Jet.AI Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2023. Jet.AI provides private aviation services, including aircraft charter and management, jet cards, fractional aircraft interests, and booking software. The August 10, 2023 business combination with Oxbridge was accounted for as a reverse recapitalization; historical operating results are those of Jet Token.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $3.37 million | $11.91 million | $8.04 million | $19.65 million |
| Gross profit (loss) | $170,441 | $1.00 million | ($105,400) | $1.82 million |
| Operating loss | ($4.27 million) | ($2.00 million) | ($9.43 million) | ($4.81 million) |
| Net loss | ($4.29 million) | ($2.00 million) | ($9.46 million) | ($4.81 million) |
| Basic and diluted loss per share | ($0.61) | ($0.45) | ($1.77) | ($1.09) |
- Margins: Gross margin was approximately 5.1% in Q3 2023 versus 8.4% in Q3 2022; for the nine-month periods it was approximately -1.3% versus 9.2%.
- Revenue mix and changes: Q3 revenue fell about 72% year over year, principally because there were no fractional aircraft sales, compared with $11.0 million of such sales in Q3 2022. Nine-month revenue declined about 59%, including the absence of $17.2 million of prior-year aircraft sales. App/on-fleet charter revenue rose to $1.86 million for Q3 and $4.41 million for nine months; jet card/fractional program revenue was $732,000 and $2.09 million, respectively. Management and other services contributed $775,000 and $1.53 million, respectively.
- Costs and losses: Q3 gross profit was lower than the prior year despite greater aircraft utilization; higher fleet operating and third-party charter costs weighed on results. Nine-month gross loss was narrower than the prior-year operating business’s gross loss after excluding the prior-year aircraft-sale profit. Operating expenses rose to $9.33 million for nine months, including $5.42 million of stock-based compensation.
- Cash flow: Nine-month operating cash use was $2.74 million, investing cash use $169,530, and financing cash provided $2.29 million. Cash decreased $623,482 to $903,909. The balance includes $500,000 of restricted cash.
- Liquidity and obligations at September 30: Current assets were $2.07 million and current liabilities $6.17 million, implying negative working capital of about $4.10 million. Total liabilities were $9.02 million, including $1.66 million of lease liabilities, $1.70 million of redeemable preferred stock, and current note-payable line items totaling about $754,000. Stockholders’ deficit was $4.26 million. Accounts payable was $2.88 million, up from $243,000 at year-end 2022.
Outlook, financing, and key risks
- Management stated that losses are expected to continue for at least the next 12 months and disclosed substantial doubt about the Company’s ability to continue as a going concern. It plans to rely on operating cash, potential GEM facility drawdowns, and expense reductions; availability of financing on acceptable terms is not assured. Management said it could suspend marketing and software development, streamline operations, and focus on existing customers to preserve cash.
- Management cited an annualized revenue run rate of about $13.5 million based on Q3 results, versus approximately $33.9 million of 2023 revenue forecast in business-combination materials. It attributed the gap to limited fractional aircraft inventory and weak acceptance of jet cards with geographic restrictions on Cirrus-managed larger aircraft. The run rate is not presented as formal updated guidance.
- The Company had released four of six planned aviation software programs. Management planned to prioritize Reroute, targeting release before year-end 2023, and expected broader FlightClub and JetCardGPT versions in Q1 2024. These are forward-looking plans, not guaranteed outcomes. A Bombardier fleet-purchase letter of intent was under discussion, with no completed purchase disclosed.
- The GEM share purchase agreement provides potential access to up to $40 million over 36 months, but access depends on registration effectiveness and contractual ownership limits. The filing says the relevant registration statement was not effective by the October 23, 2023 deadline; a $10,000-per-day penalty began October 24, subject to a $300,000 cap in specified SEC-delay circumstances. The Company also disclosed substantial potential share resales and warrant exercises that could pressure the stock price and impair future fundraising.
- September’s bridge financing provided $500,000 net proceeds against $625,000 principal, bears 5% interest, and matures March 11, 2024. Equity or debt financing proceeds trigger redemption at 110% of principal. Default provisions include a 120% increase in principal and potential conversion into common stock.
- Series A and A-1 preferred stock issued in transaction settlements carries 8% and 5% stated interest, respectively, and is subject to mandatory redemption in August 2024, with a possible three-month extension. The filing says 15% of net proceeds from an equity raise must be used for redemption.
- Principal operating risks include the Company’s limited operating history, recurring losses and financing needs, acceptance of its jet-card terms, fuel and aircraft operating costs, aviation demand and regulation, and potential dilution. Management reported that disclosure controls were effective and that there were no material changes in internal control during the quarter; no legal proceedings were reported.
Important facts for investors to verify
- Whether the GEM registration statement became effective, the penalty ultimately incurred, and the amount of financing actually available under the GEM facility.
- Cash runway and restricted-cash availability, given negative working capital, operating cash burn, and management’s going-concern warning.
- Reconciliation of the filing’s cash-flow disclosures: the financial statements report investing cash use of $169,530 and financing cash provided of $2.29 million, while portions of MD&A cite different figures. The MD&A also contains a differing 2022 cash-change figure.
- Timing and economics of planned software releases and the Bombardier proposal, and whether these plans produce revenue or require additional capital.
- Redemption, interest, default, conversion, dilution, and resale terms for bridge notes, preferred stock, warrants, the GEM facility, and the Meteora forward purchase arrangement.
- Share-count changes: 9,164,364 common shares were outstanding at September 30, 2023; the cover reports 9,015,414 outstanding as of November 17, 2023. Investors should confirm the reason for the difference and the current fully diluted share count.