Jet.AI Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparative period is Q1 2023. Jet.AI provides private aviation services, including charter booking, jet cards, fractional ownership, aircraft management and, since December 2023, B2B aviation software. The filing describes unaudited consolidated results.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / prior period |
|---|---|---|
| Revenue | $3.85 million | $1.88 million; up approximately 105% |
| Gross loss / gross margin | $124,356 / approximately -3.2% | $75,018 / approximately -4.0% |
| Operating loss | $3.15 million | $2.72 million |
| Net loss | $3.23 million | $2.72 million |
| Net loss attributable to common stockholders | $3.26 million; $0.28 per share | $2.72 million; $0.70 per share |
| Cash used in operations | $2.52 million | $1.19 million |
| Cash and cash equivalents at period end | $595,555, including $500,000 restricted | $2.10 million at December 31, 2023 |
| Current assets / current liabilities | $3.16 million / $5.74 million | At March 31, 2024 |
| Total liabilities | $8.33 million | $9.68 million at December 31, 2023 |
Revenue growth was driven mainly by Software App and Cirrus Charter revenue, which together rose to $2.37 million from $994,253, and Management and Other Services revenue, which rose to $800,187 from $333,710. Jet Card and Fractional Program revenue increased to $677,320 from $547,545. Aircraft sales were zero in both periods.
Cost of revenue increased to $3.97 million from $1.95 million, leaving gross losses in both quarters. Management attributed the 2024 gross loss primarily to higher subcharter costs. Operating expenses increased to $3.03 million from $2.64 million. Sales and marketing rose to $446,600 from $120,167; general and administrative expense included $1.20 million of stock-based compensation. Interest expense was $79,314, principally related to the bridge financing.
Financing activities provided $1.03 million in cash, including common-stock proceeds and warrant exercises, partly offset by repayment of notes. The company repaid approximately $683,000 under its bridge agreement. At quarter end, it reported no current notes payable; operating lease liabilities totaled $1.41 million. Lease expense was $320,775 for the quarter. The balance sheet also includes $1.70 million of redeemable preferred stock.
Liquidity, outlook and risks
- Management states that losses and limited operating history raise substantial concern about the company’s ability to continue as a going concern. It expects to continue operating losses for at least the next 12 months and says additional capital will likely be needed.
- Management expects to pursue growth through aircraft acquisitions, higher jet-card pricing, more CharterGPT and Reroute AI activity, and DynoFlight and other SaaS revenue. The filing provides no quantified revenue, profit or cash-flow guidance.
- Management intends to rely on operations, GEM Share Purchase Agreement drawdowns and possible proceeds from the Ionic warrant. Neither future GEM purchases nor exercise of the Ionic warrant is assured. If financing is unavailable, management says it may cut marketing and customer acquisition, suspend software development and focus on existing customers; it estimates this could allow operations to continue for a year or more.
- The March 2024 Ionic financing involved $1.5 million of gross proceeds, 250,000 common shares and Series B convertible preferred stock with a variable conversion price linked to the lowest VWAP, subject to stated limits. The related warrant could provide up to approximately $15 million if fully exercised, but exercise is not assured. Certain triggering events may require cash redemption at 110% of stated value. A registration statement for resales was filed May 13, 2024.
- Series A and A-1 preferred shares are subject to mandatory redemption on August 10, 2024, potentially extended by three months if specified financing conditions are not met. The filing says 15% of net equity financing proceeds may be required for redemption if requested by holders.
- Key business risks identified include aircraft and fuel operating costs, pilot availability and turnover, private-jet demand, aviation regulation and market acceptance of the business model. Increased pilot turnover and training time contributed to greater reliance on third-party charters in Q1.
Important facts for investors to verify
- Near-term liquidity and going concern: Verify unrestricted cash, projected cash burn, access to financing and the timing and terms of any additional capital. The reported $595,555 cash balance includes $500,000 of restricted cash.
- Liquidity figures: The balance sheet implies current liabilities exceed current assets by approximately $2.58 million, while MD&A describes the shortfall as approximately $4.0 million. Reconcile this difference and the treatment of deferred revenue.
- Share issuance disclosure: The filing reports 1,000,000 GEM shares issued in the quarter in the financial statements and MD&A, but its unregistered-sales section says 1,500,000 shares. Confirm the correct issuance total and resulting dilution.
- Deferred revenue disclosure: The notes report $187,811 of deferred revenue related to the App at March 31, while a later MD&A passage gives $1,215,710 for app bookings. Clarify the differing amounts and definitions.
- Conversion, redemption and dilution exposure: Review the Series B conversion mechanics and ownership limits, potential Ionic warrant exercise, Series A/A-1 redemption obligations, and outstanding options and warrants. The filing reports 25.22 million common-stock warrants outstanding at March 31.
- Unit economics: Track gross margin and subcharter costs against revenue growth, as higher sales did not produce positive gross profit in Q1.
The company reported no legal proceedings and no material changes to the risk factors in its 2023 Form 10-K. Management concluded disclosure controls were effective as of March 31, 2024; it reported no material changes in internal control over financial reporting during the quarter.