Jet.AI (JTAI) - 2023 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This part provides detailed financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the company ITEM 1. FINANCIAL STATEMENTS Presents Oxbridge Acquisition Corp.'s unaudited condensed financial statements for Q2 2023, with detailed notes on organization and accounting policies Condensed Balance Sheets Details the company's assets, liabilities, and shareholders' deficit as of June 30, 2023, and December 31, 2022 | Metric | June 30, 2023 (unaudited) ($) | December 31, 2022 ($) | | :------------------------------------- | :-------------------------- | :------------------ | | Cash | $19,879 | $211,718 | | Marketable securities held in Trust Account | $13,125,461 | $12,834,629 | | Total Assets | $13,181,844 | $13,049,940 | | Total Liabilities | $5,586,564 | $5,071,744 | | Shareholders' Deficit | $(5,530,181) | $(4,856,433) | Condensed Statements of Operations Presents the company's revenues, expenses, and net income or loss for the three and six months ended June 30, 2023, and 2022 | Metric | Three Months Ended June 30, 2023 ($) | Three Months Ended June 30, 2022 ($) | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative expenses | $(105,915) | $(73,811) | $(469,569) | $(129,970) | | Change in fair value of warrant liabilities | $183,282 | $(428,067) | $(205,837) | $2,992,573 | | Income earned on marketable securities in trust account | $154,650 | $- | $290,832 | $- | | Net income (loss) | $232,329 | $(501,501) | $(382,916) | $2,863,201 | | Basic and diluted net earnings (loss) per ordinary share | $0.06 | $(0.035) | $(0.09) | $0.198 | Condensed Statements of Changes in Shareholders' Deficit Outlines changes in the company's accumulated deficit and total shareholders' deficit for the periods presented | Metric | December 31, 2022 ($) | June 30, 2023 ($) | | :------------------------------------- | :------------------ | :-------------- | | Balance - Accumulated Deficit | $(4,856,721) | $(5,530,469) | | Balance - Total Shareholders' Deficit | $(4,856,433) | $(5,530,181) | | Net loss (six months ended June 30, 2023) | - | $(615,245) | | Net income (three months ended June 30, 2023) | - | $232,329 | Condensed Statement of Cash Flows Summarizes cash flows from operating, investing, and financing activities for the six months ended June 30, 2023, and 2022 | Metric | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | | :------------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income | $(382,916) | $2,863,201 | | Net cash used in operating activities | $(191,839) | $(195,428) | | Cash – Beginning of period | $211,718 | $614,395 | | Cash – Ending of period | $19,879 | $418,967 | Notes to Condensed Financial Statements Provides detailed explanations and disclosures for the financial statements, covering accounting policies and specific transactions Note 1—Description of Organization and Business Operations Details the company's SPAC formation, IPO, business combination with Jet Token Inc., and related financing activities - Oxbridge Acquisition Corp. was incorporated on April 12, 2021, as a Cayman Islands exempted company for the purpose of effecting a business combination[25] - The Company completed its IPO on August 16, 2021, raising $115,000,000 gross proceeds from 11,500,000 units at $10.00 per unit, and simultaneously sold 5,760,000 Private Placement Warrants for $5,760,000[27][28] - On November 9, 2022, shareholders approved an extension of the business combination deadline to August 16, 2023, leading to the redemption of 10,313,048 Class A ordinary shares for approximately $105.4 million[30][31] - The Sponsor provided a $575,000 Extension Loan to be deposited into the trust account to facilitate the extension[32] - On August 10, 2023, the Company consummated a Business Combination with Jet Token Inc., redomiciling as a Delaware corporation named Jet.AI Inc. and listing on Nasdaq under 'JTAI', accounted for as a reverse recapitalization with Jet Token as the accounting acquirer[7][42][44][48] - Post-Business Combination, each Oxbridge Class A and Class B Ordinary Share converted into one Jet.AI Common Stock, and Oxbridge Warrants converted into Jet.AI Warrants, while Jet Token Common Stock converted into Jet.AI Common Stock and Merger Consideration Warrants[51][52] - Oxbridge entered into a Forward Purchase Agreement with Meteora Capital Partners, LP, Meteora Select Trading Opportunities Master, LP, and Meteora Strategic Capital, LLC on August 6, 2023, for OTC Equity Prepaid Forward Transactions, involving the potential purchase of up to 1,186,952 Class A ordinary shares[53][54] - The Company entered into settlement agreements with Maxim Group LLC and the Sponsor on August 10, 2023, issuing Jet.AI Common Stock and Series A/A-1 Convertible Preferred Stock to settle payment obligations[63][64] Note 2—Summary of Significant Accounting Policies Outlines key accounting principles and methods, including fair value measurements and warrant accounting, used in financial statement preparation - The financial statements are prepared in accordance with GAAP for interim financial information and SEC regulations, with certain disclosures condensed or omitted[67] - The Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[69][72] - Fair value measurements are categorized into a three-tier hierarchy (Level 1, 2, 3), with Public Warrants classified as Level 1 and Private Placement Warrants as Level 3 due to valuation methodology[82][86] - Warrants are recognized as derivative liabilities and are subject to re-measurement at each balance sheet date, with changes in fair value recognized in the statement of operations[89][134] - Class A ordinary shares subject to possible redemption are classified as temporary equity, as redemption rights are outside the Company's control[90] - The Company is an exempted Cayman Islands company and is not subject to income taxes in the Cayman Islands or the United States, resulting in a zero tax provision[99] Note 3—Initial Public Offering Details the terms and proceeds of the company's IPO, including the number of units, share price, and warrant structure - The IPO on August 16, 2021, involved 10,000,000 units at $10.00 each, generating $100,000,000, plus an over-allotment of 1,500,000 units for an additional $15,000,000[101] - Each unit consisted of one Class A ordinary share and one redeemable Public Warrant, exercisable at $11.50 per share[102] Note 4—Related Party Transactions Describes related party transactions, including Sponsor's Founder Shares, Private Placement Warrants, and administrative support fees - The Sponsor acquired 2,875,000 Class B ordinary shares (Founder Shares) for $25,000, which convert to Class A ordinary shares upon business combination and are subject to transfer restrictions[103][104] - 5,760,000 Private Placement Warrants were sold to the Sponsor and Maxim for $1.00 each, generating $5,760,000, these warrants are non-redeemable and exercisable on a cashless basis when held by the Sponsor or permitted transferees[107][108] - The Company may receive Working Capital Loans from the Sponsor or affiliates to finance transaction costs, repayable upon business combination or from working capital outside the trust account if no combination occurs, with no amounts outstanding as of June 30, 2023[109] - The Company pays its Sponsor up to $10,000 per month for administrative support, totaling $80,000 for the six months ended June 30, 2023[110] - The Sponsor provided a $575,000 Extension Loan via a promissory note to extend the business combination deadline to August 16, 2023, which is non-interest bearing and repayable upon business combination or liquidation[113][114] Note 5—Commitments and Contingencies Outlines contractual obligations, including registration rights, deferred underwriting discounts, and geopolitical event impacts - Holders of Founder Shares, Private Placement Warrants, and securities from Working Capital Loans are entitled to registration rights, allowing them to demand the Company register their securities[116] - The underwriters received a $2.3 million underwriting discount at IPO closing and are entitled to a deferred underwriting discount of $4.03 million, payable upon completion of a Business Combination[118] - The Company acknowledges risks and uncertainties related to the military action between the Russian Federation/Belarus and Ukraine, noting the impact on the world economy and the Company's financial condition is not yet determinable[119] Note 6 – Derivative Warrant Liabilities Details outstanding Public and Private Placement Warrants, their terms, exercisability, redemption conditions, and accounting treatment - As of June 30, 2023, there were 11,500,000 Public Warrants and 5,760,000 Private Placement Warrants outstanding[120] - Public Warrants become exercisable 30 days after a Business Combination or 12 months from IPO closing, expiring five years from Business Combination or earlier upon redemption/liquidation[120] - The Company may redeem Public Warrants for $0.01 each if the Class A ordinary share price equals or exceeds $18.00 for 20 trading days within a 30-trading day period[124][126] - Private Placement Warrants are identical to Public Warrants but are non-redeemable and exercisable on a cashless basis when held by Initial Shareholders or permitted transferees, and are subject to transfer restrictions[129] - Warrants are accounted for as derivative liabilities and re-measured at fair value each balance sheet date, with changes recognized in the statement of operations, resulting in a loss of approximately ($0.2 million) for the six months ended June 30, 2023, and a gain of $3.0 million for the six months ended June 30, 2022[130][134] Note 7 - Fair Value Measurements Provides fair value measurements for financial instruments, including marketable securities and warrant liabilities, categorized by valuation hierarchy Fair Value Measurements | Description | June 30, 2023 (Level 1) ($) | June 30, 2023 (Level 3) ($) | December 31, 2022 (Level 1) ($) | December 31, 2022 (Level 3) ($) | | :------------------------------------- | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Marketable securities held in Trust Account | $13,125,461 | $- | $12,834,629 | $- | | Warrant liabilities - public warrants | $575,000 | $- | $368,000 | $- | | Warrant liabilities - private warrants | $- | $739 | $- | $1,902 | - Public Warrants are classified as Level 1 due to observable market prices, while Private Placement Warrants are classified as Level 3 and valued using a Black-Scholes option pricing model with unobservable inputs[135][138] Input for Private Placement Warrants | Input | June 30, 2023 | December 31, 2022 | | :-------------------- | :-------------- | :---------------- | | Share price ($) | $10.87 | $10.45 | | Exercise price ($) | $11.5 | $11.5 | | Expected dividend yield (%) | 0% | 0% | | Expected volatility (%) | 4.96% | 2.97% | | Risk-free interest rate (%) | 5.31% | 4.85% | | Expected life (years) | 0.13 | 0.67 | Warrant Liabilities Rollforward | Metric | Private Placement Warrants ($) | Public Warrants ($) | Total Warrant Liabilities ($) | | :------------------------------------- | :------------------------- | :-------------- | :------------------------ | | Fair value as of January 1, 2023 | $1,902 | $368,000 | $369,902 | | Change in valuation inputs or other assumptions | $(1,163) | $207,000 | $205,837 | | Fair value as of June 30, 2023 | $739 | $575,000 | $575,739 | Note 8—Shareholders' Equity Details authorized and outstanding preference, Class A, and Class B ordinary shares, including their characteristics and redemption status - The Company is authorized to issue 4,000,000 preference shares, but none were issued or outstanding as of June 30, 2023[142] - 400,000,000 Class A ordinary shares are authorized; 1,301,952 were outstanding as of June 30, 2023, with 1,186,952 classified as temporary equity due to redeemable nature[143] - 40,000,000 Class B ordinary shares are authorized; 2,875,000 were issued and outstanding as of June 30, 2023, and convert to Class A shares on a one-for-one basis upon initial Business Combination[144][145] Note 9—Subsequent Events Reports significant post-balance sheet events, including the Business Combination completion and related share redemptions - On August 10, 2023, the Company completed the Business Combination, with holders of 502,832 Class A Ordinary Shares exercising their redemption rights for approximately $5.58 million at $11.10 per share[147] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses the company's financial condition, operational results, liquidity, the Jet Token Inc. business combination, and critical accounting policies Cautionary Note Regarding Forward-Looking Statements Highlights forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially[150] Overview Summarizes Oxbridge Acquisition Corp.'s SPAC formation, IPO, Jet Token Inc. business combination, and reverse recapitalization accounting - Oxbridge Acquisition Corp. was formed as a SPAC to effect a business combination, which was consummated with Jet Token Inc. on August 10, 2023, resulting in the company being renamed Jet.AI Inc.[151][161][164] - The IPO raised $115 million, with $116.725 million deposited into a trust account for the business combination, and the deadline was extended to August 16, 2023, with a $575,000 Extension Loan from the Sponsor[152][154][157][159] - The Business Combination was accounted for as a reverse recapitalization, with Jet Token Inc. identified as the accounting acquirer based on factors like voting interest, management, and historical operating activity[163][164][169] Forward Purchase Agreement Describes the Forward Purchase Agreement with Meteora Capital Partners, LP, for OTC Equity Prepaid Forward Transactions, including share purchase and prepayment terms - Oxbridge entered into a Forward Purchase Agreement with Meteora Capital Partners, LP, Meteora Select Trading Opportunities Master, LP, and Meteora Strategic Capital, LLC on August 6, 2023, for OTC Equity Prepaid Forward Transactions[170] - The Seller intended to purchase up to 1,186,952 Class A ordinary shares, subject to a 9.9% ownership limitation waiver at the Seller's discretion[171] - The agreement included a $1,250,000 Prepayment Shortfall, with half paid initially and the other half contingent on the VWAP Price and average daily trading value[172] - The Seller waived redemption rights for any Recycled Shares in connection with the Business Combination[175] FPA Funding Amount PIPE Subscription Agreements Details the subscription agreement with the Seller for Oxbridge Shares issuance and sale on the Closing Date, adjusted for Recycled Shares - On August 6, 2023, Oxbridge entered into a subscription agreement with the Seller, agreeing to issue and sell up to 1,186,952 Oxbridge Shares on the Closing Date, less Recycled Shares[176][178] Maxim Settlement Agreement Describes the settlement of payment obligations with Maxim Group LLC via Jet.AI Common Stock and Series A Convertible Preferred Stock issuance - On August 10, 2023, the Company settled payment obligations with Maxim Group LLC by issuing 270,000 shares of Jet.AI Common Stock and 1,127 shares of Series A Convertible Preferred Stock (valued at $1,127,000)[179] Sponsor Settlement Agreement Details the settlement of the $575,000 promissory note to the Sponsor through Series A-1 Convertible Preferred Stock issuance - On August 10, 2023, the Company settled its $575,000 promissory note obligation to the Sponsor by issuing 575 shares of Series A-1 Convertible Preferred Stock[180] Liquidity and Capital Resources Assesses the company's cash position, working capital, and potential Working Capital Loans to meet financial obligations - As of June 30, 2023, the Company had cash of approximately $20,000 and a working capital deficit of approximately $354,000[181] - The Sponsor or affiliates may provide Working Capital Loans to finance transaction costs, with up to $1,500,000 convertible into private placement-equivalent warrants at $1.00 per warrant[182][184] - Management believes the Company has sufficient working capital and borrowing capacity to meet its needs through the earlier of a Business Combination or three months from the filing date[185] Risks and Uncertainties Addresses the potential impact of geopolitical events, specifically the Russia-Ukraine conflict, on the company's financial condition - The impact of the military action between the Russian Federation/Belarus and Ukraine on the world economy and the Company's financial condition is not yet determinable[186] Results of Operations Summarizes the company's financial performance, including net income/loss and key expenses, for the three and six months ended June 30, 2023, and 2022 - The Company had not commenced operations as of June 30, 2023, with all activity related to structuring and consummating the Business Combination[187] Results of Operations Summary | Metric | Three Months Ended June 30, 2023 ($) | Three Months Ended June 30, 2022 ($) | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $232,000 | $(502,000) | $(383,000) | $2,863,000 | | Basic and diluted income (loss) per share | $0.06 | $(0.035) | $(0.09) | $0.198 | | General and administrative expenses | $106,000 | $74,000 | $470,000 | $130,000 | | Other income | $155,000 | $377 | $292,000 | $598 | | Gain (loss) on warrant liability revaluation | $183,000 (gain) | $(428,000) (loss) | $(206,000) (loss) | $2,993,000 (gain) | Contractual Obligations Outlines the company's commitments, including administrative support fees, registration rights, and deferred underwriting discounts - The Company has no long-term debt, capital lease, operating lease, or purchase obligations other than those disclosed[190] - Under the Administrative Services Agreement, the Company pays its Sponsor up to $10,000 per month for office space and administrative support, totaling $80,000 for the six months ended June 30, 2023[191] - Holders of Founder Shares, Private Placement Warrants, and certain other securities are entitled to registration rights[192] - A deferred underwriting discount of $4,025,000 is payable to underwriters upon completion of an initial Business Combination[193] Critical Accounting Policies Focuses on key accounting policies, specifically derivative financial instruments (warrants) and redeemable Class A Ordinary Shares - Derivative financial instruments, specifically warrants, are recognized as derivative liabilities and re-measured at fair value each balance sheet date, with changes recognized in the statement of operations[194][195] - Class A Ordinary Shares subject to possible redemption are classified as temporary equity due to redemption rights outside the Company's control[196] Emerging Growth Company Status Explains the company's 'emerging growth company' status under the JOBS Act and its election regarding new accounting standards - The Company is an 'emerging growth company' under the JOBS Act, allowing it to take advantage of certain exemptions from reporting requirements[197] - The Company has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards, which may affect comparability with other public companies[198] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK As a smaller reporting company, Oxbridge Acquisition Corp. is exempt from market risk disclosures - The Company is a smaller reporting company and is not required to provide disclosures regarding market risk[199] ITEM 4. CONTROLS AND PROCEDURES The CEO and CFO concluded disclosure controls were effective as of June 30, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023[201] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[202] PART II – OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and a list of exhibits ITEM 1. LEGAL PROCEEDINGS The company has no legal proceedings to report - There are no legal proceedings[204] ITEM 1A. RISK FACTORS No material changes to risk factors have occurred since previous filings in Annual Reports, Quarterly Report, and Registration Statement - No material changes to risk factors have occurred since previous filings[205] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There were no unregistered sales of equity securities or use of proceeds to report - There were no unregistered sales of equity securities and use of proceeds[206] ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities to report - There were no defaults upon senior securities[208] ITEM 4. MINE SAFELY DISCLOSURES Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[209] ITEM 5. OTHER INFORMATION There is no other information to report under this item - There is no other information[210] ITEM 6. EXHIBITS Lists all exhibits filed or incorporated by reference into this Quarterly Report, including key agreements and certifications - Exhibits include the Business Combination Agreement, Amended and Restated Memorandum and Articles, Warrant Agreement, Specimen Certificates, and various certifications[211]