entered into the Letter Agreement described in Note 12, Equity Offerings and agreed to reduce the conversion price of the Series B Convertible Preferred Stock to an alternative price of $
The amendment to the Series B Convertible Preferred Stock pursuant to the Letter Agreement was accounted for as an extinguishment. Upon extinguishment, the Company derecognized the original Series B Convertible Preferred Stock at its carrying amount, and recognized the amended Series B Convertible Preferred Stock at fair value. The resulting difference of $
Series B Convertible Preferred Stock were converted as follows:
| Date of Conversion | Series B Shares Converted | Common Shares Issued | |||
| June 11, 2025 | | | |||
| March 10, 2026 |
As of March 31, 2026 and December 31, 2025, the Company had
Series C-1 Convertible Preferred Stock
In February and March 2026, pursuant to the February 2026 Private Placement and the March 2026 Private Placement, the Company issued
Subject to certain limitations described below, the Series C-1 Convertible Preferred Stock is convertible into shares of the Company’s common stock at the option of the holder at an initial conversion price of $
Notwithstanding the foregoing, the holders of shares of Series C-1 Convertible Preferred Stock do not have the right to convert any portion of their Series C-1 Convertible Preferred Stock if the holder, together with its affiliates, would beneficially own a number of shares of common stock in excess of
Holders of Series C-1 Convertible Preferred Stock are entitled to receive dividends when and as declared by the Board of Directors, in its sole discretion, on the stated value of such shares. In addition, upon certain rights offerings or other distributions to holders of common stock, the holders of Series C-1 Convertible Preferred Stock are entitled to participate on an as-if-converted-to-common-stock basis, in each case subject to the Beneficial Ownership Limitation and applicable issuance limitations.
Upon any liquidation, dissolution or winding-up of the Company, the holders of Series C-1 Convertible Preferred Stock are entitled to receive, prior and in preference to any distribution to holders of Junior Securities, an amount equal to the stated value of such shares, plus any accrued and unpaid dividends thereon, if any, and any other fees or liquidated damages then due and owing.
In the event of certain fundamental transactions, upon any subsequent conversion of the Series C-1 Convertible Preferred Stock, the holders will be entitled to receive, for each share of common stock that would otherwise have been issuable upon conversion immediately prior to such transaction, the same kind and amount of securities, cash or other property that would have been received by a holder of common stock, and the conversion price will be adjusted accordingly.
The Series C-1 Convertible Preferred Stock includes certain contingent payment provisions that should be bifurcated and accounted for as a derivative under ASC 815. The estimated fair value of these embedded derivatives was deemed to be de minimis at issuance and at March 31, 2026.
Except as otherwise required by law, and subject to certain protective provisions, the Series C-1 Convertible Preferred Stock do not have voting rights. As of March 31, 2026, the Company had
Series J Convertible Preferred Stock
On December 31, 2025, pursuant to the Exchange Agreement discussed in Note 9, Royalties Payable, the Company issued
Subject to certain limitations described below, the Series J Convertible Preferred Stock is convertible into an aggregate of
The conversion of the Series J Convertible Preferred Stock is subject to stockholder approval and Beneficial Ownership Limitations. The holders do not have the right to convert any portion of their Series J Convertible Preferred Stock if the holder, together with its affiliates, would beneficially own a number of shares of common stock in excess of
Holders of Series J Convertible Preferred Stock are entitled to receive dividends and distributions on shares of Series J Convertible Preferred Stock equal to, on an as-if-converted-to-common stock basis, and in the same form as dividends and distributions actually paid on shares of common stock. The holders also have the right to receive dividends when and as declared by the Board of Directors. No dividends have been granted to the Series J Convertible Preferred Stockholders.
The Series J Convertible Preferred Stockholders do not have a preference upon any liquidation, dissolution, or winding-up of the Company. In the event of certain restructuring or disposal events, then upon any subsequent conversion of the Series J Convertible Preferred Stock, for each convertible share that would have been issuable upon conversion immediately prior to the event, the holders shall receive the number of shares of common stock of the successor entity and any alternate consideration given to common stockholders. The conversion price shall be adjusted to apply to such alternate consideration based on the amount of alternate consideration issuable for one share of common stock. If holders of common stock are given any choice as to the securities, cash, or property received for alternate consideration, the holders of Series J Convertible Preferred Stock shall be given the same choice.
Except as otherwise required by law, the Series J Convertible Preferred Stock do not have any voting rights.
As of March 31, 2026, the Company had
The 2018 Equity Incentive Plan (the "2018 Plan") was replaced by the 2023 Equity Incentive Plan (the "2023 Plan"), as described below. As of December 31, 2025, stock options outstanding under the 2018 Plan were eliminated following the reverse stock split at 1-for-
2020 Inducement Equity Incentive Plan
The Company adopted the 2020 Inducement Equity Incentive Plan (the “2020 Plan”) in March 2020 and terminated it in April 2024. On adoption,
2023 Equity Incentive Plan
For the three months ended March 31, 2026. the Committee approved the grant of
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Volatility | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Expected life (in years) | ||||||||
Options with Performance-Based Vesting Conditions
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Risk-free interest rate | % | |||||||
| Volatility | % | |||||||
| Expected dividend yield | % | |||||||
| Expected life (in years) | — | |||||||
The following is a summary of stock option activity for the 2023 Plan options for the three months ended March 31, 2026:
| Weighted | Weighted | |||||||||||||||
| Average | Average | Aggregate | ||||||||||||||
| Stock | Exercise | Remaining | Intrinsic Value | |||||||||||||
| Options | Price | Life | (in thousands) | |||||||||||||
| Outstanding at December 31, 2025 | $ | $ | ||||||||||||||
| Options exercised | — | — | ||||||||||||||
| Options granted | — | — | ||||||||||||||
| Cancelled/forfeited | ( | ) | — | — | ||||||||||||
| Outstanding at March 31, 2026 | $ | $ | ||||||||||||||
| Vested and expected to vest at March 31, 2026 | $ | $ | ||||||||||||||
| Exercisable at March 31, 2026 | $ | $ | ||||||||||||||
The weighted-average grant-date fair value of the 2023 Plan options granted during the three months ended March 31, 2026 and 2025 was $
Non-Plan Options Issued
On January 6, 2025, the Board approved and issued a total of
The Non-Plan Options issued for the three months ended March 31, 2026 and 2025 were valued using the Black-Scholes model based on the following assumptions on the date of issue:
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Risk-free interest rate | % | |||||||
| Volatility | % | |||||||
| Expected dividend yield | % | |||||||
| Expected life (in years) | — | |||||||
The following is a summary of stock option activity for the Non-Plan options for the three months ended March 31, 2026:
| Weighted | Weighted | |||||||||||||||
| Average | Average | Aggregate | ||||||||||||||
| Stock | Exercise | Remaining | Intrinsic Value | |||||||||||||
| Options | Price | Life | (in thousands) | |||||||||||||
| Outstanding at December 31, 2025 | $ | $ | ||||||||||||||
| Options exercised | — | — | ||||||||||||||
| Options granted | — | — | ||||||||||||||
| Cancelled/forfeited | — | — | ||||||||||||||
| Outstanding at March 31, 2026 | $ | $ | ||||||||||||||
| Vested and expected to vest at March 31, 2026 | $ | $ | ||||||||||||||
| Exercisable at March 31, 2026 | $ | $ | ||||||||||||||
The weighted-average grant-date fair value of the Non-Plan options granted during the three months ended March 31, 2026 and 2025 was $
Stock-based compensation expense is recorded in selling, general and administrative expenses in the condensed consolidated statements of operations. Stock-based compensation expense for the three months ended March 31, 2026 and 2025 was $
Total unrecognized estimated stock-based compensation expense by award type and the remaining weighted average recognition period over which such expense is expected to be recognized at March 31, 2026 was as follows:
| Unrecognized Expense (in thousands) | Remaining Weighted Average Recognition Period | |||||||
| Stock options (Non-Plan Options) | $ | |||||||
| Stock options (2023 Plan Options) | $ | |||||||
Note 15. Asset Acquisitions
On January 24, 2025, the Company acquired
On December 31, 2025, in connection with the second amendment of the Related Party Notes described in Note 8, Notes Payable, the Company transferred the Perikard membership interests for de minimis proceeds to Mr. Jenkins. The disposal primarily related to the previously acquired patent for pericardial access technology. Because the patent was fully expensed as IPR&D at the time of acquisition and Perikard held no other assets or liabilities, no impairment or other charges were recognized in connection with the disposal. See Note 8, Notes Payable, for additional information over the debt extinguishment.
On May 5, 2025, Cardionomix acquired certain assets from Cardionomic. The assets primarily related to Cardionomic’s CPNS System, which represents a novel technology for the late-stage treatment of acute decompensated heart failure.
The acquisition was accounted for as an asset acquisition consisting primarily of an IPR&D Asset (the CPNS System). The Company issued
See Note 8, Notes Payable for additional information on the Note Payable.
Note 16. Income Taxes
The provision for income taxes for interim periods is determined using an estimated annual effective tax rate. The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions, if any, and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business.
For the three months ended March 31, 2026 and 2025, the Company recorded federal income tax benefit of $
The Company has no open income tax audits with any taxing authority as of March 31, 2026.
Note 17. Commitments and Contingencies
In the normal course of business, the Company is at times subject to pending and threatened legal actions. In management’s opinion, any potential loss resulting from the resolution of these matters will not have a material effect on the results of operations, financial position or cash flows of the Company.
Employment Litigation
In connection with the FLYTE acquisition, the Company assumed certain contingent liabilities, including an employment dispute with a former FLYTE employee alleging wrongful termination. The matter is currently proceeding through arbitration. While the Company disputes these allegations, the Company determined a loss was probable and reasonably estimable and recorded an estimated liability of $
Promissory Note Settlement
Prior to the Company’s acquisition of Flyte, Flyte was involved in a legal proceeding regarding a defaulted unsecured subordinated promissory note originally executed in November 2023. In September 2025, judgment was entered against Flyte in favor of the noteholders. On March 9, 2026, Flyte entered into a settlement and judgment satisfaction agreement to resolve the matter and satisfy the judgment. Pursuant to the agreement, Flyte agreed to pay an aggregate settlement amount of $
Note 18. Related Parties
Prior to the 2023 Merger between Old Catheter and Catheter, David A. Jenkins, the Company’s current Executive Chairman of the Board and Chief Executive Officer, and Old Catheter’s Chairman of the Board of Directors, and his affiliates held approximately $
On December 31, 2025, pursuant to the Exchange Agreement, Mr. Jenkins and his affiliate converted their aforementioned royalty rights and accrued royalty amounts into an aggregate of
In addition to the shares described above that were issued in connection with the Notes, Mr. Jenkins and his affiliates received
Mr. Jenkins’ daughter, the Company’s non-executive Chief Operating Officer, received options to purchase
On May 1, 2024, Marie-Claude Jacques, the Company’s then Chief Commercial Officer, received a non-plan option to purchase
During the year ended December 31, 2024, the Company entered into various short-term promissory notes with various related parties (the “Related Party Notes”). These Related Party Notes had a maturity date of August 30, 2024 and interest rates of
On July 11, 2025, two short-term promissory notes with a face value of $
The related parties and the amounts owed to each related party as of March 31, 2026 are summarized in the following table (in thousands):
| Related Party | Issuance Date | Principal Amount | Premium | Interest Accrued | |||||||||
| David Jenkins |
| $ | $ | $ | |||||||||
| FatBoy Capital, L.P. |
| $ | $ | $ | |||||||||
| FatBoy Capital, L.P. |
| $ | $ | $ | |||||||||
| FatBoy Capital, L.P. |
| $ | $ | $ | |||||||||
| Jenkins Family Charitable Institute |
| $ | $ | $ | |||||||||
| David Jenkins |
| $ | $ | $ | |||||||||
| Lifestim, Inc. |
| $ | $ | $ | |||||||||
On September 3, 2024, the Jenkins Family Charitable Institute also invested approximately $
On October 28, 2024, the Jenkins Family Charitable Institute exercised all
On January 6, 2025, Philip Anderson, the Company's Chief Financial Officer, received a non-plan option to purchase
In February 2025, Catheter formed its subsidiary Cardionomix. The capitalization structure of the newly formed entity included
On June 20, 2025, Catheter formed a new subsidiary, KardioNav. The capitalization structure of the newly formed entity include
Following the Company's acquisition of FLYTE in February and March 2026, the Company leases aircrafts from SEG Jets. The aircraft leases are used in connection with FLYTE’s aviation operations. The aircraft leases commenced between March 9, 2026 and March 16, 2026, and have remaining lease terms ranging from 18 months to 24 months and require fixed monthly lease payments.
On March 26, 2026, David Jenkins and Philip Anderson, received options to purchase
Note 19. Subsequent Events
Reverse Stock Split
On April 15, 2026, the shareholders of the Company approved a proposal to amend the Company’s Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split. The proposal allows but does not require the Board to effect a reverse stock split of the Company’s common stock at a reverse stock split ratio of not less than 1-for-
Issuance of Series D Convertible Preferred Stock
On April 20, 2026, in connection with the Company’s acquisition of FLYTE, the Company issued
Subject to certain limitations described below, the Series D Preferred Stock are convertible into shares of the Company's common stock at the option of a holder at an initial conversion price of $
Notwithstanding the foregoing, the holders of shares of Series D Convertible Preferred Stock do not have the right to convert any portion of their Series D Convertible Preferred Stock if the holder, together with its affiliates, would beneficially own a number of shares of common stock in excess of
Holders of Series D Convertible Preferred Stock are entitled to receive dividends when and as declared by the Board of Directors, in its sole discretion, on the stated value of such shares. In addition, upon certain rights offerings or other distributions to holders of common stock, the holders of Series D Convertible Preferred Stock are entitled to participate on an as-if-converted-to-common-stock basis, in each case subject to the Beneficial Ownership Limitation and applicable issuance limitations.
Upon any liquidation, dissolution or winding-up of the Company, the holders of Series D Convertible Preferred Stock are entitled to receive, prior and in preference to any distribution to holders of Junior Securities, an amount equal to the stated value of such shares, plus any accrued and unpaid dividends thereon, if any, and any other fees or liquidated damages then due and owing.
In the event of certain fundamental transactions, upon any subsequent conversion of the Series D Convertible Preferred Stock, the holders will be entitled to receive, for each share of common stock that would otherwise have been issuable upon conversion immediately prior to such transaction, the same kind and amount of securities, cash or other property that would have been received by a holder of common stock, and the conversion price will be adjusted accordingly.
Except as otherwise required by law, and subject to certain protective provisions, the Series D Convertible Preferred Stock do not have voting rights.
Issuance of Series C-2 Convertible Preferred Stock
On April 21, 2026, pursuant to the Securities Purchase Agreements dated February 6, 2026 and March 9, 2026, the Company issued an aggregate of
Subject to certain limitations described below, the Series C-2 Convertible Preferred Stock is convertible into shares of the Company’s common stock at the option of the holder at an initial conversion price of $
Notwithstanding the foregoing, the holders of shares of Series C-2 Convertible Preferred Stock do not have the right to convert any portion of their Series C-2 Convertible Preferred Stock if the holder, together with its affiliates, would beneficially own a number of shares of common stock in excess of
Holders of Series C-2 Convertible Preferred Stock are entitled to receive dividends when and as declared by the Board of Directors, in its sole discretion, on the stated value of such shares. In addition, upon certain rights offerings or other distributions to holders of common stock, the holders of Series C-2 Convertible Preferred Stock are entitled to participate on an as-if-converted-to-common-stock basis, in each case subject to the Beneficial Ownership Limitation and applicable issuance limitations.
Upon any liquidation, dissolution or winding-up of the Company, the holders of Series C-2 Convertible Preferred Stock are entitled to receive, prior and in preference to any distribution to holders of Junior Securities, an amount equal to the stated value of such shares, plus any accrued and unpaid dividends thereon, if any, and any other fees or liquidated damages then due and owing.
In the event of certain fundamental transactions, upon any subsequent conversion of the Series C-2 Convertible Preferred Stock, the holders will be entitled to receive, for each share of common stock that would otherwise have been issuable upon conversion immediately prior to such transaction, the same kind and amount of securities, cash or other property that would have been received by a holder of common stock, and the conversion price will be adjusted accordingly.
Except as otherwise required by law, and subject to certain protective provisions, the Series C-2 Convertible Preferred Stock do not have voting rights.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are subject to risks and uncertainties. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. All statements, other than statements of historical facts, regarding management’s expectations, beliefs, goals, plans or Catheter Precision’s prospects should be considered forward-looking statements. Readers are cautioned that actual results may differ materially from projections or estimates due to a variety of important factors, and readers are directed to the Risk Factors identified in Catheter Precision’s filings with the SEC, including its most recent Annual Report on Form 10-K, copies of which are available free of charge at the SEC’s website at www.sec.gov or upon request from Catheter Precision. Catheter Precision may not actually achieve the goals or plans described in its forward-looking statements, and such forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Investors should not place undue reliance on these statements. Catheter Precision assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties. Actual outcomes or results may differ from anticipated results, sometimes materially. Factors that could cause actual results to differ include, but are not limited to: the ability of the combined company to achieve the identified synergies; the ability to integrate the FLYTE business into Catheter Precision and realize the anticipated strategic benefits of the transaction within the expected time-frames or at all; that such integration may be more difficult, time-consuming or costly than expected; that operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers or suppliers) may be greater than expected following the closing of the transaction; the retention of certain key employees of FLYTE; the expected benefits and success of FLYTE’s business model; general economic conditions that are less favorable than expected; geopolitical developments and additional changes in international trade policies and relations, including tariffs; and the ability of our products and product candidates to compete effectively against current and future competitors.
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including, but not limited to, those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025, as well as those described below. To the extent that any risk factor set forth below is inconsistent with or expands upon a risk factor set forth in the 10‑K, the risk factor described below supersedes the prior disclosure. These risks include, but are not limited to, that: if we pursue a strategic transaction, such as FLYTE acquisition, it may change the primary focus of our business, and our management team could be diverted from pursuing our present core business and from obtaining regulatory approval for our products in development; we will be unable to develop the assets acquired in by KardioNav and Cardionomix unless we are able to obtain additional financing in sufficient amounts to fund our current business, any future businesses we may enter into and to fund our products in development, which financing may not be available on acceptable terms or at all, and could require significant changes in our management and business focus, the results of anticipated trials may not turn out as we currently expect and future trials may not occur on the time tables we expect or may be more costly than anticipated, or may be abandoned due to lack of financing or changes in our business focus, we will be required to raise additional funds to finance our operations and continue as a going concern , and we may not be able to do so when necessary, and/or the terms of any financings may not be advantageous to us or could require changes to governance or operations, and we may require additional funds sooner than our current expectations and we may be required to significantly dilute our existing stockholders in order to raise sufficient operating funds assuming that we are able to raise funds at all, which is uncertain; our stockholder equity is near the minimum level prescribed by the NYSE American and if we are unable to maintain minimum listing requirements, we are liable to be delisted from the NYSE American; our common stock may be subject to extreme market volatility and trading patterns and may experience rapid and substantial increases or decreases unrelated to our operating performance or prospects, or macro or industry fundamentals, which could occur for a number of reasons including but not limited to analyst recommendations, changes in our industry or the overall markets, significant acquisitions or other strategic transactions by or involving us or our subsidiaries, among other reasons; our operating business has a history of losses, is expected to incur additional losses, and may never achieve profitability; our past performance may not be a reliable indicator of future performance, including but not limited to in the event of a strategic transaction; historical trends should not be used to anticipate results or trends in future periods; our ability to increase our at-the-market offering availability in the future is subject to obtaining necessary approvals, certifications, legal opinions and accounting comfort letters, and there is no guaranty that we can do so successfully; we have previously identified material weaknesses in our internal control over financial reporting and, if these or other material weaknesses occur again, they could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner; compliance with Sarbanes-Oxley Act Section 404 could have a material adverse impact on our business; we will not be able to reach profitability unless we are able to achieve our product expansion and growth goals or engage in a strategic transaction which realigns our business focus; our VIVO launch plans require significant investment in infrastructure and sales representatives; our research and development and commercialization efforts may depend on entering into agreements with corporate collaborators; we have entered into joint marketing agreements with respect to our products, and may enter into additional joint marketing agreements, that will reduce our revenues from product sales; royalty agreements with respect to LockeT, the surgical vessel closing pressure device, will reduce any future profits from this product; if we experience significant disruptions in our information technology systems, our business may be adversely affected; litigation and other legal proceedings may adversely affect our business; if we make acquisitions or divestitures, we could encounter difficulties that harm our business, and entering into a strategic transaction could materially alter our business model and focus; failure to attract and retain sufficient qualified personnel could also impede our growth; our revenues may depend on our customers’ receipt of adequate reimbursement from private insurers and government sponsored healthcare programs; we may be unable to compete successfully with companies in our highly competitive industry, many of whom have substantially greater resources than we do; our future operating results depend upon our ability to obtain components in sufficient quantities on commercially reasonable terms or according to schedules, prices, quality and volumes that are acceptable to us, and suppliers may fail to deliver components, or we may be unable to manage these components effectively or obtain these components on such terms; if hospitals, physicians and patients do not accept our current and future products or if the market for indications for which any product candidate is approved is smaller than expected, we may be unable to generate significant operating revenue, if any; a variety of risks associated with marketing our products internationally could materially adversely affect our business; the impact of the military conflicts in Ukraine and Israel, and the actions that have been and could be taken by other countries, including new and stricter sanctions and actions taken in response to such sanctions, have affected, and may continue to affect, our business and results of operations, including our supply chain; if the third parties on which we rely for the conduct of our clinical trials and results do not perform our clinical trial activities in accordance with good clinical practices and related regulatory requirements, we may be unable to obtain regulatory approval for or commercialize our product candidates; we may be adversely affected by product liability claims, unfavorable court decisions or legal settlements; our ability to use our net operating loss carryforwards may be limited; we are subject to pervasive and continuing regulation by the FDA and other regulatory agencies; our products may be subject to additional recalls, revocations or suspensions after receiving FDA or foreign approval or clearance, which could divert managerial and financial resources, harm our reputation, and adversely affect our business; changes in trade policies among the United States (“U.S.”) and other countries, in particular the imposition of new or higher tariffs, could place pressure on our average selling prices as our customers seek to offset the impact of increased tariffs on their own products; increased tariffs or the imposition of other barriers to international trade could have a material adverse effect on our revenues and operating results; product clearances and approvals can often be denied or significantly delayed, although we have obtained regulatory clearance for our VIVO and LockeT products in the U.S. and certain non-U.S. jurisdictions; our current business plans for our current operating business include expanding uses for our products, which if implemented would require additional clearances; even after clearance is obtained, our products remain subject to extensive regulatory scrutiny; reductions in staffing and funding at FDA and other federal agencies could cause delays in the development and approval of our products; our business may be adversely affected by changes and uncertainty in the health care industry including health care public‑policy developments; if we or our suppliers fail to comply with the FDA’s Quality System Regulation, or QSR, or any applicable state equivalent, our operations could be interrupted, and our potential product sales and operating results could suffer; if any of our products cause or contribute to a death or a serious injury, or malfunction in certain ways, we will be required to report under applicable medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions; healthcare reform initiatives and other administrative and legislative proposals may adversely affect our business, financial condition, results of operations and cash flows in our key markets; if we are unable to obtain and maintain patent protection for our products, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our existing products and any products we may develop, and our technology may be adversely affected; and any short-term sale may produce proceeds that are less than the market or stated value of such assets and less than the proceeds that could have been obtained if they were liquidated in the ordinary course. If we enter into a strategic transaction, such as a merger or acquisition, we may become subject to additional risks in addition to those described above, which risks would be identified and disclosed in conjunction with consummating any such transaction. There is no guarantee that we will be able to identify and enter into any such strategic transaction.
The forward-looking statements in this report and identified above reflect our beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Quarterly Report and are subject to risks and uncertainties including those described in the cautionary statements above. Given these risks and uncertainties, you should not place undue reliance on the forward-looking statements. We qualify all of the forward-looking statements in this Quarterly Report by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events or otherwise.
This Quarterly Report also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources.
References to “we”, “us”, “our”, "Catheter" and “the Company” refer to Catheter Precision, Inc.
Overview
Catheter Precision, Inc. was incorporated in California on September 4, 2002, and reincorporated in Delaware in July 2018. Catheter was initially formed to develop, commercialize, and market its advanced excimer laser-based platform for use in the treatment of vascular and dermatological immune-mediated inflammatory diseases. On January 9, 2023, we merged with the former Catheter Precision, Inc. ("Old Catheter”), a privately held Delaware corporation (the "Merger”), which became our wholly owned subsidiary. Historically, our activities primarily relate to Old Catheter’s historical business, which comprises the design, manufacture and sale of new and innovative medical technologies focused in the field of cardiac electrophysiology ("EP").
On February 17, 2025, we formed a new subsidiary, Cardionomix, Inc. ("Cardionomix"), to acquire certain assets previously held by Cardionomic, Inc. ("Cardionomic"), a third-party entity that had ceased operations. We own 82% of Cardionomix’s issued and outstanding common stock. Our Chief Executive Officer and Chairman of the Board and certain of his affiliates own 12%, while the remaining 6% of the outstanding common stock was issued to certain third parties as finder's fees for the asset acquisition (see Note 2, Summary of Significant Accounting Policies in the audited consolidated financial statements included elsewhere in this Annual Report). On May 5, 2025, Cardionomix acquired certain assets primarily related to the Cardiac Pulmonary Nerve Stimulation ("CPNS") System previously held by Cardionomic (see Note 14, Asset Acquisition in the audited consolidated financial statements included elsewhere in this Annual Report). The CPNS System is a novel technology for the late-stage treatment of acute decompensated heart failure by stimulating the autonomic cardiac nerves to restore autonomic balance. Unless Cardionomix can obtain its own dedicated financing, the Company does not intend to allocate capital to fund the clinical development of the acquired assets.
On June 20, 2025, we formed a new subsidiary, KardioNav, Inc. ("KardioNav"), to pursue the advancement, development, and commercialization of certain intellectual property assigned to KardioNav. We transferred certain intellectual property related to the View into Ventricular Onset System ("VIVO" or "VIVO System") to KardioNav, while Chelak iECG, Inc. ("Chelak"), an unrelated third party, transferred certain patents related to a medical device designed to interface with implanted cardiac devices to KardioNav. KardioNav intends to integrate the VIVO mapping intellectual property with Chelak's assigned patents to develop a system that interfaces with implanted cardiac devices to enable improved pre-ablation mapping and more precise localization of arrhythmogenic tissue. Research and development activities in animals and humans have begun. We own 57% of the subsidiary's issued and outstanding common stock, while Chelak owns 33% of the subsidiary’s issued and outstanding common stock. Our Chief Executive Officer and Chairman of the Board of Directors and certain of his affiliates own the remaining 10% of the subsidiary’s issued and outstanding common stock. KardioNav obtained its own financing in 2025. The Company does not intend to provide additional financial support to KardioNav. See Note 2, Summary of Significant Accounting Policies in the audited consolidated financial statements included elsewhere in this Quarterly Report.
One of our two primary products is the VIVO System, which is a non-invasive imaging system that offers 3D cardiac mapping to help with localizing the sites of origin of idiopathic ventricular arrhythmias in patients with structurally normal hearts prior to EP procedures.
We have received FDA clearance to market and promote the VIVO System in the U.S. as a pre-procedure planning tool for patients with structurally normal hearts undergoing ablation treatment for idiopathic ventricular arrhythmias. VIVO allows for the acquisition, analysis, display and storage of cardiac electrophysiological data and maps for analysis by a physician. To date, VIVO has been utilized in more than 1,000 procedures in the U.S. and EU by over 30 physicians, with no reported device-related complications.
We have been cleared to label the VIVO System with the CE Mark in the EU and certain other countries. The CE Mark designation, which affirms the product’s conformity with European health, safety, and environmental protection standards, allows us to market that product in countries that are members of the EU and the European Free Trade Association. Catheter has commenced limited sales of the VIVO System in Europe and the UK through independent distributors. Catheter’s international distributors are supported by two EU-based full-time consultants.
Our second and newest primary product, LockeT® ("LockeT”), is a suture retention device indicated for wound healing by distributing suture tension over a larger area in the patient in conjunction with a figure of eight suture closure. LockeT is intended to temporarily secure sutures and aid clinicians in locating and removing sutures efficiently. LockeT is a sterile Class I product that was registered with the FDA in the U.S. We recognized our first sale of LockeT in May 2024. In September 2024, we received notification of the issuance of our first LockeT patent in the country of China and we also completed a Middle East distribution agreement for LockeT.
In April 2025, we received notification of the issuance of our first LockeT patent in the U.S. by the United States Patent and Trademark Office. We also obtained the CE Mark approval for LockeT, permitting the marketing and sale of LockeT in the European Union, Switzerland and Turkey. Since receipt of the CE Mark, we have signed agreements with new distributors in the United Kingdom, Italy, Spain, Portugal, Switzerland, the Middle East, South Africa and Brunei.
In February 2026, we entered into an Acquisition Purchase Agreement with SEG Jets LLC ("SEG Jets"), whereby we agreed to acquire 19.98% of the issued and outstanding shares of common stock of Fly Flyte, Inc. ("FLYTE") held by SEG Jets in exchange for 5,250 shares of our newly designated Series D Convertible Preferred Stock, with a par value of $0.0001 per share and a stated value of $1,000 per share, for an aggregate stated value of $5.3 million, subject to customary closing conditions and stockholder approval. In March 2026, we entered into a Securities Purchase Agreement with Creatd, Inc. ("Creatd"), whereby we acquired 80.02% of the remaining issued and outstanding shares of common stock of FLYTE and 100% of the membership interests of Ponderosa Air, LLC ("Ponderosa"), subject to closing conditions. As consideration for the acquired equity interests in FLYTE and Ponderosa, we agreed to pay $11.6 million as follows: (A) cash consideration $0.8 million due at closing, (B) $5.0 million in principal amount of a promissory note, and (C) 5,778 shares of Series D Convertible Preferred Stock for an aggregate stated value of $5.8 million. As a result of these transactions, we now own 100% of the issued and outstanding common stock of FLYTE common stock and 100% of the membership interests of Ponderosa.
With respect to our historical business, our strategy is to become a leading medical device company in the field of cardiac electrophysiology developing and selling electrophysiology products to provide patients, hospitals, and physicians with novel technologies and solutions to improve the lives of patients with cardiac arrhythmias and reduce cost per procedure. We aim to establish VIVO as an integral tool used by cardiac electrophysiologists during ablation treatment of ventricular arrhythmias by reducing procedure time and patient complications and increasing procedural success.
Following the March 2026 acquisition of FLYTE, we now operate in two reporting segments: (i) cardiac electrophysiology and (ii) private aviation charter services.
Our business strategy is to become a leading medical device company in the field of cardiac electrophysiology, and we are dedicated to developing and delivering electrophysiology products to provide patients, hospitals, and physicians with novel technologies and solutions to improve the lives of patients with cardiac arrhythmias. We aim to establish VIVO as an integral tool used by cardiac electrophysiologists during ablation treatment of ventricular arrhythmias by reducing procedure time, patient complications and increasing procedural success.
However, in order to attract capital to fund our operating losses while we pursue this strategy, we have also adopted a holding company structure within which we house and operate our FLYTE private aviation charter business which has the potential to quickly grow into a profitable subsidiary. FLYTE is a technology-enabled regional air mobility company operating a growing fleet of Cirrus Vision Jets. Focused on high frequency, short haul markets, FLYTE is providing a faster, safer, and more efficient alternative to commercial and existing private charter air travel. Flight operations are conducted through FLYTE’s wholly owned subsidiary, Ponderosa Air, LLC, an FAA certified Part 135 air carrier. With certified aircraft, active revenue generating operations and scalable fleet expansion underway, FLYTE is seeking to build a disciplined, asset backed aviation infrastructure designed to serve underserved regional markets.
Recent Developments
On December 26, 2025, we issued an unsecured convertible notes payable with a principal amount of $102 thousand and a discount of $2 thousand to Boot Capital LLC for cash proceeds of $100 thousand. We further issued an unsecured convertible note payable with a principal amount of $204 thousand and a discount of $4 thousand to Vanquish Funding Group Inc. for cash proceeds of $200 thousand. The convertible notes payable have a maturity date of September 30, 2026 and stated interest rate of 10% per annum, which shall be payable when the principal amount is due. Any principal amount or interest that is not paid when due shall bear the default interest of 22% per annum.
In accordance with the fair value option, the convertible notes payable were recorded at fair value in the accompanying condensed consolidated balance sheets included elsewhere in this Quarterly Report. Changes in fair value of convertible notes payable along with interest expense are recorded under change in fair value of convertible notes payable in the accompanying condensed consolidated statements of operations included elsewhere in this Quarterly Report.
See Note 8, Notes Payable in the condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information.
Modification of Related Party Notes
On December 31, 2025, we entered into the second amendment of the Related Party Notes, which extended the maturity date of the notes payable to the Jenkins Family Charitable Institute to January 31, 2028, and the notes payable to FatBoy Capital, L.P. ("FatBoy") and Mr. Jenkins to January 31, 2029. As part of the second amendment, we issued 170,000 Series M Warrants to FatBoy and Mr. Jenkins, respectively, and transferred the Perikard membership interests to Mr. Jenkins for de minimis proceeds. All other terms and conditions remained unchanged.
The second amendment was accounted for as a debt extinguishment since the amended terms and conditions were substantially different from prior terms and conditions. We derecognized the net carrying amount of the original Related Party Notes and recorded the amended Related Party Notes at fair value. Since the fair value of the amended Related Party Notes of $1.7 million was greater than the principal balance of $1.5 million, we recognized a premium of $0.2 million as of December 31, 2025. The difference between the reacquisition price, which is the sum of the fair values of the amended Related Party Notes, Perikard membership interests, and Series M Warrants, and the net carrying amount of the original Related Party Notes of $0.6 million was recorded as loss on debt extinguishment consolidated statements of operations for the year ended December 31, 2025.
See Note 8, Notes Payable in the condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information.
Each Series M Warrant is exercisable for shares of the Company’s common stock at an exercise price of $1.56 per share. The Series M Warrants are not exercisable until Stockholder Approval is obtained, and expire 5.5 years thereafter. Each Series M Warrant is exercisable into one share of the Company's common stock and may be exercised on a cashless basis under certain circumstances. The exercise price of the Series M Warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company's common stock. The Series M Warrants are callable by the Company for $0.01 per share if the volume-weighted average price of the Company's common stock for 20 consecutive trading days exceeds $1.50 per share and the Series M Warrants have not been exercised. Stockholder approval has not been obtained.
The Company assessed the Series M Warrants and determined that they do not require liability classification pursuant to ASC Topic 480. Furthermore, the Series M Warrants do not have any net cash settlement provisions that would preclude equity classification under ASC Topic 815-40.
See Note 12, Equity Offerings in the condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information on the provisions for the Series M Warrants.
Royalty Payable Exchange
On December 31, 2025, we entered into the Series J Exchange Agreement ("Royalty Right Exchange") with Mr. Jenkins and FatBoy to exchange future and accrued royalty rights of $2.7 million for an aggregate of 9,490 shares of the Company's newly designated Series J Convertible Preferred Stock, par value $0.0001 per share and stated value of $1,000 per share. We derecognized $2.7 million of royalties payable due to related parties and recognized the fair value of the Series J Convertible Preferred Stock of $5.3 million in additional paid-in capital for the year ended December 31, 2025. The difference between the fair value of the Series J Convertible Preferred Stock and the fair value of the royalties payable due to related parties of $2.6 million was recorded as loss on debt extinguishment in the consolidated statement of operations for the year ended December 31, 2025.
See Note 13, Preferred Stock, in our condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information on the Series J Convertible Preferred Stock issued in connection with the Royalty Right Exchange.
One of the third-party Noteholders remained a party to the royalty agreement and associated payable as of March 31, 2026.
February 2026 Private Placement
On February 6, 2026, we entered into a Securities Purchase Agreement with certain accredited investors for a private placement financing and issued an aggregate of (i) 392,608 shares of our common stock, par value $0.0001 per share, at a per share purchase price of $1.43 and (ii) 1,617 shares of newly designated Series C-1 Convertible Preferred Stock par value $0.0001 per share, with a stated value of $1,000 per share for gross proceeds of $2.2 million. The investors agreed to purchase newly designated Series C-2 and Series C-3 Convertible Preferred Stock, par value $0.0001 per share, with stated values of $1,000 per share, under additional closings for aggregate gross proceeds of $1.6 million per closing. The additional closings are subject to certain closing conditions, including stockholder approval to issue shares of common stock in excess of 19.99% of our issued and outstanding shares of common stock and to effect a reverse stock split ("Stockholder Approval”) and, solely with respect to the closing of the Series C-3 Convertible Preferred Stock, declaration of the effectiveness of the Registration Statement filed for the resale of the common stock underlying the Series C-1, C-2, and C-3 Convertible Preferred Stock. The investors also have the right, but not the obligation, to purchase up to an aggregate of $39.2 million of Series C-4 Convertible Preferred Stock, par value $0.0001 per share, with stated value of $1,000 per share in one or more closings.
February 2026 Warrant Exercise and Series B Convertible Preferred Stock Conversion Inducement
In February 2026, the Company agreed to lower the exercise price of existing warrants and the conversion price of the Series B Convertible Preferred Stock to $1.78 per share for certain holders as consideration for exercising the existing warrants and converting the Series B Convertible Preferred Stock, resulting in aggregate proceeds of $0.4 million.
March 2026 Private Placement
On March 9, 2026, we entered into an additional Securities Purchase Agreement with certain accredited investors for a private placement financing pursuant to which the investors agreed to purchase 1,853 shares of Series C-1 Convertible Preferred Stock, par value of $0.0001 per share and stated value of $1,000 per share, for aggregate gross proceeds of $1.9 million. The investors agreed to purchase newly designated Series C-2 and Series C-3 Convertible Preferred Stock, par value $0.0001 per share, with stated values of $1,000 per share, under additional closings for aggregate gross proceeds of $1.9 million per closing. The additional closings are subject to closing conditions, including approval from our stockholders to issue shares of common stock in excess of 19.99% of our issued and outstanding shares of common stock and, solely with respect to the closing for the Series C-3 Convertible Preferred Stock, effectiveness of the Registration Statement filed to register the resale of common stock underlying the Series C-1, C-2, and C-3 Convertible Preferred Stock. The investors also have the right, but not the obligation, to purchase up to an aggregate of $39.2 million of Series C-4 Convertible Preferred Stock, par value $0.0001 per share, with stated value of $1,000 per share in one or more closings.
FLYTE Acquisition
In February 6, 2026, we entered into an Acquisition Purchase Agreement with SEG Jets LLC ("SEG Jets"), whereby we agreed to acquire 19.98% of the issued and outstanding shares of common stock of Fly Flyte, Inc. ("FLYTE") held by SEG Jets in exchange for 5,250 shares of our newly designated Series D Convertible Preferred Stock, with a par value of $0.0001 per share and a stated value of $1,000 per share, for an aggregate stated value of $5.2 million, subject to customary closing conditions and stockholder approval. In March 9, 2026, we entered into a Securities Purchase Agreement with Creatd, whereby we acquired 80.02% of the remaining issued and outstanding shares of common stock of FLYTE and 100% of the membership interests of Ponderosa Air, LLC ("Ponderosa"), subject to closing conditions. As consideration for the acquired equity interests in FLYTE and Ponderosa, we agreed to pay $11.6 million as follows: (A) cash consideration $0.8 million due at closing, (B) $5.0 million in principal amount of a promissory note, and (C) 5,778 shares of Series D Convertible Preferred Stock for an aggregate stated value of $5.8 million. As a result of these transactions, we owned 100% of the issued and outstanding common stock of FLYTE common stock and 100% of the membership interests of Ponderosa as of March 9, 2026.
Additional information regarding the FLYTE acquisition is set forth in our Current Report on Form 8-K filed with the SEC on February 6, 2026 and March 9, 2026 and in Note 3 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
FLYTE is a technology-powered, private air transportation company. Founded in August 2018, FLYTE’s mission is to make private air travel a passenger-first, more inclusive and accessible mode of transportation, made possible through properly applied technology, use of more conveniently located existing infrastructure and operational efficiencies. FLYTE provides two distinct air travel services: Flyte Hops operates short-haul charter routes using its own fleet of leased Cirrus Vision jets flown by pilots that are full-time employees of Flyte. Flyte manages marketing, customer booking, flight scheduling, pricing, collects payment, purchases jet fuel, files the flight plan, uses its own aircraft flown by its own pilots to fly the customers, maintains all necessary FAA certifications. Flyte Luxe matches passengers seeking airplanes larger than the Cirrus Vision or with longer range with appropriate 3rd party aircraft and crews, providing private aviation coordination and bespoke travel experiences. We believe FLYTE is positioned to compete with operators focused on the emerging urban air mobility (“UAM”), regional air mobility (“RAM”) and advanced air mobility (“AAM”) markets, each of which is likely to consist primarily of short-range electric-powered aircraft using short take-off and vertical take-off and landing technology.
The financial results of FLYTE are included in our unaudited condensed consolidated financial statements from March 10, 2026 through March 31, 2026. As a result, the consolidated results of operations for the three months ended March 31, 2026 reflect approximately twenty-two days of contribution from FLYTE, and the comparative results for the three months ended March 31, 2025 do not include any results of FLYTE. Investors are cautioned that period-over-period comparisons of our consolidated results of operations are not directly comparable as a result of the Acquisition.
Issuance of Series D Convertible Preferred Stock
Unpredictable changes in economic conditions, including the effects of inflation, elevated interest rates, slowing or contracting gross domestic product, geopolitical instability, changes in international trade policy (including the imposition or escalation of tariffs), increased governmental intervention, and other macroeconomic factors, may adversely affect our general business strategy. Persistent or renewed inflationary pressure generally affects us by increasing our cost of labor, our cost of materials and components used in the manufacture of our products, and, with respect to FLYTE, our cost of aviation fuel and our cost of access to third-party aircraft operator capacity. Declining general economic, business or industry conditions, inflation, or a recession may have a material adverse effect on our future results of operations, liquidity and financial condition. We have also observed a continuing trend of higher third-party aircraft operator costs in the private aviation market, which could impact FLYTE’s short-term and long-term margins and profitability.
FLYTE continues to rely on third-party aircraft operators to generate substantially all of the revenue of its charter brokerage business. As a result, we face the risk that any of these third-party aircraft operators may not fulfill their contracts and deliver their services on a timely basis, or at all. The ability of any third-party aircraft operator to effectively satisfy our requirements could also be impacted by the operator’s financial difficulty or damage to its operations caused by fire, terrorist attack, natural disaster, public health emergency, or other events. In addition, due to aircraft supply constraints that have persisted across the private aviation industry, we may be required to pay more for capacity with our third-party aircraft operators to service customer flights. The failure of any third-party aircraft operator to perform to our expectations could result in delayed or cancelled flights or service credits, and could harm portions of our business.
In addition, our results of operations for periods following the FLYTE acquisition will reflect, among other things, the amortization of acquired intangible assets, the depreciation of acquired property and equipment at stepped-up fair values, the valuation of the preferred stock issued as part of the consideration for the FLYTE acquisition, and integration-related costs. These items did not affect our results of operations in periods preceding the FLYTE acquisition, and as a result, period-over-period comparisons of our results of operations may not be directly comparable.
See “Results of Operations” and “Liquidity and Capital Resources” below.
Supply Chain and Pilot Availability Relating to FLYTE
The execution of FLYTE’s business strategy is dependent on, among other things, the availability of aviation fuel at acceptable prices and our ability to hire and retain qualified pilots to support our air-taxi service and to support the third-party aircraft operators that fly under our charter brokerage arrangements. The supply of qualified pilots to the airline and private aviation industries has remained constrained, and demand for pilots may continue to outpace supply for the foreseeable future. Continued periods of significant disruption in the supply of aviation fuel, sustained increases in fuel prices, or difficulty in attracting and retaining qualified pilots could have a significant negative impact on our operating results, liquidity and financial condition.
Environmental Relating to FLYTE
FLYTE is subject to increasingly rigorous federal, state, local and foreign laws and regulations relating to the protection of the environment and noise, including those relating to emissions to the air, discharges to surface and subsurface waters, safe drinking water, and the use, management, disposal and release of, and exposure to, hazardous substances, oils and waste materials. FLYTE may be subject to new laws and regulations that may have a material adverse effect on its operations. In addition, U.S. airport authorities continue to explore ways to limit de-icing fluid discharges. Any such existing, future, new or potential laws and regulations, including any future regulation of greenhouse gas emissions from aviation activities, could have a material adverse impact on our business, results of operations and financial condition.
Components of our Results of Operations for the Three Months Ended March 31, 2026 and 2025
Revenues
Our current activities primarily relate to the design, manufacture and sale of new and innovative medical technologies in the field of cardiac electrophysiology and private aviation charter services. Our two primary products under the cardiac electrophysiology segment are (i) the VIVO System and (ii) the LockeT device.
The VIVO System provides 3D cardiac mapping to aid with localizing the sites of origin of idiopathic ventricular arrhythmias in patients with structurally normal hearts prior to electrophysiology studies. Customers also have the option to purchase software upgrades in advance at contract inception. We invoice the customer for VIVO System and related software upgrade services after physical possession and control of VIVO System has been transferred. Subsequent renewals for software upgrade services are invoiced at inception of the renewed term. The timing of payment for the corresponding invoices depends on the credit terms identified in each contract. We recognize revenues for VIVO System at the point in time that the product is delivered to the customer. We recognize revenues for software upgrade services evenly over time over the term of the contract. We did not recognize any revenues for software upgrade services for the three months ended March 31, 2026 and 2025.
LockeT is a suture retention device indicated for wound healing by distributing suture tension over a larger area in the patient in conjunction with a figure of eight suture closure. We recognize sales of LockeT at the point in time that the product is delivered to the customer.
We generate service revenue through two primary private aviation charter services, (i) Hops and (ii) Luxe.
Hops refers to short-haul private flights operated directly by us under its Part 135 certificate. These flights are conducted on aircraft managed by us and typically service high-demand regional routes throughout the New York Metro Area, Long Island, New England and the Eastern seaboard, to any destination within 400 nautical miles of the Company’s base in Farmingdale, New York. For Hops arrangements, we act as the principal because we control the specified flight service before it is transferred to the customer, are primarily responsible for operating and fulfilling the flight, and have discretion in establishing pricing. Accordingly, Hops revenue is presented on a gross basis. We recognize revenue upon completion of each flight and includes base charter rates, repositioning fees, and ancillary charges. Customer payments received in advance are recorded as deferred revenue until the related flight is completed.
Luxe is the operated under our brokerage division, offering clients access to on-demand charters through a vetted network of third-party operators. We recognize revenue when control of the promised service is transferred to our customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. We utilized registered independent third-party aircraft operators in the performance of all of our flights in 2025. We evaluate 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. Based on this evaluation, it was determined that we act as the agent within Luxe revenue arrangements, because the third-party aircraft operator is primarily responsible for operating and fulfilling the flight, and we do not control the underlying flight service before it is provided to the customer. Accordingly, Luxe revenue is presented on a net basis, representing the net amount retained by us after amounts payable to the third-party aircraft operator. The nature of the flight services we provide to customers is similar regardless of which third-party aircraft operators is involved. We direct third-party aircraft operators to provide an aircraft to a customer. Based on evaluation of the control model, it was determined that we act as the principal rather than the agent within all revenue arrangements, as we have the authority to direct the key components of the service on behalf of the customer regardless of which third-party is used.
Service revenue is earned and recognized as revenue at the point in time in which the service is provided. We generally does not issue refunds for flights unless there is a failure to meet its service obligations. For roundtrip flights, revenue is recognized upon arrival at the destination for each flight.
We are a business that has operations within and outside of the United States. During the three months ended March 31, 2026 and 2025, approximately 62% and 6% of our product sales were derived from customers outside of the United States, respectively. During the three months ended March 31, 2026, 100% of our service revenue was derived from customers inside of the United States.
Cost of revenues
Cost of product revenues consists primarily of component costs, labor costs, and manufacturing overhead incurred to produce our products and support production. Cost of service revenues consists of primarily labor costs, fuel costs and landing fees related to our Hops aviation charter services.
Selling, general and administrative expenses
Selling, general and administrative (“SG&A”) expenses consist of employee-related costs, including salaries, benefits and stock-based compensation expenses. Other SG&A expenses include amortization of intangible assets, depreciation of fixed assets, professional services fees, including legal, audit and tax fees, insurance fees, general corporate expenses and facility-related expenses.
Research and development expenses
Research and development (“R&D”) expenses are expensed as incurred and include research grants paid to other parties, product development, costs of clinical studies to support new products and product enhancements, including expanded indications, supplies used for internal R&D and clinical activities, and costs for outside consultants who assist with technology development and clinical affairs.
Acquired in-process research and development expenses
Assets that are acquired in an asset acquisition for use in research and development activities that have an alternative future use are capitalized as IPR&D. Acquired IPR&D that has no alternative future use as of the acquisition date is recognized as research and development expense as of the acquisition date.
Results of Operations for the Three Months Ended March 31, 2026 and 2025
The following table sets forth the results of the Company's operations for the periods presented (in thousands):
| For the Three Months Ended March 31, |
||||||||||
| 2026 |
2025 |
Change |
||||||||
| Revenues: |
||||||||||
| Product revenue |
$ | 248 | $ | 143 | $ | 105 | ||||
| Service revenue, net |
184 | — | 184 | |||||||
| Total revenues |
432 | 143 | 289 | |||||||
| Cost of revenues: |
||||||||||
| Cost of product revenue |
31 | 11 | 20 | |||||||
| Cost of service revenue |
11 | — | 11 | |||||||
| Total cost of revenues |
42 | 11 | 31 | |||||||
| Selling, general and administrative expenses |
2,559 | 3,485 | (926 | ) | ||||||
| Research and development expenses |
149 | 103 | 46 | |||||||
| Change in fair value of minority equity interest |
2,302 | — | 2,302 | |||||||
| Change in fair value of deferred consideration |
(2,877 | ) | — | (2,877 | ) | |||||
| Acquired in-process research and development expenses |
— | 119 | (119 | ) | ||||||
| Change in fair value of royalties payable due to related parties |
— | (1,163 | ) | 1,163 | ||||||
| Other income (expense), net (1) |
(122 | ) | (31 | ) | (91 | ) | ||||
| Income tax benefit |
(175 | ) | (724 | ) | 549 | |||||
(1) Constitutes the operating activities within other income (expense), net in the condensed consolidated statements of operations, except for the change in fair value of royalties payable due to related parties that is presented separately in the table above.
Revenues
The increase in product revenue of approximately $105 thousand for the three months ended March 31, 2026 as compared to the corresponding period in the prior year was due to an increase of $46 thousand and $59 in LockeT and VIVO System sales, respectively. The increase in LockeT sales is primarily the result of our sales team's efforts to effectively prove the procedural efficiency, cost-effectiveness and improved patient experience resulting from the use of LockeT compared with incumbent or competing closure devices to prospective new hospital customers. Accordingly, we have entered into long-term contracts with a number of those hospitals, which has resulted in receiving initial and repeat orders as the LockeT devices are used and consumed in clinical procedures. The increase in VIVO System sales was primarily due to growth in international patch sales resulting from expanded European sales efforts
The increase in service revenue of approximately $184 thousand for the three months ended March 31, 2026 as compared to the corresponding period in the prior year was due to the acquisition of FLYTE during the period, which contributed to additional revenue stream from the private aviation charter services.
Cost of revenues
The increase in cost of revenues of approximately $31 thousand for the three months ended March 31, 2026 as compared to the corresponding period in the prior year was primarily due to an increase in LockeT and VIVO System sales, which resulted in higher related cost of revenues of approximately $20 thousand and cost of revenues associated with the increase in private charter aviation services revenue of $11 thousand.
Selling, general and administrative expenses
The decrease in selling, general and administrative expenses of approximately $0.9 million for the three months ended March 31, 2026 as compared to the corresponding period in the prior year was due to a decrease in salaries and benefits of $0.5 million, a decrease in investor relations and SEC fees of $0.2 million as well as a decrease in depreciation and amortization of $0.1 million, respectively. The decrease in salaries and benefits was primarily due to a reduction in overall headcount and a restructuring of sales compensation. The decrease in investor relations and SEC fees was driven by non-recurring expenses from the prior year period related to a shareholder meeting, consulting and advisory services, and stock-based compensation. Finally, the decrease in professional fees was primarily attributable to lower legal expenses following a transition to new corporate counsel in the fall of 2025.
Research and development expenses
The increase in research and development expenses of approximately $0.1 thousand for the three months ended March 31, 2026, as compared to the corresponding period in the prior year, was primarily due to an increase in professional fees of $0.1 million that relates to third-party consulting for VIVO software upgrades and the development of a system that interfaces with implanted cardiac devices to enable improved pre-ablation mapping and more precise localization of arrhythmogenic tissue.
Acquired in-process research and development expenses
We did not incur any acquired in-process research and development expenses during the three months ended March 31, 2026. The decrease in acquired in-process research and development expenses of approximately $0.1 million for the three months ended March 31, 2026 as compared the corresponding period in the prior year primarily relates the asset acquisitions completed in on January 24, 2025. We acquired 100% of the membership interests of Perikard, LLC for $119 thousand, which was accounted for as an asset acquisition consisting primarily of a single patent for pericardial access technology. The patent was determined to be IPR&D with no alternative future use, and accordingly, we recognized $119 thousand, consisting of $113 thousand of stock consideration and $6 thousand of direct transaction costs, as acquired in-process research and development in the condensed consolidated statements of operations for the three months ended March 31, 2025.
Change in fair value of equity investment
This represents the change in fair value of our initial minority equity interest of 19.98% in FLYTE from $5.2 million as of February 6, 2026 to $2.9 million as of March 9, 2026, the date we acquired a controlling equity interest in FLYTE. The fair value of the investment was determined based on the implied transaction value of FLYTE, which was derived from the purchase price paid to acquire the remaining 80.02% interest in FLYTE.
Change in fair value of deferred consideration
We remeasured the deferred consideration payable incurred for our controlling equity interest in FLYTE as of March 31, 2026, and recorded a gain of $2.9 million for the change in fair value of deferred consideration.
Change in fair value of royalties payable due to related parties
At each reporting period, the fair value of the royalties payable due to related parties is calculated using the discounted cash flow method. During the three months ended March 31, 2026, we did not record a change in fair value of royalties payable due to related parties as there is no there was no triggering event. As a result, the change in fair value of royalties payable due to related parties decreased approximately by $1.2 million for the three months ended March 31, 2026 as compared to the corresponding period in the prior year.
Other income (expense), net
The increase in other income (expense), net of $0.1 million for the three months ended March 31, 2026 as compared to the corresponding periods in the prior year, primarily relates to an increase in interest expense incurred in connection with the note payable issued by Cardionomix on May 5, 2025, the short-term note payables issued by KardioNav on July 11, 2025, and the assumed notes in relation to the FLYTE Acquisition. We did not incur interest expense on these related party notes or the assumed notes for the three months ended March 31, 2025.
Income tax benefit
The decrease in income tax benefit of approximately $0.5 thousand for the three months ended March 31, 2026, as compared to the corresponding periods in the prior year primarily relates to changes in the estimated amount of net operating losses that are not subject to limitations under Section 382 of the Internal Revenue Code.
Liquidity and capital resources
As of March 31, 2026, we had cash and cash equivalents of $0.4 million and an accumulated deficit of $311.2 million. For the three months ended March 31, 2026, net cash used in operating activities was $2.8 million. We have incurred recurring net losses from operations and negative cash flows from operating activities since inception.
In February and March 2026, we raised gross proceeds of $3.5 in connection with the February 2026 and March 2026 Private Placements, respectively. We also raised gross proceeds of $0.4 million through the induced exercise of certain existing warrants and conversion of the Series B Convertible Preferred Stock. In addition, as a result of the FLYTE Acquisition, we paid $0.8 million in cash at closing to Creatd and issued a promissory note with a principal amount of $5.0 million and an interest rate of 0% per annum to Creatd.
In April 2026, we raised gross proceeds of $3.5 million in connection with the February 2026 and March 2026 under the Second Tranche.
We expect operating losses and negative cash flows to continue for the foreseeable future unless our sales and gross profit increase sufficiently to cover our operating expenses. We expect our current operating expenses to remain relatively fixed for the near term, absent entering into a transformative strategic transaction. We believe that our current cash on hand of $1.1 million as of May 8, 2026 will not be sufficient to fund our current operations. Further, we have outstanding short-term notes that will become due and payable within the next twelve months, including the March Bridge Note which come due in May 2026, the notes payable of variable interest entities due to related parties that will be due in July 2026, and Assumed Notes acquired in the Flyte Acquisition that are past due.
We estimate that we will require additional capital over the next twelve months to:
| ● |
Support the operations and growth of our private aviation segment, including aircraft lease payments, maintenance, and working capital needs; |
| ● |
Fund ongoing operations of our cardiac electrophysiology segment efforts for our VIVO and LockeT products while it remains part of our business; |
| ● |
Meet debt service obligations; and |
| ● |
Address general corporate purposes and working capital requirements. |
As of March 31, 2026, we have debt obligations due within the next twelve months. If we are unable to refinance or extend these obligations prior to maturity, we will be required to repay them from cash on hand or from proceeds of additional financing, which may not be available on acceptable terms or at all.
Because expected revenues are not adequate to fund our planned expenditures and anticipated operating costs and liabilities beyond such point, we are currently evaluating potential means of raising cash, as described below, to fund our operations and to pay our debts as they come due. If we are unable to do so, we will be required to reduce our spending to align with expected revenue levels and cash reserves, although there can be no guarantee that we will be successful in doing so. If we are unable to do so, we will be required to suspend a portion or all of our operations and/or potentially seek relief from our creditors. We may not be able to secure financing in a timely manner or on favorable terms, if at all. Due to the challenging economic environment, we have explored and continue to explore a wide variety of possible capital-raising and strategic transactions, including but not limited to private equity offerings, registered issuances, credit facilities, and convertible debt, as well as other innovative and specialty finance strategies or business combination. There is no guarantee that we will succeed in securing the financing or other strategic transaction needed to sustain our company or that any such transaction will be on our preferred terms.
Management plans to address our liquidity needs include actively pursuing multiple strategies to obtain the capital necessary to continue operations, including equity financing, debt financing, and strategic transactions. We have engaged a financial advisor to assist in evaluating these alternatives. However, there can be no assurance that any strategic transaction will be successfully completed, and any such transaction may not occur on terms favorable to us or our stockholders.
As a result of these factors, we have concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date the condensed consolidated financial statements for the quarter ended March 31, 2026 are issued. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result should we be unable to continue as a going concern and the outcome of this uncertainty.
Cash Flows for the Three Months Ended March 31, 2026 and 2025 (in thousands)
| For the Three Months Ended March 31, |
||||||||
| 2026 |
2025 |
|||||||
| Net cash provided by (used in): |
||||||||
| Operating activities |
$ | (2,796 | ) | $ | (2,338 | ) | ||
| Investing activities |
(1,319 | ) | (10 | ) | ||||
| Financing activities |
4,468 | (75 | ) | |||||
| Net change in cash and cash equivalents |
$ | 353 | $ | (2,423 | ) | |||
Net cash used in operating activities
During the three months ended March 31, 2026, net cash used in operating activities of $2.8 million primarily related to the net loss of $1.7 million and a decrease in operating assets and liabilities of $1.0 million. This was partially offset by non-cash adjustments related to depreciation and amortization of $0.4 million.
During the three months ended March 31, 2025, net cash used in operating activities of $2.3 million primarily related to the net loss of $4.0 million and non-cash adjustments related to deferred income tax benefits of $0.7 million. This was partially offset by an increase in operating assets and liabilities of $0.5 million and non-cash adjustments related to depreciation and amortization of $0.5 million and change in fair value of royalties payable due to related parties of $1.2 million.
Net cash used in investing activities
During the three months ended March 31, 2026, net cash used in investing activities of $1.3 million primarily related to the FLYTE Acquisition of $1.2 million.
During the three months ended March 31, 2025, net cash used in investing activities of $10 thousand consisted of purchases of property and equipment.
Net cash provided by financing activities
During the three months ended March 31, 2026, net cash provided by financing activities of $4.5 million consisted of net proceeds from issuance of common stock and other equity-classified contracts of $3.7 million, proceeds from the exercise of warrants issuance of $0.4 million, and proceeds from notes payable of $0.8 million, partially offset by $0.5 million in payments on notes payable.
During the three months ended March 31, 2025, net cash provided by financing activities of $0.1 million primarily consisted of payments on notes payable.
Off-balance sheet arrangements
We have not engaged in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, as a part of our ongoing business. Accordingly, we did not have any off-balance sheet arrangements during any of the periods presented.
The Company’s Critical Accounting Estimates
The information set forth below relates to our critical accounting policies and estimates. Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. Our estimates are based on current facts, historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Accordingly, a different financial presentation could result depending on the judgments, estimates or assumptions that are used. However, we do not believe that actual results will deviate materially from our estimates related to our accounting policies described below but because application of these accounting policies involves the exercise of judgment and the use of assumptions as to future uncertainties, actual results could differ materially from these estimates. Therefore, we consider an understanding of the variability and judgment required in making these estimates and assumptions to be critical in fully understanding and evaluating our reported financial results.
The discussion and analysis of our financial position and results of operations is based on our condensed consolidated financial statements included elsewhere in this Quarterly Report, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We regularly evaluate estimates and assumptions related to asset acquisitions, including the provisions for legal contingencies, income taxes, deferred income tax asset valuation allowances, royalties payable due to related parties, share based compensation, evaluation of impairment of long-lived assets, valuation of long-lived assets and their associated estimated useful lives, and revenues.
We believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and require our most difficult, subjective and complex judgments.
Accounting for long-lived assets - estimated useful lives
Intangible assets acquired from business combinations are initially measured at their estimated fair values and are then amortized on a straight-line basis over their estimated useful lives. Management evaluates whether events or circumstances have occurred that indicate the remaining useful life or carrying value of the amortizing intangible assets should be revised and adjusted, if necessary.
Accounting for impairment of long-lived assets
We periodically review our long-lived assets for impairment whenever events or changes in circumstances indicate that such assets might be impaired and the carrying value of the long-lived assets may not be recoverable. If events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the expected undiscounted future cash flows attributable to the asset are less than the carrying amount of the asset, an impairment loss equal to the excess of the assets carrying value over its fair value is recorded in our condensed consolidated statements of operations at that date.
Royalties payable
We are obligated to pay royalties related to the sales of LockeT and AMIGO System under various royalty agreements executed by Old Catheter. We recognize a liability for royalty fees incurred and payable based on actual sales of products under current portion of royalties payable due to related parties in the condensed consolidated balance sheets. We recognize a liability for future, estimated royalty payments at fair value under current portion of royalties payable due to related parties and royalties payable due to related parties in the condensed consolidated balance sheets if it is payable within the next 12 months and under royalties payable due to related parties in the condensed consolidated balance sheets if it is payable 12 months after the balance sheet date. The royalties payable due to related parties are remeasured at each reporting period. Changes in fair value of royalties payable due to related parties are recorded on the condensed consolidated statements of operations in the period in which they occur.
The fair value measurement of royalties payable due to related parties includes significant unobservable inputs that are not supported by any market data. Royalties payable due to related parties equal the present value of estimated future royalty payments. We apply an internally developed, revenue adjusted discount rate (“RADR”) to discount back the forecasted royalty payments. The RADR is based on the Company’s weighted average cost of capital (“WACC”) adjusted for the product revenue’s risk profile. The risk-free rate used to determine the cost of equity for the RADR is adjusted to be commensurate with the term of the royalty agreements. Furthermore, the Beta and Risk Premium used to determine the cost of equity are also adjusted to reflect the product revenue's volatility. All other inputs for the RADR and our WACC are the same. The RADR was 19.5% as of March 31, 2026 and December 31, 2025.
Convertible notes payable
We elected to measure the Convertible Notes Payable using the fair value option under ASC Topic 825. The fair value of the Convertible Notes Payable is remeasured at each reporting date using a probability weighted expected return model ("PWER model”). The PWER model values the convertible notes payable based on the discounted cash flows of three potential settlement outcomes: (i) the convertible notes payable will be converted into and settled in shares of common stock, (ii) the convertible notes payable’s principal and accrued interest will be paid in cash, and (iii) a dissolution scenario wherein the investor receives a partial payment based on a recovery rate. The conversion outcome incorporates a Monte Carlo simulation to estimate our common stock price at the expected conversion date and the number of shares issuable based on the variable conversion price. Aside from the probability of the three potential settlement outcomes, the fair value measurement incorporates several significant unobservable inputs, including the recovery rate, implied equity volatility, expected term assumptions, simulated conversion price, and credit-risk adjusted discount rate.
Goodwill and Other Intangible Assets
We use the acquisition method of accounting, in accordance with ASC Topic 805, “Business Combinations” ("ASC Topic 805") to allocate costs of acquired businesses to the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition. The excess costs of acquired businesses over the fair values of the assets acquired and liabilities assumed are recognized as goodwill. The valuations of the acquired assets and liabilities will impact the determination of future operating results. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, revenue growth rates and earnings before interest, taxes, depreciation and amortization, margins, discount rates, customer attrition rates, royalty rates, asset lives and market multiples, among other items. We determine the fair values of intangible assets acquired generally in consultation with third-party valuation advisors. Any fair value adjustments to the assets and liabilities are recognized and the results of operations of the acquired business are included in our condensed consolidated financial statements from the effective date of the acquisition.
New Accounting Pronouncements
See Note 2 in the condensed consolidated financial statements included elsewhere in this Quarterly Report for a description of new accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial position, and cash flows as applicable.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Executive Chairman of the Board and Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, 2026. Our objective in designing our disclosure controls and procedures is that they provide reasonable assurance of achieving their objectives of ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon this evaluation, management has concluded that our disclosure controls and procedures were effective as of March 31, 2026 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Our independent registered public account firm, WithumSmith+Brown, PC ("Withum"), is not required to and has not issued an attestation report as of March 31, 2026, because we are not an "accelerated filer" or a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act.
Changes in Internal Control over Financial Reporting
During the quarter ended March 31, 2026 and as noted elsewhere in this Form 10-Q, the Company completed the acquisition of FLYTE. The Company has elected to exclude FLYTE from management's assessment of internal control over financial reporting for the period from the acquisition date through March 31, 2026, and intends to integrate FLYTE into the Company's internal control over financial reporting during the year following the acquisition.
Except for the matters set forth above, there have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2026, which were identified in connection with management's evaluation required by paragraph (d) of Rule 13a-15 under the Securities Exchange Act of 1934, as amended, and that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
From time to time, we may be involved in litigation that arises through the normal course of business. As of the date of this filing and except as set forth below, we are neither a party to any litigation nor are we aware of any such threatened or pending litigation which we believe might result in a material adverse effect to our business.
In connection with the FLYTE acquisition, the Company assumed certain contingent liabilities, including an employment dispute with a former FLYTE employee alleging wrongful termination. The matter is currently proceeding through arbitration.
Summary Risk Factors
Our business, financial condition and results of operations are subject to numerous risks and uncertainties, including those relating to the acquired business of our wholly-owned subsidiary, Fly Flyte, Inc. (“FLYTE”) and our recent equity financings. The following is a summary of the principal risks relating to the aviation industry and the FLYTE business that you should consider, in addition to the other information set forth in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed with the SEC on March 31, 2026. This summary is qualified in its entirety by the more detailed discussion of these and other risks set forth in the remainder of this “Risk Factors” section and elsewhere in this Form 10-Q. The occurrence of any of the following risks could materially and adversely affect our business, financial condition, results of operations, cash flows and the trading price of our common stock.
Risks relating to the aviation business of FLYTE
| ● |
Demand for private aviation services is sensitive to general economic conditions, including recession, persistent inflation and elevated interest rates, and a decrease in demand could have a material adverse effect on FLYTE’s business. |
| ● |
The private aviation industry is highly competitive, and many of FLYTE’s competitors have substantially greater resources and broader operations than FLYTE. |
| ● |
FLYTE relies on a wide range of third-party service providers, and disruptions affecting such providers could adversely affect FLYTE’s operations. |
| ● |
FLYTE’s ability to operate depends on its ability to attract and retain qualified personnel, including pilots, in a constrained labor market, and labor cost increases, work stoppages or unionization could adversely affect FLYTE’s business. |
| ● |
Significant or sustained increases in aviation fuel prices, and the limited availability of sustainable aviation fuel at acceptable prices, could materially increase FLYTE’s operating costs. |
| ● |
FLYTE’s insurance may not be adequate to cover all liabilities that we may incur, and insurance coverage for the aviation industry may become more difficult or expensive to obtain. |
| ● |
FLYTE is exposed to factors beyond its control, including air traffic congestion, weather, natural disasters, climate change, public health emergencies, terrorist activities and geopolitical instability, any of which could disrupt FLYTE’s operations and harm our business. |
| ● |
The market for short-range flights, including the urban, regional and advanced air mobility markets, is in early stages of development, and may not develop as anticipated or on a timeline favorable to FLYTE’s business model. |
| ● |
The safe operation of aircraft is critical to FLYTE’s business, and any accident or incident involving FLYTE or other private aviation operators, or any damage to FLYTE’s reputation or brand, could materially adversely affect demand for FLYTE’s services. |
| ● |
FLYTE’s customer base is concentrated in certain geographic regions of the United States, making us vulnerable to adverse developments in those regions. |
Risks relating to FLYTE’s reliance on third-party aircraft operators
| ● |
FLYTE relies on third-party aircraft operators for substantially all flights other than those operated under its Flewber Hops air-taxi service, and any failure of such operators to perform, or any disruption affecting such operators, could materially adversely affect FLYTE’s operations. |
| ● |
Trends of higher third-party aircraft operator costs, capacity constraints, indemnification obligations to such operators, and potential gaps in insurance coverage relating to third-party operations each expose us to operational and financial risk. |
Risks relating to FLYTE’s intellectual property and technology
| ● |
If FLYTE is unable to adequately protect its intellectual property and its proprietary technology, or if FLYTE is found to infringe the intellectual property rights of others, our business could be materially adversely affected. |
| ● |
Failures, interruptions or security breaches affecting FLYTE’s technology infrastructure or the third-party platforms on which FLYTE relies (including cloud hosting providers and mobile application marketplaces) could harm FLYTE’s operations, reputation and customer relationships. |
| ● |
FLYTE’s collection and use of personal information subjects FLYTE to evolving privacy and data protection laws, including the CCPA and the GDPR, the noncompliance with which could result in significant fines, penalties and reputational harm. |
Legal and regulatory risks relating to FLYTE’s business
| ● |
FLYTE is subject to significant governmental regulation by the U.S. Department of Transportation, the Federal Aviation Administration, the Transportation Security Administration and other federal, state and local agencies, and changes in laws or regulations, or new interpretations thereof, could have a material adverse effect on FLYTE’s business. |
| ● |
Any suspension, revocation, modification or non-renewal of permits, approvals, authorizations or licenses required for FLYTE’s operations could have a material adverse effect on our business. |
| ● |
FLYTE is subject to environmental, noise and emissions laws and regulations — and to evolving climate-related restrictions on aviation activity — the cost of compliance with which, or the expansion of which to FLYTE’s operations, could materially adversely affect our business. |
| ● |
FAA or manufacturer operating restrictions, airworthiness directives or similar requirements affecting FLYTE’s owned Cirrus SF50 Vision Jet, or any aircraft type on which FLYTE’s third-party aircraft operators rely, could materially disrupt FLYTE’s operations. |
| ● |
From time to time, FLYTE may become involved in litigation or regulatory proceedings, the outcome of which is inherently uncertain and which could have a material adverse effect on our business. |
Risks relating to dilution from our convertible preferred stock
| ● |
Conversion of our outstanding Series B, Series C-1, Series C-2, Series D and Series J Convertible Preferred Stock could result in substantial dilution to our existing common stockholders. |
| ● |
The issuance and conversion of additional Series C-3 and Series C-4 Convertible Preferred Stock under our existing Securities Purchase Agreements could result in extraordinary additional dilution to our existing common stockholders. |
| ● |
The conversion price of each of our Series C-1, Series C-2, Series C-3, Series C-4 and Series D Convertible Preferred Stock is subject to a floor that we may waive in our sole discretion, and any such waiver would substantially increase the resulting dilution. |
| ● |
The existence of these contingent issuance and conversion rights may itself adversely affect the trading price of our common stock. |
Risks Related to the Aviation Business of FLYTE
FLYTE is exposed to the risk of a decrease in demand for private aviation services.
Fly Flyte, Inc. (“FLYTE”) historically has generally provided private aviation services to individuals and individual entities on a per-trip basis, without use of a membership-only program business model. A decrease in demand for private aviation services could materially and adversely impact FLYTE’s operations and revenues. We believe that demand for private aviation services is sensitive to general economic conditions and to customers’ perceptions of the strength of the economy, including the possibility of recession, persistent inflation, elevated interest rates and other macroeconomic factors. A weaker economy or customers’ perception of a weaker economy could result in a decrease in demand for FLYTE’s services leading to future periods in which we generate less revenue from the FLYTE business than we presently expect. If demand for private aviation services decreases, this could result in slower growth, or contraction, in the FLYTE business, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, customers may consider private air travel through FLYTE’s products and services to be a luxury item, especially when compared to commercial air travel. As a result, any general downturn in economic, business and financial conditions which has an adverse effect on customers’ spending habits could cause them to travel less frequently and, to the extent they do travel, to travel using commercial air carriers or other means considered to be more economical. In addition, in cases where sufficient hours of private flight are needed, many of the companies and high-net-worth individuals to whom FLYTE provides products and services have the financial ability to purchase their own jets or operate their own corporate flight department should they elect to do so. These circumstances could negatively impact our cash flows from operations, accelerate our liquidity needs and require us to seek alternate sources of capital, which may not be available or on acceptable terms.
The private aviation industry is subject to intense competition.
Many of the markets in which FLYTE operates are competitive as a result of the continuing expansion of existing private aircraft charter brokerage businesses, on-demand operators, fractional ownership programs, jet card programs, membership-based programs, charter operators and traditional commercial airlines. Some of FLYTE’s competitors have substantially greater financial, technical, marketing and other resources than FLYTE does, longer operating histories, larger customer bases, broader geographic coverage, larger fleets, greater brand recognition and more established relationships with third-party aircraft operators, airports, fixed-base operators and other aviation service providers. We cannot assure investors that FLYTE will be able to compete successfully against current or future competitors, or that competitive pressures will not have a material adverse effect on our business, financial condition and results of operations.
If FLYTE experiences problems with any of its third-party service providers, its operations could be adversely affected.
FLYTE’s reliance upon others to provide essential services on behalf of its operations may limit our ability to control the efficiency, timeliness and regulatory compliance of those services. FLYTE relies on third parties to provide a wide range of essential services, including, but not limited to, third-party aircraft operators, fixed-base operators, fueling services, ground handling, maintenance and repair services, catering, de-icing, baggage handling, security and other operational services. Any failure of, disruption of, or interruption in, the services provided by such third parties, or any deterioration in the financial condition or business operations of such third parties, could have a material adverse effect on FLYTE’s operations, customer service and reputation, and, in turn, could materially and adversely affect our business, financial condition and results of operations.
The loss of key personnel upon whom FLYTE depends to operate its business, or its inability to attract additional qualified personnel, could materially and adversely affect FLYTE’s operations.
We believe that the future success of the FLYTE business will depend in large part on FLYTE’s ability to retain or attract highly qualified management, technical, operational, sales and marketing personnel, including qualified pilots, mechanics and other aviation specialists. Competition for such personnel in the aviation industry is intense, and we may not be able to retain or attract such personnel, or to do so on a cost-effective basis. The loss of one or more members of FLYTE’s senior management team or other key employees, or the failure to attract additional qualified personnel, could have a material adverse effect on FLYTE’s business and on our business, financial condition and results of operations.
The supply of qualified pilots is constrained and may negatively affect FLYTE’s operations and financial condition, and increases in labor costs may adversely impact FLYTE’s profitability.
The supply of qualified pilots to the aviation industry, including commercial airlines, business aviation operators and private aviation operators, has been constrained for an extended period, and demand for qualified pilots may continue to outpace supply for the foreseeable future. Pilots who operate aircraft for the third-party aircraft operators on which FLYTE’s charter brokerage operations rely, as well as pilots who operate FLYTE’s Cirrus Jet under its Hops air-taxi service, are increasingly being recruited by major commercial airlines and other operators that may offer higher compensation, better benefits or more predictable schedules. Increases in pilot compensation and benefits, including those that may result from collective bargaining, regulatory changes affecting pilot training, qualification or duty-time requirements, or competitive pressures, could substantially increase FLYTE’s labor costs and operating expenses, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, FLYTE’s operations and financial condition may be negatively impacted if it is unable to train or qualify pilots in a timely manner to meet the needs of its operations. On occasion, FLYTE may rely on commercial airlines to fly its pilots to a departure location for a Hops flight. Any disruption to such commercial air travel could adversely impact our ability to operate flights as scheduled and could harm FLYTE’s reputation, business and operating results.
Pilot attrition may negatively affect FLYTE’s operations and financial condition.
In recent years, FLYTE has experienced volatility in pilot attrition, including volatility resulting from pilot wage and bonus changes at competing operators. If FLYTE experiences a sustained increase in pilot attrition, our ability to operate flights on time and as scheduled could be impaired, and FLYTE may incur substantial additional costs to recruit, train and retain replacement pilots, any of which could have a material adverse effect on our business, financial condition and results of operations.
FLYTE may be subject to unionization, work stoppages, slowdowns or increased labor costs, and the unionization of pilots or other employees could materially and adversely affect FLYTE’s operations.
FLYTE’s business is labor intensive. While FLYTE’s employees and independent contractors, particularly its pilots and other operational personnel, are not currently represented by a labor union, we may not be able to maintain this status in the future. If any of FLYTE’s employees were to unionize, we could be subject to risks of work stoppages, work slowdowns, strikes and other labor disputes, as well as increased labor costs, all of which could have a material adverse effect on FLYTE’s business and operations and, in turn, on our business, financial condition and results of operations.
Significant increases in fuel costs could have a material adverse effect on FLYTE’s business, financial condition and results of operations.
Aviation fuel is essential to the operation of aircraft and to FLYTE’s ability to carry out its transportation services. Fuel costs are subject to wide fluctuations as a result of a number of factors outside of our control, including, but not limited to, changes in global supply and demand, geopolitical events, government taxes and regulations, refining capacity, transportation and storage costs, and seasonality. Significant or sustained increases in aviation fuel prices could materially increase the operating costs of FLYTE’s third-party aircraft operators (which are typically passed through to FLYTE in the form of higher charter rates) and could materially increase the operating costs of FLYTE’s Hops air-taxi service that uses FLYTE’s owned Cirrus Jet.
Additionally, sustainable aviation fuel is not currently readily available at prices that are not prohibitive. In the future, if FLYTE elects, or is required by law or regulation, to operate using sustainable aviation fuel, the increased cost of doing so could have a material adverse effect on our business, financial condition and results of operations.
FLYTE’s insurance may become too difficult or expensive to obtain, and if FLYTE is unable to maintain sufficient insurance, our business could be materially and adversely affected.
Hazards are inherent in the aviation industry and may result in loss of life and property, potentially exposing FLYTE and us to substantial liability claims. While FLYTE maintains insurance of types and in amounts that we believe to be customary in the industry, the insurance industry, including aviation insurance, may experience periods of significant cost increases, reduced capacity or restrictive policy terms and conditions, and FLYTE’s insurance coverage may not be adequate to cover all liabilities that we may incur. There can be no assurance that, in the future, FLYTE will be able to obtain insurance coverage of the types and in the amounts that we believe to be appropriate at acceptable cost, or that the coverage FLYTE does obtain will be adequate to protect us from all liabilities and losses that may arise.
The loss of insurance coverage, or a reduction in the level of coverage available to FLYTE, could have a material adverse effect on our business, financial condition and results of operations.
If FLYTE’s efforts to continue to build its brand identity and improve customer satisfaction and loyalty are not successful, we may not be able to attract or retain customers, and FLYTE’s operating results may be adversely affected.
FLYTE must continue to build and maintain a strong brand identity for its products and services, which have expanded over time. We believe that a strong brand identity will continue to be important in attracting customers and retaining their loyalty. If FLYTE’s efforts to promote and maintain its brand are not successful, our operating results, our customer relationships and our reputation could be adversely affected.
Decreases in repeat bookings by returning customers could adversely affect FLYTE’s business and financial results.
A significant portion of FLYTE’s revenue is based on repeat bookings by its returning customers. There can be no assurance that FLYTE’s returning customers will continue to use FLYTE’s products and services in future periods at historical levels, or at all. A decline in repeat bookings, whether as a result of general economic conditions, competitive pressures, customer dissatisfaction, changes in customer preferences, or other factors, could have a material adverse effect on FLYTE’s revenues and on our business, financial condition and results of operations.
Aviation businesses are often affected by factors beyond their control, including air traffic congestion at airports, air traffic control inefficiencies, adverse weather conditions and increased security measures, any of which could have a material adverse effect on FLYTE’s business.
Like other aviation companies, FLYTE’s business is affected by factors beyond our control, including air traffic congestion at airports, air traffic control inefficiencies, adverse weather conditions, increased and enhanced security measures, outbreaks of disease, geopolitical instability, accidents, labor actions and other factors. Each of these factors could result in flight cancellations, delays, diversions or increased costs, any of which could harm FLYTE’s reputation, customer service, operating results, and our business, financial condition and results of operations.
Further, the future implementation by the FAA of the Next Generation Air Transport System could result in changes to aircraft routes and ground operations and may require FLYTE and its third-party aircraft operators to invest in new equipment and training, the cost of which could be substantial.
The market for short-range flights is still in relatively early stages of development, and the UAM, RAM and AAM markets may not develop as anticipated.
FLYTE believes that providing air travelers with access to short-range flights on suitable conventional aircraft, including through the Hops air-taxi service, will enable FLYTE to compete in the developing urban air mobility (“UAM”), regional air mobility (“RAM”) and advanced air mobility (“AAM”) markets. However, the UAM, RAM and AAM markets are still in early stages of development, and the timing, scale and commercial viability of these markets are subject to substantial uncertainty. Currently, there are only a minimal number of electric-powered vertical take-off and landing aircraft and other aircraft using sustainable aviation fuel that are commercially available, and the wider availability of such aircraft is subject to substantial regulatory, technological and commercial uncertainty. If these markets do not develop as anticipated, or develop more slowly than anticipated, or develop with regulatory or technological characteristics that are not favorable to FLYTE’s business model, FLYTE may not realize the benefits we currently expect.
Extreme weather, natural disasters and other adverse events could have a material adverse effect on FLYTE’s business, results of operations and financial condition.
Adverse weather conditions and natural disasters, such as hurricanes, winter snowstorms, wildfires or earthquakes, can cause flight cancellations or significant delays. Cancellations or delays due to weather conditions or natural disasters affect FLYTE’s revenue, operating costs, customer satisfaction and reputation. Any general reduction in passenger traffic that may result from adverse weather, natural disasters or other adverse events could have a material adverse effect on our business, results of operations and financial condition.
FLYTE is subject to risks associated with climate change, including the potential increased impacts of severe weather events and regulatory action.
Climate change-related regulatory activity and developments may adversely affect FLYTE’s business and financial results by requiring FLYTE or FLYTE’s third-party aircraft operators to reduce emissions, alter operations, purchase emissions credits, or pay additional taxes, fees or assessments. The potential physical effects of climate change, such as increased frequency and severity of storms, floods, fires, fog, mist, freezing conditions, sea-level rise and other climate-related events, may also adversely affect FLYTE’s operations, increase FLYTE’s operating costs (including insurance, fuel and maintenance costs), reduce customer demand for air travel, or otherwise adversely affect our business, financial condition and results of operations.
FLYTE’s business is primarily focused on certain targeted geographic regions, making us vulnerable to risks associated with having geographically concentrated operations.
FLYTE’s customer base is primarily concentrated in certain geographic regions of the United States, including the northeast, southeast and certain other markets. As a result, our business may be more vulnerable to adverse economic, weather, regulatory, security, public health or other developments in those regions than would be the case for a more geographically diversified operator. Adverse developments in these regions, including local recessions, severe weather, natural disasters, terrorist activity, regulatory changes affecting general aviation, airport closures or capacity constraints, or public health emergencies, could have a disproportionate adverse effect on FLYTE’s revenue and operations and, in turn, on our business, financial condition and results of operations.
The operation of aircraft is subject to various risks, and failure to maintain an acceptable safety record may have an adverse impact on FLYTE’s ability to obtain customers and generate revenue.
The operation of aircraft is subject to various risks, including catastrophic disasters, crashes, mechanical failures, collisions, fire, severe weather, terrorist incidents, cybersecurity events, human error and other operational hazards, any of which could result in loss of life, serious injury, property damage or environmental damage. In addition, any aircraft accident or incident, whether involving FLYTE or other private aircraft operators, could adversely affect public perception of the safety of private aviation generally or of the aircraft types or operators on which FLYTE relies, which could in turn reduce demand for FLYTE’s services and adversely affect our business, results of operations and financial condition.
FLYTE incurs considerable costs to maintain the quality of (i) its safety program, (ii) its training programs and (iii) its operational oversight. If FLYTE is unable to maintain an acceptable safety record, or if a serious accident or incident involving FLYTE or its third-party aircraft operators occurs, the resulting reputational, regulatory, operational, insurance and financial consequences could have a material adverse effect on our business, financial condition and results of operations.
Any damage to FLYTE’s reputation or brand image could adversely affect our business or financial results.
Maintaining a positive reputation is critical to FLYTE’s business. FLYTE’s reputation or brand image could be adversely affected by, among other things, accidents or incidents involving aircraft operated by FLYTE’s third-party aircraft operators, complaints or negative publicity about FLYTE’s services, customer dissatisfaction, security or data privacy incidents, employee conduct, or actions taken by FLYTE’s third-party service providers. FLYTE operates in a highly visible industry that has significant exposure to social media. Negative publicity, whether or not justified, can spread rapidly through traditional and social media channels. Should FLYTE fail to respond in a timely and appropriate manner to address negative publicity, FLYTE’s brand and reputation could be adversely affected, which in turn could have a material adverse effect on our business, financial condition and results of operations.
Terrorist activities or warnings have dramatically impacted the aviation industry and will likely continue to do so.
The terrorist attacks of September 11, 2001 and subsequent actual or threatened acts of terrorism affecting the aviation industry have had, and any future acts or threatened acts of terrorism would likely have, significant negative impacts on the aviation business, including private aviation. We cannot provide any assurance that future terrorist incidents or threats, or governmental or industry responses to such incidents or threats, will not harm the aviation industry generally, or FLYTE’s operations specifically, in ways that could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to FLYTE’s Reliance on Third-Party Aircraft Operators
FLYTE relies on third-party aircraft operators to provide and operate aircraft. If those third-party aircraft operators fail to perform, FLYTE’s business could be materially and adversely affected.
With the exception of flights operated under FLYTE’s air-taxi service using FLYTE’s owned Cirrus Jet, all of FLYTE’s flight services are provided by third-party aircraft operators that are certificated air carriers under Title 14 of the Code of Federal Regulations. Pilots, maintenance, hangar, insurance and fuel are all costs borne by FLYTE’s network of third-party aircraft operators. Should FLYTE experience complications with any of these third-party aircraft operators or their aircraft, FLYTE may need to use alternative aircraft operators to fulfill its commitments to customers. There can be no assurance that suitable alternative aircraft operators would be available on commercially acceptable terms, or at all. Any failure of FLYTE’s third-party aircraft operators to perform to our expectations, or any interruption in services provided by such third-party aircraft operators, could result in delayed, cancelled or substandard flights and could have a material adverse effect on FLYTE’s reputation, customer relationships and our business, financial condition and results of operations.
FLYTE may incur losses on the cancellation or delay of flights, and on flights booked with third-party aircraft operators.
FLYTE’s third-party aircraft operators generally have the ability to cancel, delay or terminate any flight for any reason permitted under their respective regulatory authorizations and contractual arrangements, including weather, mechanical issues, crew availability, regulatory or safety considerations, or unilateral business decisions. FLYTE may incur losses as a result of such cancellations or delays, including the cost of providing alternative transportation, refunds or credits to customers, increased customer dissatisfaction and reputational harm. In addition, if demand for FLYTE’s services grows, FLYTE’s third-party aircraft operators may not be able to match FLYTE’s growth with available aircraft capacity on commercially acceptable terms, or at all, which could limit FLYTE’s ability to grow its business and meet customer demand.
FLYTE faces the risk that any of its third-party aircraft operators may not fulfill their contracts and deliver their services on a timely basis, or at all, and FLYTE is subject to the risk of disruption affecting such operators.
FLYTE operates a significant portion of its flights through a finite number of certificated third-party aircraft operators. The ability of FLYTE’s third-party aircraft operators to effectively satisfy our requirements could be impacted by financial difficulty experienced by any such third-party aircraft operator, damage to its operations caused by fire, terrorist attack, natural disaster, public health emergency or other events, or its inability to hire or retain skilled personnel, including qualified pilots and mechanics. Union strikes or staff shortages among airport workers or certain pilots of third-party aircraft operators may also result in disruption to FLYTE’s operations. In addition, if potential competitors establish cooperative or strategic relationships with the third-party aircraft operators on which FLYTE relies, the availability of capacity to FLYTE could be reduced, and FLYTE’s cost of access to capacity could increase, in each case in ways that could have a material adverse effect on our business, financial condition and results of operations.
FLYTE may be negatively impacted by increases in third-party aircraft operator costs.
In recent years, there has been a trend of higher third-party aircraft operator costs across the private aviation industry, driven by, among other things, higher pilot compensation, higher maintenance costs, higher insurance costs, higher fuel costs and constraints on the supply of available aircraft. Since FLYTE currently relies on third-party aircraft operators to generate the substantial majority of its revenue, sustained increases in third-party aircraft operator costs could materially compress FLYTE’s margins, particularly to the extent FLYTE is unable to pass through such cost increases to its customers, which could have a material adverse effect on our business, financial condition and results of operations.
FLYTE could suffer losses and adverse publicity stemming from any accident involving aircraft models operated by FLYTE’s third-party aircraft operators.
Certain aircraft models on which FLYTE’s third-party aircraft operators rely, including the Cirrus SF50 Vision Jet that FLYTE owns and operates as part of its Hops air-taxi service, have experienced accidents while operated by third parties. If other operators of such aircraft models, or FLYTE itself, experience additional accidents or incidents, regulators may issue operating restrictions or airworthiness directives affecting such aircraft, manufacturers may issue recalls or service bulletins, or public perception of the safety of such aircraft may be adversely affected, any of which could have a material adverse effect on FLYTE’s operations and on our business, financial condition and results of operations.
FLYTE’s agreements with third-party aircraft operators may contain obligations for FLYTE to indemnify such third-party aircraft operators against certain claims.
Many of the agreements FLYTE has with third-party aircraft operators include indemnification obligations of FLYTE to those third-party aircraft operators. Although FLYTE generally requires its customers to indemnify FLYTE for many of the claims and damages for which FLYTE is obligated to indemnify its third-party aircraft operators, there can be no assurance that FLYTE’s customers will be financially able to honor those indemnification obligations or that FLYTE’s insurance will cover the resulting exposure. As a result, FLYTE could be required to make payments under such indemnification obligations that exceed the available insurance coverage and any customer indemnification recoveries, which could have a material adverse effect on our business, financial condition and results of operations.
FLYTE may not have sufficient insurance coverage for damages relating to flights provided by third-party aircraft operators.
Incidents related to aircraft operations involving the third-party aircraft operators on which FLYTE relies could result in claims against FLYTE that exceed the insurance coverage available to FLYTE. Additionally, to the extent FLYTE’s third-party aircraft operators maintain insurance covering liability arising from the operation of their aircraft, there can be no assurance that such insurance will be adequate to cover all liabilities that may arise, or that FLYTE will be named as an additional insured or otherwise have the benefit of such coverage. Inadequate insurance coverage could expose FLYTE to material uninsured liabilities and could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to FLYTE’s Intellectual Property and Technology
If FLYTE is unable to adequately protect its intellectual property interests, or is found to be infringing on intellectual property rights of others, FLYTE may incur significant costs or be required to alter or cease using such intellectual property.
FLYTE’s intellectual property includes its trademarks, domain names, website, mobile and web applications, software, trade secrets and certain proprietary algorithms. FLYTE protects its intellectual property through a combination of trademark, copyright and trade secret laws, contracts and technical safeguards. However, the steps FLYTE takes to protect its intellectual property may be inadequate or ineffective, and FLYTE may be unable to prevent competitors from acquiring trademarks or domain names that are similar to, infringe upon or diminish the value of FLYTE’s intellectual property.
In addition, FLYTE’s business is subject to the risk of third parties infringing FLYTE’s intellectual property. FLYTE may not always detect such infringement, and protecting FLYTE’s intellectual property is expensive and time-consuming, may not be successful and may divert management’s attention from other matters. Companies in the aviation and technology industries are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. If FLYTE is found to infringe the intellectual property rights of others, FLYTE could be required to pay damages, alter FLYTE’s products or services or cease using the intellectual property in question, any of which could have a material adverse effect on our business, financial condition and results of operations.
A delay or failure to identify, invest in and implement important technology, business and other initiatives could have a material adverse effect on FLYTE’s business.
In order to operate its business, achieve its goals and remain competitive, FLYTE continuously seeks to identify and develop important technology, business and other initiatives, improvements to FLYTE’s booking and operations platforms, and adoption of new aircraft technologies. FLYTE’s business and the aircraft FLYTE operates are characterized by changing technology, the introduction and enhancement of products and services, evolving customer expectations and evolving industry standards. If FLYTE is unable to upgrade its operations or fleet with the latest technological advances in a timely manner, or at all, FLYTE’s ability to compete effectively could be impaired, which could have a material adverse effect on our business, financial condition and results of operations.
A failure in FLYTE’s technology or breaches of the security of its information technology infrastructure may adversely affect FLYTE’s business, may result in losses, and may damage FLYTE’s reputation.
The performance and reliability of the technology that FLYTE and its third-party aircraft operators use are critical to FLYTE’s ability to compete effectively. As part of FLYTE’s ordinary business operations, FLYTE collects and stores sensitive data, including personally identifiable information of its customers, employees and contractors, as well as proprietary information about its business and the businesses of its third-party aircraft operators. Methods used to obtain unauthorized access, disable or degrade service, or sabotage information systems are constantly evolving, and may be difficult to anticipate or detect for long periods of time. Any security breach, cyberattack, ransomware attack, data loss or system failure affecting FLYTE or its third-party service providers could result in the loss or unauthorized disclosure of sensitive data, regulatory investigations, litigation, reputational harm, business interruption, and substantial remediation and notification costs, any of which could have a material adverse effect on our business, financial condition and results of operations.
FLYTE relies on third-party Internet, mobile and other products and services to deliver its mobile and web applications, and any disruption of or interference with these third-party products and services could adversely affect FLYTE’s business.
FLYTE’s platform’s continuing and uninterrupted performance is critical to FLYTE’s success. That platform is dependent on a variety of third-party products and services, including cloud hosting providers and other third-party Internet, mobile and software services. FLYTE currently hosts its platform, including its mobile and web-based applications, with third-party hosting providers. Any interruption in, or failure of, these third-party products or services could result in FLYTE’s platform being unavailable, slow or unreliable, which could harm FLYTE’s reputation and FLYTE’s ability to attract and retain customers.
FLYTE relies on third parties maintaining open marketplaces to distribute FLYTE’s mobile and web applications, and any changes by such third parties could adversely affect FLYTE’s business.
FLYTE’s mobile applications rely on third parties maintaining open marketplaces, including the Apple App Store and the Google Play Store, for distribution of its app. If any of these third parties changes its terms of service, increases its fees, restricts the availability of FLYTE’s applications, removes FLYTE’s applications from its marketplace, or otherwise impairs the distribution of FLYTE’s applications, FLYTE’s ability to acquire and retain customers could be materially and adversely affected.
Because FLYTE’s software could be used to collect and store personal information, privacy concerns in the territories in which FLYTE operates could result in additional cost and liability to FLYTE or inhibit sales of FLYTE’s services.
The regulatory framework for privacy and data protection issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. In the United States, these regulations include rules and regulations promulgated under the authority of the Federal Trade Commission, the California Consumer Privacy Act (the “CCPA”) and the California Privacy Rights Act, and other state and federal laws relating to privacy and data security. Internationally, FLYTE may be subject to similar regulations, including the European Union’s General Data Protection Regulation (the “GDPR”) and the United Kingdom GDPR, as applicable. Compliance with these and other privacy and data security laws and regulations could be costly and could require significant changes to FLYTE’s business practices, products and services. Failure to comply with such laws and regulations could subject FLYTE to significant fines, penalties, reputational harm and litigation, any of which could have a material adverse effect on our business, financial condition and results of operations.
Legal and Regulatory Risks Related to FLYTE’s Business
FLYTE is subject to significant governmental regulation, and changes in government regulations imposing additional requirements could have a material adverse effect on FLYTE’s business.
All interstate air carriers, including FLYTE, are subject to regulation by the U.S. Department of Transportation (the “DOT”), the Federal Aviation Administration (the “FAA”), the Transportation Security Administration (the “TSA”), U.S. Customs and Border Protection (“CBP”) and other federal, state and local agencies, both domestically and, to the extent FLYTE’s third-party aircraft operators conduct international flights, internationally. The laws and regulations enforced by these and other agencies impose substantial requirements on the operation of aircraft, including with respect to safety, maintenance, training, security, operational specifications, environmental matters, consumer protection and air traffic control.
Title 49, U.S. Code, Section 40102 and administrative interpretations thereof issued by the DOT or its predecessor agencies, as well as ongoing interpretive and enforcement actions taken by the DOT and the FAA in respect of charter brokers and on-demand operators, may affect the manner in which FLYTE conducts business. For example, the FAA has, in recent years, issued notices targeting certain air charter operators that the FAA believes are engaged in operations not consistent with applicable regulations. Although we believe FLYTE’s operations comply with applicable regulatory requirements, there can be no assurance that the DOT, FAA or other regulators will not assert positions that could affect FLYTE’s operations or impose additional costs or compliance burdens. Changes in laws and regulations applicable to FLYTE’s business, or new interpretations of existing laws or regulations, could have a material adverse effect on our business, financial condition and results of operations.
Revocation of permits, approvals, authorizations and licenses will adversely affect FLYTE’s business, results of operations and financial condition.
FLYTE’s business requires a variety of federal, state and local permits, approvals, authorizations and licenses. FLYTE’s business depends on the continued effectiveness of such permits, approvals, authorizations and licenses. Any suspension, revocation, modification or non-renewal of any of FLYTE’s material permits, approvals, authorizations or licenses, or any failure by FLYTE to obtain any necessary new or amended permits, approvals, authorizations or licenses, could have a material adverse effect on our business, results of operations and financial condition.
FLYTE is subject to various environmental and noise laws and regulations, which could have a material adverse effect on FLYTE’s business, results of operations and financial condition.
FLYTE is subject to increasingly stringent federal, state, local and foreign laws, regulations and ordinances relating to the protection of the environment, including those relating to emissions to the air, discharges to surface and subsurface waters, safe drinking water and the management, disposal and release of, and exposure to, hazardous substances, oils and waste materials. FLYTE is also subject to environmental laws and regulations that require FLYTE to investigate and remediate soil or groundwater contamination, regardless of fault. In addition, FLYTE is subject to noise laws and regulations that may restrict aircraft operations at certain airports or during certain hours.
Climate change-related regulatory developments may also restrict aviation activity. In December 2022, France became the first European nation to institute a ban on domestic commercial flights where train alternatives exist. Other European lawmakers, including in Spain, Germany and Scandinavia, have considered similar restrictions. If similar restrictions are adopted in the United States or other markets in which FLYTE operates, including with respect to private aviation, or if FLYTE’s third-party aircraft operators become subject to such restrictions, our business, results of operations and financial condition could be materially and adversely affected.
Environmental regulation and liabilities, including new or developing laws and regulations, or sustainability initiatives, could increase FLYTE’s costs of operations.
In recent years, governments, customers, suppliers, employees and other stakeholders have increasingly focused on environmental, social and governance matters, including the impact of aviation on climate change. New or developing laws and regulations relating to greenhouse gas emissions, sustainable aviation fuel mandates, carbon offset requirements or other environmental matters could materially increase FLYTE’s costs of operations or those of FLYTE’s third-party aircraft operators, which could have a material adverse effect on our business, financial condition and results of operations.
The issuance of operating restrictions applicable to one of the aircraft fleet types FLYTE operates, or on which FLYTE’s third-party aircraft operators rely, could have a material adverse effect on our business.
The issuance of FAA or manufacturer operating restrictions, airworthiness directives, mandatory service bulletins, or similar requirements that ground or otherwise restrict the use of this aircraft, or any other aircraft on which FLYTE or its third-party aircraft operators rely, could materially disrupt FLYTE’s operations and require FLYTE to incur additional costs to comply or to procure alternative capacity. Any such disruption could have a material adverse effect on our business, financial condition and results of operations.
FLYTE may become involved in litigation that may materially and adversely affect us.
From time to time, FLYTE may become involved in various legal proceedings relating to matters incidental to the ordinary course of its business, including, but not limited to, regulatory matters, customer disputes, employment matters, intellectual property claims, contractual disputes and personal injury claims relating to aviation operations. The outcome of any such legal proceedings is inherently uncertain, and any adverse outcome, settlement, judgment or regulatory action could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Existing and Potential Future Dilution from our Convertible Preferred Stock
Issued shares of our convertible preferred stock are convertible into a substantial number of shares of common stock that, upon conversion, will significantly dilute our existing common stockholders.
As of the date of this Form 10-Q, we have outstanding the following series of our convertible preferred stock, each with a stated value of $1,000 per share, that are convertible into shares of our common stock:
| ● | 1,632 shares of our Series B Convertible Preferred Stock (the "Series B Preferred"), originally issued on May 12, 2025 pursuant to the May 2025 PIPE Financing, the conversion price of which was reduced from $6.65 to $1.78 per share pursuant to a letter agreement dated February 6, 2026; | |
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3,470 shares of our Series C-1 Convertible Preferred Stock (the “Series C-1 Preferred”), issued pursuant to the Securities Purchase Agreements that we entered into on February 6, 2026 and March 9, 2026 (the “Series C Purchase Agreements”); |
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3,470 shares of our Series C-2 Convertible Preferred Stock (the “Series C-2 Preferred”), issued on April 21, 2026 pursuant to the Series C Purchase Agreements; |
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11,028 shares of our Series D Convertible Preferred Stock (the “Series D Preferred”), of which 5,250 shares were issued on April 20, 2026 to SEG Jets in partial consideration for our acquisition of an initial 19.98% interest in FLYTE and 5,778 shares were issued on April 20, 2026 to Creatd, Inc. (“Creatd”) in partial consideration for our acquisition of the remaining 80.02% interest in FLYTE and 100% of the membership interests of Ponderosa Air, LLC; and |
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9,489.488 shares of our Series J Convertible Preferred Stock (the “Series J Preferred”), issued on December 31, 2025 to David A. Jenkins, our Executive Chairman of the Board and Chief Executive Officer, and to FatBoy Capital, L.P., an entity controlled by Mr. Jenkins, in exchange for the termination of certain royalty rights. |
The conversion price of each of the Series C-1 Preferred, Series C-2 Preferred and Series D Preferred is variable and is subject to downward adjustment based on the trading price of our common stock at specified dates following the effectiveness of the resale registration statement filed pursuant to the related registration rights agreements. In each case, the conversion price is subject to a floor of $0.35 per share, which we may waive in our sole discretion. The conversion price of the Series B Preferred is fixed at $1.78 per share, subject to customary anti-dilution adjustments. The conversion price of the Series J Preferred is fixed at $1.56 per share, subject to customary anti-dilution adjustments.
Assuming conversion at the floor price (in the case of the Series C-1, Series C-2 and Series D Preferred) and at the applicable fixed conversion price (in the case of the Series B Preferred and the Series J Preferred), our issued and outstanding shares of convertible preferred stock would convert into an aggregate of approximately 58,337,003 shares of our common stock, consisting of:
| ● | approximately 916,854 shares issuable upon conversion of the Series B Preferred; | |
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approximately 9,914,286 shares issuable upon conversion of the Series C-1 Preferred; |
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approximately 9,914,286 shares issuable upon conversion of the Series C-2 Preferred; |
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approximately 31,508,572 shares issuable upon conversion of the Series D Preferred; and |
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approximately 6,083,005 shares issuable upon conversion of the Series J Preferred. |
As of May 8, 2026, we had 2,692,473 shares of our common stock outstanding. The aggregate number of shares of common stock issuable upon conversion of our issued and outstanding shares of convertible preferred stock as described above would represent approximately 2,167% of our common stock outstanding as of May 8, 2026, or, on a post-conversion basis, would result in the dilution of our existing common stockholders to less than approximately 4.4% of our post-conversion outstanding common stock. If we were to waive the $0.35 floor with respect to any of the Series C-1 Preferred, the Series C-2 Preferred or the Series D Preferred, the number of shares of common stock issuable upon conversion of those securities could be substantially greater than the amounts above.
Conversion of the Series B Preferred, the Series C-1 Preferred, the Series C-2 Preferred, the Series D Preferred and the Series J Preferred is also subject to customary beneficial ownership limitations applicable to each holder, which limit individual holders' as-converted ownership to specified thresholds (typically 4.99% or 9.99%) but do not limit the aggregate amount of common stock that may be issued upon conversion to all holders. Therefore, the beneficial ownership limitations do not constrain the aggregate dilution described above.
The market price of our common stock has been, and may continue to be, volatile. A sustained decline in our share price prior to the conversion of the Series C-1 Preferred, the Series C-2 Preferred or the Series D Preferred would significantly increase the number of shares issuable upon conversion of those securities, up to the limit imposed by the $0.35 floor (which we may waive in our sole discretion). Any such conversion would dilute the voting power and economic interests of our existing common stockholders.
We may issue additional series of convertible preferred stock under the Series C Purchase Agreements that, upon issuance and conversion, could result in extraordinary additional dilution to our existing common stockholders.
In addition to the shares of convertible preferred stock currently outstanding, the Series C Purchase Agreements provide for additional issuances of our convertible preferred stock, as follows:
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Series C-3 Preferred Stock. The investors in the Series C Purchase Agreements have agreed to purchase newly designated Series C-3 Convertible Preferred Stock (the “Series C-3 Preferred”), with a stated value of $1,000 per share, for an aggregate purchase price of $3,470,000, subject to the satisfaction of certain closing conditions, including effectiveness of the resale registration statement filed in connection with the Series C Purchase Agreements. |
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Series C-4 Preferred Stock. The investors in the Series C Purchase Agreements may elect in their sole discretion to purchase up to an aggregate of $77,806,667.67 of newly designated Series C-4 Convertible Preferred Stock (the “Series C-4 Preferred”), with a stated value of $1,000 per share, in one or more closings. |
The conversion price of each of the Series C-3 Preferred and the Series C-4 Preferred is subject to adjustment in a manner substantially similar to the Series C-1 Preferred and Series C-2 Preferred, including a $0.35 floor that we may waive in our sole discretion. See Note 12 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information regarding the terms of the Series C-3 Preferred and Series C-4 Preferred.
Assuming all of the Series C-3 Preferred and the maximum amount of the Series C-4 Preferred are issued, and assuming conversion of each at the $0.35 floor price, the Series C-3 Preferred and the Series C-4 Preferred would convert into an aggregate of approximately 232,219,051 shares of our common stock (consisting of approximately 9,914,286 shares from the Series C-3 Preferred and approximately 222,304,765 shares from the Series C-4 Preferred). Together with the shares of common stock that would be issued upon conversion of our currently outstanding Series C-1 Preferred, Series C-2 Preferred, Series D Preferred and Series J Preferred (as described in the preceding risk factor), the aggregate number of shares of common stock that could be issued upon conversion of all such securities at the relevant conversion prices would be approximately 289,639,200 shares.
As of May 8, 2026, we had 2,692,473 shares of common stock outstanding. The aggregate number of shares of common stock issuable upon conversion of all of our existing and potential future shares of convertible preferred stock described above would represent approximately 10,758% of our common stock outstanding as of May 8, 2026, or, on a post-conversion basis, would result in the dilution of our existing common stockholders to less than approximately 0.9% of our post-conversion outstanding common stock.
The actual number of shares of common stock that may be issued under the Series C Purchase Agreements could be higher than the amounts set forth above if we waive the $0.35 floor in our sole discretion, which we may do at any time. There can be no assurance that we will not waive the floor.
Whether and when these contingent issuances and conversions occur will depend on, among other things, the investors' decisions to exercise their respective rights, the satisfaction of remaining closing conditions, our ability and willingness to waive the floor, and the trading price of our common stock. There can be no assurance that any of these events will occur or will not occur. However, if the investors exercise the Series C-4 right in full and the conversion of all of our convertible preferred stock occurs at or near the floor, the resulting dilution to our existing common stockholders would be extraordinary, and would substantially eliminate the existing common stockholders' relative economic and voting interests in the Company. Moreover, the existence of these contingent issuance and conversion rights may itself adversely affect the trading price of our common stock, as market participants may anticipate the issuance and conversion of these securities and the resulting dilution.
We may not receive any proceeds from the Series C-4 right because exercise of that right is at the investors' option and is not within our control. As a result, we cannot rely on the Series C-4 right to fund our operations. We may also be unable to satisfy the closing conditions to the Series C-3 issuance, in which case we will not receive the related proceeds.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The information required by Item 701 of Regulation S-K with respect to unregistered sales of the Company's equity securities during the three months ended March 31, 2026 has been previously reported in the Company's Current Reports on Form 8-K filed with the Securities and Exchange Commission on February 6, 2026, February 12, 2026 and March 9, 2026.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
During the three months ended March 31, 2026, director or officer, as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended, of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
| 101.INS* |
Inline XBRL Instance Document |
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| 101.SCH* |
Inline XBRL Taxonomy Extension Schema Document |
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| 101.CAL* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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| 101.DEF* |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
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| 101.LAB* |
Inline XBRL Taxonomy Extension Label Linkbase Document |
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| 101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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| 104* |
Cover Page Interactive Data File (embedded within the Inline XBRL document). |
| * |
Filed herewith. |
| @ |
The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of section 18 of the Exchange Act of 1934, as amended (Exchange Act), and is not to be incorporated by reference into any filing of Catheter Precision, Inc. under the Securities Act of 1933, as amended (Securities Act), or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
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 thereunto duly authorized.
| CATHETER PRECISION, INC.
(Registrant) |
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| Date: May 18, 2026 |
By: |
/s/ David A. Jenkins |
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| David A. Jenkins Executive Chairman of the Board and Chief Executive Officer (Principal Executive Officer) |
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| Date: May 18, 2026 |
By: |
/s/ Philip Anderson |
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| Philip Anderson |
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| Chief Financial Officer |
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| (Principal Financial and Accounting Officer) |
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Exhibit 10.9
SECURED PROMISSORY NOTE
February 27, 2025
$ 365,000
FOR VALUE RECEIVED, Creatd, Inc., a Nevada corporation located at 169 Madison Avenue, Ste. 2774, New York NY 10016 (the “Borrower”), hereby promises to pay to the order of Marc Sellouk, an individual, and his successors or assignees (the “Holder”), the principal amount of Three Hundred and Sixty Five Thousand and 00/100 United States Dollars ($365,000.00) (the “Principal Amount”) on or prior to April 3, 2025 (the “Maturity Date”). This Promissory Note (this note, and all modifications, extensions, future advances, supplements, and renewals thereof, and any substitutions therefore, hereinafter referred to as the “Note”) shall be payable in accordance with the terms set forth below.
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Payments of Principal. |
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Payment of Principal. The Principal Amount shall be paid to the Holder on or prior to the Maturity Date. |
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General Payment Provisions. All payments on this Note shall be made in lawful money of the United States of America by certified bank check or wire transfer to such account as the Holder may designate by written notice to the Borrower in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding Business Day. For purposes of this Note, “Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of New York are authorized or required by law or executive order to remain closed. |
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Interest. This note shall accrue interest at a flat rate of $3,000 per month (“Interest Rate”), starting from the date of issuance. This amount shall be applied against any and all unpaid principal. |
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Defaults and Remedies. |
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Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” hereunder: (i) the Borrower shall fail to pay any installment of principal within one (1) business days of when any such payment shall be due and payable; (ii) the Borrower makes an assignment for the benefit of creditors; (iii) any order or decree is rendered by a court which appoints or requires the appointment of a receiver or trustee for the Borrower, and the order or decree is not vacated within sixty (60) days from the date of entry thereof; (iv) any order or decree is rendered by a court adjudicating the Borrower insolvent, and the order or decree is not vacated within sixty (60) days from the date of entry thereof; (v) the Borrower files a petition in bankruptcy under the provisions of any bankruptcy law or any insolvency act; or (vi) the Borrower shall fail to perform, comply with or abide by any of the stipulations, agreements, conditions and/or covenants contained in this Note on the part of the Borrower to be performed complied with or abided by, and such failure is not cured within ten (10) days after written notice of such failure is delivered by Holder to the Borrower. |
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b. |
Remedies. Upon the occurrence of one or more Events of Default, the Holder, at its option and without further notice, demand or presentment for payment to the Borrower or others, may declare the then outstanding principal balance of this Note, immediately due and payable, together with all reasonable attorneys’ fees, paralegals’ fees and costs and expenses incurred by the Holder in collecting or enforcing payment thereof (whether such reasonable fees, costs or expenses are incurred in negotiations, all trial and appellate levels, administrative proceedings, bankruptcy proceedings or otherwise), and all other sums due by the Borrower hereunder, all without any relief whatsoever from any valuation or appraisement laws and payment thereof may be enforced and recovered in whole or in part at any time by one or more of the remedies provided to the Holder at law, in equity, or under this Note.
Additionally, upon an Event of Default, Holder shall be issued an additional 100,000 warrants issued at the same terms at the warrants issued herewith. |
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Default Interest Rate. In the event of default, an interest rate of 18% per annum (the “Penalty Rate”) shall be applied against any and all unpaid principal. In no event shall any interest to be paid under the Notes exceed the maximum rate permitted by law. In any such event, the Note shall automatically be deemed amended to permit interest charges at an amount equal to, but not greater than, the maximum rate permitted by law. |
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Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of the Company. |
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Seniority. As of the Closing Date, no Indebtedness or other claim against the Company, is senior to this note in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, other than the May Convertible Loan and July Convertible Loan, indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby). The Company may note grant debt that is senior to or pari-passu with this note without the written consent of the Holder. |
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Lost or Stolen Note. Upon notice to the Borrower of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Holder to the Borrower in a form reasonably acceptable to the Borrower and customary for similar circumstances in commercial lender/borrower circumstances, and, in the case of mutilation, upon surrender and cancellation of the Note, the Borrower shall execute and deliver a new Note of like tenor and date and in substantially the same form as this Note. |
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6. |
Cancellation. After all principal owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Borrower for cancellation and shall not be re-issued. |
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7. |
Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the laws of the State of New York, without giving effect to provisions thereof regarding conflict of laws. Each party hereto hereby irrevocably submits to the nonexclusive jurisdiction of the state and federal courts sitting in New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper, provided, however, nothing contained herein shall limit the Holder’s ability to bring suit or enforce this Note in any other jurisdiction. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by sending by certified mail or overnight courier a copy thereof to such party at the address indicated in the preamble hereto and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY. |
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8. |
Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies of the Holder as provided herein shall be cumulative and concurrent and may be pursued singly, successively or together, at the sole discretion of the Holder, and may be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. |
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9. |
Specific Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Borrower and the Holder and shall not be construed against any person as the drafter hereof. |
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10. |
Failure or Indulgence Not Waiver. Holder shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder, unless such waiver is in writing and signed by Holder, and then only to the extent specifically set forth in the writing. A waiver on one event shall not be construed as continuing or as a bar to or waiver of any right or remedy to a subsequent event. |
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11. |
Notice. Notice shall be given to each party at the address indicated in the preamble hereto or at such other address as provided to the other party in writing. |
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12. |
Usury Savings Clause. Notwithstanding any provision in this Note, the total liability for payments of interest and payments in the nature of interest, including, without limitation, all charges, fees, exactions, or other sums which may at any time be deemed to be interest, shall not exceed the limit imposed by the usury laws of the jurisdiction governing this Note or any other applicable law. In the event the total liability of payments of interest and payments in the nature of interest, including, without limitation, all charges, fees, exactions or other sums which may at any time be deemed to be interest, shall, for any reason whatsoever, result in an effective rate of interest, which for any month or other interest payment period exceeds the limit imposed by the usury laws of the jurisdiction governing this Note, all sums in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice by, between, or to any party hereto, be applied to the reduction of the outstanding principal balance of this Note immediately upon receipt of such sums by the Holder hereof, with the same force and effect as though the Borrower had specifically designated such excess sums to be so applied to the reduction of such outstanding principal balance and the Holder hereof had agreed to accept such sums as a penalty free payment of principal; provided, however, that the Holder of this Note may, at any time and from time to time, elect, by notice in writing to the Borrower, to waive, reduce, or limit the collection of any sums in excess of those lawfully collectible as interest rather than accept such sums as a prepayment of the outstanding principal balance. It is the intention of the parties that the Borrower does not intend or expect to pay nor does the Holder intend or expect to charge or collect any interest under this Note greater than the highest non-usurious rate of interest which may be charged under applicable law. |
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13. |
Binding Effect. This Note shall be binding upon the Borrower and the successors and assigns of the Borrower and shall inure to the benefit of Holder and the successors and assigns of Holder. |
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14. |
Severability. In the event any one or more of the provisions of this Note shall for any reason be held to be invalid, illegal, or unenforceable, in whole or in part, in any respect, or in the event that any one or more of the provisions of this Note operates or would prospectively operate to invalidate this Note, then and in any of those events, only such provision or provisions shall be deemed null and void and shall not affect any other provision of this Note. The remaining provisions of this Note shall remain operative and in full force and effect and shall in no way be affected, prejudiced, or disturbed thereby. |
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15. |
Participations. Holder may from time to time sell or assign, in whole or in part, or grant participations in this Note and/or the obligations evidenced hereby, subject, however, to first obtaining the Borrower’s written consent. The holder of any such sale, assignment or participation, if the applicable agreement between Holder and such holder so provides, shall be: (a) entitled to all of the rights, obligations and benefits of Holder (to the extent of such holder’s interest or participation); and (b) deemed to hold and may exercise the rights of setoff or banker’s lien with respect to any and all obligations of such holder to the Borrower (to the extent of such holder’s interest or participation), in each case as fully as though the Borrower was directly indebted to such holder. |
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16. |
Amendments. The provisions of this Note may be changed only by a written agreement executed by the Borrower and Holder. |
[Signature pages follows]
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed on and as of the date set forth above.
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BORROWER
CREATD, INC. |
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/s/ Jeremy Frommer |
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Jeremy Frommer CEO |
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HOLDER
Marc Sellouk |
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| /s/ Marc Sellouk | ||
| Marc Sellouk |
Exhibit 10.10
EXCLUSIVE AIRCRAFT DRY LEASE AGREEMENT
This EXCLUSIVE AIRCRAFT DRY LEASE AGREEMENT, dated as of September 9, 2025 (this "Lease"), is by and between SEG JETS LLC, a Delaware Limited Liability Company (the "Lessor") and Ponderosa Air LLC a New York limited liability company (the "Lessee"). The effective date of the start of the 24 monthly lease payments will begin when actual receipt of the Aircraft is delivered with final purchase.
WITNESSETH:
WHEREAS, the Lessor is anticipated to become the owner of the 2020 Cirrus Design Corp. SF50 aircraft bearing manufacturer’s serial number 0223 and US Registration N25MG together with one Williams FJ33-5A engine serial number 361140 (the “Aircraft”) on or before September 16, 2025 at the latest, with a target Close date on or before September 09, 2025; and
WHEREAS, the Lessee is the holder of air operator’s certificate 1POA204M (“Certificate”) for the operation of flights under part 135 of the United States Code of Federal Aviation Regulations (“Part 135”).
NOW, THEREFORE, the parties hereto, declaring their intentions to be legally bound hereunder, and for good and valuable consideration set forth below hereby covenant and agree as follows:
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1. |
Definitions and Interpretation. |
The following terms shall have the following meanings for all purposes of this Lease.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person.
"Aircraft" shall mean the aircraft described in the recitals hereof.
"Applicable Law" means all applicable (i) laws, treaties and international agreements of any national government, (ii) laws of any state, province, territory, locality or other political subdivision of a national government, and (iii) rules, regulations, judgments, decrees, orders, injunctions, writs, directives, licenses and permits of any government, court, government, Governmental Body or arbitration authority.
"Approved Pilots" means, a pilot who satisfies all of the following criteria: (i) a pilot who is qualified to operate the Aircraft under Part 135, (ii) holds at least a First Class Medical Certificate, and (iii) satisfies the requirements the insurance required to be maintained by the Lessee pursuant to the terms of Section 7. “Basic Rent” is defined in Schedule I to this Lease.
"Business Day" means any day on which federally chartered banking institutions in the State of New York are open for the transaction of business.
“Commencement Date” the date which the Aircraft is delivered to Lessee.
"Event of Default" shall have the meaning set forth in Section 9.
“Expiration Date” means 24 months for start of Lease.
"FAA" means the Federal Aviation Administration of the U.S. Department of Transportation, or any successor agency.
"FARs" means the Federal Aviation Regulations issued by the FAA in accordance with Title 49 of the United States Code.
"Governmental Body" means any department, commission, board, bureau, court, legislature, agency, instrumentality or authority of any national government or any political subdivision of a national government.
"Indemnitee" means the Lessor, any Affiliate of the Lessor, or and any successor, assign, agent, partner, officer, director or employee of the Lessor or any such Affiliates.
“Lessee Damage Costs” shall have the meaning set forth in Section 6(a).
“Lien” has the meaning set forth in Section 8(b) hereof.
“Month” means a calendar month.
“Operational Control” with respect to a flight, means the exercise of authority over initiating, conducting or terminating a flight.
“Person” means any individual, corporation, partnership, limited partnership, proprietorship, association, limited liability company, firm, trust, estate or other enterprise or entity.
"Redelivery Condition" means the condition set forth in Schedule II to this Lease.
“Security Deposit” shall have the meaning set forth in Schedule I to this Lease.
"Taxes" means all taxes of every kind (excluding any tax measured by or assessed against Lessor’s income, including, without limitation, any income tax, gross income tax, net income tax, or capital gains tax) assessed or levied by any federal, state, county, local, airport, district, foreign, or other governmental authority, including, without limitation, sales taxes, use taxes, retailer taxes, federal air transportation excise taxes, federal aviation fuel excise taxes, and other similar duties, fees, and excise taxes.
"Term" means the period commencing on the Commencement Date and ending on the Expiration Date.
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2. |
Lease of the Aircraft. |
(a) The Lessor agrees to dry lease the Aircraft to Lessee on a continuous and exclusive basis at all times during the Term pursuant to the terms and conditions in this Lease. The Lessee has inspected the Aircraft and confirms that the condition of the Aircraft is acceptable to the Lessee in all respects and that Lessor will deliver the Aircraft to the Lessee on the Commencement Date.
(b) Lessor will provide Lessee a Right of First Refusal (“ROFR”) in two respects:
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Lessor will provide Lessee a Right of First Refusal ("ROFR") option to extend this lease agreement, at market terms available at the time of the lease end date. |
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In the event Lessor contemplates a sale of the Aircraft during the Term, Lessee shall have the right to match any bona fide third-party offer to purchase the Aircraft on the same material terms. Lessor shall provide written notice to Lessee of the material terms of any such offer, and Lessee shall have ten (10) Business Days from receipt of such notice to exercise its ROFR. If Lessee does not exercise its ROFR within such period, Lessor shall be free to proceed with the sale to the third party on terms no more favorable than those offered to the Lessee. |
(c) Notwithstanding anything to the contrary in this Lease, Lessor shall have the right to sell the Aircraft at any time upon providing Lessee with at least ninety (90) days’ prior written notice. In such event, this Lease shall automatically terminate effective as of the closing date of such sale, provided the required notice period has been satisfied. If the closing date of the sale occurs mid-month, Lessee shall be responsible only for a prorated portion of the Rent due for that month, calculated on a daily basis. The Security Deposit shall be handled in the same manner as it would be upon expiration of the Lease under its normal terms, including the application of any portion to unpaid or final month’s Rent in accordance with this Lease. Lessee shall cooperate in good faith with any reasonable requests from Lessor to facilitate the sale process, including providing access for inspections or prospective purchasers, so long as such cooperation does not materially disrupt Lessee’s operations.
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Basic Rent; Other Lessee Costs. |
(a) Each calendar month during the Term, the Lessee shall pay to the Lessor rent with respect to the Aircraft in an amount equal to Basic Rent together with any Taxes applicable to rental payments and any other sales applicable to any such payment (collectively, the “Rent”).
(b) Lessee shall pay all expenses incurred with respect to the Aircraft during the Term, including, without limitation, crew costs and expenses, all fuel, oil, provisions, supplies, and services required for operation of the Aircraft, including all maintenance; handling and custom fees and related charges; taxes and airport fees; hangar and tiedown charges; use taxes on all Rent; and all fines, fees or penalties relating in any manner to the operation of the Aircraft by Lessee under this Lease; (“Lease Operation Expenses”). To the extent that Lessor is billed for any Lease Operation Expenses, Lessee shall promptly pay or reimburse Lessor for such Lease Operation Expenses upon demand.
(d) An additional three and a half (3.5%) percent charge shall apply to all amounts due under this Lease paid via credit card. Overdue amounts payable pursuant to this Lease shall bear interest at a monthly rate equal to (1.50%) percent.
(e) Lessee shall be responsible for, shall indemnify and hold harmless Lessor against, and shall pay all Taxes assessed or levied by any taxing jurisdictions as a result of the lease of the Aircraft to Lessee, or the use of the Aircraft by Lessee. This is an absolute net lease, and all Rent and other sums payable by Lessee shall be paid promptly when due hereunder without notice or demand of any kind, and without counterclaim, set-off, deduction, recoupment or any defense that Lessee may have against Lessor or any other person. Lessee’s obligation for the payment of all amounts due hereunder is and shall be absolute and unconditional, and there shall be no abatement, suspension, deferment or diminution in such amounts by reason of, and the obligations and liabilities of Lessee under this Lease shall not be affected by, any circumstances or occurrences whatsoever, including, without limitation, (i) any restriction or prevention of, or interference with, any use of the Aircraft, or any part thereof; (ii) any defect in the condition, airworthiness, design, operation, quality or fitness for use of the Aircraft or any part thereof; (iii) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings by or against Lessee or any action taken with respect to this Lease by any trustee or receiver of Lessee or by any court in any such proceeding; or (iv) any change, extension, waiver, sufferance or other action or omission in respect of any obligation or liability of Lessee.
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4. |
Maintenance and Compliance. |
(a) During the Term: (i) the Lessee, at its sole cost and expense, shall maintain and inspect the Aircraft in accordance with the maintenance standards set forth by the Federal Aviation Administration (“FAA”) in Part 135 of the Federal Aviation Regulations (“FARs”) and Lessee’s maintenance program; and (ii) the Lessee shall maintain the certificate of airworthiness for the Aircraft issued by the FAA and shall take all actions necessary in connection therewith including the installation or replacement of any and all appliances, products, parts or equipment of any type or kind as may be or become required by Part 135 of the FARs, any other Applicable Law, and/or under Lessee’s maintenance or flight operations manuals. Lessee may not otherwise modify the Aircraft in any manner without the prior written consent of the Lessor, which the Lessor may withhold in its sole discretion.
(b) THE AIRCRAFT IS BEING LEASED ON AN “AS IS” BASIS AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE, AND LESSOR HEREBY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EITHER EXPRESSED OR IMPLIED, OF ANY KIND OR NATURE WHATSOEVER WITH RESPECT TO THE AIRCRAFT, INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE AIRCRAFT, ITS MERCHANTABILITY OR FITNESS FOR LESSEE’S INTENDED USE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT, ITS VALUE OR AIRWORTHINESS OR CONFORMITY OF THE AIRCRAFT TO ANY SPECIFICATIONS; NOR SHALL LESSOR BE LIABLE TO THE LESSEE FOR ANY LOSS, CLAIM, DEMAND, LIABILITY, COST DAMAGE, OR EXPENSE OF ANY KIND, CAUSED OR ALLEGED TO BE CAUSED, DIRECTLY OR INDIRECTLY, BY THE AIRCRAFT, OR BY ANY INADEQUACY THEREOF FOR ANY PURPOSE, OR BY ANY DEFECT THEREIN; OR IN THE USE OR MAINTENANCE THEREOF, OR ANY REPAIRS, SERVICING, OR ADJUSTMENTS THERETO, OR ANY DELAY IN PROVIDING, OR FAILURE TO PROVIDE THE SAME, OR ANY INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF, OR ANY LOSS OF BUSINESS, OR ANY DAMAGE WHATSOEVER AND HOWSOEVER CAUSED. NOTWITHSTANDING ANYTHING SET FORTH IN THIS AGREEMENT, IN NO EVENT SHALL LESSOR BE LIABLE TO LESSEE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT OR ABSOLUTE LIABILITY IN TORT).
(c) At all times during the Term the Lessee shall cause the Aircraft to be hangered indoors and Lessee may not leave the Aircraft outside for any period greater than twenty-four (24) hours.
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5. |
Operational Control; Other Lessee; Operation. |
(a) During the Term, the Lessee shall at all times be in Operational Control of the Aircraft as that term is defined under the Federal Aviation Regulations, and the Aircraft shall be in the exclusive possession of the Lessee throughout the term of this Lease. As further evidence that Lessee shall exclusively be in Operational Control of the Aircraft solely the Lessee shall: be responsible for the initiation, conduct and termination of any flight involving the Aircraft; decide which crewmembers shall operate the aircraft and their duty assignments; determine whether to accept a flight request; be responsible for all maintenance performed on the Aircraft during the Lease Term and the costs associated with same; ensure that the aircraft, flight and flight crew comply with all pertinent Regulations; be responsible for all weather and fuel requirements, the costs of which shall be borne exclusively by the Lessee; be responsible for the costs of all landing, airport, and hangar fees, and flight provisions; and that the flight crew piloting the aircraft shall be selected exclusively by the Lessee (in accordance with applicable regulations and/or insurance requirements) and said individuals are not employees or agents of the Lessor. The foregoing factors are not exclusive but rather to demonstrate that the Lessee is at all times in sole possession and Operational Control of the Aircraft throughout the Lease Term.
(b) Lessee shall provide its own pilots for the operation of the Aircraft. The Aircraft may only be operated by Approved Pilots by the Lessee during the Term.
(c) The Lessee shall operate the Aircraft in accordance with Part 135 and bear responsibility for any and all violations of Part 135 or of any other Applicable Law brought about by its operation or use of the Aircraft under this Lease.
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6. |
Damage and Indemnity. |
(a) If the Aircraft (i) disappears or is stolen, (ii) suffers damage beyond economic repair or (iii) suffers damage that results in an insurance settlement on the basis of a total loss or a constructive total loss (collectively, “Event of Loss”), upon the earlier of: (x) ninety (90) days following the occurrence of an Event of Loss in respect of the Aircraft or, (y) five (5) days following the date of Lessee's or Lessor's (as the case may be) receipt of insurance proceeds with respect to such Event of Loss, Lessee shall pay to Lessor, or cause to be paid to Lessor, the Stipulated Value (as defined in Schedule 1). In the case of any other damage to the Aircraft, the Lessee shall direct the insurers to pay to the Lessor any insurance proceeds (and if the Lessee receives any such insurance proceeds it will immediately pay such amounts to the Lessor), Lessee shall cause a Cirrus Design Corp. Authorized Service Center to rectify such damage. In the event of such damage and the Lessor receives proceeds from the Insurer for such damage, the Lessor shall reimburse the Lessee for any cost, up to the amount of insurance proceeds received by the Lessor, incurred by the Lessee to rectify such damage, but Lessee shall be responsible for any cost in excess of the amount of insurance proceeds received by the Lessor to rectify such damage.
(b) The Lessee shall release, indemnify and hold harmless the Indemnitees from and against any and all claims, demands, actions and proceedings by third parties against the Indemnitees for liability or damage arising from or in connection with: (i) any act or omission of Lessee, or its employees, agents, officers, directors, shareholders, or other representatives in respect of the transactions contemplated hereby, or the enforcement of any of the terms hereof, including but not limited to the breach of any representation, warranty, covenant, obligation or duty of Lessee hereunder or any other document or agreement executed and delivered in connection herewith or with respect to any Indemnitee; or (ii) the condition, manufacture, delivery, lease, acceptance, possession, repossession, return, disposition pursuant to the exercise of remedies under Section 10 hereof, airworthiness, use, maintenance, storage or operation of the Aircraft either in the air or on the ground; or (iii) any defect in the Aircraft (whether or not discovered or discoverable by Lessee or Lessor) arising from any material or articles or parts used therein or from the design, testing, or use thereof or from any maintenance, repair, modification, alteration, service, repair, overhaul, or testing of the Aircraft, whether or not the Aircraft is in the possession of Lessee, and regardless of where the Aircraft may then be located; or (iv) any transaction, approval, or document contemplated by this Lease, or given or entered into in connection herewith or therewith
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7. |
Insurance. |
(a) During the Term, the Lessee shall procure and maintain in full force and effect legal liability insurance in respect of the Aircraft. All such insurance:
(i) shall be in an amount of no less than $5,000,000 combined smooth single limit;
(ii) shall be carried with an insurance underwriter or insurance carrier rated no less than “A” by AM Best’s Key Financial Rating Guide;
(iii) shall name Lessor as an additional insured;
(iv) shall provide that the insurers shall waive all rights of subrogation against Lessor; and
(v) The Lessee will provide the Lessor proof of Certification of Insurance on a monthly basis. If not provided, the Lessee will discontinue operations until proof of insurance is provided. In all events, the insurance company shall provide Lessor 30 days’ notice (7 days in case of war risk) of cancellation or material change in coverage.
(b) During the Term, the Lessee shall procure and maintain in full force and effect all-risk aircraft hull ground and flight insurance covering the Aircraft in an amount equal to the Stipulated Value of the Aircraft, listing Lessor as loss payee.
(c) On the date hereof, the Lessee shall provide the Lessor a copy of the insurance certificate evidencing that insurance in the amounts and of the types specified by this Lease is in full force and effect.
(d) Lessee shall be solely responsible for the cost of the insurance coverage maintained by Lessee pursuant to this Section 7.
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8. |
Lessee Covenants and Representations and Warranties. |
(a) Lessee shall not utilize the Aircraft: (i) in a manner prohibited by the insurance coverage described in Section 7; (ii) in any area excluded from coverage by any insurance policy described in Section 7; (iii) in any unlawful manner and or in violation of any Applicable Laws; or (iv) in violation with the manufacturer’s operating manual.
(b) Lessee shall not create, incur or suffer to be created or incurred any pledge, lien, charge, encumbrance of claim of any kind on or with respect to the Aircraft, excluding any air navigation authority, airport materialmen’s, workmen’s, repairmen’s, mechanic’s, employees’ or other similar liens arising in the ordinary course of the Lessee’s normal operations by statute or by operation of law in respect of obligations that are not yet due or that are being contested in good faith (“Lien”). Lessee shall have no right, title or interest in or to the Aircraft except as expressly provided herein and shall take no action that would impair the continued registration of the Aircraft at the FAA in the name of the Lessor.
(c) Lessee may not sublease the Aircraft.
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9. |
Events of Default. Each of the following shall constitute an “Event of Default” under this Lease: |
(a) If Lessee shall fail to pay any sums due under this Lease within five (5) business days after the date such sum is due; or
(b) If Lessee shall fail to perform any covenant contained herein, and such failure shall continue for a period of five (5) days after notice thereof shall have been given by Lessor in writing unless such failure is cured within five (5) days after the date of such notice; or
(c) If any proceeding is being commenced by Lessee under any bankruptcy, insolvency, reorganization, readjustment of debt, receivership or liquidation law or statute of any jurisdiction; or if any such proceedings shall be instituted against Lessee and shall not be withdrawn or terminated within 10 days after their commencement; or
(d) If the Aircraft is operated by Lessee or any other party in violation of any Applicable Law or in violation of any provision of any insurance policy contemplated by this Lease; or
(e) If any warranty or representation made by Lessee herein shall prove to be false in any material respect.
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10. |
Remedies. If an Event of Default has occurred, the Lessor may at its sole discretion exercise any one or more of the following remedies: |
(a) Terminate this Agreement and recover any and all sums which may be due under this Agreement.
(b) demand that Lessee, and Lessee shall upon such demand of Lessor and at Lessee's expense, immediately return the Aircraft to Lessor at Republic Airport (KFRG), in the manner specified in such notice, and such return shall not be delayed for purposes of complying with the Redelivery Conditions specified in Section 11 hereof (none of which conditions shall be deemed to affect Lessor's possession of the Aircraft) or delayed for any other reason. Notwithstanding the foregoing, at Lessor's option, Lessee shall be required thereafter to take such actions, at Lessee's expense, as would be required by the provisions of this Lease if the Aircraft were being returned at the end of the Term hereof.
(c) Exercise any other rights or remedies which may be available under the provisions of this Agreement or under any of the laws of the state of New York.
(d) Sell at private or public sale, as Lessor may determine, or hold, use, operate or lease to others the Aircraft as Lessor in its sole discretion may determine, all free and clear of any rights of Lessee.
(e) Date, complete and file the lease termination attached to the Lease as Schedule III;
(f) Lessor may enter upon the premises where all or any part of the Aircraft is located and retake possession of the Aircraft and the manuals, logs and records without notice to the Lessee.
Each and every power and remedy specified herein shall be in addition to every other power and remedy specifically so given or now or hereafter existing at law or in equity, and each and every power and remedy may be exercised from time to time individually or simultaneously and as often and in such order as may be deemed expedient by the Lessor. All such powers and remedies shall be cumulative and the exercise of one shall not be deemed a waiver of the right to exercise any other or others.
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11. |
Return. |
(a) On or before the Expiration Date or the earlier termination of this Lease pursuant to Section 10 (“Return Date”), Lessee shall make the Aircraft available, at Lessee's expense, to Lessor at Republic Airport (KFRG) for inspection to verify that the condition of the Aircraft complies with the Redelivery Condition (inspections being hereinafter collectively referred to as the "Final Inspection"). The Final Inspection shall consist of a records review and a visual inspection of the Aircraft. Lessee shall provide Lessor all information reasonably requested by Lessor regarding the status of all maintenance items tracked in accordance with Lessee’s maintenance program. If the Aircraft is not returned to Republic Airport (KFRG) in the Redelivery Condition on or before the Return Date, Lessee shall be responsible for, and upon demand shall pay Lessor: (a) for all costs and expenses (including but not limited to reasonable attorney’s fees) incurred by Lessor to repossess the Aircraft and (b) for all costs and expenses incurred to return the Aircraft to the Redelivery Condition.
(b) To the extent that the Aircraft fails upon the Return Date to conform to any requirement imposed by this Lease, with the exception of any potential maintenance and / or repair, Lessor, at its sole option, may continue the Lease, and the Term shall be deemed to have been automatically extended, and the obligation to pay 150% of Basic Rent shall continue until such time as the Aircraft is returned to the Republic Airport (KFRG) in the Redelivery Condition. Lessee shall not be permitted to operate the Aircraft during any such extension period.
12. Expenses. The Lessor and the Lessee will each assume its own costs, fees (including legal and documentation fees) and other expenses incurred in connection with the preparation and execution of the documentation relating to the transactions contemplated by this Lease. The prevailing party in any action or proceeding to interpret or enforce any provision of this Lease or any agreement or instrument executed in connection herewith will be awarded all costs and expenses including reasonable attorneys' fees incurred in the preparation, prosecution and appeal of any such judgment or award.
13. Governing Law; Consent to Jurisdiction. (a) THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE BY RESIDENTS THEREOF TO BE WHOLLY PERFORMED THEREIN EXCEPT WHERE OTHERWISE PREEMPTED BY FEDERAL LAW OR STATUTE.
(b) Each of the Lessor and the Lessee hereby expressly submits to the non-exclusive jurisdiction of the State and Federal Courts located in New York. Final judgment against the Lessor or the Lessee in any such suit shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or as otherwise permitted by Applicable Law.
14. Waiver of Jury Trial. EACH OF THE LESSOR AND THE LESSEE HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR IN CONNECTION WITH THIS LEASE. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
15. Notices. All notices, requests, demands or other communications required under or given pursuant to the Lease shall be in writing unless otherwise expressly provided herein: Any notice, request, demand or other communication permitted under the Lease may be sent by (a) hand delivery; (b) U.S. mail; (c) international courier; (d) electronic mail. All notices, requests, demands or other communications required under or given pursuant to this lease become effective: (i) for hand delivery, upon receipt thereof by the recipient; (ii) for U.S. mail, upon the expiration of five Business Days after depositing such notice with a U.S. post office or U.S., post office mail box; (iii) for international courier, at the time such delivery is recorded in the international courier’s electronic tracking system; and (c) for electronic mail, upon such electronic mail being recorded in the sender’s “Out Box” and the sender does not receive any subsequent notice within five hours that such electronic mail has not been delivered. All notices, requests, demands or other communications required under or given pursuant to this Lease shall be directed to the address listed in Schedule I or to such other address as the Lessor or the Lessee may from time to time designate by notice in writing to the other party.
16. Amendments. The terms and provisions of this Lease may not be amended, waived, discharged or terminated orally. Any amendment, waiver, discharge or termination shall require a written instrument signed by the party against whom enforcement of the amendment, waiver, discharge or termination is sought.
17. Assignment. This Lease may not be assigned by either party hereto without the prior written consent of the other party.
18. Counterparts. This Lease may be executed by the Lessor and the Lessee in separate counterparts, each of which when so executed and delivered shall be an original, but all counterparts shall together constitute but one and the same agreement.
19. Sole Agreement. This Lease contains the entire understanding between the parties and supersedes any documents previously signed by the parties in respect to the subject matter contained herein and may be amended only by a written instrument duly executed by the parties or their respective permitted assignees.
20. True Lease. The Lessor and the Lessee intend that this Lease constitutes a “true lease” and a lease for all United States federal income tax purposes. The Lessor and the Lessee further intend and agree that, to the extent applicable, the Lessor shall be entitled to the full benefits afforded lessors of aircraft under Section 1110 or under the equivalent provisions under the Cape Town Convention.
21. THE AIRCRAFT LISTED AND REFERENCED HEREIN WILL BE MAINTAINED AND INSPECTED UNDER FAR 135 FOR OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT DURING THE DURATION OF THIS AGREEMENT.
THE LESSEE, LOCATED AT THE ADDRESS LISTED HEREIN, IS CONSIDERED TO BE IN OPERATIONAL CONTROL OF THE AIRCRAFT DURING ANY LEASE PERIOD (AS DEFINED HEREIN). LESSEE CERTIFIES IT IS RESPONISBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT DURING ANY LEASE PERIOD (AS DEFINED HEREIN) AND UNDERSTANDS AND IS FAMILIAR WITH ITS RESPONSIBILITY FOR COMPLIANCE WITH THE APPLICABLE FEDERAL AVIATION REGULATIONS.
A COPY OF THIS AGREEMENT SHALL BE CARRIED ON SAID AIRCRAFT AT ALL TIMES AND SHALL BE MADE AVAILABLE FOR REVIEW UPON REQUEST BY THE ADMINISTRATOR OR HIS REPRESENTATIVE.
AN EXPLANATION OF THE FACTORS BEARING ON OPERATIONAL CONTROL AND THE PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE FAA GENERAL AVIATION DISTRICT OFFICE.
[Signature Page Follows]
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Exclusive Lease Agreement to be duly executed and delivered as of the day and year first above written.
| SEG JETS LLC | ||
| By: | /s/ Joseph Reda | |
| Name: Joseph Reda | ||
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Title: Managing Member |
||
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Lessee: Ponderosa Air, LLC |
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| By: | /s/ Marc Sellouk | |
| Name: Marc Sellouk | ||
| Title: Managing Member | ||
SCHEDULE I
Basic Rent
Shall mean: (a) Lease execution Date of September 9, 2025 and a (b) lease Commencement Date that corresponds to the date of Acquisition of the Aircraft and will match the date of pickup of the Aircraft and (c) a monthly payment in the amount of $23,777.77, plus a Security Deposit of an additional $23,777.77 that can be applied, at the sole discretion of the Lessor, against the Last Months Lease Payment.
The Security Deposit and first monthly payment shall be due at the signing of the Lease. The second monthly payment shall be due one month after the Commencement Date, and all following monthly payments and all following monthly payments shall be due on the same day of each successive month thereafter, counted from the Commencement Date, until the expiration or earlier termination of this Lease.
The Lease is a 24 month lease commencing on the defined Commencement Date, after which the Aircraft will be returned in the Redelivery Condition in accordance with Section 11 of the Lease.
Basic Rent Coverage:
Basic Rent includes an implied payment to the Lessor for maintaining Jetstream and Engine Blue program coverage for the first 365 hours of flight time during the Lease Period.
• The Lease is capped at 50 hours of usage per calendar month, unless otherwise waived in writing by the Lessor.
• All operational and maintenance costs beyond the initial 365 hours, including fuel, repositioning, crew, hangar, and related expenses, shall be borne solely by Lessee.
• Additional Jetstream and Engine Blue hour blocks shall be purchased in increments of 150 hours, currently priced at $80,489 (subject to change by Cirrus Aircraft).
Prepayment Requirement:
Ownership Group (SEG Jets LLC) agrees to pre-pay Cirrus Aircraft for additional Jetstream and Engine Blue hour blocks only after full prepayment from Lessee has been received. SEG Jets LLC shall have no obligation to make any payment for additional coverage unless and until the corresponding funds are received from Lessee. However, SEG Jets LLC shall have the obligation to pre-pay Cirrus Aircraft for additional Jetstream and Engine Blue hour blocks within the later of the Cirrus Aircraft due date or within 24 hours of receipt of such prepayment from Lessee.
Monthly Cap of Hours Flown
The Lessee will agree to cap the monthly flight time at 50 hours per month. If demand exceeds this monthly cap, the ownership group will agree to consider waiving such restriction.
The Lessee agrees to the Lessor, that in the future event of multiple Aircraft being contracted
under lease, that the Lessor, SEG Jets LLC shall be the first lease paid (First Aircraft Lease money out).
Lessor Address
SEG Jets LLC
1324 Manor Circle
Pelham Manor, NY 10803
Lessee Address
Ponderosa Air, LLC
7110 Republic Airport
Farmingdale, NY 11735
SCHEDULE II
AIRCRAFT REDELIVERY CONDITION
1.1.1 Schedule II – Redelivery Condition
Upon expiration or earlier termination of the Lease, Lessee shall return the Aircraft to Lessor in the following condition (the “Redelivery Condition”):
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1. |
Regulatory Compliance: |
|
o |
All Airworthiness Directives (ADs) and Service Bulletins (SBs) applicable to the Aircraft and its components shall be fully complied with and current, with no outstanding or deferred items. |
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2. |
Maintenance Programs: |
|
o |
The Aircraft shall have undergone a fresh 100-hour inspection and/or Phase inspection (as applicable) within 10 flight hours or 30 calendar days of redelivery. |
|
o |
The Aircraft shall be enrolled and current in Jetstream and Engine Blue or equivalent programs, and such coverage shall be fully transferable to Lessor or any successor lessee without penalty or lapse. |
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3. |
Logbooks and Records: |
|
o |
All Aircraft maintenance logs, engine logs, propeller logs, airframe records, weight & balance data, wiring diagrams, manuals, and other regulatory and manufacturer documentation shall be: |
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■ |
Original (not scanned or copied), |
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■ |
Complete and continuous, and |
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■ |
Accurately reflecting all maintenance performed during the Lease Period. |
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4. |
Software & Avionics: |
|
o |
All software and firmware for the Aircraft’s avionics and systems shall be: |
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■ |
Up to date, stable, and functioning as intended, and |
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■ |
Compliant with FAA requirements and compatible with the Aircraft’s installed hardware. |
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5. |
Condition & Cleanliness: |
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o |
The Aircraft shall be returned in clean, airworthy, and flight-ready condition, free of damage (other than normal wear and tear) and with: |
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■ |
Interior professionally cleaned, |
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■ |
Exterior washed and detailed, and |
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■ |
All Lessee-installed equipment, branding, or modifications removed unless otherwise agreed in writing. |
SCHEDULE III
LEASE TERMINATION
By execution hereof (this “Lease Termination”), the undersigned, SEG Jets LLC as lessor (“Lessor”), and Ponderosa Air, LLC, as lessee (“Lessee”), hereby acknowledge and agree: (i) that the Lease Agreement is terminated and otherwise cancelled; (ii) that the Equipment is released from all the terms and conditions of the Lease Agreement; (iii) to the discharge of all registrations on the International Registry against the Equipment created by the Lease Agreement; and (iv) Lessee disclaims all right, title and interest in and to the Equipment.
This Lease Termination is without prejudice to the surviving rights of the parties under the Lease Agreement and nothing in this Lease Termination shall relieve either party from its obligations under the Lease Agreement which are still unsatisfied and/or from any of its obligations under the Lease Agreement which may be due after the date of this Lease Termination.
Capitalized terms not otherwise defined herein shall have the meanings given them in Exhibit A attached hereto.
Dated as of this day of , 2025.
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Ponderosa Air, LLC, Lessee |
SEG JETS LLC. Lessor |
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| By: | By: | ||||
| Name: Marc Sellouk | Name: | ||||
| Title: Managing Member | Title: | ||||
Exhibit 10.11
EXCLUSIVE AIRCRAFT DRY LEASE AGREEMENT
This EXCLUSIVE AIRCRAFT DRY LEASE AGREEMENT, dated as of February 11, 2026 (this "Lease"), is by and between SEG JETS LLC, a Delaware Limited Liability Company (the "Lessor") and Ponderosa Air LLC a New York limited liability company (the "Lessee"). The effective date of the start of the 24 monthly lease payments will begin when actual receipt of the Aircraft is delivered with final purchase.
WITNESSETH:
WHEREAS, the Lessor is anticipated to become the owner of the 2019 Cirrus Design Corp. SF50 aircraft bearing manufacturer’s serial number 0161 and US Registration N696MR together with one Williams FJ33-5A engine serial number 361070 (the “Aircraft”) on or before February 15, 2026 at the latest, with a target Close date on or before March 02, 2026; and
WHEREAS, the Lessee is the holder of air operator’s certificate 1POA204M (“Certificate”) for the operation of flights under part 135 of the United States Code of Federal Aviation Regulations (“Part 135”).
NOW, THEREFORE, the parties hereto, declaring their intentions to be legally bound hereunder, and for good and valuable consideration set forth below hereby covenant and agree as follows:
1. Definitions and Interpretation.
The following terms shall have the following meanings for all purposes of this Lease.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person.
"Aircraft" shall mean the aircraft described in the recitals hereof.
"Applicable Law" means all applicable (i) laws, treaties and international agreements of any national government, (ii) laws of any state, province, territory, locality or other political subdivision of a national government, and (iii) rules, regulations, judgments, decrees, orders, injunctions, writs, directives, licenses and permits of any government, court, government, Governmental Body or arbitration authority.
"Approved Pilots" means, a pilot who satisfies all of the following criteria: (i) a pilot who is qualified to operate the Aircraft under Part 135, (ii) holds at least a First Class Medical Certificate, and (iii) satisfies the requirements the insurance required to be maintained by the Lessee pursuant to the terms of Section 7.
“Basic Rent” is defined in Schedule I to this Lease.
"Business Day" means any day on which federally chartered banking institutions in the State of New York are open for the transaction of business.
“Commencement Date” the date which the Aircraft is delivered to Lessee.
"Event of Default" shall have the meaning set forth in Section 9.
“Expiration Date” means 24 months for start of Lease.
"FAA" means the Federal Aviation Administration of the U.S. Department of Transportation, or any successor agency.
"FARs" means the Federal Aviation Regulations issued by the FAA in accordance with Title 49 of the United States Code.
"Governmental Body" means any department, commission, board, bureau, court, legislature, agency, instrumentality or authority of any national government or any political subdivision of a national government.
"Indemnitee" means the Lessor, any Affiliate of the Lessor, or and any successor, assign, agent, partner, officer, director or employee of the Lessor or any such Affiliates.
“Lessee Damage Costs” shall have the meaning set forth in Section 6(a).
“Lien” has the meaning set forth in Section 8(b) hereof.
“Month” means a calendar month.
“Operational Control” with respect to a flight, means the exercise of authority over initiating, conducting or terminating a flight.
“Person” means any individual, corporation, partnership, limited partnership, proprietorship, association, limited liability company, firm, trust, estate or other enterprise or entity.
"Redelivery Condition" means the condition set forth in Schedule II to this Lease.
“Security Deposit” shall have the meaning set forth in Schedule I to this Lease.
"Taxes" means all taxes of every kind (excluding any tax measured by or assessed against Lessor’s income, including, without limitation, any income tax, gross income tax, net income tax, or capital gains tax) assessed or levied by any federal, state, county, local, airport, district, foreign, or other governmental authority, including, without limitation, sales taxes, use taxes, retailer taxes, federal air transportation excise taxes, federal aviation fuel excise taxes, and other similar duties, fees, and excise taxes.
"Term" means the period commencing on the Commencement Date and ending on the Expiration Date.
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2. |
Lease of the Aircraft. |
(a) The Lessor agrees to dry lease the Aircraft to Lessee on a continuous and exclusive basis at all times during the Term pursuant to the terms and conditions in this Lease. The Lessee has inspected the Aircraft and confirms that the condition of the Aircraft is acceptable to the Lessee in all respects and that Lessor will deliver the Aircraft to the Lessee on the Commencement Date.
(b) Lessor will provide Lessee a Right of First Refusal (“ROFR”) in two respects:
|
a. |
Lessor will provide Lessee a Right of First Refusal ("ROFR") option to extend this lease agreement, at market terms available at the time of the lease end date. |
|
b. |
In the event Lessor contemplates a sale of the Aircraft during the Term, Lessee shall have the right to match any bona fide third-party offer to purchase the Aircraft on the same material terms. Lessor shall provide written notice to Lessee of the material terms of any such offer, and Lessee shall have ten (10) Business Days from receipt of such notice to exercise its ROFR. If Lessee does not exercise its ROFR within such period, Lessor shall be free to proceed with the sale to the third party on terms no more favorable than those offered to the Lessee. |
(c) Notwithstanding anything to the contrary in this Lease, Lessor shall have the right to sell the Aircraft at any time upon providing Lessee with at least ninety (90) days’ prior written notice. In such event, this Lease shall automatically terminate effective as of the closing date of such sale, provided the required notice period has been satisfied. If the closing date of the sale occurs mid-month, Lessee shall be responsible only for a prorated portion of the Rent due for that month, calculated on a daily basis. The Security Deposit shall be handled in the same manner as it would be upon expiration of the Lease under its normal terms, including the application of any portion to unpaid or final month’s Rent in accordance with this Lease. Lessee shall cooperate in good faith with any reasonable requests from Lessor to facilitate the sale process, including providing access for inspections or prospective purchasers, so long as such cooperation does not materially disrupt Lessee’s operations.
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3. |
Basic Rent; Other Lessee Costs. |
(a) Each calendar month during the Term, the Lessee shall pay to the Lessor rent with respect to the Aircraft in an amount equal to Basic Rent together with any Taxes applicable to rental payments and any other sales applicable to any such payment (collectively, the “Rent”).
(b) Lessee shall pay all expenses incurred with respect to the Aircraft during the Term, including, without limitation, crew costs and expenses, all fuel, oil, provisions, supplies, and services required for operation of the Aircraft, including all maintenance; handling and custom fees and related charges; taxes and airport fees; hangar and tiedown charges; use taxes on all Rent; and all fines, fees or penalties relating in any manner to the operation of the Aircraft by Lessee under this Lease; (“Lease Operation Expenses”). To the extent that Lessor is billed for any Lease Operation Expenses, Lessee shall promptly pay or reimburse Lessor for such Lease Operation Expenses upon demand.
(d) An additional three and a half (3.5%) percent charge shall apply to all amounts due under this Lease paid via credit card. Overdue amounts payable pursuant to this Lease shall bear interest at a monthly rate equal to (1.50%) percent.
(e) Lessee shall be responsible for, shall indemnify and hold harmless Lessor against, and shall pay all Taxes assessed or levied by any taxing jurisdictions as a result of the lease of the Aircraft to Lessee, or the use of the Aircraft by Lessee. This is an absolute net lease, and all Rent and other sums payable by Lessee shall be paid promptly when due hereunder without notice or demand of any kind, and without counterclaim, set-off, deduction, recoupment or any defense that Lessee may have against Lessor or any other person. Lessee’s obligation for the payment of all amounts due hereunder is and shall be absolute and unconditional, and there shall be no abatement, suspension, deferment or diminution in such amounts by reason of, and the obligations and liabilities of Lessee under this Lease shall not be affected by, any circumstances or occurrences whatsoever, including, without limitation, (i) any restriction or prevention of, or interference with, any use of the Aircraft, or any part thereof; (ii) any defect in the condition, airworthiness, design, operation, quality or fitness for use of the Aircraft or any part thereof; (iii) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings by or against Lessee or any action taken with respect to this Lease by any trustee or receiver of Lessee or by any court in any such proceeding; or (iv) any change, extension, waiver, sufferance or other action or omission in respect of any obligation or liability of Lessee.
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4. |
Maintenance and Compliance. |
(a) During the Term: (i) the Lessee, at its sole cost and expense, shall maintain and inspect the Aircraft in accordance with the maintenance standards set forth by the Federal Aviation Administration (“FAA”) in Part 135 of the Federal Aviation Regulations (“FARs”) and Lessee’s maintenance program; and (ii) the Lessee shall maintain the certificate of airworthiness for the Aircraft issued by the FAA and shall take all actions necessary in connection therewith including the installation or replacement of any and all appliances, products, parts or equipment of any type or kind as may be or become required by Part 135 of the FARs, any other Applicable Law, and/or under Lessee’s maintenance or flight operations manuals. Lessee may not otherwise modify the Aircraft in any manner without the prior written consent of the Lessor, which the Lessor may withhold in its sole discretion.
(b) THE AIRCRAFT IS BEING LEASED ON AN “AS IS” BASIS AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE, AND LESSOR HEREBY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EITHER EXPRESSED OR IMPLIED, OF ANY KIND OR NATURE WHATSOEVER WITH RESPECT TO THE AIRCRAFT, INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE AIRCRAFT, ITS MERCHANTABILITY OR FITNESS FOR LESSEE’S INTENDED USE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT, ITS VALUE OR AIRWORTHINESS OR CONFORMITY OF THE AIRCRAFT TO ANY SPECIFICATIONS; NOR SHALL LESSOR BE LIABLE TO THE LESSEE FOR ANY LOSS, CLAIM, DEMAND, LIABILITY, COST DAMAGE, OR EXPENSE OF ANY KIND, CAUSED OR ALLEGED TO BE CAUSED, DIRECTLY OR INDIRECTLY, BY THE AIRCRAFT, OR BY ANY INADEQUACY THEREOF FOR ANY PURPOSE, OR BY ANY DEFECT THEREIN; OR IN THE USE OR MAINTENANCE THEREOF, OR ANY REPAIRS, SERVICING, OR ADJUSTMENTS THERETO, OR ANY DELAY IN PROVIDING, OR FAILURE TO PROVIDE THE SAME, OR ANY INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF, OR ANY LOSS OF BUSINESS, OR ANY DAMAGE WHATSOEVER AND HOWSOEVER CAUSED. NOTWITHSTANDING ANYTHING SET FORTH IN THIS AGREEMENT, IN NO EVENT SHALL LESSOR BE LIABLE TO LESSEE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT OR ABSOLUTE LIABILITY IN TORT).
(c) At all times during the Term the Lessee shall cause the Aircraft to be hangered indoors and Lessee may not leave the Aircraft outside for any period greater than twenty-four (24) hours.
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5. |
Operational Control; Other Lessee; Operation. |
(a) During the Term, the Lessee shall at all times be in Operational Control of the Aircraft as that term is defined under the Federal Aviation Regulations, and the Aircraft shall be in the exclusive possession of the Lessee throughout the term of this Lease. As further evidence that Lessee shall exclusively be in Operational Control of the Aircraft solely the Lessee shall: be responsible for the initiation, conduct and termination of any flight involving the Aircraft; decide which crewmembers shall operate the aircraft and their duty assignments; determine whether to accept a flight request; be responsible for all maintenance performed on the Aircraft during the Lease Term and the costs associated with same; ensure that the aircraft, flight and flight crew comply with all pertinent Regulations; be responsible for all weather and fuel requirements, the costs of which shall be borne exclusively by the Lessee; be responsible for the costs of all landing, airport, and hangar fees, and flight provisions; and that the flight crew piloting the aircraft shall be selected exclusively by the Lessee (in accordance with applicable regulations and/or insurance requirements) and said individuals are not employees or agents of the Lessor. The foregoing factors are not exclusive but rather to demonstrate that the Lessee is at all times in sole possession and Operational Control of the Aircraft throughout the Lease Term.
(b) Lessee shall provide its own pilots for the operation of the Aircraft. The Aircraft may only be operated by Approved Pilots by the Lessee during the Term.
(c) The Lessee shall operate the Aircraft in accordance with Part 135 and bear responsibility for any and all violations of Part 135 or of any other Applicable Law brought about by its operation or use of the Aircraft under this Lease.
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6. |
Damage and Indemnity. |
(a) If the Aircraft (i) disappears or is stolen, (ii) suffers damage beyond economic repair or (iii) suffers damage that results in an insurance settlement on the basis of a total loss or a constructive total loss (collectively, “Event of Loss”), upon the earlier of: (x) ninety (90) days following the occurrence of an Event of Loss in respect of the Aircraft or, (y) five (5) days following the date of Lessee's or Lessor's (as the case may be) receipt of insurance proceeds with respect to such Event of Loss, Lessee shall pay to Lessor, or cause to be paid to Lessor, the Stipulated Value (as defined in Schedule 1). In the case of any other damage to the Aircraft, the Lessee shall direct the insurers to pay to the Lessor any insurance proceeds (and if the Lessee receives any such insurance proceeds it will immediately pay such amounts to the Lessor), Lessee shall cause a Cirrus Design Corp. Authorized Service Center to rectify such damage. In the event of such damage and the Lessor receives proceeds from the Insurer for such damage, the Lessor shall reimburse the Lessee for any cost, up to the amount of insurance proceeds received by the Lessor, incurred by the Lessee to rectify such damage, but Lessee shall be responsible for any cost in excess of the amount of insurance proceeds received by the Lessor to rectify such damage.
(b) The Lessee shall release, indemnify and hold harmless the Indemnitees from and against any and all claims, demands, actions and proceedings by third parties against the Indemnitees for liability or damage arising from or in connection with: (i) any act or omission of Lessee, or its employees, agents, officers, directors, shareholders, or other representatives in respect of the transactions contemplated hereby, or the enforcement of any of the terms hereof, including but not limited to the breach of any representation, warranty, covenant, obligation or duty of Lessee hereunder or any other document or agreement executed and delivered in connection herewith or with respect to any Indemnitee; or (ii) the condition, manufacture, delivery, lease, acceptance, possession, repossession, return, disposition pursuant to the exercise of remedies under Section 10 hereof, airworthiness, use, maintenance, storage or operation of the Aircraft either in the air or on the ground; or (iii) any defect in the Aircraft (whether or not discovered or discoverable by Lessee or Lessor) arising from any material or articles or parts used therein or from the design, testing, or use thereof or from any maintenance, repair, modification, alteration, service, repair, overhaul, or testing of the Aircraft, whether or not the Aircraft is in the possession of Lessee, and regardless of where the Aircraft may then be located; or (iv) any transaction, approval, or document contemplated by this Lease, or given or entered into in connection herewith or therewith
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7. |
Insurance. |
(a) During the Term, the Lessee shall procure and maintain in full force and effect legal liability insurance in respect of the Aircraft. All such insurance:
(i) shall be in an amount of no less than $5,000,000 combined smooth single limit;
(ii) shall be carried with an insurance underwriter or insurance carrier rated no less than “A” by AM Best’s Key Financial Rating Guide;
(iii) shall name Lessor as an additional insured;
(iv) shall provide that the insurers shall waive all rights of subrogation against Lessor; and
(v) The Lessee will provide the Lessor proof of Certification of Insurance on a monthly basis. If not provided, the Lessee will discontinue operations until proof of insurance is provided. In all events, the insurance company shall provide Lessor 30 days’ notice (7 days in case of war risk) of cancellation or material change in coverage.
(b) During the Term, the Lessee shall procure and maintain in full force and effect all-risk aircraft hull ground and flight insurance covering the Aircraft in an amount equal to the Stipulated Value of the Aircraft, listing Lessor as loss payee.
(c) On the date hereof, the Lessee shall provide the Lessor a copy of the insurance certificate evidencing that insurance in the amounts and of the types specified by this Lease is in full force and effect.
(d) Lessee shall be solely responsible for the cost of the insurance coverage maintained by Lessee pursuant to this Section 7.
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8. |
Lessee Covenants and Representations and Warranties. |
(a) Lessee shall not utilize the Aircraft: (i) in a manner prohibited by the insurance coverage described in Section 7; (ii) in any area excluded from coverage by any insurance policy described in Section 7; (iii) in any unlawful manner and or in violation of any Applicable Laws; or (iv) in violation with the manufacturer’s operating manual.
(b) Lessee shall not create, incur or suffer to be created or incurred any pledge, lien, charge, encumbrance of claim of any kind on or with respect to the Aircraft, excluding any air navigation authority, airport materialmen’s, workmen’s, repairmen’s, mechanic’s, employees’ or other similar liens arising in the ordinary course of the Lessee’s normal operations by statute or by operation of law in respect of obligations that are not yet due or that are being contested in good faith (“Lien”). Lessee shall have no right, title or interest in or to the Aircraft except as expressly provided herein and shall take no action that would impair the continued registration of the Aircraft at the FAA in the name of the Lessor.
(c) Lessee may not sublease the Aircraft.
9. Events of Default. Each of the following shall constitute an “Event of Default” under this Lease:
(a) If Lessee shall fail to pay any sums due under this Lease within five (5) business days after the date such sum is due; or
(b) If Lessee shall fail to perform any covenant contained herein, and such failure shall continue for a period of five (5) days after notice thereof shall have been given by Lessor in writing unless such failure is cured within five (5) days after the date of such notice; or
(c) If any proceeding is being commenced by Lessee under any bankruptcy, insolvency, reorganization, readjustment of debt, receivership or liquidation law or statute of any jurisdiction; or if any such proceedings shall be instituted against Lessee and shall not be withdrawn or terminated within 10 days after their commencement; or
(d) If the Aircraft is operated by Lessee or any other party in violation of any Applicable Law or any provision of any insurance policy contemplated by this Lease, or if any required insurance is cancelled, lapses, is materially reduced, or is not maintained as required under Section 7 (each of the foregoing being an immediate Event of Default with no cure period); or
(e) If any warranty or representation made by Lessee herein shall prove to be false in any material respect; or
(f) If Lessee, Flyte, or any Lessee Party (as defined in the Side Letter) fails to perform, observe, or comply with any covenant, obligation, or agreement under that certain Side Letter Agreement dated as of January 17, 2026 (as amended from time to time, the “Side Letter”), and such failure continues beyond any applicable cure period expressly set forth in the Side Letter (if any); provided, however, that any failure to honor Lessor’s equity transfer rights, ROFR/participation rights, or other material rights under the Side Letter shall constitute an immediate Event of Default with no cure period.
10. Remedies. If an Event of Default has occurred, the Lessor may at its sole discretion exercise any one or more of the following remedies:
(a) Terminate this Agreement and recover any and all sums which may be due under this Agreement.
(b) demand that Lessee, and Lessee shall upon such demand of Lessor and at Lessee's expense, immediately return the Aircraft to Lessor at Republic Airport (KFRG), in the manner specified in such notice, and such return shall not be delayed for purposes of complying with the Redelivery Conditions specified in Section 11 hereof (none of which conditions shall be deemed to affect Lessor's possession of the Aircraft) or delayed for any other reason. Notwithstanding the foregoing, at Lessor's option, Lessee shall be required thereafter to take such actions, at Lessee's expense, as would be required by the provisions of this Lease if the Aircraft were being returned at the end of the Term hereof.
(c) Exercise any other rights or remedies which may be available under the provisions of this Agreement or under any of the laws of the state of New York.
(d) Sell at private or public sale, as Lessor may determine, or hold, use, operate or lease to others the Aircraft as Lessor in its sole discretion may determine, all free and clear of any rights of Lessee.
(e) Date, complete and file the lease termination attached to the Lease as Schedule III;
(f) Lessor may enter upon the premises where all or any part of the Aircraft is located and retake possession of the Aircraft and the manuals, logs and records without notice to the Lessee.
Each and every power and remedy specified herein shall be in addition to every other power and remedy specifically so given or now or hereafter existing at law or in equity, and each and every power and remedy may be exercised from time to time individually or simultaneously and as often and in such order as may be deemed expedient by the Lessor. All such powers and remedies shall be cumulative and the exercise of one shall not be deemed a waiver of the right to exercise any other or others.
11. Return.
(a) On or before the Expiration Date or the earlier termination of this Lease pursuant to Section 10 (“Return Date”), Lessee shall make the Aircraft available, at Lessee's expense, to Lessor at Opa Locka Airport (KOPF) or a similar airport within a 50 mile radius for inspection to verify that the condition of the Aircraft complies with the Redelivery Condition (inspections being hereinafter collectively referred to as the "Final Inspection"). The Final Inspection shall consist of a records review and a visual inspection of the Aircraft. Lessee shall provide Lessor all information reasonably requested by Lessor regarding the status of all maintenance items tracked in accordance with Lessee’s maintenance program. If the Aircraft is not returned to Opa Locka Airport (KOPF) or a similar airport within a 50 mile radius in the Redelivery Condition on or before the Return Date, Lessee shall be responsible for, and upon demand shall pay Lessor: (a) for all costs and expenses (including but not limited to reasonable attorney’s fees) incurred by Lessor to repossess the Aircraft and (b) for all costs and expenses incurred to return the Aircraft to the Redelivery Condition.
(b) To the extent that the Aircraft fails upon the Return Date to conform to any requirement imposed by this Lease, with the exception of any potential maintenance and / or repair, Lessor, at its sole option, may continue the Lease, and the Term shall be deemed to have been automatically extended, and the obligation to pay 150% of Basic Rent shall continue until such time as the Aircraft is returned to the Opa Locka Airport (KOPF) or a similar airport within a 50 mile radius in the Redelivery Condition. Lessee shall not be permitted to operate the Aircraft during any such extension period.
12. Expenses. The Lessor and the Lessee will each assume its own costs, fees (including legal and documentation fees) and other expenses incurred in connection with the preparation and execution of the documentation relating to this Dry Lease. The prevailing party in any action or proceeding to interpret or enforce any provision of this Lease or any agreement or instrument executed in connection herewith will be awarded all costs and expenses including reasonable attorneys' fees incurred in the preparation, prosecution and appeal of any such judgment or award.
13. Governing Law; Consent to Jurisdiction. (a) THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE BY RESIDENTS THEREOF TO BE WHOLLY PERFORMED THEREIN EXCEPT WHERE OTHERWISE PREEMPTED BY FEDERAL LAW OR STATUTE.
(b) Each of the Lessor and the Lessee hereby expressly submits to the non-exclusive jurisdiction of the State and Federal Courts located in New York. Final judgment against the Lessor or the Lessee in any such suit shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or as otherwise permitted by Applicable Law.
14. Waiver of Jury Trial. EACH OF THE LESSOR AND THE LESSEE HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR IN CONNECTION WITH THIS LEASE. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
15. Notices. All notices, requests, demands or other communications required under or given pursuant to the Lease shall be in writing unless otherwise expressly provided herein: Any notice, request, demand or other communication permitted under the Lease may be sent by (a) hand delivery; (b) U.S. mail; (c) international courier; (d) electronic mail. All notices, requests, demands or other communications required under or given pursuant to this lease become effective: (i) for hand delivery, upon receipt thereof by the recipient; (ii) for U.S. mail, upon the expiration of five Business Days after depositing such notice with a U.S. post office or U.S., post office mail box; (iii) for international courier, at the time such delivery is recorded in the international courier’s electronic tracking system; and (c) for electronic mail, upon such electronic mail being recorded in the sender’s “Out Box” and the sender does not receive any subsequent notice within five hours that such electronic mail has not been delivered. All notices, requests, demands or other communications required under or given pursuant to this Lease shall be directed to the address listed in Schedule I or to such other address as the Lessor or the Lessee may from time to time designate by notice in writing to the other party.
16. Amendments. The terms and provisions of this Lease may not be amended, waived, discharged or terminated orally. Any amendment, waiver, discharge or termination shall require a written instrument signed by the party against whom enforcement of the amendment, waiver, discharge or termination is sought.
17. Assignment. Lessee may not assign this Lease or any of its rights or obligations hereunder without the prior written consent of Lessor. Lessor may assign this Lease, and any of its rights and remedies hereunder, without Lessee’s consent, to (i) any purchaser of the Aircraft, (ii) any lender or financing party providing financing secured by the Aircraft, (iii) any special purpose vehicle or affiliate of Lessor, or (iv) any assignee in connection with a sale, securitization, or other disposition of the Aircraft or Lessor’s interest herein. Any permitted assignee of Lessor may exercise all rights of Lessor under this Lease. Lessee agrees to execute such acknowledgements or estoppels reasonably requested to evidence such assignment.
18. Counterparts. This Lease may be executed by the Lessor and the Lessee in separate counterparts, each of which when so executed and delivered shall be an original, but all counterparts shall together constitute but one and the same agreement.
19. Sole Agreement. This Lease contains the entire understanding between the parties and supersedes any documents previously signed by the parties in respect to the subject matter contained herein and may be amended only by a written instrument duly executed by the parties or their respective permitted assignees.
20. True Lease. The Lessor and the Lessee intend that this Lease constitutes a “true lease” and a lease for all United States federal income tax purposes. The Lessor and the Lessee further intend and agree that, to the extent applicable, the Lessor shall be entitled to the full benefits afforded lessors of aircraft under Section 1110 or under the equivalent provisions under the Cape Town Convention.
21. THE AIRCRAFT LISTED AND REFERENCED HEREIN WILL BE MAINTAINED AND INSPECTED UNDER FAR 135 FOR OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT DURING THE DURATION OF THIS AGREEMENT.
THE LESSEE, LOCATED AT THE ADDRESS LISTED HEREIN, IS CONSIDERED TO BE IN OPERATIONAL CONTROL OF THE AIRCRAFT DURING ANY LEASE PERIOD (AS DEFINED HEREIN). LESSEE CERTIFIES IT IS RESPONISBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT DURING ANY LEASE PERIOD (AS DEFINED HEREIN) AND UNDERSTANDS AND IS FAMILIAR WITH ITS RESPONSIBILITY FOR COMPLIANCE WITH THE APPLICABLE FEDERAL AVIATION REGULATIONS.
A COPY OF THIS AGREEMENT SHALL BE CARRIED ON SAID AIRCRAFT AT ALL TIMES AND SHALL BE MADE AVAILABLE FOR REVIEW UPON REQUEST BY THE ADMINISTRATOR OR HIS REPRESENTATIVE.
AN EXPLANATION OF THE FACTORS BEARING ON OPERATIONAL CONTROL AND THE PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE FAA GENERAL AVIATION DISTRICT OFFICE.
[Signature Page Follows]
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Exclusive Lease Agreement to be duly executed and delivered as of the day and year first above written.
| SEG JETS LLC | ||
| By: | /s/ Joseph Reda | |
| Name: Joseph Reda | ||
| Title: | ||
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Lessee: Ponderosa Air, LLC |
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| By: | /s/Marc Sellouk | |
| Name: Marc Sellouk | ||
| Title: Managing Member | ||
SCHEDULE I
Basic Rent
Shall mean: (a) Lease execution Date on or before February 11th, 2026 and a (b) lease Commencement Date that corresponds to the date of Conformity of the Aircraft and will match the date of pickup of the Aircraft and (c) a monthly payment in the amount of $22,083.00, plus a Security Deposit of an additional $22,083.00 that can be applied, at the sole discretion of the Lessor, against the Last Months Lease Payment.
The Security Deposit and first monthly payment shall be due upon the date of physical acquisition of the Aircraft. The second monthly payment shall be due one month after the Commencement Date, and all following monthly payments and all following monthly payments shall be due on the same day of each successive month thereafter, counted from the Commencement Date, until the expiration or earlier termination of this Lease.
The Lease is a 24 month lease commencing on the defined Commencement Date, after which the Aircraft will be returned in the Redelivery Condition in accordance with Section 11 of the Lease.
Basic Rent Coverage:
Basic Rent includes an implied payment to the Lessor for maintaining Jetstream and Engine Blue program coverage for the first 400 hours of flight time during the Lease Period.
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The Lease is capped at 50 hours of usage per calendar month, unless otherwise waived in writing by the Lessor. |
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All maintenance costs beyond the initial 400 hours, plus all operational costs including fuel, repositioning, crew, hangar, and related expenses, shall be borne solely by Lessee. |
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Additional Jetstream and Engine Blue hour blocks shall be purchased in increments of 150 hours, currently priced at $83,141 (subject to change by Cirrus Aircraft). |
Prepayment Requirement:
Ownership Group (SEG Jets LLC) agrees to pre-pay Cirrus Aircraft for additional Jetstream and Engine Blue hour blocks only after full prepayment from Lessee has been received. SEG Jets LLC shall have no obligation to make any payment for additional coverage unless and until the corresponding funds are received from Lessee. However, SEG Jets LLC shall have the obligation to pre-pay Cirrus Aircraft for additional Jetstream and Engine Blue hour blocks within the later of the Cirrus Aircraft due date or within 24 hours of receipt of such prepayment from Lessee.
Monthly Cap of Hours Flown
The Lessee will agree to cap the monthly flight time at 50 hours per month. If demand exceeds this monthly cap, the ownership group will agree to consider waiving such restriction.
The Lessee agrees to the Lessor, that in the future event of multiple Aircraft being contracted under lease, that the Lessor, SEG Jets LLC shall be the second lease paid (Second Aircraft Lease money out).
Lessor Address
SEG Jets LLC
1324 Manor Circle
Pelham Manor, NY 10803
Lessee Address
Ponderosa Air, LLC
7110 Republic Airport
Farmingdale, NY 11735
SCHEDULE II
AIRCRAFT REDELIVERY CONDITION
1.1.1 Schedule II – Redelivery Condition
Upon expiration or earlier termination of the Lease, Lessee shall return the Aircraft to Lessor in the following condition (the “Redelivery Condition”):
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1. |
Regulatory Compliance: |
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All Airworthiness Directives (ADs) and Service Bulletins (SBs) applicable to the Aircraft and its components shall be fully complied with and current, with no outstanding or deferred items. |
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2. |
Maintenance Programs: |
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o |
The Aircraft shall have undergone a fresh 100-hour inspection and/or Phase inspection (as applicable) within 10 flight hours or 30 calendar days of redelivery. |
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The Aircraft shall be enrolled and current in Jetstream and Engine Blue or equivalent programs, and such coverage shall be fully transferable to Lessor or any successor lessee without penalty or lapse. |
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3. |
Logbooks and Records: |
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All Aircraft maintenance logs, engine logs, propeller logs, airframe records, weight & balance data, wiring diagrams, manuals, and other regulatory and manufacturer documentation shall be: |
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Original (not scanned or copied), |
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Complete and continuous, and |
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Accurately reflecting all maintenance performed during the Lease Period. |
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4. |
Software & Avionics: |
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All software and firmware for the Aircraft’s avionics and systems shall be: |
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Up to date, stable, and functioning as intended, and |
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Compliant with FAA requirements and compatible with the Aircraft’s installed hardware. |
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5. |
Condition & Cleanliness: |
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The Aircraft shall be returned in clean, airworthy, and flight-ready condition, free of damage (other than normal wear and tear) and with: |
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Interior professionally cleaned, |
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Exterior washed and detailed, and |
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All Lessee-installed equipment, branding, or modifications removed unless otherwise agreed in writing. |
SCHEDULE III
LEASE TERMINATION
By execution hereof (this “Lease Termination”), the undersigned, SEG Jets LLC as lessor (“Lessor”), and Ponderosa Air, LLC, as lessee (“Lessee”), hereby acknowledge and agree: (i) that the Lease Agreement is terminated and otherwise cancelled; (ii) that the Equipment is released from all the terms and conditions of the Lease Agreement; (iii) to the discharge of all registrations on the International Registry against the Equipment created by the Lease Agreement; and (iv) Lessee disclaims all right, title and interest in and to the Equipment.
This Lease Termination is without prejudice to the surviving rights of the parties under the Lease Agreement and nothing in this Lease Termination shall relieve either party from its obligations under the Lease Agreement which are still unsatisfied and/or from any of its obligations under the Lease Agreement which may be due after the date of this Lease Termination.
Capitalized terms not otherwise defined herein shall have the meanings given them in Exhibit A attached hereto.
Dated as of this day of , 2028.
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Ponderosa Air, LLC, Lessee |
SEG JETS LLC. Lessor |
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| By: | By: | ||||
| Name: Marc Sellouk | Name: | ||||
| Title: Managing Member | Title: | ||||
Exhibit 10.12
EXCLUSIVE AIRCRAFT DRY LEASE AGREEMENT
This EXCLUSIVE AIRCRAFT DRY LEASE AGREEMENT, dated as of March 16, 2026 (this "Lease"), is by and between SEG JETS LLC, a Delaware Limited Liability Company (the "Lessor") and Ponderosa Air LLC a New York limited liability company (the "Lessee"). The effective date of the start of the 24 monthly lease payments will begin when actual receipt of the Aircraft is delivered with final purchase.
WITNESSETH:
WHEREAS, the Lessor is anticipated to become the owner of the 2022 Cirrus Design Corp. SF50 aircraft bearing manufacturer’s serial number 0405 and US Registration N895WT together with one Williams FJ33-5A engine serial number 397118 (the “Aircraft”) on or before March 20, 2026 at the latest, with a target Close date on or before March 20, 2026; and
WHEREAS, the Lessee is the holder of air operator’s certificate 1POA204M (“Certificate”) for the operation of flights under part 135 of the United States Code of Federal Aviation Regulations (“Part 135”).
NOW, THEREFORE, the parties hereto, declaring their intentions to be legally bound hereunder, and for good and valuable consideration set forth below hereby covenant and agree as follows:
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1. |
Definitions and Interpretation. |
The following terms shall have the following meanings for all purposes of this Lease.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person.
"Aircraft" shall mean the aircraft described in the recitals hereof.
"Applicable Law" means all applicable (i) laws, treaties and international agreements of any national government, (ii) laws of any state, province, territory, locality or other political subdivision of a national government, and (iii) rules, regulations, judgments, decrees, orders, injunctions, writs, directives, licenses and permits of any government, court, government, Governmental Body or arbitration authority.
"Approved Pilots" means, a pilot who satisfies all of the following criteria: (i) a pilot who is qualified to operate the Aircraft under Part 135, (ii) holds at least a First Class Medical Certificate, and (iii) satisfies the requirements the insurance required to be maintained by the Lessee pursuant to the terms of Section 7.
“Basic Rent” is defined in Schedule I to this Lease.
"Business Day" means any day on which federally chartered banking institutions in the State of New York are open for the transaction of business.
“Commencement Date” the date which the Aircraft is delivered to Lessee.
"Event of Default" shall have the meaning set forth in Section 9.
“Expiration Date” means 24 months for start of Lease.
"FAA" means the Federal Aviation Administration of the U.S. Department of Transportation, or any successor agency.
"FARs" means the Federal Aviation Regulations issued by the FAA in accordance with Title 49 of the United States Code.
"Governmental Body" means any department, commission, board, bureau, court, legislature, agency, instrumentality or authority of any national government or any political subdivision of a national government.
"Indemnitee" means the Lessor, any Affiliate of the Lessor, or and any successor, assign, agent, partner, officer, director or employee of the Lessor or any such Affiliates.
“Lessee Damage Costs” shall have the meaning set forth in Section 6(a).
“Lien” has the meaning set forth in Section 8(b) hereof.
“Month” means a calendar month.
“Operational Control” with respect to a flight, means the exercise of authority over initiating, conducting or terminating a flight.
“Person” means any individual, corporation, partnership, limited partnership, proprietorship, association, limited liability company, firm, trust, estate or other enterprise or entity.
"Redelivery Condition" means the condition set forth in Schedule II to this Lease.
“Security Deposit” shall have the meaning set forth in Schedule I to this Lease.
"Taxes" means all taxes of every kind (excluding any tax measured by or assessed against Lessor’s income, including, without limitation, any income tax, gross income tax, net income tax, or capital gains tax) assessed or levied by any federal, state, county, local, airport, district, foreign, or other governmental authority, including, without limitation, sales taxes, use taxes, retailer taxes, federal air transportation excise taxes, federal aviation fuel excise taxes, and other similar duties, fees, and excise taxes.
"Term" means the period commencing on the Commencement Date and ending on the Expiration Date.
2. Lease of the Aircraft.
(a) The Lessor agrees to dry lease the Aircraft to Lessee on a continuous and exclusive basis at all times during the Term pursuant to the terms and conditions in this Lease. The Lessee has inspected the Aircraft and confirms that the condition of the Aircraft is acceptable to the Lessee in all respects and that Lessor will deliver the Aircraft to the Lessee on the Commencement Date.
(b) Lessor will provide Lessee a Right of First Refusal (“ROFR”) in two respects:
|
a. |
Lessor will provide Lessee a Right of First Refusal ("ROFR") option to extend this lease agreement, at market terms available at the time of the lease end date. |
|
b. |
In the event Lessor contemplates a sale of the Aircraft during the Term, Lessee shall have the right to match any bona fide third-party offer to purchase the Aircraft on the same material terms. Lessor shall provide written notice to Lessee of the material terms of any such offer, and Lessee shall have ten (10) Business Days from receipt of such notice to exercise its ROFR. If Lessee does not exercise its ROFR within such period, Lessor shall be free to proceed with the sale to the third party on terms no more favorable than those offered to the Lessee. |
(c) Notwithstanding anything to the contrary in this Lease, Lessor shall have the right to sell the Aircraft at any time upon providing Lessee with at least ninety (90) days’ prior written notice. In such event, this Lease shall automatically terminate effective as of the closing date of such sale, provided the required notice period has been satisfied. If the closing date of the sale occurs mid-month, Lessee shall be responsible only for a prorated portion of the Rent due for that month, calculated on a daily basis. The Security Deposit shall be handled in the same manner as it would be upon expiration of the Lease under its normal terms, including the application of any portion to unpaid or final month’s Rent in accordance with this Lease. Lessee shall cooperate in good faith with any reasonable requests from Lessor to facilitate the sale process, including providing access for inspections or prospective purchasers, so long as such cooperation does not materially disrupt Lessee’s operations.
3. Basic Rent; Other Lessee Costs.
(a) Each calendar month during the Term, the Lessee shall pay to the Lessor rent with respect to the Aircraft in an amount equal to Basic Rent together with any Taxes applicable to rental payments and any other sales applicable to any such payment (collectively, the “Rent”).
(b) Lessee shall pay all expenses incurred with respect to the Aircraft during the Term, including, without limitation, crew costs and expenses, all fuel, oil, provisions, supplies, and services required for operation of the Aircraft, including all maintenance; handling and custom fees and related charges; taxes and airport fees; hangar and tiedown charges; use taxes on all Rent; and all fines, fees or penalties relating in any manner to the operation of the Aircraft by Lessee under this Lease; (“Lease Operation Expenses”). To the extent that Lessor is billed for any Lease Operation Expenses, Lessee shall promptly pay or reimburse Lessor for such Lease Operation Expenses upon demand.
(d) An additional three and a half (3.5%) percent charge shall apply to all amounts due under this Lease paid via credit card. Overdue amounts payable pursuant to this Lease shall bear interest at a monthly rate equal to (1.50%) percent.
(e) Lessee shall be responsible for, shall indemnify and hold harmless Lessor against, and shall pay all Taxes assessed or levied by any taxing jurisdictions as a result of the lease of the Aircraft to Lessee, or the use of the Aircraft by Lessee. This is an absolute net lease, and all Rent and other sums payable by Lessee shall be paid promptly when due hereunder without notice or demand of any kind, and without counterclaim, set-off, deduction, recoupment or any defense that Lessee may have against Lessor or any other person. Lessee’s obligation for the payment of all amounts due hereunder is and shall be absolute and unconditional, and there shall be no abatement, suspension, deferment or diminution in such amounts by reason of, and the obligations and liabilities of Lessee under this Lease shall not be affected by, any circumstances or occurrences whatsoever, including, without limitation, (i) any restriction or prevention of, or interference with, any use of the Aircraft, or any part thereof; (ii) any defect in the condition, airworthiness, design, operation, quality or fitness for use of the Aircraft or any part thereof; (iii) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings by or against Lessee or any action taken with respect to this Lease by any trustee or receiver of Lessee or by any court in any such proceeding; or (iv) any change, extension, waiver, sufferance or other action or omission in respect of any obligation or liability of Lessee.
4. Maintenance and Compliance.
(a) During the Term: (i) the Lessee, at its sole cost and expense, shall maintain and inspect the Aircraft in accordance with the maintenance standards set forth by the Federal Aviation Administration (“FAA”) in Part 135 of the Federal Aviation Regulations (“FARs”) and Lessee’s maintenance program; and (ii) the Lessee shall maintain the certificate of airworthiness for the Aircraft issued by the FAA and shall take all actions necessary in connection therewith including the installation or replacement of any and all appliances, products, parts or equipment of any type or kind as may be or become required by Part 135 of the FARs, any other Applicable Law, and/or under Lessee’s maintenance or flight operations manuals. Lessee may not otherwise modify the Aircraft in any manner without the prior written consent of the Lessor, which the Lessor may withhold in its sole discretion.
(b) THE AIRCRAFT IS BEING LEASED ON AN “AS IS” BASIS AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE, AND LESSOR HEREBY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EITHER EXPRESSED OR IMPLIED, OF ANY KIND OR NATURE WHATSOEVER WITH RESPECT TO THE AIRCRAFT, INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE AIRCRAFT, ITS MERCHANTABILITY OR FITNESS FOR LESSEE’S INTENDED USE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT, ITS VALUE OR AIRWORTHINESS OR CONFORMITY OF THE AIRCRAFT TO ANY SPECIFICATIONS; NOR SHALL LESSOR BE LIABLE TO THE LESSEE FOR ANY LOSS, CLAIM, DEMAND, LIABILITY, COST DAMAGE, OR EXPENSE OF ANY KIND, CAUSED OR ALLEGED TO BE CAUSED, DIRECTLY OR INDIRECTLY, BY THE AIRCRAFT, OR BY ANY INADEQUACY THEREOF FOR ANY PURPOSE, OR BY ANY DEFECT THEREIN; OR IN THE USE OR MAINTENANCE THEREOF, OR ANY REPAIRS, SERVICING, OR ADJUSTMENTS THERETO, OR ANY DELAY IN PROVIDING, OR FAILURE TO PROVIDE THE SAME, OR ANY INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF, OR ANY LOSS OF BUSINESS, OR ANY DAMAGE WHATSOEVER AND HOWSOEVER CAUSED. NOTWITHSTANDING ANYTHING SET FORTH IN THIS AGREEMENT, IN NO EVENT SHALL LESSOR BE LIABLE TO LESSEE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT OR ABSOLUTE LIABILITY IN TORT).
(c) At all times during the Term the Lessee shall cause the Aircraft to be hangered indoors and Lessee may not leave the Aircraft outside for any period greater than twenty-four
(24) hours.
5. Operational Control; Other Lessee; Operation.
(a) During the Term, the Lessee shall at all times be in Operational Control of the Aircraft as that term is defined under the Federal Aviation Regulations, and the Aircraft shall be in the exclusive possession of the Lessee throughout the term of this Lease. As further evidence that Lessee shall exclusively be in Operational Control of the Aircraft solely the Lessee shall: be responsible for the initiation, conduct and termination of any flight involving the Aircraft; decide which crewmembers shall operate the aircraft and their duty assignments; determine whether to accept a flight request; be responsible for all maintenance performed on the Aircraft during the Lease Term and the costs associated with same; ensure that the aircraft, flight and flight crew comply with all pertinent Regulations; be responsible for all weather and fuel requirements, the costs of which shall be borne exclusively by the Lessee; be responsible for the costs of all landing, airport, and hangar fees, and flight provisions; and that the flight crew piloting the aircraft shall be selected exclusively by the Lessee (in accordance with applicable regulations and/or insurance requirements) and said individuals are not employees or agents of the Lessor. The foregoing factors are not exclusive but rather to demonstrate that the Lessee is at all times in sole possession and Operational Control of the Aircraft throughout the Lease Term.
(b) Lessee shall provide its own pilots for the operation of the Aircraft. The Aircraft may only be operated by Approved Pilots by the Lessee during the Term.
(c) The Lessee shall operate the Aircraft in accordance with Part 135 and bear responsibility for any and all violations of Part 135 or of any other Applicable Law brought about by its operation or use of the Aircraft under this Lease.
6. Damage and Indemnity.
(a) If the Aircraft (i) disappears or is stolen, (ii) suffers damage beyond economic repair or (iii) suffers damage that results in an insurance settlement on the basis of a total loss or a constructive total loss (collectively, “Event of Loss”), upon the earlier of: (x) ninety (90) days following the occurrence of an Event of Loss in respect of the Aircraft or, (y) five (5) days following the date of Lessee's or Lessor's (as the case may be) receipt of insurance proceeds with respect to such Event of Loss, Lessee shall pay to Lessor, or cause to be paid to Lessor, the Stipulated Value (as defined in Schedule 1). In the case of any other damage to the Aircraft, the Lessee shall direct the insurers to pay to the Lessor any insurance proceeds (and if the Lessee receives any such insurance proceeds it will immediately pay such amounts to the Lessor), Lessee shall cause a Cirrus Design Corp. Authorized Service Center to rectify such damage. In the event of such damage and the Lessor receives proceeds from the Insurer for such damage, the Lessor shall reimburse the Lessee for any cost, up to the amount of insurance proceeds received by the Lessor, incurred by the Lessee to rectify such damage, but Lessee shall be responsible for any cost in excess of the amount of insurance proceeds received by the Lessor to rectify such damage.
(b) The Lessee shall release, indemnify and hold harmless the Indemnitees from and against any and all claims, demands, actions and proceedings by third parties against the Indemnitees for liability or damage arising from or in connection with: (i) any act or omission of Lessee, or its employees, agents, officers, directors, shareholders, or other representatives in respect of the transactions contemplated hereby, or the enforcement of any of the terms hereof, including but not limited to the breach of any representation, warranty, covenant, obligation or duty of Lessee hereunder or any other document or agreement executed and delivered in connection herewith or with respect to any Indemnitee; or (ii) the condition, manufacture, delivery, lease, acceptance, possession, repossession, return, disposition pursuant to the exercise of remedies under Section 10 hereof, airworthiness, use, maintenance, storage or operation of the Aircraft either in the air or on the ground; or (iii) any defect in the Aircraft (whether or not discovered or discoverable by Lessee or Lessor) arising from any material or articles or parts used therein or from the design, testing, or use thereof or from any maintenance, repair, modification, alteration, service, repair, overhaul, or testing of the Aircraft, whether or not the Aircraft is in the possession of Lessee, and regardless of where the Aircraft may then be located; or (iv) any transaction, approval, or document contemplated by this Lease, or given or entered into in connection herewith or therewith
7. Insurance.
(a) During the Term, the Lessee shall procure and maintain in full force and effect legal liability insurance in respect of the Aircraft. All such insurance:
(i) shall be in an amount of no less than $5,000,000 combined smooth single limit;
(ii) shall be carried with an insurance underwriter or insurance carrier rated no less than “A” by AM Best’s Key Financial Rating Guide;
(iii) shall name Lessor as an additional insured;
(iv) shall provide that the insurers shall waive all rights of subrogation against Lessor; and
(v) The Lessee will provide the Lessor proof of Certification of Insurance on a monthly basis. If not provided, the Lessee will discontinue operations until proof of insurance is provided. In all events, the insurance company shall provide Lessor 30 days’ notice (7 days in case of war risk) of cancellation or material change in coverage.
(b) During the Term, the Lessee shall procure and maintain in full force and effect all-risk aircraft hull ground and flight insurance covering the Aircraft in an amount equal to the Stipulated Value of the Aircraft, listing Lessor as loss payee.
(c) On the date hereof, the Lessee shall provide the Lessor a copy of the insurance certificate evidencing that insurance in the amounts and of the types specified by this Lease is in full force and effect.
(d) Lessee shall be solely responsible for the cost of the insurance coverage maintained by Lessee pursuant to this Section 7.
8. Lessee Covenants and Representations and Warranties.
(a) Lessee shall not utilize the Aircraft: (i) in a manner prohibited by the insurance coverage described in Section 7; (ii) in any area excluded from coverage by any insurance policy described in Section 7; (iii) in any unlawful manner and or in violation of any Applicable Laws; or (iv) in violation with the manufacturer’s operating manual.
(b) Lessee shall not create, incur or suffer to be created or incurred any pledge, lien, charge, encumbrance of claim of any kind on or with respect to the Aircraft, excluding any air navigation authority, airport materialmen’s, workmen’s, repairmen’s, mechanic’s, employees’ or other similar liens arising in the ordinary course of the Lessee’s normal operations by statute or by operation of law in respect of obligations that are not yet due or that are being contested in good faith (“Lien”). Lessee shall have no right, title or interest in or to the Aircraft except as expressly provided herein and shall take no action that would impair the continued registration of the Aircraft at the FAA in the name of the Lessor.
(c) Lessee may not sublease the Aircraft.
9. Events of Default. Each of the following shall constitute an “Event of Default” under this Lease:
(a) If Lessee shall fail to pay any sums due under this Lease within five (5) business days after the date such sum is due; or
(b) If Lessee shall fail to perform any covenant contained herein, and such failure shall continue for a period of five (5) days after notice thereof shall have been given by Lessor in writing unless such failure is cured within five (5) days after the date of such notice; or
(c) If any proceeding is being commenced by Lessee under any bankruptcy, insolvency, reorganization, readjustment of debt, receivership or liquidation law or statute of any jurisdiction; or if any such proceedings shall be instituted against Lessee and shall not be withdrawn or terminated within 10 days after their commencement; or
(d) If the Aircraft is operated by Lessee or any other party in violation of any Applicable Law or any provision of any insurance policy contemplated by this Lease, or if any required insurance is cancelled, lapses, is materially reduced, or is not maintained as required under Section 7 (each of the foregoing being an immediate Event of Default with no cure period); or
10. Remedies. If an Event of Default has occurred, the Lessor may at its sole discretion exercise any one or more of the following remedies:
(a) Terminate this Agreement and recover any and all sums which may be due under this Agreement.
(b) demand that Lessee, and Lessee shall upon such demand of Lessor and at Lessee's expense, immediately return the Aircraft to Lessor at Republic Airport (KFRG), in the manner specified in such notice, and such return shall not be delayed for purposes of complying with the Redelivery Conditions specified in Section 11 hereof (none of which conditions shall be deemed to affect Lessor's possession of the Aircraft) or delayed for any other reason. Notwithstanding the foregoing, at Lessor's option, Lessee shall be required thereafter to take such actions, at Lessee's expense, as would be required by the provisions of this Lease if the Aircraft were being returned at the end of the Term hereof.
(c) Exercise any other rights or remedies which may be available under the provisions of this Agreement or under any of the laws of the state of New York.
(d) Sell at private or public sale, as Lessor may determine, or hold, use, operate or lease to others the Aircraft as Lessor in its sole discretion may determine, all free and clear of any rights of Lessee.
(e) Date, complete and file the lease termination attached to the Lease as Schedule III;
(f) Lessor may enter upon the premises where all or any part of the Aircraft is located and retake possession of the Aircraft and the manuals, logs and records without notice to the Lessee.
Each and every power and remedy specified herein shall be in addition to every other power and remedy specifically so given or now or hereafter existing at law or in equity, and each and every power and remedy may be exercised from time to time individually or simultaneously and as often and in such order as may be deemed expedient by the Lessor. All such powers and remedies shall be cumulative and the exercise of one shall not be deemed a waiver of the right to exercise any other or others.
11. Return.
(a) On or before the Expiration Date or the earlier termination of this Lease pursuant to Section 10 (“Return Date”), Lessee shall make the Aircraft available, at Lessee's expense, to Lessor at Republic Airport (KFRG) or a similar airport within a 50 mile radius for inspection to verify that the condition of the Aircraft complies with the Redelivery Condition (inspections being hereinafter collectively referred to as the "Final Inspection"). The Final Inspection shall consist of a records review and a visual inspection of the Aircraft. Lessee shall provide Lessor all information reasonably requested by Lessor regarding the status of all maintenance items tracked in accordance with Lessee’s maintenance program. If the Aircraft is not returned to Republic Airport (KFRG) or a similar airport within a 50 mile radius in the Redelivery Condition on or before the Return Date, Lessee shall be responsible for, and upon demand shall pay Lessor: (a) for all costs and expenses (including but not limited to reasonable attorney’s fees) incurred by Lessor to repossess the Aircraft and (b) for all costs and expenses incurred to return the Aircraft to the Redelivery Condition.
(b) To the extent that the Aircraft fails upon the Return Date to conform to any requirement imposed by this Lease, with the exception of any potential maintenance and / or repair, Lessor, at its sole option, may continue the Lease, and the Term shall be deemed to have been automatically extended, and the obligation to pay 150% of Basic Rent shall continue until such time as the Aircraft is returned to the Republic Airport (KFRG) or a similar airport within a 50 mile radius in the Redelivery Condition. Lessee shall not be permitted to operate the Aircraft during any such extension period.
12. Expenses. The Lessor and the Lessee will each assume its own costs, fees (including legal and documentation fees) and other expenses incurred in connection with the preparation and execution of the documentation relating to this Dry Lease. The prevailing party in any action or proceeding to interpret or enforce any provision of this Lease or any agreement or instrument executed in connection herewith will be awarded all costs and expenses including reasonable attorneys' fees incurred in the preparation, prosecution and appeal of any such judgment or award.
13. Governing Law; Consent to Jurisdiction. (a) THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE BY RESIDENTS THEREOF TO BE WHOLLY PERFORMED THEREIN EXCEPT WHERE OTHERWISE PREEMPTED BY FEDERAL LAW OR STATUTE.
(b) Each of the Lessor and the Lessee hereby expressly submits to the non-exclusive jurisdiction of the State and Federal Courts located in New York. Final judgment against the Lessor or the Lessee in any such suit shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or as otherwise permitted by Applicable Law.
14. Waiver of Jury Trial. EACH OF THE LESSOR AND THE LESSEE HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR IN CONNECTION WITH THIS LEASE. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
15. Notices. All notices, requests, demands or other communications required under or given pursuant to the Lease shall be in writing unless otherwise expressly provided herein: Any notice, request, demand or other communication permitted under the Lease may be sent by (a) hand delivery; (b) U.S. mail; (c) international courier; (d) electronic mail. All notices, requests, demands or other communications required under or given pursuant to this lease become effective: (i) for hand delivery, upon receipt thereof by the recipient; (ii) for U.S. mail, upon the expiration of five Business Days after depositing such notice with a U.S. post office or U.S., post office mail box; (iii) for international courier, at the time such delivery is recorded in the international courier’s electronic tracking system; and (c) for electronic mail, upon such electronic mail being recorded in the sender’s “Out Box” and the sender does not receive any subsequent notice within five hours that such electronic mail has not been delivered.
All notices, requests, demands or other communications required under or given pursuant to this Lease shall be directed to the address listed in Schedule I or to such other address as the Lessor or the Lessee may from time to time designate by notice in writing to the other party.
16. Amendments. The terms and provisions of this Lease may not be amended, waived, discharged or terminated orally. Any amendment, waiver, discharge or termination shall require a written instrument signed by the party against whom enforcement of the amendment, waiver, discharge or termination is sought.
17. Assignment. Lessee may not assign this Lease or any of its rights or obligations hereunder without the prior written consent of Lessor. Lessor may assign this Lease, and any of its rights and remedies hereunder, without Lessee’s consent, to (i) any purchaser of the Aircraft, (ii) any lender or financing party providing financing secured by the Aircraft, (iii) any special purpose vehicle or affiliate of Lessor, or (iv) any assignee in connection with a sale, securitization, or other disposition of the Aircraft or Lessor’s interest herein. Any permitted assignee of Lessor may exercise all rights of Lessor under this Lease. Lessee agrees to execute such acknowledgements or estoppels reasonably requested to evidence such assignment.
18. Counterparts. This Lease may be executed by the Lessor and the Lessee in separate counterparts, each of which when so executed and delivered shall be an original, but all counterparts shall together constitute but one and the same agreement.
19. Sole Agreement. This Lease contains the entire understanding between the parties and supersedes any documents previously signed by the parties in respect to the subject matter contained herein and may be amended only by a written instrument duly executed by the parties or their respective permitted assignees.
20. True Lease. The Lessor and the Lessee intend that this Lease constitutes a “true lease” and a lease for all United States federal income tax purposes. The Lessor and the Lessee further intend and agree that, to the extent applicable, the Lessor shall be entitled to the full benefits afforded lessors of aircraft under Section 1110 or under the equivalent provisions under the Cape Town Convention.
21. THE AIRCRAFT LISTED AND REFERENCED HEREIN WILL BE MAINTAINED AND INSPECTED UNDER FAR 135 FOR OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT DURING THE DURATION OF THIS AGREEMENT.
THE LESSEE, LOCATED AT THE ADDRESS LISTED HEREIN, IS CONSIDERED TO BE IN OPERATIONAL CONTROL OF THE AIRCRAFT DURING ANY LEASE PERIOD (AS DEFINED HEREIN). LESSEE CERTIFIES IT IS RESPONISBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT DURING ANY LEASE PERIOD (AS DEFINED HEREIN) AND UNDERSTANDS AND IS FAMILIAR WITH ITS RESPONSIBILITY FOR COMPLIANCE WITH THE APPLICABLE FEDERAL
AVIATION REGULATIONS.
A COPY OF THIS AGREEMENT SHALL BE CARRIED ON SAID AIRCRAFT AT ALL TIMES AND SHALL BE MADE AVAILABLE FOR REVIEW UPON REQUEST BY THE ADMINISTRATOR OR HIS REPRESENTATIVE.
AN EXPLANATION OF THE FACTORS BEARING ON OPERATIONAL CONTROL AND THE PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE FAA GENERAL AVIATION DISTRICT OFFICE.
[Signature Page Follows]
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Exclusive Lease Agreement to be duly executed and delivered as of the day and year first above written.
| SEG JETS LLC | ||
| By: | /s/ Joseph Reda | |
| Name: Joseph Reda | ||
| Title: | ||
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Lessee: Ponderosa Air, LLC |
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| By: | /s/ Marc Sellouk | |
| Name: Marc Sellouk | ||
| Title: Managing Member | ||
SCHEDULE I
Basic Rent
Shall mean: (a) Lease execution Date on or before March 16th, 2026 and a (b) lease Commencement Date that corresponds to the date of Conformity of the Aircraft and will match the date of pickup of the Aircraft and (c) a monthly payment in the amount of $25,000.00, plus a Security Deposit of an additional $25,000.00 that can be applied, at the sole discretion of the Lessor, against the Last Months Lease Payment.
The Security Deposit and first monthly payment shall be due upon the date of physical acquisition of the Aircraft. The second monthly payment shall be due one month after the Commencement Date, and all following monthly payments and all following monthly payments shall be due on the same day of each successive month thereafter, counted from the Commencement Date, until the expiration or earlier termination of this Lease.
The Lease is a 24 month lease commencing on the defined Commencement Date, after which the Aircraft will be returned in the Redelivery Condition in accordance with Section 11 of the Lease.
Basic Rent Coverage:
Basic Rent includes an implied payment to the Lessor for maintaining Jetstream and Engine Blue program coverage for the first 400 hours of flight time during the Lease Period.
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The Lease is capped at 50 hours of usage per calendar month, unless otherwise waived in writing by the Lessor. |
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All maintenance costs beyond the initial 230 hours, plus all operational costs including fuel, repositioning, crew, hangar, and related expenses, shall be borne solely by Lessee. |
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Additional Jetstream and Engine Blue hour blocks shall be purchased in increments of 150 hours, currently priced at $83,141 (subject to change by Cirrus Aircraft). |
Prepayment Requirement:
Ownership Group (SEG Jets LLC) agrees to pre-pay Cirrus Aircraft for additional Jetstream and Engine Blue hour blocks only after full prepayment from Lessee has been received. SEG Jets LLC shall have no obligation to make any payment for additional coverage unless and until the corresponding funds are received from Lessee. However, SEG Jets LLC shall have the obligation to pre-pay Cirrus Aircraft for additional Jetstream and Engine Blue hour blocks within the later of the Cirrus Aircraft due date or within 24 hours of receipt of such prepayment from Lessee.
Monthly Cap of Hours Flown
The Lessee will agree to cap the monthly flight time at 50 hours per month. If demand exceeds this monthly cap, the ownership group will agree to consider waiving such restriction.
The Lessee agrees to the Lessor, that in the future event of multiple Aircraft being contracted under lease, that the Lessor, SEG Jets LLC shall be the second lease paid (Second Aircraft Lease money out).
Lessor Address
SEG Jets LLC
1324 Manor Circle
Pelham Manor, NY 10803
Lessee Address
Ponderosa Air, LLC
7110 Republic Airport
Farmingdale, NY 11735
SCHEDULE II
AIRCRAFT REDELIVERY CONDITION
1.1.1 Schedule II – Redelivery Condition
Upon expiration or earlier termination of the Lease, Lessee shall return the Aircraft to Lessor in the following condition (the “Redelivery Condition”):
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1. |
Regulatory Compliance: |
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o |
All Airworthiness Directives (ADs) and Service Bulletins (SBs) applicable to the Aircraft and its components shall be fully complied with and current, with no outstanding or deferred items. |
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2. |
Maintenance Programs: |
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o |
The Aircraft shall have undergone a fresh 100-hour inspection and/or Phase inspection (as applicable) within 10 flight hours or 30 calendar days of redelivery. |
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o |
The Aircraft shall be enrolled and current in Jetstream and Engine Blue or equivalent programs, and such coverage shall be fully transferable to Lessor or any successor lessee without penalty or lapse. |
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3. |
Logbooks and Records: |
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o |
All Aircraft maintenance logs, engine logs, propeller logs, airframe records, weight & balance data, wiring diagrams, manuals, and other regulatory and manufacturer documentation shall be: |
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Original (not scanned or copied), |
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Complete and continuous, and |
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Accurately reflecting all maintenance performed during the Lease Period. |
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4. |
Software & Avionics: |
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o |
All software and firmware for the Aircraft’s avionics and systems shall be: |
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Up to date, stable, and functioning as intended, and |
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Compliant with FAA requirements and compatible with the Aircraft’s installed hardware. |
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5. |
Condition & Cleanliness: |
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The Aircraft shall be returned in clean, airworthy, and flight-ready condition, free of damage (other than normal wear and tear) and with: |
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Interior professionally cleaned, |
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Exterior washed and detailed, and |
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All Lessee-installed equipment, branding, or modifications removed unless otherwise agreed in writing. |
SCHEDULE III
LEASE TERMINATION
By execution hereof (this “Lease Termination”), the undersigned, SEG Jets LLC as lessor (“Lessor”), and Ponderosa Air, LLC, as lessee (“Lessee”), hereby acknowledge and agree: (i) that the Lease Agreement is terminated and otherwise cancelled; (ii) that the Equipment is released from all the terms and conditions of the Lease Agreement; (iii) to the discharge of all registrations on the International Registry against the Equipment created by the Lease Agreement; and (iv) Lessee disclaims all right, title and interest in and to the Equipment.
This Lease Termination is without prejudice to the surviving rights of the parties under the Lease Agreement and nothing in this Lease Termination shall relieve either party from its obligations under the Lease Agreement which are still unsatisfied and/or from any of its obligations under the Lease Agreement which may be due after the date of this Lease Termination.
Capitalized terms not otherwise defined herein shall have the meanings given them in Exhibit A attached hereto.
Dated as of this day of , 2028.
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Ponderosa Air, LLC, Lessee |
SEG JETS LLC. Lessor |
||||
| By: | By: | ||||
| Name: Marc Sellouk | Name: | ||||
| Title: Managing Member | Title: | ||||
Exhibit 10.13
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
Original Issuance Date: [ ]
Principal Amount: US$[ ]
Subscription Amount: US$[ ]
FLEWBER GLOBAL INC.
UNSECURED 10% DISCOUNT CONVERTIBLE NOTE
|
|
DUE [ ] |
THIS UNSECURED CONVERTIBLE NOTE is a duly authorized and validly issued Unsecured Convertible Note of FLEWBER GLOBAL INC., a Delaware corporation (the “Company”), having its principal place of business at 1411 Broadway, 38th Floor, New York, New York 10018, designated as its Unsecured 10% Discount Convertible Note due on or after [ ] (this “Note”). This Note is one of a series of convertible notes issued pursuant to the terms of the Purchase Agreement (as defined below).
FOR VALUE RECEIVED, the Company promises to pay to [ ] or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of US$[ ] and any other sums due hereunder anytime on or before [ ] (the “Maturity Date”), or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to the following additional provisions.
NOW THEREFORE, the Holder hereby agrees as follows:
Section 1. Definitions. Terms not otherwise defined herein shall have the meanings given to them in the Purchase Agreement. For the purposes hereof, in addition to the terms defined in the Purchase Agreement and elsewhere in this Note, the following terms shall have the following meanings:
“Bankruptcy Event” means any of the following events: (a) the Company commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within sixty (60) days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty (60) calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, (g) the Company or any Significant Subsidiary thereof admits in writing that it is generally unable to pay its debts as they become due, (h) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Conversion Shares” means, collectively, the shares of Common Stock issuable upon Conversion of this Note in accordance with the terms hereof.
“Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Excluded Securities” means the issuance of (a) shares of Common Stock or options not to exceed 20% of the shares of Common Stock outstanding at any given time to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Company, (b) securities upon the exercise or exchange of or conversion of (i) this Note, (ii) any other securities issued in connection with the transactions pursuant to the Purchase Agreement, including in any of the other Transaction Documents, and/or (iii) other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the Original Issuance Date (without regard to any vesting requirements), provided that such securities have not been amended since the Original Issuance Date to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits) or to extend the term of such securities, or (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period in Section 4.13(a) herein, and provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
“Purchase Agreement” means the Securities Purchase Agreement between the Company and the Holder, dated as of August [ ], 2024, in connection with which this Note is issued.
“Significant Subsidiary” has the meaning given to it in Rule 1-02(w) of Regulation S-X.
Section 2. Default Interest; Prepayment of Note.
a) Default Interest. This Note has been issued with original issue discount and no interest shall accrue hereunder prior to the occurrence of an Event of Default. From and after the occurrence and during the continuance of any Event of Default, interest shall accrue hereunder at a rate equal to 2% per month or, if less, the highest amount permitted by law (such interest upon an Event of Default shall be referred to as “Interest” or “Default Interest”), shall compound monthly based upon a 360-day year, and shall be due and payable on the first Business Day of each month during the continuance of such Event of Default (a “Default Interest Payment Date”). In the event that such Event of Default is subsequently cured and no other Event of Default then exists (including, without limitation, for the Company’s failure to pay such Default Interest on the applicable Default Interest Payment Date), the Default Interest shall cease to accrue hereunder as of the day immediately following the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such cure of such Event of Default.
b) Prepayment. Except as otherwise set forth in this Note, the Company may not prepay any portion of the principal amount of this Note or accrued interest hereunder, without the prior written consent of the Holder.
Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
b) Investment Representations. This Note may be transferred or exchanged only in compliance with investment representations of the Holder set forth in the Purchase Agreement and all other terms of this Note, and applicable federal and state securities laws and regulations.
c) Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
Section 4. Conversion.
a) Mandatory Conversion at IPO. In the event that the Company consummates an IPO, then the total outstanding principal amount of this Note and any unpaid accrued Interest shall automatically convert into Conversion Shares, without any further action by the Holder, at the Mandatory Conversion Price set forth in Section 4(c)(i) hereafter (a “Mandatory Conversion”). The applicable date of conversion, with respect to a Mandatory Conversion (the “Mandatory Conversion Date”) shall be the date of the closing of the IPO. The Company shall deliver to the Holder written notice of the Mandatory Conversion, including the material terms thereof and a calculation of the Conversion Price with supporting detail, at least twenty (20) days prior to the proposed Mandatory Conversion Date. Upon a Mandatory Conversion hereunder, the Holder shall surrender this Note as promptly as is reasonably practicable after the Mandatory Conversion Date without delaying the Company’s obligation to deliver the shares on the Share Delivery Date.
b) Optional Conversion by Holder. In the event that this Note continues to be outstanding on December 31, 2024, the Holder shall have the option, upon delivery to the Company of written notice, on or before January 31, 2025 (the “Optional Conversion Notice”), to convert the total outstanding principal amount of this Note and any unpaid accrued Interest into Conversion Shares, at the Optional Conversion Price set forth in Section 4(c)(ii) hereafter (an “Optional Conversion” and collectively with a Mandatory Conversion, a “Conversion”). The Optional Conversion Notice shall be delivered at least ten (10) Business Days prior to the date of Optional Conversion.
c) Conversion Price.
i. The conversion price applicable to a Mandatory Conversion shall be equal to a 45% discount to the initial public offering price of the Company’s Securities in the IPO, subject to any adjustments provided in this Note (the “Mandatory Conversion Price”).
ii. The conversion price, on a per share of common stock basis, with respect to an Optional Conversion shall be, either, at the option of the Holder (i) $1.80 (subject to adjustment hereunder) or (ii) such conversion price, as determined based on a $15.5 million valuation of the Company divided by the aggregate total number of shares of Common Stock and Common Stock Equivalents then outstanding, including the Conversion Shares issuable upon the conversion of this Note (the “Optional Conversion Price,” and collectively with the Mandatory Conversion Price, the “Conversion Price”).
d) Mechanics of Conversion.
i. Conversion Shares Issuable upon Conversion of Principal Amount and Interest. The number of Conversion Shares issuable upon a Conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note and accrued and unpaid interest to be converted by (y) the applicable Conversion Price.
ii. Delivery of Conversion Shares Upon Conversion. Not later than five (5) Business Days after the Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder a notice of issuance for the number of Conversion Shares being acquired upon the Conversion of this Note, which shall include the restrictive legends described below, unless it is otherwise determined in good faith that such restrictive legends are not required.
iii. Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon Conversion of this Note and payment of any Interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder, not less than such aggregate number of Conversion Shares (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the Conversion of the then outstanding principal amount of this Note and payment of Interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.
iv. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the Conversion of this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such Conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the applicable Conversion Price or round up to the next whole share.
v. Transfer Taxes and Expenses. The issuance of Conversion Shares on Conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon Conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
Section 5. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any Common Stock Equivalent (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Note), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then, in each such case, the Company shall make an applicable adjustment to the Mandatory Conversion Price and the Optional Conversion Price to equitably increase or reduce the number of shares issuable upon the Conversion of this Note, as determined by its Board of Directors. Any adjustment made pursuant to this Section 5(a) shall become effective (x) immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, (y) immediately after the effective date in the case of a subdivision, combination or re-classification, or (z) as determined in the good faith reasonable judgment of the Board of Directors in any other case taking into account any recommendation including in any opinion received in connection with an adjustment.
b) Rights upon Issuance of Other Securities.
i. Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Original Issuance Date the Company grants, issues or sells (or enters into any agreement to grant, issue or sell), or in accordance with this Section 5(b) is deemed to have granted, issued or sold, any shares of Common Stock (including the granting, issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities granted, issued or sold or deemed to have been granted, issued or sold) for a consideration per share (the “New Issuance Price”) less than a price equal to the Mandatory Conversion Price and/or Optional Conversion Price in effect immediately prior to such granting, issuance or sale or deemed granting, issuance or sale (such Conversion Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the applicable Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation, determining the adjusted Conversion Price and the New Issuance Price under this Section 5(b)), the following shall be applicable:
x. Issuance of Options. If the Company in any manner grants, issues or sells (or enters into any agreement to grant, issue or sell) any options or rights to acquire Common Stock or Convertible Securities (“Options”) and the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting, issuance or sale of such Option for such price per share. For purposes of this Section 5(b)(i)(x), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting, issuance or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof, minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) with respect to any one share of Common Stock upon the granting, issuance or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof plus the value of any other consideration (including, without limitation, consideration consisting of cash, debt forgiveness, assets or any other property) received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms thereof or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.
y. Issuance of Convertible Securities. If the Company in any manner issues or sells (or enters into any agreement to issue or sell) any Convertible Securities and the lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale (or the time of execution of such agreement to issue or sell, as applicable) of such Convertible Securities for such price per share. For the purposes of this Section 5(b)(i)(y), the “lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale (or pursuant to the agreement to issue or sell, as applicable) of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) with respect to any one share of Common Stock upon the issuance or sale (or the agreement to issue or sell, as applicable) of such Convertible Security plus the value of any other consideration received or receivable (including, without limitation, any consideration consisting of cash, debt forgiveness, assets or other property) by, or benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price has been or is to be made pursuant to other provisions of this Section 5(b), except as contemplated below, no further adjustment of the Conversion Price shall be made by reason of such issuance or sale.
z. Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time, the Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate (as the case may be) at the time initially granted, issued or sold. For purposes of this Section 5(b)(i)(z), if the terms of any Option or Convertible Security (including, without limitation, any Option or Convertible Security that was outstanding as of the Original Issuance Date) are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 5(b)(i)(z) shall be made if such adjustment would result in an increase of the Conversion Price then in effect.
c) Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.
d) Notice to the Holder. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall deliver to each Holder within two (2) Business Days a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
e) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (ii) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).
Section 6. Events of Default.
a) “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
i. any default in the payment of (A) the principal amount of this Note or (B) interest, liquidated damages and other amounts owing to the Holder on this Note, as and when the same shall become due and payable (upon demand for payment by the Holder or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within three (3) Business Days;
ii. the Company shall fail to observe or perform any other covenant or agreement contained in this Note or in any other Transaction Document, which failure is not cured, if possible to cure, within five (5) Business Days after notice of such failure sent by the Holder to the Company;
iii. any representation or warranty made in this Note or the Purchase Agreement, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;
iv. the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event; or
v. the Company shall fail to maintain a sufficient number of shares of Common Stock reserved for issuance upon the Conversion of this Note and such failure is not cured within thirty (30) days after written notice from the Holder.
b) Remedies Upon Event of Default.
i. Acceleration. If any Event of Default occurs, the outstanding principal amount of this Note, plus accrued but unpaid Interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable, at the Holder’s election in cash. Upon the payment of this Note in full, including interest, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. The Company shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.
ii. Extension of Maturity Date. In the event that the Holder does not elect to accelerate the payment of this Note upon the occurrence of an Event of Default, as provided in Section 6(b)(i) above, the Holder may elect to extend the Maturity Date of this Note by one (i) month for each month or portion of a month that an Event of Default exists and is continuing. During any such extensions, Default Interest shall continue to be payable by the Company until the Event of Default has been cured, as provided in Section 2(a) hereof.
Section 7. Miscellaneous.
a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder or the Company hereunder shall be in writing and delivered as provided in Section 5.4 of the Purchase Agreement.
b) Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.
c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.
d) Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Note (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of this Note, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
e) Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by the Company or the Holder must be in writing.
f) Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
g) Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.
h) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
i) Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
j) Amendments. This Note may be amended, in writing, by the mutual agreement of the Company and the Holder.
k) Expenses. The Company and the Holder will each bear their own legal and other expenses in connection with the preparation and negotiation of this Note. The Company shall pay all out-of-pocket expenses incurred by the Holder, including the fees, charges and disbursements of counsel for the Holder, in connection with the enforcement or protection of its rights (i) in connection with this Note, including its rights under this Section 7 and (ii) in connection with this Note, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of this Note (collectively, the “Enforcement Costs”).
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.
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FLEWBER GLOBAL INC. |
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By: |
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Name: |
Marc Sellouk |
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Chief Executive Officer |
Address for Notices: 1411 Broadway 38th Floor, New York, NY 10018
Email for Notices: [email protected]
Exhibit 10.14
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISS ION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1 933 , AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
Issue Date: [ ]
Principal Amount: US$[ ]
UNSECURED CONVERTIBLE NOTE DUE
[ ]1
THIS UNSECURED CONVERTIBLE NOTE is a duly authorized and validly issued Unsecured Convertible Note of FLEWBER GLOBAL INC., a Delaware corporation (the "Company"), having its principal place of business at 1411 Broadway, 38th Floor, New York, New York 10018, designated as its Unsecured Subordinated Convertible Note due on or after [ ]1 (this "Note"). This Note is one of a series of convertible notes issued pursuant to the terms of the Purchase Agreement.
FOR VALUE RECEIVED, the Company promises to pay to [ ] or its registered assigns (the "Holder"), or shall have paid pursuant to the terms hereunder, the principal sum of US$[ ] and any other sums due hereunder anytime on or after [ ]1 (the "Maturity Date"), or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to the following additional provisions.
NOW THEREFORE, the Holder hereby agrees as follows:
Section 1. Definitions. Terms not otherwise defined herein shall have the meanings given to them in the Purchase Agreement. For the purposes hereof, in addition to the terms defined in the Purchase Agreement and elsewhere in this Note, the following terms shall have the following meanings:
"Bankruptcy Event" means any of the following events: (a) the Company commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within sixty (60) days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty (60) calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, (g) the Company or any Significant Subsidiary thereof admits in writing that it is generally unable to pay its debts as they become due, (h) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
1 12 months after the date of issuance
"Conversion Shares" means, collectively, the shares of Common Stock issuable upon Conversion of this Note in accordance with the terms hereof.
"Exchange Act" means the Securities Exchange Act of 1 934, as amended, and the rules and regulations promulgated thereunder.
"Purchase Agreement" means the Securities Purchase Agreement, dated as of January 6, 2023, between the Company, the Holder and the other investors signatory thereto. .
"Significant Subsidiary" has the meaning given to it in Rule 1 -02(w) of Regulation S -X.
Section 2. Interest.
a) Payment of Interest. Subject to any other terms of this Note and the Subordination Agreement, the Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note at the rate of eight percent (8%) per annum payable with the repayment of the outstanding principal amount on the Maturity Date. Payments will be credited first to accrued interest due and payable, with any remainder applied to principal (subject to Section 2(c) herein). All accrued and unpaid interest shall also be payable upon the final repayment of this Note.
b) Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal amount, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest shall cease to accrue with respect to any principal amount converted, provided that, the Company actually delivers the Conversion Shares within the time period required by Section 4(d)(ii) herein. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the "Note Register"). The Company shall update the Note Register to reflect permitted transferees and assignees of the Note.
c) Prepayment. Except as otherwise set forth in this Note, the Company may not prepay any portion of the principal amount of this Note or accrued interest hereunder, without the prior written consent of the Holder.
Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
b) Investment Representations. This Note may be transferred or exchanged only in compliance with investment representations of the Holder set forth in the Purchase Agreement and all other terms of this Note, and applicable federal and state securities laws and regulations.
c) Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
Section 4. Conversion.
a) Conversion. In the event that the Company consummates an IPO, then the total outstanding principal amount of this Note and any unpaid accrued interest thereon shall automatically convert into Conversion Shares, without any further action by the Holder a "Conversion"). The applicable date of conversion, with respect to a Conversion (the "Conversion Date") shall be the date of the closing of the IPO. The Company shall deliver to the Holder written notice of the Conversion, including the material terms thereof and a calculation of the Conversion Price with supporting detail, at least twenty (20) days prior to the proposed Conversion Date. Upon a Conversion hereunder, the Holder shall surrender this Note as promptly as is reasonably practicable after the Conversion Date without delaying the Company1 s obligation to deliver the shares on the Share Delivery Date.
b) Conversion Price. The conversion price applicable to a Conversion shall be equal to 75 % of the initial public offering price of the Company’s Securities in the IPO, subject to any adjustments provided in this Note (the "Conversion Price").
c) Mechanics of Conversion.
i. Conversion Shares Issuable upon Conversion of Principal Amount and Interest. The number of Conversion Shares issuable upon a Conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note and accrued and unpaid interest to be converted by (y) the Conversion Price.
ii. Delivery of Conversion Shares Upon Conversion. Not later than five (5) Business Days after the Conversion Date (the "Share Delivery Date"), the Company shall deliver, or cause to be delivered, to the Holder a notice of issuance for the number of Conversion Shares being acquired upon the Conversion of this Note, which shall include the restrictive legends described below, unless it is otherwise determined in good faith that such restrictive legends are not required.
iii. Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon Conversion of this Note and payment of interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder, not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the Conversion of the then outstanding principal amount of this Note and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.
iv. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the Conversion of this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such Conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.
v. Transfer Taxes and Expenses. The issuance of Conversion Shares on Conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon Conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
Section 5. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any Common Stock Equivalent (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Note), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then, in each such case, the Company shall make an applicable adjustment to the Conversion Price to equitably increase or reduce the number of shares issuable upon the Conversion of this Note, as determined by its Board of Directors. Any adjustment made pursuant to this Section 5 (a) shall become effective (x) immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, (y) immediately after the effective date in the case of a subdivision, combination or re-classification, or (z) as determined in the good faith reasonable judgment of the Board of Directors in any other case taking into account any recommendation including in any opinion received in connection with an adjustment.
b) Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.
c) Notice to the Holder. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall deliver to each Holder within two (2) Business Days a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
Section 6. Events of Default.
a) "Event of Default" means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
i. any default in the payment of (A) the principal amount of this Note or (B) interest, liquidated damages and other amounts owing to the Holder on this Note, as and when the same shall become due and payable (upon demand for payment by the Holder or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within three (3) Business Days;
ii. the Company shall fail to observe or perform any other covenant or agreement contained in this Note or in any other Transaction Document, which failure is not cured, if possible to cure, within five (5) Business Days after notice of such failure sent by the Holder to the Company;
iii. any representation or warranty made in this Note or the Purchase Agreement, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;
iv. the Company or any Significant Subsidiary (as such term is defined in Rule l -02(w) of Regulation S -X) shall be subject to a Bankruptcy Event; or
v. the Company shall fail to maintain a sufficient number of shares of Common Stock reserved for issuance upon the Conversion of this Note and such failure is not cured within thirty (3 0) days after written notice from the Holder.
b) Remedies Upon Event of Default. If any Event of Default occurs, subject to the Subordination Agreement, the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable, at the Holder’s election in cash. Upon the payment of this Note in full, including interest, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. The Company shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.
Section 7. Miscellaneous.
a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder or the Company hereunder shall be in writing and delivered as provided in Section 5.4 of the Purchase Agreement.
b) Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.
c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.
d) Governing Law; Jurisdiction All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Note (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the "New York Courts"). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of this Note, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
e) Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by the Company or the Holder must be in writing.
f) Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
g) Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.
h) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
i) Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
j) Amendments. This Note may be amended, in writing, by the mutual agreement of the Company and the Holder.
k) Expenses. The Company and the Holder will each bear their own legal and other expenses in connection with the preparation and negotiation of this Note. The Company shall pay all out-of-pocket expenses incurred by the Holder, including the fees, charges and disbursements of counsel for the Holder, in connection with the enforcement or protection of its rights (i) in connection with this Note, including its rights under this Section 7 and (iii) in connection with this Note, including all such out-of-pocket expenses incurred during any workouts restructuring or negotiations in respect of this Note (collectively, the "Enforcement Costs").
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(Signature Page Follows)
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.
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FLEWBER GLOBAL INC. |
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By: |
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Name: Marc Sellouk |
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Title: Chief Executive Officer |
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| Address for Notices: 1411 Broadway 38th Floor, New York, NY 10018 | |||
| Email for Notices: [email protected] | |||
Exhibit 10.15
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THIS NOTE, SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, IS AVAILABLE.
FLEWBER GLOBAL INC.
UNSECURED SUBORDINATED PROMISSORY NOTE
| Principal Amount: US [ ] | Issuance Date: [ ] |
FOR VALUE RECEIVED, Flewber Global Inc., a Delaware Company (the “Company”), promises to pay to [ ]. (“Holder”), the principal amount noted above, payable originally on [ ], (the “Maturity Date”).
The following is a statement of the rights of the Holder of this Note and the terms and conditions to which this Note is subject, and to which the Holder, by acceptance of this Note, agrees:
1. Interest. The outstanding principal amount of the Note shall bear interest for the period commencing on the Issuance Date until paid in full at a rate per annum equal to twelve percent (12%) per annum. The Company shall pay interest on the principal amount hereunder, in arrears, on the Maturity Date. Any payment by the Company of any interest amount in excess of that permitted by law shall be considered a mistake, with the excess being applied to the principal amount of this Note without prepayment premium or penalty.
2. Maturity. The Company shall pay to Holder on the Maturity Date, and there shall become absolutely due and payable on the Maturity Date, the principal amount of the Note outstanding on such date, together with any and all accrued and unpaid interest thereon.
3. Prepayment. As a result of a liquidity event such as an IPO, the Company at any time prior to the Maturity Date and without penalty or premium will as a priority pay all or any portion of the unpaid principal amount of the Note, together with all accrued and unpaid interest thereon.
4. Events of Default. In the event that any of the following (each, an “Event of Default”) shall occur:
(a) Non-Payment. The Company shall default in the payment of the principal of, or accrued interest on, this Note as and when the same shall become due and payable, whether by acceleration or otherwise; or
(b) Bankruptcy. The Company shall: (a) admit in writing its inability to pay its debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Company or any of its property, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiesce in, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for the Company or for any part of its property; or (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Company, and, if such case or proceeding is not commenced by the Company or converted to a voluntary case, such case or proceeding shall be consented to or acquiesced in by the Company or shall result in the entry of an order for relief; then, and so long as such Event of Default is continuing for a period of five (5) business days in the case of non-payment under Section 5(a) and for a period of thirty (30) calendar days in the case of an event under Sections 5(b) (and the event which would constitute such Event of Default, if curable, has not been cured), by written notice to the Company, all obligations of the Company under this Note shall be immediately due and payable (except with respect to any Event of Default set forth in Section 5(b) hereof, in which case all obligations of the Company under this Note shall automatically become immediately due and payable without the necessity of any notice or other demand to the Company) without presentment, demand, protest or any other action nor obligation of the Holder of any kind, all of which are hereby expressly waived, and Holder may exercise any other remedies the Holder may have at law or in equity.
5. Mutilated, Destroyed, Lost or Stolen Note.In case this Note shall become mutilated or defaced, or be destroyed, lost or stolen, the Company shall execute and deliver a new note of like principal amount in exchange and substitution for the mutilated or defaced Note, or in lieu of and in substitution for the destroyed, lost or stolen Note. In the case of a mutilated or defaced Note, the Holder shall surrender such Note to the Company.In the case of any destroyed, lost or stolen Note, the Holder shall furnish to the Company: (i) evidence to its satisfaction of the destruction, loss or theft of such Note and (ii) such indemnity as may be reasonably required by the Company to hold the Company harmless.
6. Waiver of Demand, Presentment, etc. The Company hereby expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, bringing of suit and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereunder, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder. The Company agrees that, in the event of an Event of Default, to reimburse the Holder for all reasonable costs and expenses (including reasonable legal fees of one counsel) incurred in connection with the enforcement and collection of this Note.
7. Payment. All payments with respect to this Note shall be made in lawful money of the United States of America, at the address of the Holder as of the date hereof or as designated in writing by the Holder from time to time. The receipt by the Holder of immediately available funds shall constitute a payment of principal and interest hereunder and shall satisfy and discharge the liability for principal and interest on this Note to the extent of the sum represented by such payment. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal.
8. Assignment. The rights and obligations of the Company and the Holder of this Note shall be binding upon, and inure to the benefit of, the successors and permitted assigns of the parties hereto. Interest and principal are payable only to the registered Holder of this Note on the books and records of the Company. Holder shall not assign or transfer any of its rights or obligations under this Note without the prior written approval of the Company, which approval by the Company shall not be unreasonably withheld.
9. Waiver and Amendment. Any provision of this Note, including, without limitation, the due date hereof, and the observance of any term hereof, may be amended, waived or modified (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.
10. Notices. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid, or delivered by electronic mail transmission, to such party at its address or email address set forth below, or such other address or telecopier number as such party may hereinafter specify by notice to each other party thereto:
If to the Company, to:
Flewber Global Inc.
Attn: Marc Sellouk, CEO 1411 Broadway, 38th Floor New York, NY 10028
With a copy to:
Scott M. Miller, Esq.
Ellenoff Grossman & Schole LLP 1345 Avenue of the Americas New York, NY 10105
If to the Holder:
11. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, excluding that body of law relating to conflicts of laws.
12. Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or relating to this Note shall be instituted exclusively in Supreme Court of the State of New York in New York County, or in the United Stated District Court for the Southern District of New York. The parties hereto hereby: (i) waives any objection which they may now have or hereafter have to the venue of any such suit, action or proceeding, and (ii) irrevocably consents to the jurisdiction of the Supreme Court of the State of New York in New York County, and the United States District Court for the Southern District of New York in any such suit, action or proceeding. The parties further agree to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in the Supreme Court of the State of New York in New York County, and the United States District Court for the Southern District of New York and agree that service of process upon a party mailed by certified mail to such party’s address shall be deemed in every respect effective service of process upon such party in any such suit, action or proceeding.
13. Severability. If one or more provisions of this Note are held to be unenforceable under applicable law, such provisions shall be excluded from this Note, and the balance of this Note shall be interpreted as if such provisions were so excluded and shall be enforceable in accordance with its terms.
14. Headings. Section headings in this Note are for convenience only, and shall not be used in the construction of this Note.
15. Definitions. All capitalized terms used in this Note or other document, instrument or agreement executed or delivered pursuant hereto (unless otherwise indicated therein) shall have the meanings ascribed to such terms herein or referred to below.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first above written.
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FLEWBER GLOBAL INC. |
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By: |
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Name: Marc Selouk |
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Title: Chief Executive Officer |
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EXHIBIT 31.1
Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, David A. Jenkins, certify that:
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I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 of Catheter Precision, Inc.; |
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 18, 2026
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/s/ David A. Jenkins |
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David A. Jenkins |
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Executive Chairman of the Board and Chief Executive Officer |
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(Principal Executive Officer) |
EXHIBIT 31.2
Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Philip Anderson, certify that:
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1. |
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 of Catheter Precision, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 18, 2026
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/s/ Philip Anderson |
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Philip Anderson |
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Chief Financial Officer |
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(Principal Financial Officer) |
EXHIBIT 32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, David A. Jenkins, Executive Chairman of the Board and Chief Executive Officer of Catheter Precision, Inc. (the “Company”), hereby certify, that, to my knowledge:
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1. |
the Quarterly Report on Form 10-Q for the three-month period ended March 31, 2026 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and |
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2. |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 18, 2026
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/s/ David A. Jenkins |
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David A. Jenkins |
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Executive Chairman of the Board and Chief Executive Officer |
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(Principal Executive Officer) |
EXHIBIT 32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Philip Anderson, Chief Financial Officer of Catheter Precision, Inc. (the “Company”), hereby certify, that, to my knowledge:
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1. |
the Quarterly Report on Form 10-Q for the three-month period ended March 31, 2026 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and |
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2. |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 18, 2026
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/s/ Philip Anderson |
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Philip Anderson |
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Chief Financial Officer |
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(Principal Financial Officer) |