Jet.AI (JTAI) - 2025 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements The unaudited consolidated financial statements for the quarter ended March 31, 2025, show a significant increase in total assets to $18.5 million and stockholders' equity to $13.6 million, primarily driven by financing activities, while the company continues to report a net loss of $3.2 million, consistent with the prior year period, and revenues decreased slightly to $3.5 million Consolidated Balance Sheets As of March 31, 2025, total assets increased to $18.5 million from $10.8 million at year-end 2024, mainly due to a rise in cash and cash equivalents from $5.9 million to $12.2 million, with total liabilities increasing moderately to $4.8 million and stockholders' equity growing substantially to $13.6 million from $6.5 million, reflecting recent financing activities Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2025 ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $12,245,419 | $5,872,627 | | Total current assets | $12,980,984 | $6,362,608 | | Total assets | $18,458,622 | $10,797,323 | | Liabilities & Equity | | | | Total current liabilities | $4,473,114 | $3,789,081 | | Total liabilities | $4,835,030 | $4,284,863 | | Total stockholders' equity | $13,623,592 | $6,512,460 | | Total liabilities and stockholders' equity | $18,458,622 | $10,797,323 | Consolidated Statements of Operations For the three months ended March 31, 2025, revenues decreased to $3.5 million from $3.8 million in the prior-year period, resulting in a gross loss of $115,514 and a net loss of $3.2 million, comparable to Q1 2024, while net loss per share significantly improved to $(1.85) from $(64.08) due to increased weighted average shares outstanding Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended March 31, 2025 ($) | Three Months Ended March 31, 2024 ($) | | :--- | :--- | :--- | | Revenues | $3,474,638 | $3,848,598 | | Gross loss | $(115,514) | $(124,356) | | Operating loss | $(3,171,273) | $(3,149,796) | | Net Loss | $(3,169,804) | $(3,229,049) | | Net loss per share - basic and diluted | $(1.85) | $(64.08) | - Stock-based compensation, a major component of general and administrative expenses, decreased significantly to $550,936 in Q1 2025 from $1,199,318 in Q1 2024[12] Consolidated Statements of Cash Flows In Q1 2025, net cash used in operating activities was $2.2 million, investing activities used $1.2 million primarily for an aircraft deposit, and financing activities provided a significant inflow of $9.7 million, mainly from the exercise of Series B Preferred Stock warrants, resulting in a net increase in cash and cash equivalents of $6.4 million for the quarter Consolidated Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2025 ($) | Three Months Ended March 31, 2024 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,180,208) | $(2,520,790) | | Net cash used in investing activities | $(1,177,000) | $(12,922) | | Net cash provided by financing activities | $9,730,000 | $1,028,724 | | Increase (decrease) in cash | $6,372,792 | $(1,504,988) | - The primary source of financing cash flow in Q1 2025 was $11.0 million from the proceeds from the exercise of Series B Convertible Preferred Stock warrants[16] Notes to Consolidated Financial Statements The notes detail the company's business operations, significant accounting policies, and key events, highlighting going concern uncertainty due to historical losses, the planned spin-off of the charter business to flyExclusive, and significant financing activities through convertible preferred stock and warrants, alongside key commitments including an aircraft purchase agreement with Textron and an operating lease for an aircraft - The company's principal business activities include the sale of fractional/whole aircraft interests, jet cards, a proprietary booking platform, aircraft chartering, brokerage, and management services[20] - The company has incurred losses since inception, raising concerns about its ability to continue as a going concern, with management planning to fund operations through capital from operations, its Share Purchase Agreement with GEM, proceeds from warrant exercises, and other potential financing[21][22] - On February 13, 2025, the company entered into a merger agreement with flyExclusive, which involves spinning off its jet charter business (SpinCo) and merging it with a flyExclusive subsidiary, with Jet.AI stockholders receiving flyExclusive shares while retaining their Jet.AI stock post-transaction[93][94][95] - In Q1 2025, the company issued 1,100 shares of Series B Preferred Stock upon the exercise of warrants, generating gross proceeds of $11.0 million[102] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 9.7% decrease in Q1 2025 revenue to $3.5 million, attributed to reduced software-related and jet card sales, though partially offset by a 60% increase in aircraft management revenue, highlighting its strategic plan to spin off its aviation business to flyExclusive and pivot to AI and data-center sectors, with liquidity significantly improved by an $11.0 million financing in the quarter, despite continued operating losses, and exploration of further funding options, including a potential $50 million transaction with Hexstone Capital Overview and Strategic Direction Jet.AI operates in private aviation through fractional/whole aircraft sales, jet cards, a proprietary booking platform, and aircraft management, but a significant strategic shift is underway with the planned sale of its aviation business to flyExclusive, after which Jet.AI will retain its software and IP assets and focus on opportunities in the AI and data-center enterprise sectors - The company is planning to sell its aviation business assets (fractional, jet card, and management) to flyExclusive via a spin-off and merger transaction[127][128] - Following the transaction, Jet.AI will continue as a public company, retaining its software and intellectual property, and intends to pursue business opportunities in the AI and data-center sectors[129] Results of Operations Q1 2025 revenue decreased 9.7% year-over-year to $3.5 million, primarily due to a 39% decline in software-related revenue from reduced marketing and an industry-wide demand slowdown, though aircraft management revenue saw a strong 60% increase, while the gross loss slightly improved to $116,000 and the operating loss widened marginally to $3.2 million, driven by higher G&A expenses excluding stock-based compensation Revenue Breakdown by Subcategory | Revenue Source | Three Months Ended March 31, 2025 ($) | Three Months Ended March 31, 2024 ($) | | :--- | :--- | :--- | | Software App and Cirrus Charter | $1,849,950 | $2,371,091 | | Jet Card and Fractional Programs | $343,345 | $677,320 | | Management and Other Services | $1,281,343 | $800,187 | | Total Revenue | $3,474,638 | $3,848,598 | - Software-related revenue declined 39% due to reduced marketing and an industry-wide decline in private jet travel demand[133] - Aircraft management service revenue increased by 60%, driven by a new management agreement from Q4 2023 and the addition of a second managed aircraft in April 2024[134] Liquidity and Capital Resources As of March 31, 2025, the company held $12.2 million in cash, a substantial increase from year-end 2024 due to raising $11.0 million from the Ionic Transaction, and despite a history of operating losses and an accumulated deficit of $55.7 million, management believes it has sufficient capital for the next 12 months, supported by existing funds, access to the GEM Share Purchase Agreement, and a non-binding term sheet for a potential $50 million financing with Hexstone Capital - The company raised $11.0 million in Q1 2025 through the issuance of 1,100 shares of Series B Preferred Stock from warrant exercises[150] - The company has a history of negative cash flows and an accumulated deficit of $55.7 million as of March 31, 2025[151] - In February 2025, the company entered into a non-binding term sheet with Hexstone Capital LP for a proposed private placement of up to $50 million in Series C Convertible Preferred Stock[170][171] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Jet.AI Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a "smaller reporting company" and is therefore not required to provide the information for this item[205] Item 4. Controls and Procedures Based on an evaluation as of March 31, 2025, the company's Interim Chief Executive Officer and Interim Chief Financial Officer concluded that the disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - Management, including the Interim CEO and Interim CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[207] - No changes occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[208] PART II OTHER INFORMATION Item 1. Legal Proceedings The company reports no legal proceedings - None[210] Item 1A. Risk Factors There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[211] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Since January 1, 2025, the company issued 1,100 shares of Series B Preferred Stock from the exercise of the Ionic Warrant, resulting in gross proceeds of $11.0 million, with these securities sold in a private placement exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506(b), and no equity securities repurchased by the company during the quarter - From January 1, 2025, the Company issued 1,100 shares of Series B Preferred Stock from exercises of the Ionic Warrant for gross proceeds of $11.0 million, with the sale exempt from registration under Section 4(a)(2) of the Securities Act[212] - There were no purchases of equity securities by the Company or its affiliates during the quarter ended March 31, 2025[214] Item 5. Other Information During the quarter, there was no information required to be disclosed on a Form 8-K that was not already reported, no material changes to the procedures for stockholder director nominations, and no directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement - No directors or officers adopted, modified, or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the quarter[218]