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As filed with the Securities and Exchange Commission on June 27, 2024

 

Registration No. 333-

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

Jet.AI Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware

  4522   93-2971741

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

10845 Griffith Peak Dr.

Suite 200

Las Vegas, Nevada 89135

(702) 747-4000

(Address including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Mike Winston

Interim Chief Executive Officer

Jet.AI Inc.

10845 Griffith Peak Dr.

Suite 200

Las Vegas, Nevada 89135

(702) 747-4000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

Copies to:

 

Kate L. Bechen

Peter F. Waltz

Dykema Gossett PLLC

111 East Kilbourn Avenue

Suite 1050

Milwaukee, WI 53202

(414) 488-7300

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions under the Merger Agreement described herein.

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

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 ☐

     
 

Non-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 7(a)(2)(B) of the Securities Act.

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐

 

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐

 

 

 

 
 

 

The information in this document may change. The registrant may not complete the offer and issue these securities until the registration statement filed with the United States Securities and Exchange Commission is effective. This document is not an offer to sell these securities and it is not soliciting an offer to buy these securities, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation, or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

 

PRELIMINARY- SUBJECT TO COMPLETION, DATED JUNE 27, 2024

 

PROSPECTUS/OFFER TO EXCHANGE

 

Jet.AI Inc.

 

 

Offer to Exchange Warrants to Purchase Shares of Common Stock

of

Jet.AI Inc.

for

Shares of Common Stock of Jet.AI Inc.

and

Consent Solicitation

 

 

 

THE OFFER PERIOD (AS DEFINED HEREIN) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., EASTERN TIME, ON JULY 25, 2024, OR SUCH LATER TIME AND DATE TO WHICH WE MAY EXTEND.

 

Terms of the Offer and Consent Solicitation

 

Until July 25, 2024 (the “Expiration Date”), Jet.AI Inc. (the “Company,” “we,” “our,” and “us”) is offering to the holders of certain of our outstanding warrants (collectively, the “Warrants”), each of which is exercisable to purchase one share of our common stock, par value $0.0001 per share (the “Common Stock”; such shares, the “Common Shares”), the opportunity to receive a specified number of Common Shares in exchange for each outstanding Warrant tendered by the holder (the “Warrantholder”) and exchanged pursuant to the offer (the “Offer”), as determined in accordance with the fixed exchange rate of Warrants for Common Shares (the “Exchange Ratio”) applicable to each type of Warrant that can be exchanged in the Offer. The Offer is being made to all holders of:

 

Our publicly traded, five-year warrants that are each exercisable to purchase one Common Share at an exercise price of $11.50 per share (the “Redeemable Warrants”), which were issued under that certain Warrant Agreement dated August 21, 2021 between the Company (as the successor to Oxbridge Acquisition Corp., our predecessor and a Cayman Islands-exempted company (“Oxbridge”)), Continental Stock Transfer & Trust Company, as warrant agent (“CSTTC”), and each Warrantholder (the “Redeemable Warrant Agreement”), in connection with the Company’s initial public offering (the “IPO”);

 

Our private, five-year warrants that are each exercisable to purchase one Common Share at an exercise price of $11.50 per share (the “Private Warrants”), which were issued under the Redeemable Warrant Agreement to OAC Sponsor Ltd. (the “Sponsor”) and Maxim Partners LLC (“Maxim Partners”) simultaneously with the IPO in a private placement exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) and are identical to the Redeemable Warrants, except that the Private Warrants are not redeemable by the Company and are exercisable on a cashless basis so long as they are held by the Sponsor and Maxim Partners or their respective permitted transferees or affiliates (the “Initial Private Warrantholders”); and

 

 
 

 

Our publicly traded, ten-year warrants that are each exercisable to purchase one Common Share at an exercise price of $15.00 per share (the “Merger Consideration Warrants”; together with the Redeemable Warrants, the “Public Warrants”), which were issued under that certain Warrant Agreement dated August 10, 2023 between the Company, CSTTC, and each Warrantholder (the “Merger Consideration Warrant Agreement”; together with the Redeemable Warrant Agreement, the “Warrant Agreements”), in connection with the business combination (the “Business Combination”) consummated pursuant to that certain Business Combination Agreement and Plan of Reorganization, dated February 24, 2023, as amended by Amendment No. 1 to the Business Combination Agreement, dated as of May 11, 2023 (the “Business Combination Agreement”), by and among Oxbridge, certain wholly owned subsidiaries of the Company (the “Merger Subs”), and Jet Token Inc., a Delaware corporation (“Jet Token”).

 

The number of Common Shares that each Warrant can be exchanged for pursuant to the Offer (the “Exchange Consideration”) will vary depending on the type of Warrant tendered for exchange. In each case, the Exchange Consideration will be determined according to the applicable Exchange Ratio, pursuant to which each Warrantholder will receive (i) 0.3054 Common Shares for each Redeemable Warrant or Private Warrant (the “RW Exchange Ratio”), and (ii) 1.0133 Common Shares for each Merger Consideration Warrant (the “MCW Exchange Ratio”) tendered by such Warrantholder and exchanged in accordance with the Offer.

 

For the avoidance of doubt, if a Warrantholder exchanges more than one Warrant of a particular type in the Offer, then the consideration due in respect of such exchange of such type of Warrants will (in the case of any Warrants held in “street name” through a direct or indirect participant of The Depository Trust Company (“DTC”), to the extent permitted by, and practicable under, DTC’s procedures) be computed based on the total number of Warrants of such type exchanged by such Warrantholder.

 

Our Common Stock, Redeemable Warrants, and Merger Consideration Warrants are listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “JTAI,” “JTAIW,” and “JTAIZ,” respectively.

 

As of June 26, 2024, an aggregate of 23,052,625 Warrants are outstanding, consisting of: (i) 9,859,220 Redeemable Warrants; (ii) 7,433,405 Merger Consideration Warrants; and (iii) 5,760,000 Private Warrants. Pursuant to the Offer, we are offering up to an aggregate of 12,334,621 Common Shares (inclusive of potential shares issuable for purposes of rounding fractional amounts) in exchange for all of the outstanding Warrants. No fractional Common Shares will be issued pursuant to the Offer. Instead, any fractional Common Shares to which a Warrantholder would otherwise have been entitled to receive pursuant to the Offer will be aggregated and then rounded up to the nearest whole Common Share. Our obligation to complete the Offer is not conditioned on the receipt of a minimum number of tendered Warrants.

 

Concurrently with the Offer, we are also soliciting consents (the “Consent Solicitation”) from Warrantholders to amend the Redeemable Warrant Agreement (the “Redeemable Warrant Amendment”) and the Merger Consideration Warrant Agreement (the “Merger Consideration Warrant Amendment”; together with the Redeemable Warrant Amendment, the “Warrant Amendments”), which will govern all of the Warrants to permit the Company to require that each Warrant that is outstanding upon the closing of the Offer be exchanged into a number of Common Shares equal to 10% less than the number of Common Shares the Warrantholder would have received as Exchange Consideration had their Warrants been exchanged pursuant to the applicable Exchange Ratio in the Offer. Pursuant to the terms of the Redeemable Warrant Agreement, all except certain specified modifications or amendments require the vote or written consent of holders of at least a majority of the outstanding Redeemable Warrants; provided that any amendment solely to the Private Warrants requires the vote or written consent of holders of at least a majority of the outstanding Private Warrants. Under the Merger Consideration Warrant Agreement, all except certain specified modifications or amendments require the vote or written consent of holders of at least 65% of the outstanding Merger Consideration Warrants.

 

 
 

 

If adopted, we currently intend to require the exchange of all outstanding Warrants to Common Shares as provided in the Warrant Amendments, which would result in the holders of any remaining outstanding Warrants receiving approximately 10% fewer Common Shares than if they had tendered their Warrants in the Offer. See the section of this this prospectus/offer to exchange (this “Prospectus/Offer to Exchange”) entitled “The Offer and Consent Solicitation – Transactions and Agreements Concerning Our Securities.”

 

You may not consent to the Warrant Amendments, as applicable, without tendering your Warrants in the Offer, and you may not tender such Warrants without consenting to the Warrant Amendments. The consents to the Warrant Amendments are part of the Letter of Transmittal and Consent (as defined below) relating to the Warrants, and, therefore, by tendering your Warrants for exchange, you will be delivering to us your consent. You may revoke your consent at any time prior to the Expiration Date by withdrawing the Warrants you have tendered in the Offer.

 

The Offer and Consent Solicitation is made solely upon the terms and conditions in this Prospectus/Offer to Exchange and in the related letter of transmittal and consent (as it may be supplemented and amended from time to time, the “Letter of Transmittal and Consent”). The Offer and Consent Solicitation will be open until 11:59 p.m., Eastern Time, on July 25, 2024, or such later time and date to which we may extend the Offer and Consent Solicitation (such period during which the Offer and Consent Solicitation is open, giving effect to any withdrawal or extension, the “Offer Period”; such date and time at which the Offer Period ends, the “Expiration Date”). The Offer and Consent Solicitation is not made to those Warrantholders who reside in states or other jurisdictions where an offer, solicitation, or sale would be unlawful.

 

We may withdraw the Offer and Consent Solicitation only if the conditions to the Offer and Consent Solicitation are not satisfied or waived prior to the Expiration Date or if we have determined, in our sole discretion, to terminate the Offer and Consent Solicitation. Promptly upon any such withdrawal, we will return the tendered Warrants to the holders (and the related consents to the Warrant Amendments will be revoked).

 

You may tender some or all of your Warrants in the Offer. If you elect to tender Warrants in response to the Offer and Consent Solicitation, please follow the instructions in this Prospectus/Offer to Exchange and the related documents, including the Letter of Transmittal and Consent. If you tender Warrants, you may withdraw your tendered Warrants at any time before the Expiration Date and retain them on their current terms, or on amended terms if the Warrant Amendments are approved, by following the instructions in this Prospectus/Offer to Exchange. In addition, tendered Warrants that are not accepted by us for exchange by July 25, 2024 may thereafter be withdrawn by you until such time as the Warrants are accepted by us for exchange. If you withdraw the tender of your Warrants, your related consents to the Warrant Amendments, as applicable, will be withdrawn as a result.

 

Warrants not exchanged for our Common Shares pursuant to the Offer will remain outstanding subject to their current terms, or amended terms if the Warrant Amendments are approved. We reserve the right to redeem any of the Warrants, as applicable, pursuant to their current terms at any time, and if the Warrant Amendments are approved, we intend to require the exchange of all outstanding Warrants to Common Shares as provided in the Warrant Amendments. Our Redeemable Warrants and Merger Consideration Warrants are currently listed on Nasdaq under the symbols “JTAIW” and “JTAIZ,” respectively; however, Nasdaq may consider delisting the Public Warrants, or either of the Redeemable Warrants or the Merger Consideration Warrants, if it determines that the extent of public distribution or aggregate market value of the outstanding Public Warrants has become so reduced as to make further listing inadvisable, or if it otherwise determines continued listing is unwarranted.

 

The Offer and Consent Solicitation is conditioned upon the effectiveness of a registration statement on Form S-4 that we filed with the U.S. Securities and Exchange Commission (the “SEC”) regarding the Common Shares issuable upon exchange of the Warrants pursuant to the Offer. This Prospectus/Offer to Exchange forms a part of such registration statement.

 

A majority of our board of directors (the “Board”), consisting of disinterested directors with respect to the Offer, has approved the Offer and Consent Solicitation. However, neither we nor any of our management, our Board, or Morrow Sodali LLC, as the information agent (the “Information Agent”), or Continental Stock Transfer & Trust Company, as the exchange agent (the “Exchange Agent”), for the Offer and Consent Solicitation is making any recommendation as to whether Warrantholders should tender Warrants for exchange in the Offer or consent to the Warrant Amendments in the Consent Solicitation. Each Warrantholder must make its own decision as to whether to exchange some or all of its Warrants and, as applicable, consent to the Warrant Amendments.

 

 
 

 

All questions concerning the terms of the Offer and Consent Solicitation should be directed to the Company:

 

All questions concerning exchange procedures and requests for additional copies of this Prospectus/Offer to Exchange, the Letter of Transmittal and Consent or the Notice of Guaranteed Delivery in the form we have provided with this Prospectus/Offer to Exchange (the “Notice of Guaranteed Delivery”) should be directed to the Information Agent:

 

Morrow Sodali LLC

333 Ludlow Street, 5th Floor, South Tower

Stamford, Connecticut 06902

Banks and Brokers Call Collect: (203) 658-9400

All Other Call Toll-Free: (800) 662-5200

Email: JTAI.info@investor.morrowsodali.com

 

We will amend our offering materials, including this Prospectus/Offer to Exchange, to the extent required by applicable securities laws to disclose any material changes to information previously published, sent or given to Warrantholders.

 

 

 

The securities offered by this Prospectus/Offer to Exchange involve risks. Before participating in the Offer and consenting to the applicable Warrant Amendments, you are urged to carefully read the section entitled “Risk Factors” beginning on page 8 of this Prospectus/Offer to Exchange.

 

Neither the SEC nor any state securities commission or any other regulatory body has approved or disapproved of these securities or determined if this Prospectus/Offer to Exchange is truthful or complete. Any representation to the contrary is a criminal offense.

 

Through the Offer, we are soliciting your consent to the Warrant Amendments, as applicable. By tendering your Warrants, you will be delivering your consent to the applicable proposed Warrant Amendments, which consent will be effective upon our acceptance of such Warrants for exchange.

 

 

 

This Prospectus/Offer to Exchange is dated June 27, 2024.

 

 
 

 

TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS/OFFER TO EXCHANGE   ii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS   iii
SUMMARY   1
EMERGING GROWTH COMPANY AND SMALLER REPORTING COMPANY EXPLANATORY NOTE   8
RISK FACTORS   8
THE OFFER AND CONSENT SOLICITATION   27
BUSINESS OF JET.AI   39
PROPERTIES OF JET.AI   50
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   51
MANAGEMENT   70
EXECUTIVE COMPENSATION   76
MARKET INFORMATION, DIVIDENDS, AND RELATED STOCKHOLDER MATTERS   89
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES   89
DESCRIPTION OF SECURITIES   95
CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS   105
BENEFICIAL OWNERSHIP OF SECURITIES   110
LEGAL MATTERS   111
EXPERTS   111
WHERE YOU CAN FIND ADDITIONAL INFORMATION   112
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS   113
FORM OF REDEEMABLE WARRANT AMENDMENT   A-1
FORM OF MERGER CONSIDERATION WARRANT AMENDMENT   B-1

 

i
 

 

ABOUT THIS PROSPECTUS/OFFER TO EXCHANGE

 

This Prospectus/Offer to Exchange is a part of the Registration Statement that we filed on Form S-4 with the SEC. You should read this Prospectus/Offer to Exchange, including the detailed information regarding our Company, Common Shares, and Warrants, and the financial statements and the notes to those statements that are included in this Prospectus/Offer to Exchange and any applicable prospectus supplement.

 

You should rely only on the information contained in and incorporated by reference in this Prospectus/Offer to Exchange and in any accompanying prospectus supplement. We have not authorized anyone to provide you with information different from that contained in this Prospectus/Offer to Exchange. If anyone makes any recommendation or representation to you, or gives you any information, you must not rely upon that recommendation, representation, or information as having been authorized by us. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. You should not assume that the information in or incorporated by reference in this Prospectus/Offer to Exchange or any prospectus supplement is accurate as of any date other than the date on the front of those documents. You should not consider this Prospectus/Offer to Exchange to be an offer or solicitation relating to the securities in any jurisdiction in which such an offer or solicitation relating to the securities is not authorized.

 

Furthermore, you should not consider this Prospectus/Offer to Exchange to be an offer or solicitation relating to the securities if the person making the offer or solicitation is not qualified to do so, or if it is unlawful for you to receive such an offer or solicitation. We are not aware of any U.S. state where the making of the Offer and the Consent Solicitation is not in compliance with applicable law. If we become aware of any U.S. state where the making of the Offer and the Consent Solicitation or the acceptance of the Warrants pursuant to the Offer is not in compliance with applicable law, we will make a good faith effort to comply with the applicable law. If, after such good faith effort, we cannot comply with the applicable law, the Offer and the Consent Solicitation will not be made to (nor will tenders be accepted from or on behalf of) Warrantholders who reside in states or other jurisdictions where an offer, solicitation or sale would be unlawful.

 

This Prospectus/Offer to Exchange incorporates important business and financial information about us that is not included in or delivered with this document. You may request, and we will provide you with, a copy of these filings, at no cost, by calling us at (702) 747-4000 or by writing to us at the following address:

 

Jet.AI Inc.

10845 Griffith Peak Dr.

Suite 200

Las Vegas, Nevada 89135

 

To obtain timely delivery, you must request information no later than five business days prior to the expiration of the Offer and Consent Solicitation, which expiration is 11:59 p.m., Eastern Time, on July 25, 2024, or such later time and date to which we may extend.

 

ii
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Prospectus/Offer to Exchange includes forward-looking statements. Forward-looking statements include but are not limited to statements regarding our expectations, hopes, beliefs, intentions, or strategies regarding the future. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “can,” “continue,” “could,” “designed,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions that are predictions of, that indicate future events and trends, or that do not related to historical matters, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward looking. Forward-looking statements in this Prospectus/Offer to Exchange may include, for example, statements about:

 

  changes in our growth, strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, and plans;

 

  the implementation, market acceptance, and success of our business model;

 

  our ability to maintain the listing of the Company’s securities on Nasdaq;

 

  our ability to develop new offerings, services, solutions, and features, to bring them to market in a timely manner, and to make enhancements to our business;

 

  the risks of data-security breaches, cyber-attacks, or other network outages;

 

  the quality and effectiveness of and advancements in our technology and our ability to accurately and effectively use data and engage in predictive analytics;

 

  the overall level of consumer demand for our products and services;

 

  expectations and timing related to our product and service launches;

 

  expectations of achieving and maintaining profitability;

 

  projections of total addressable markets, market opportunity, and market share;

 

  our ability to obtain regulatory approvals and authorizations from governmental agencies;

 

  our reliance on third parties and expectations concerning third-party relationships;

 

  our ability to acquire from third parties or to develop products, technologies, software, or equipment we believe could complement or expand our business;

 

  our ability to finance aircraft or generate sufficient funds;

 

  our ability to obtain and protect patents, trademarks, licenses, and other intellectual property rights and interests;

 

  developments and projections relating to our competitors and industries, such as the projected growth in demand for private-aviation data;

 

  our ability to acquire new customers and partners or to obtain renewals, upgrades, or expansions from our existing customers;

 

  our ability to compete with existing and new market participants having greater financial resources and operating experience than we do;

 

  our ability to retain, recruit, or adapt to changes in our officers, key employees, or directors;

 

iii
 

 

  the conversion or planned repayment of our debt obligations;

 

  our ability to obtain funding for our operations and to raise additional capital;
     
  our ability to effectively build scalable and robust processes to manage the growth of our business profitably;
     
  the impact on our business of existing and developing laws and regulations, and any changes thereto, including with respect to regulations concerning aviation, aircraft ownership, intellectual-property law, and privacy and data protection;
     
  the complexities of compliance within the regulatory environment to which we are subject, including compliance with Federal restrictions on ownership of U.S. airlines and aircraft;
     
  our ability to grow our client base;
     
  global and domestic economic conditions, including currency exchange rate fluctuations, inflation and geopolitical uncertainty and instability, and their impact on demand and pricing for our offerings in affected markets;
     
  the impact and severity of public-health threats on global capital and financial markets, general economic conditions in the United States, and our business and operations;
     
  the approval of the Warrant Amendments and our ability to require that all outstanding Warrants be exchanged for shares of our Common Stock;
     
  the exchange of Warrants for Common Shares pursuant to the Offer, which will increase the number of Common Shares eligible for future resale in the public market and result in dilution to our stockholders;
     
  the lack of a third-party determination that the Offer or the Consent Solicitation is fair to Warrantholders; and
     
  other factors detailed under the section of this Prospectus/Offer to Exchange entitled “Risk Factors.”

 

We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Prospectus/Offer to Exchange. Except as required by law, we do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or uncertainties after the date hereof or to reflect the occurrence of unanticipated events.

 

You should read this Prospectus/Offer to Exchange and the documents that we incorporate by reference into this Prospectus/Offer to Exchange and have filed as exhibits to the Registration Statement on Form S-4 of which this Prospectus/Offer to Exchange is a part completely and with the understanding that our actual future results may be materially different from what we expect. The information contained in this Prospectus/Offer to Exchange is accurate only as of the date of this Prospectus/Offer to Exchange, regardless of the time of delivery of this Prospectus/Offer to Exchange or any sale of our securities.

 

iv
 

 

 

SUMMARY

 

The Offer and Consent Solicitation

 

This summary provides a brief overview of the key aspects of the Offer and Consent Solicitation. Because it is only a summary, it does not contain all of the detailed information contained elsewhere in this Prospectus/Offer to Exchange or in the documents incorporated by reference herein or included as exhibits to the Registration Statement on Form S-4 of which this Prospectus/Offer to Exchange forms a part. Accordingly, you are urged to carefully review this Prospectus/Offer to Exchange in its entirety (including all documents incorporated by reference herein or filed as exhibits to the Registration Statement of which this Prospectus/Offer to Exchange forms a part), which may be obtained by following the procedures set forth herein in the section entitled “Where You Can Find Additional Information.”

 

The Company
 
Corporate Information   Jet.AI Inc. was formed on June 4, 2018 in the State of Delaware and is now headquartered in Las Vegas, Nevada. Our principal executive office is located at 10845 Griffith Peak Dr., Suite 200, Las Vegas, Nevada 89135, and our telephone number is (702) 747-4000.
 
Our Business and Strategy  

Jet.AI Inc. is a private air charter company that develops innovative artificial intelligence (“AI”) technology to facilitate access to travel by private aircraft travel through our iOS and Android charter booking app, CharterGPT (“CharterGPT”), and our B2B software platform (the “Jet.AI Operator Platform”), which provides a suite of software-as-a-service (“SaaS”) products that we offer aircraft owners and operators. We strive to streamline and enhance the aviation experience for both operators and customers by leveraging advanced natural language processing and advanced fleet logistics optimizations.

 

Our business strategy combines concepts from fractional jet ownership programs and aviation jet membership cards with AI innovations.

     
Our App   Our CharterGPT app uses natural language processing and machine learning to improve the private jet booking experience, which is advanced by CharterGPT’s direct connection via our application programming interface (“API”) to Avinode, one of the largest centralized databases for charter services in the private-aviation industry. CharterGPT receives users’ requests for private-aircraft travel, connects users to private-charter operators who have posted their aircraft for hire, displays a variety of charter booking options at a range of prices drawn from thousands of aircraft listings on the Avinode platform along with pricing for our own fleet of four aircraft, and facilitates communication, contract exchange, and payment between the user and the operator of the aircraft ultimately selected for travel.
     
Our SaaS Products  

Our Jet.AI Operation Platform currently consists of the following SaaS products:

 

  Reroute AI. Our newest SaaS product, Reroute AI, is web-based and enables Federal Aviation Administration (“FAA”) Part 135 operators to earn revenue on otherwise empty flight legs. When prompted with basic travel itinerary information, Reroute AI searches its database of empty flight legs and proposes combinations or adjustments of those legs that meet the constraints provided. The Company generates revenue each time an operator wishes to book an itinerary proposed by Reroute AI that uses a third-party operator’s aircraft.

 

  DynoFlight. DynoFlight is a software API that enables small- to medium-sized aircraft operators to track and estimate their emissions and then to offset their emissions by purchasing carbon-offset credits via our DynoFlight API.

 

 

1
 

 

 

    Flight Club. Our Flight Club API enables FAA Part 135 operators to function simultaneously under FAA Part 380, which permits private jet services to be sold by the seat rather than the whole aircraft. The Flight Club software integrates front-end ticketing and payment collection with the flight management systems of an FAA Part 135 operator. We operate Flight Club through 380 Software LLC, a subsidiary owned 50/50 by us and by Great Western Air, LLC d/b/a Cirrus Aviation Services, LLC (“Cirrus”), the largest private jet charter company in Nevada. We currently limit our use of Flight Club to our partnership with the Las Vegas Golden Knights, but we may expand the availability of Flight Club in the future.

 

Our Aircraft Fleet and OnBoard Program   We currently have a fleet of four aircraft, including three HondaJet HA-420 aircraft (the “HondaJet Elites”) and one Citation CJ4 Gen 2. The three HondaJet Elites are managed, operated, and maintained by Cirrus pursuant to an Executive Aircraft Management and Charter Services Agreement in compliance with all applicable FAA regulations and certification requirements. The Citation CJ4 Gen 2 in our fleet is owned and managed by a customer through our OnBoard Program, which allows aircraft owners to contribute their aircraft to our charter and jet-card inventory after they have completed certain Cirrus and FAA certifications and requirements.
     
Our Ownership and Flight Programs  

We offer the following programs for our HondaJet Elite aircraft:

 

 Fractional Ownership Program. This program provides potential owners the ability to purchase a share in a jet at a fraction of the cost of acquiring an entire aircraft. Each 1/5 share guarantees 75 occupied hours of usage per year with 24 hours of notice. As part of the aircraft purchase agreement, the buyer enters into a three-year aircraft management agreement, after which the aircraft is typically sold, and the owners are given their pro-rata share of the sale proceeds.

 

 Jet Card Program. A membership in our jet card program generally includes 10, 25, or 50 occupied hours of usage per year with 24 hours of notice. Members generally pay 100% upfront and then fly for a fixed hourly rate over the next twelve months. Those who require guaranteed availability may pay a membership fee for an additional charge. Jet card program members may interchange as a set ratio per aircraft onto any one of twenty jets operated by our partner, Cirrus.

 

   In addition to servicing members, fractional owners, and third-party charter clients, our HondaJet Elites are available to address unexpected cancellations or delays on brokered charters. Our ability to maintain a fleet of readily available aircraft to backfill third-party charter services gives us a competitive edge by providing more reliability than our competitors and is an attractive selling point for potential clients.

 

Warrants that Qualify for the Offer
     
Public Warrants   Our Public Warrants include our Redeemable Warrants and our Merger Consideration Warrants. As of June 26, 2024, we had 9,859,220 Redeemable Warrants outstanding and 7,433,405 Merger Consideration Warrants outstanding, each of which can be exercised to purchase one Common Share. Accordingly, there are 23,052,625 Common Shares underlying the Public Warrants.

 

 

2
 

 

 

The Redeemable Warrants

 

 

Each Redeemable Warrant entitles the Warrantholder to purchase one Common Share for a purchase price of $11.50, subject to adjustments pursuant to the Warrant Agreement (as defined below). Once the Redeemable Warrants become exercisable, we may call the Redeemable Warrants for redemption (excluding the Private Warrants so long as they are still held by the Initial Private Warrantholders) at our option:

 

 in whole and not in part;

 

 upon a minimum of 30 days’ prior written notice of redemption to each Warrantholder;

 

 at a price of $0.01 per Redeemable Warrant; and

 

 if, and only if, the last-reported sales price of our Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within the 30-trading-day period ending on the third trading day prior to the date on which we send notice of the redemption to Warrantholders.

 

   

The Private Warrants will not be redeemable by us so long as they are held by the Initial Private Warrantholders. The Sponsor, Maxim, or their permitted transferees have the option to exercise the Private Warrants on a cashless basis. If the Private Warrants are held by holders other than the Initial Private Warrantholders, the Private Warrants will be redeemable by us in all redemption scenarios and exercisable by the holders on the same basis as the Redeemable Warrants.

 

The Redeemable Warrants expire on August 10, 2028, subject to certain terms and conditions.

 

The Merger Consideration Warrants

 

  The Merger Consideration Warrants are substantially similar to the Redeemable Warrants issued in connection with the Company’s IPO, except that the Merger Consideration Warrants became exercisable upon completion of the Company’s Business Combination, have an exercise price of $15.00 per share, subject to adjustments, and have a ten-year term following the Business Combination, such that they expire at 5:00 p.m., New York City time, on August 10, 2033, or earlier upon redemption or liquidation. Furthermore, the requisite voting threshold to amend the Merger Consideration Warrant Agreement is higher than under the Redeemable Warrant Agreement, requiring the approval of the holders of at least 65% of the then-outstanding Merger Consideration Warrants compared to the majority of the then-outstanding Redeemable Warrants required to amend the Redeemable Warrant Agreement.
     

Private Warrants

 

 

As of June 26, 2024, there were 5,760,000 Private Warrants to purchase an aggregate of 5,760,000 Common Shares outstanding. The Private Warrants were purchased by the Sponsor and Maxim Partners in connection with the IPO in a private placement exempt from registration under the Securities Act. The Private Warrants are governed by the Redeemable Warrant Agreement, which contains certain provisions that are exclusive to the Private Warrants.

 

The terms of the Private Warrants are identical to the Redeemable Warrants, except that the Private Warrants are not redeemable by the Company and are exercisable on a cashless basis so long as they are held by the Initial Private Warrantholders.

     

Market Price of Our Capital Stock

 

  Our Common Stock, Redeemable Warrants, and Merger Consideration Warrants are listed on the Nasdaq Stock Market LLC under the symbols “JTAI,” “JTAIW,” and “JTAIZ,” respectively. See “Market Information, Dividends, and Related Stockholder Matters.”

 

 

3
 

 

 

The Offer
     

Warrants for Common Shares

 

 

Pursuant to the Offer, we are offering up to an aggregate of 12,334,621 Common Shares (inclusive of potential shares issuable for purposes of rounding fractional amounts) in exchange for all of the Warrants.

 

The Exchange Consideration, meaning the number of Common Shares that each Warrant will be exchanged for pursuant to the Offer, will vary depending on the type of Warrant tendered for exchange. In each case, the Exchange Consideration will be determined according to the Exchange Ratio applicable to each Warrant type, as follows: (i) in accordance with the RW Exchange Ratio, each Redeemable Warrant or Private Warrant tendered for exchange in the Offer will be exchanged for 0.3054 Common Shares; and (ii) in accordance with the MCW Exchange Ratio, each Merger Consideration Warrant tendered for exchange in the Offer will be exchanged for 1.0133 Common Shares.

 

No fractional Common Shares will be issued pursuant to the Offer. Instead, any fractional Common Shares to which a Warrantholder would otherwise have been entitled to receive pursuant to the Offer will be aggregated and then rounded up to the nearest whole Common Share. Our obligation to complete the Offer is not conditioned on the receipt of a minimum number of tendered Warrants.

 

Holders of the Warrants tendered for exchange will not have to pay any of the exercise price for the tendered Warrants to receive shares of our Common Stock in the exchange.

 

The Common Stock issued in exchange for the Warrants will be unrestricted and freely transferable, as long as the holder is not an affiliate of ours and was not an affiliate of ours within the three months prior to the proposed transfer of such shares.

     
The Offerees   The Offer is being made to all Warrantholders, subject to the following: We are not aware of any U.S. state where the making of the Offer and the Consent Solicitation is not in compliance with applicable law. If we become aware of any U.S. state where the making of the Offer and the Consent Solicitation or the acceptance of the Warrants pursuant to the Offer is not in compliance with applicable law, we will make a good faith effort to comply with the applicable law. If, after such good faith effort, we cannot comply with the applicable law, the Offer and the Consent Solicitation will not be made to (nor will tenders be accepted from or on behalf of) Warrantholders who reside in states or other jurisdictions where an offer, solicitation or sale would be unlawful.
     
Offer Period  

The Offer and Consent Solicitation will expire on the Expiration Date, which is 11:59 p.m., Eastern Time, on July 25, 2024, or such later time and date to which we may extend the Offer Period. All Warrants tendered for exchange pursuant to the Offer and Consent Solicitation, and all required related paperwork, must be received by the Exchange Agent by the Expiration Date, as described in this Prospectus/Offer to Exchange.

 

If the Offer Period is extended, we will make a public announcement of such extension by no later than 9:00 a.m., Eastern Time, on the next business day following the Expiration Date as in effect immediately prior to such extension.

 

We may withdraw the Offer and Consent Solicitation only if the conditions of the Offer and Consent Solicitation are not satisfied or waived prior to the Expiration Date. Promptly upon any such withdrawal, we will return the tendered Warrants (and the related consents to the Warrant Amendments will be revoked). We will announce our decision to withdraw the Offer and Consent Solicitation by disseminating notice by public announcement or otherwise as permitted by applicable law. See “The Offer and Consent Solicitation – General Terms – Offer Period.”

 

 

4
 

 

 

Withdrawal Rights

 

  If you tender your Warrants and change your mind, you may withdraw your tendered Warrants (and thereby revoke the related consents to the Warrant Amendments, as applicable) at any time prior to the Expiration Date, as described in greater detail in the section entitled “The Offer and Consent Solicitation – Withdrawal Rights.” If the Offer Period is extended, you may withdraw your tendered Warrants (and your related consents to the Warrant Amendments will be automatically revoked as a result) at any time until the extended Expiration Date. In addition, tendered Warrants that are not accepted by us for exchange by July 25, 2024 may thereafter be withdrawn by you until such time as the Warrants are accepted by us for exchange.
     

Participation by Directors and Affiliates

 

  Although certain affiliates who are holders of our Private Warrants and Merger Consideration Warrants have advised us that they expect to participate in the Offer, none of our directors or affiliates are required to participate in the Offer. See “The Offer and Consent Solicitation – Interests of Directors and Others.”
     

Absence of Appraisal or Dissenters’ Rights

  Holders of the Warrants do not have any appraisal or dissenters’ rights under applicable law in connection with the Offer and Consent Solicitation.
     
The Consent Solicitation and Warrant Amendment
     
The Warrant Amendments   To tender Warrants in the Offer and Consent Solicitation, holders are required to consent (by executing the Letters of Transmittal and Consent or requesting that their broker or nominee consent on their behalf) to the applicable amendments to the Warrant Agreements governing the Warrants. The Redeemable Warrant Amendment is attached hereto as Annex A, while the Merger Consideration Warrant Amendment is attached as Annex B. If approved, the Warrant Amendments would permit the Company at any time following the consummation of the Offer to require that all remaining outstanding Warrants not tendered in the Offer be exchanged into a number of Common Shares equal to 10% less than the number of Common Shares such Warrantholder would have received as Exchange Consideration had their Warrants been exchanged pursuant to the applicable Exchange Ratio in the Offer), which would permit us to eliminate all of the Warrants that remain outstanding after the Offer expires. However, even though as a result of the approval of the Warrant Amendments we intend to require an exchange of all remaining outstanding Warrants, we would not be required to effect such an exchange and may defer doing so, if ever, until most economically advantageous to us.
     

Purpose of the Offer and Consent Solicitation

 

  The purpose of the Offer and Consent Solicitation is to simplify our common share structure and reduce the potential dilutive impact of the Warrants thereby providing us with more flexibility for financing our operations in the future. See “The Offer and Consent Solicitation – Background and Purpose of the Offer and Consent Solicitation.

 

 

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Amendments to the Offer and Consent Solicitation

 

We reserve the right at any time or from time to time, to amend the Offer and Consent Solicitation, including by increasing or (if the conditions to the Offer are not satisfied) decreasing the applicable Exchange Ratio used to determine the Exchange Consideration issued as Common Shares for every Warrant exchanged in the Offer or by changing the terms of the Warrant Amendments. If we make a material change in the terms of the Offer and Consent Solicitation or the information concerning the Offer and Consent Solicitation, or if we waive a material condition of the Offer and Consent Solicitation, we will extend the Offer and Consent Solicitation to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). See “The Offer and Consent Solicitation – General Terms – Amendments to the Offer and Consent Solicitation.”

 

Conditions to the Offer and Consent Solicitation

  The Offer is subject to customary conditions, including the effectiveness of the registration statement of which this document is a part and there being no action or proceeding, statute, rule, regulation, or order that would challenge or restrict the making or completion of the Offer. The Offer is not conditioned upon the receipt of a minimum number of tendered Warrants. The Consent Solicitation is conditioned upon receiving the consent of holders of at least a majority of the outstanding Public Warrants (which is the minimum number required to amend the Warrant Agreement). If adopted, we currently intend to require the exchange of all outstanding Warrants to shares of Common Stock as provided in the Warrant Amendments, which would result in the holders of any remaining outstanding Warrants receiving approximately 10% fewer shares than if they had tendered their Warrants in the Offer. We may waive some of the conditions to the Offer. See “The Offer and Consent Solicitation – General Terms – Conditions to the Offer and Consent Solicitation.”
     
Legal, Regulatory, and Tax Matters
     

Federal and State Regulatory Approvals

 

  Other than compliance with the applicable federal and state securities laws, no federal or state regulatory requirements must be complied with and no federal or state regulatory approvals must be obtained in connection with the Offer and Consent Solicitation.
     

U.S. Tax Consequences of the Offer and Warrant Amendment

 

 

For Warrantholders participating in the Offer and for any holders of Warrants subsequently exchanged for Common Stock pursuant to the terms of the Warrant Amendments, if approved, we intend to treat your exchange of Warrants for our Common Stock as a “recapitalization” within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended (the “Code”) pursuant to which (i) you should not recognize any gain or loss on the exchange of Warrants for shares of our Common Stock, (ii) your aggregate tax basis in the shares of Common Stock received in the exchange should equal your aggregate tax basis in your Warrants surrendered in the exchange, and (iii) your holding period for the Common Shares received in the exchange should include your holding period for the surrendered Warrants. However, because there is a lack of direct legal authority regarding the U.S. federal income tax consequences of the exchange of Warrants for our Common Stock, there can be no assurance in this regard and alternative characterizations are possible by the IRS or a court, including ones that would require U.S. holders to recognize taxable income. Warrantholders are urged to review the section entitled “Material U.S. Federal Income Tax Consequences” for more information regarding the Offer as well as the adoption of the Warrant Amendments.

 

Although the issue is not free from doubt, we intend to treat the adoption of the Warrant Amendments, if approved, as a deemed exchange of existing “old” Warrants for “new” Warrants with the modified terms pursuant to the Warrant Amendments. Further, we intend to treat such deemed exchange as a “recapitalization” within the meaning of Section 368(a)(1)(E) of the Code, pursuant to which (i) you should generally not recognize any gain or loss on the deemed exchange of Warrants for “new” Warrants, (ii) your aggregate tax basis in the “new” Warrants deemed to be received in the exchange should generally equal your aggregate tax basis in your existing Warrants, and (iii) your holding period for the “new” Warrants deemed to be received in the exchange should generally include your holding period for the surrendered Warrants. However, because there is a lack of direct legal authority regarding the U.S. federal income tax consequences of the deemed exchange of the “old” Warrants for “new” Warrants pursuant to the Warrant Amendments, if approved, there can be no assurance in this regard and alternative characterizations are possible by the IRS or a court, including ones that would require U.S. holders to recognize taxable income. Warrantholders are urged to review the section entitled “Material U.S. Federal Income Tax Consequences” for more information regarding the adoption of the Warrant Amendments.

 

 

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No Recommendation   None of the Company, our affiliates, directors, officers, or employees, or the Information Agent or the Exchange Agent for the Offer and Consent Solicitation, is making any recommendations to any Warrantholder as to whether to exchange its Warrants or deliver its consents to the Warrant Amendments, as applicable. Each Warrantholder must make its own decision as to whether to tender Warrants for exchange pursuant to the Offer and consent to the Warrant Amendments of the Warrant Agreements, as applicable, pursuant to the Consent Solicitation.
     

Risk Factors

 

  For risks related to the Offer and Consent Solicitation, please read the section entitled “Risk Factors” beginning on page 8 of this Prospectus/Offer to Exchange.
     

Exchange Agent

 

 

The Exchange Agent for the Offer and Consent Solicitation:

 

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, NY 10004

Attention: Compliance Department

(212) 509-4000

     
Additional Information   We recommend that our Warrantholders review the Registration Statement on Form S-4 of which this Prospectus/Offer to Exchange forms a part, including the exhibits thereto, that we have filed with the SEC in connection with the Offer and Consent Solicitation and our other materials that we have filed with the SEC, before making a decision on whether to accept the Offer and consent to the Warrant Amendments. All reports and other documents we have filed with the SEC can be accessed electronically on the SEC’s website at www.sec.gov.

 

Emerging Growth Company and Smaller Reporting Company

 

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For so long as we remain an emerging growth company, we are permitted, and currently intend, to rely on certain provisions of the JOBS Act that contain exceptions from disclosure and other requirements that otherwise are applicable to public companies and file periodic reports with the SEC. Those provisions and our status as an emerging growth company and as a smaller reporting company are described in the section of this Prospectus/Offer to Exchange entitled “Emergency Growth Company and Smaller Reporting Company Explanatory Note.

 

 

7
 

 

EMERGING GROWTH COMPANY AND SMALLER REPORTING COMPANY EXPLANATORY NOTE

 

On August 10, 2023, the Company consummated the Business Combination, pursuant to which Jet Token combined with Oxbridge, a special purpose acquisition company. For more information about our Business Combination, please see the sections of this Prospectus/Offer to Exchange entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Combination” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

 

Following the Business Combination, we are an “emerging growth company” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies but not to “emerging growth companies,” including, but not limited to:

 

not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act;

 

not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and

 

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

We could be an emerging growth company until the last day of the fiscal year following August 16, 2026, the fifth anniversary of the closing of Oxbridge’s initial public offering, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1,235,000,000, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would require, among other things, that we have been a public company for at least 12 months and would occur at the end of the fiscal year during which the market value of our common stock held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period. Under Section 107(b) of the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards until such time as those standards apply to private companies.

 

Because we have elected to take advantage of certain reduced disclosure obligations and may elect to take advantage of other reduced reporting requirements in future filings, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

 

We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is $250 million or more measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is $700 million or more measured on the last business day of our second fiscal quarter.

 

RISK FACTORS

 

In consultation with your own advisors, you should carefully consider, among other matters, the risk factors set forth below, as well as the other information included or incorporated by reference in this Prospectus/Offer to Exchange, before deciding whether to participate in the Offer and Consent Solicitation. If any of the risks contained in or incorporated by reference into this Prospectus/Offer to Exchange develop into actual events, our business, financial condition, liquidity, results of operations, and prospects could be materially and adversely affected. Some statements in this Prospectus/Offer to Exchange, including statements in the following risk factors, constitute forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” in this Prospectus/Offer to Exchange.

 

8
 

 

Risks Related to Our Business

 

The Company is an early-stage company with a limited operating history.

 

The Company’s predecessor operating company Jet Token, Inc. was formed on June 4, 2018. Accordingly, the Company has a limited history upon which an investor can evaluate its performance and future prospects. The Company has a short history and a limited number of aircraft and related customers. The Company’s current and proposed operations are subject to all business risks associated with newer enterprises. These include likely fluctuations in operating results as the Company reacts to developments in its markets, difficulty in managing its growth and the entry of competitors into the market. The Company has incurred net losses to date and anticipates continuing net losses for the foreseeable future. The Company cannot assure you that it will be profitable in the foreseeable future or generate sufficient profits to pay dividends. If the Company does achieve profitability, the Company cannot be certain that it will be able to sustain or increase such profitability. The Company has not consistently generated positive cash flow from operations, and it cannot be certain that it will be able to generate positive cash flow from operations in the future. To achieve and sustain profitability, the Company must accomplish numerous objectives, including broadening and stabilizing its sources of revenue and increasing the number of paying members to its service. Accomplishing these objectives may require significant capital investments. The Company cannot be assured that it will be able to achieve these objectives.

 

The Company may not be able to successfully implement its growth strategies.

 

The Company’s growth strategies include, among other things, expanding its addressable market by opening up private aviation to non-members through our marketplace, expanding into new domestic markets and developing adjacent businesses. The Company faces numerous challenges in implementing its growth strategies, including its ability to execute on market, business, product/service and geographic expansions. The Company’s strategies for growth are dependent on, among other things, its ability to expand existing products and service offerings and launch new products and service offerings. Although the Company devotes significant financial and other resources to the expansion of its products and service offerings, its efforts may not be commercially successful or achieve the desired results. The Company’s financial results and its ability to maintain or improve its competitive position will depend on its ability to effectively gauge the direction of its key marketplaces and successfully identify, develop, market and sell new or improved products and services in these changing marketplaces. The Company’s inability to successfully implement its growth strategies could have a material adverse effect on its business, financial condition and results of operations and any assumptions underlying estimates of expected cost savings or expected revenues may be inaccurate.

 

The Company’s operating results are expected to be difficult to predict based on a number of factors that also will affect its long-term performance.

 

The Company expects its operating results to fluctuate significantly in the future based on a variety of factors, many of which are outside its control and difficult to predict. As a result, period-to-period comparisons of the Company’s operating results may not be a good indicator of its future or long-term performance. The following factors may affect the Company from period-to-period and may affect its long-term performance:

 

  the Company may fail to successfully execute its business, marketing and other strategies;
     
  the Company’s ability to grow complementary products and service offerings may be limited, which could negatively impact its growth rate and financial performance;
     
  the Company may be unable to attract new customers and/or retain existing customers;
     
  the Company may require additional capital to finance strategic investments and operations, pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances, and the Company cannot be sure that additional financing will be available;

 

9
 

 

  the Company’s historical growth rates may not be reflective of its future growth;
     
  the Company’s business and operating results may be significantly impacted by general economic conditions, the health of the U.S. aviation industry and risks associated with its aviation assets;
     
  litigation or investigations involving the Company could result in material settlements, fines or penalties and may adversely affect the Company’s business, financial condition and results of operations;
     
  existing or new adverse regulations or interpretations thereof applicable to the Company’s industry may restrict its ability to expand or to operate its business as intended and may expose the Company to fines and other penalties;
     
  the occurrence of geopolitical events such as war, terrorism, civil unrest, political instability, environmental or climatic factors, natural disaster, pandemic or epidemic outbreak, public health crisis and general economic conditions may have an adverse effect on the Company’s business;
     
  some of the Company’s potential losses may not be covered by insurance, and the Company may be unable to obtain or maintain adequate insurance coverage; and
     
  the Company is potentially subject to taxation-related risks in multiple jurisdictions, and changes in tax laws could have a material adverse effect on its business, cash flow, results of operations or financial condition.

 

The Company’s business is primarily focused on certain targeted geographic regions, making it vulnerable to risks associated with having geographically concentrated operations.

 

Jet.AI’s customer base is primarily concentrated in certain geographic regions of the United States. As a result, Jet.AI’s business, financial condition and results of operations are susceptible to regional economic downturns and other regional factors, including state regulations and budget constraints and severe weather conditions, catastrophic events or other disruptions. As Jet.AI seeks to expand in its existing markets, opportunities for growth within these regions will become more limited and the geographic concentration of the Company’s business may increase.

 

If the Company cannot internally or externally finance its aircraft or generate sufficient funds to make payments to external financing sources, the Company may not succeed.

 

As is customary in the aviation industry, the Company is reliant on external financing for the acquisition of its aircraft and is likely to need additional financing in the future in order to grow its fleet. If the Company is unable to generate sufficient revenue or other funding to make payments on this lease arrangement, the lessor may take back the aircraft, which would have a material adverse effect on the Company’s business and reputation. Furthermore, if the Company does not have access to external financing for future aircraft, for whatever reason, including reasons relating to the Company’s business or prospects or the broader economy, the Company may not be in a position to grow and/or survive.

 

The Company may not have enough capital as needed and may be required to raise more capital and the terms of subsequent financings may adversely impact your investment.

 

The Company anticipates needing access to credit in order to support its working capital requirements as it grows. Interest rates are rising, and it is a difficult environment for obtaining credit on favorable terms. If the Company cannot obtain credit when needed, the Company may issue debt or equity securities to raise funds, modify its growth plans, or take some other action. Interest on debt securities could increase costs and negatively impact operating results and convertible debt securities could result in diluting your interest in the Company. If the Company is unable to find additional capital on favorable terms, then it is possible that it will choose to cease its sales activity. In that case, the only asset remaining to generate a return on your investment could be the Company’s intellectual property. Even if the Company is not forced to cease its sales activity, the unavailability of capital could result in the Company performing below expectations, which could adversely impact the value of your investment.

 

10
 

 

The Company’s business and reputation rely on, and will continue to rely on, third parties.

 

The Company has relied on a third-party app developer to develop the initial versions of its app, CharterGPT, and the Company may continue to rely on third parties for future development of portions of any new or revised app. In place of a third-party app developer, the Company relies both on internal development and freelance contractors supervised by the Company’s Chief Technology Officer. The Company intends to continue to build its internal development team and to gradually decrease its reliance on external contractors for app development. If there were delays or complications in the further development of the app, this might result in difficulties that include but are not limited to the following:

 

  Increased Development Costs: Extended development timelines can result in higher costs associated with personnel, software licenses, hardware, and other development resources. Delays may require additional investments to address technical issues, hire more personnel, or acquire additional technology or expertise to expedite the development process. These increased costs may negatively impact our financial performance and profitability.
     
  Missed Time-to-Market Opportunities: Delays in app development may cause us to miss strategic market windows, limiting our ability to capture early adopters and gain a competitive advantage. Competitors may seize the opportunity to launch similar apps, potentially eroding our market share and diminishing our growth prospects. Our ability to generate revenue and establish a strong market presence may be compromised as a result.
     
  Customer Dissatisfaction and Loss of Trust: If delays or complications prolong the release of our App, it may lead to customer frustration and disappointment. Anticipation for the App’s availability may diminish, and users may turn to alternative solutions or competitors. Customer dissatisfaction can harm our reputation and brand image, resulting in a loss of trust and reducing customer loyalty and engagement with our products and services.
     
  Negative Impact on Revenue and Financial Performance: The delay in launching our app may impact our revenue projections, financial forecasts, and investment plans. The inability to generate expected revenue streams can adversely affect our cash flow, profitability, and ability to meet financial obligations or raise additional capital. Our valuation and attractiveness to investors may also be negatively impacted.
     
  Opportunity Costs and Competitive Disadvantage: Time spent on addressing delays and complications diverts management’s attention and resources away from other strategic initiatives or product developments. We may miss out on potential partnership opportunities, market expansions, or product enhancements, resulting in missed revenue and growth opportunities. Competitors who successfully launch their apps within a shorter timeframe may gain a competitive advantage over us.
     
  Loss of Investor Confidence: Extended delays or ongoing complications may erode investor confidence in our ability to execute our business plan successfully. Investors may question our management’s capability, resulting in reduced investor interest, difficulty in raising funds, and a potential decline in our stock price. The loss of investor confidence can have broader implications for our overall financial stability and long-term viability.

 

The Company also expects to rely heavily on its existing operating partner, Cirrus Aviation Services, to maintain and operate the Company’s leased aircraft for charter services and the Company will rely on third party operators when its clients book flights through its platform with those operators. Both the Company and Cirrus actively book charters onto the Company’s aircraft. Cirrus books charters via its 24-hour charter department and the Company books charters via its App. The failure of these third parties to perform these roles properly may result in damage to the Company’s reputation, loss of clients, potential litigation, and other costs. The Company may also experience delays, defects, errors, or other problems with their work that could have an adverse effect on its results and its ability to achieve profitability.

 

11
 

 

The Company relies on third-party Internet, mobile, and other products and services to deliver its mobile and web applications and flight management system offerings to customers, and any disruption of, or interference with, the Company’s use of those services could adversely affect its business, financial condition, results of operations, and customers.

 

The Company’s platform’s continuing and uninterrupted performance is critical to its success. That platform is dependent on the performance and reliability of Internet, mobile, and other infrastructure services that are not under the Company’s control. While the Company has engaged reputable vendors to provide these products or services, the Company does not have control over the operations of the facilities or systems used by its third-party providers. These facilities and systems may be vulnerable to damage or interruption from natural disasters, cybersecurity attacks, human error, terrorist attacks, power outages, pandemics, and similar events or acts of misconduct. In addition, any changes in one of the Company’s third-party service provider’s service levels may adversely affect the Company’s ability to meet the requirements of its customers. While the Company believes it has implemented reasonable backup and disaster recovery plans, the Company has experienced, and expects that in the future it will experience, interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions, capacity constraints, or external factors beyond the Company’s control. Sustained or repeated system failures would reduce the attractiveness of the Company’s offerings and could disrupt the Company’s customers’ businesses. It may become increasingly difficult to maintain and improve our performance, especially during peak usage times, as the Company expands its products and service offerings. Any negative publicity or user dissatisfaction arising from these disruptions could harm the Company’s reputation and brand, may adversely affect the usage of the Company’s offerings, and could harm the Company’s business, financial condition, and results of operation.

 

The Company relies on third parties maintaining open marketplaces to distribute its mobile and web applications.

 

The success of the Company’s app, Charter GPT, relies in part on third parties maintaining open marketplaces, including the Apple App Store and Google Play, which make our app available for download. The Company cannot be assured that the marketplaces through which it distributes its app will maintain their current structures or that such marketplaces will not charge the Company fees to list its app for download.

 

The Company may be unable to adequately protect its intellectual property interests or may be found infringing on the intellectual property interests of others.

 

The Company’s intellectual property includes its trademarks, domain names, website, mobile and web applications, software (including our proprietary algorithms and data analytics engines), copyrights, trade secrets, and inventions (whether or not patentable). The Company believes that its intellectual property plays an important role in protecting its brand and the competitiveness of its business. If the Company does not adequately protect its intellectual property, its brand and reputation may be adversely affected and its ability to compete effectively may be impaired.

 

The Company protects its intellectual property through a combination of trademarks, domain names and other measures. The Company has registered its trademarks and domain names that it currently uses in the United States. The Company’s efforts may not be sufficient or effective. Further, the Company may be unable to prevent competitors from acquiring trademarks or domain names that are similar to or diminish the value of its intellectual property. In addition, it may be possible for other parties to copy or reverse engineer the Company’s app or other technology offerings. Moreover, the Company’s proprietary algorithms, data analytics engines, or other software or trade secrets may be compromised by third parties or the Company’s employees, which could cause the Company to lose any competitive advantage it may have from them.

 

In addition, the Company’s business is subject to the risk of third parties infringing its intellectual property. The Company may not always be successful in securing protection for, or identifying or stopping infringements of, its intellectual property and it may need to resort to litigation in the future to enforce its rights in this regard. Any such litigation could result in significant costs and a diversion of resources. Further, such enforcement efforts may result in a ruling that the Company’s intellectual property rights are unenforceable.

 

Moreover, companies in the aviation and technology industries are frequently subject to litigation based on allegations of intellectual property infringement, misappropriation, or other violations. As the Company expands and raises its profile, the likelihood of intellectual property claims being asserted against it grows. Further, the Company may acquire or introduce new technology offerings, which may increase the Company’s exposure to patent and other intellectual property claims. Any intellectual property claims asserted against the Company, whether or not having any merit, could be time-consuming and expensive to settle or litigate. If the Company is unsuccessful in defending such a claim, it may be required to pay substantial damages or could be subject to an injunction or agree to a settlement that may prevent it from using its intellectual property or making its offerings available to customers. Some intellectual property claims may require the Company to seek a license to continue its operations, and those licenses may not be available on commercially reasonable terms or may significantly increase the Company’s operating expenses. If the Company is unable to procure a license, it may be required to develop non-infringing technological alternatives, which could require significant time and expense. Any of these events could adversely affect the Company’s business, financial condition, or operations.

 

12
 

 

A delay or failure to identify and devise, invest in, and implement certain important technology, business, and other initiatives could have a material impact on the Company’s business, financial condition, and results of operations.

 

In order to operate its business, achieve its goals, and remain competitive, the Company continuously seeks to identify and devise, invest in, implement, and pursue technology, business, and other important initiatives, such as those relating to aircraft fleet structuring, business processes, information technology, initiatives seeking to ensure high quality service experience, and others.

 

The Company’s business and the aircraft the Company operates are characterized by changing technology, introductions, and enhancements of models of aircraft and services and shifting customer demands, including technology preferences. The Company’s future growth and financial performance will depend in part upon its ability to develop, market and integrate new services and to accommodate the latest technological advances and customer preferences. In addition, the introduction of new technologies or services that compete with the Company’s product and services could result in its revenues decreasing over time. If the Company is unable to upgrade its operations or fleet with the latest technological advances in a timely manner, or at all, its business, financial condition, and results of operations could suffer.

 

The Company is dependent on its information systems which may be vulnerable to cyber-attacks or other events.

 

The Company’s operations are dependent on its information systems and the information collected, processed, stored, and handled by these systems. The Company relies heavily on its computer systems to manage its client account balances, booking, pricing, processing, and other processes. The Company receives, retains, and transmits certain confidential information, including personally identifiable information that its clients provide. In addition, for these operations, the Company depends in part on the secure transmission of confidential information over public networks to charter operators. The Company’s information systems are subject to damage or interruption from power outages, facility damage, computer and telecommunications failures, computer viruses, security breaches, including credit card or personally identifiable information breaches, coordinated cyber-attacks, vandalism, catastrophic events, and human error. If the Company’s platform is hacked, these funds could be at risk of being stolen which would damage the Company’s reputation and likely its business. Any significant disruption or cyber-attacks on the Company’s information systems, particularly those involving confidential information being accessed, obtained, damaged, or used by unauthorized or improper persons, could harm the Company’s reputation, and expose it to regulatory or legal actions and adversely affect its business and its financial results.

 

Because the Company’s software could be used to collect and store personal information, privacy concerns in the territories in which the Company operates could result in additional costs and liabilities to the Company or inhibit sales of its software.

 

The regulatory framework for privacy issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many government bodies and agencies have adopted or are considering adopting laws and regulations regarding the collection, use, storage and disclosure of personal information and breach notification procedures. The Company is also required to comply with laws, rules and regulations relating to data security. Interpretation of these laws, rules and regulations and their application to the Company’s software and services in applicable jurisdictions is ongoing and cannot be fully determined at this time.

 

In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the California Consumer Privacy Act of 2018 (the “CCPA”) and other state and federal laws relating to privacy and data security. By way of example, the CCPA requires covered businesses to provide new disclosures to California residents, provide them new ways to opt-out of certain disclosures of personal information, and allows for a new cause of action for data breaches. It includes a framework that includes potential statutory damages and private rights of action. There is some uncertainty as to how the CCPA, and similar privacy laws emerging in other states, could impact the Company’s business as it depends on how such laws will be interpreted. As the Company expands its operations, compliance with privacy laws may increase its operating costs.

 

13
 

 

The Company may not have enough funds to sustain the business until it becomes profitable.

 

The Company may not accurately anticipate how quickly it may use its funds and whether these funds are sufficient to bring the business to profitability.

 

Jet.AI is subject to risks related to taxation in the United States.

 

Significant judgments based on interpretations of existing tax laws or regulations are required in determining Jet.AI’s provision for income taxes. Jet.AI’s effective income tax rate could be adversely affected by various factors, including, but not limited to, changes in the mix of earnings in tax jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in existing tax policies, laws, regulations or rates, changes in the level of non-deductible expenses (including share-based compensation), changes in the location of Jet.AI’s operations, changes in Jet.AI’s future levels of research and development spending, mergers and acquisitions or the results of examinations by various tax authorities. Although Jet.AI believes its tax estimates are reasonable, if the Internal Revenue Service or any other taxing authority disagrees with the positions taken on its tax returns, Jet.AI could have additional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a material impact on our results of operations and financial position.

 

Changes to applicable tax laws and regulations or exposure to additional income tax liabilities could affect Jet.AI’s business and future profitability.

 

One of the Company’s predecessors, Oxbridge Acquisition Corp., was organized under the laws of the Cayman Islands. Jet.AI is a U.S. corporation and thus subject to U.S. corporate income tax on its worldwide income. Further, since Jet.AI’s operations and customers are located throughout the United States, Jet.AI is subject to various U.S. state and local taxes. U.S. federal, state, local and non-U.S. tax laws, policies, statutes, rules, regulations, or ordinances could be interpreted, changed, modified or applied adversely to Jet.AI and may have an adverse effect on its business and future profitability.

 

For example, several tax proposals have been set forth that would, if enacted, make significant changes to U.S. tax laws. Such proposals include an increase in the U.S. income tax rate applicable to corporations (such as Jet.AI) from 21% to 28%. Congress may consider, and could include, some or all of these proposals in connection with tax reform that may be undertaken. It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could take effect. The passage of any legislation as a result of these proposals and other similar changes in U.S. federal income tax laws could adversely affect Jet.AI’s business and future profitability.

 

As a result of plans to expand Jet.AI’s business operations, including to jurisdictions in which tax laws may not be favorable, its obligations may change or fluctuate, become significantly more complex or become subject to greater risk of examination by taxing authorities, any of which could adversely affect Jet.AI’s after-tax profitability and financial results.

 

In the event that Jet.AI’s business expands domestically or internationally, its effective tax rates may fluctuate widely in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under U.S. Generally Accepted Accounting Principles (“GAAP”), changes in deferred tax assets and liabilities, or changes in tax laws. Factors that could materially affect Jet.AI’s future effective tax rates include, but are not limited to: (a) changes in tax laws or the regulatory environment, (b) changes in accounting and tax standards or practices, (c) changes in the composition of operating income by tax jurisdiction and (d) pre-tax operating results of Jet.AI’s business.

 

Additionally, Jet.AI may be subject to significant income, withholding, and other tax obligations in the United States and may become subject to taxation in numerous additional U.S. state and local and non-U.S. jurisdictions with respect to income, operations and subsidiaries related to those jurisdictions. Jet.AI’s after-tax profitability and financial results could be subject to volatility or be affected by numerous factors, including (a) the availability of tax deductions, credits, exemptions, refunds and other benefits to reduce tax liabilities, (b) changes in the valuation of deferred tax assets and liabilities, if any, (c) the expected timing and amount of the release of any tax valuation allowances, (d) the tax treatment of stock-based compensation, (e) changes in the relative amount of earnings subject to tax in the various jurisdictions, (f) the potential business expansion into, or otherwise becoming subject to tax in, additional jurisdictions, (g) changes to existing intercompany structure (and any costs related thereto) and business operations, (h) the extent of intercompany transactions and the extent to which taxing authorities in relevant jurisdictions respect those intercompany transactions, and (i) the ability to structure business operations in an efficient and competitive manner. Outcomes from audits or examinations by taxing authorities could have an adverse effect on Jet.AI’s after-tax profitability and financial condition. Additionally, the Internal Revenue Service and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles. Tax authorities could disagree with Jet.AI’s intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. If Jet.AI does not prevail in any such disagreements, Jet.AI’s profitability may be affected.

 

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Jet.AI’s after-tax profitability and financial results may also be adversely affected by changes in relevant tax laws and tax rates, treaties, regulations, administrative practices and principles, judicial decisions, and interpretations thereof, in each case, possibly with retroactive effect.

 

Jet.AI’s ability to utilize its net operating loss and tax credit carryforwards to offset future taxable income may be subject to certain limitations.

 

In general, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change net operating loss carryforwards (“NOLs”) to offset future taxable income. The limitations apply if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period. If the Company has experienced an ownership change at any time since its incorporation, Jet.AI may be subject to limitations on its ability to utilize its existing NOLs and other tax attributes to offset taxable income or tax liability. In addition, future changes in Jet.AI’s stock ownership, which may be outside of Jet.AI’s control, may trigger an ownership change. Similar provisions of state tax law may also apply to limit Jet.AI’s use of accumulated state tax attributes. As a result, even if Jet.AI earns net taxable income in the future, its ability to use its pre-change NOL carryforwards and other tax attributes to offset such taxable income or tax liability may be subject to limitations, which could potentially result in increased future income tax liability to Jet.AI.

 

Jet.AI’s sole material asset is its direct and indirect interests in its subsidiaries and, accordingly, Jet.AI will be dependent upon distributions from its subsidiaries to pay taxes and cover its corporate and other overhead expenses and pay dividends, if any, on the Common Stock.

 

Jet.AI is a holding company and it has no material assets other than its direct and indirect equity interests in its subsidiaries. Jet.AI will have no independent means of generating revenue. To the extent Jet.AI’s subsidiaries have available cash, Jet.AI will cause its subsidiaries to make distributions of cash to pay taxes, cover Jet.AI’s corporate and other overhead expenses and pay dividends, if any, on the Common Stock. To the extent that Jet.AI needs funds and its subsidiaries fail to generate sufficient cash flow to distribute funds to Jet.AI or are restricted from making such distributions or payments under applicable law or regulation or under the terms of their financing arrangements, or are otherwise unable to provide such funds, Jet.AI’s liquidity and financial condition could be materially adversely affected.

 

Risks Related to the Company’s Operating Environment

 

Demand for the Company’s product and services may decline due to factors beyond its control.

 

Demand for private jet charters may be negatively impacted by factors affecting air travel generally, such as adverse weather conditions, an outbreak of a contagious disease and other natural events, terrorism, and increased security screening requirements.

 

In particular, the recurrence of a pandemic, whether COVID-19 or otherwise, may result in a decline in air travel. Additionally, the reimposition of travel restrictions and other measures intended to contain the spread of any such virus may contribute to a decline in demand for air travel. If travel remains in a general decline for a significant period of time, the Company may be unable to compete with more established operators and may not be able to achieve profitability in the medium term or at all.

 

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More broadly, business jet travel is highly correlated to the performance of the economy, and an economic downturn, such as the current economic environment, which has been adversely affected by high rates of inflation, increasing interest rates, and low consumer sentiment, is likely to have a direct impact on the use of business jets. The Company’s customers may consider private air travel through its products and services to be a luxury item, especially when compared to commercial air travel. As a result, any economic downturn which has an adverse effect on the Company’s customers’ spending habits could cause them to travel less frequently and, to the extent they travel, to travel using commercial air carriers or other means considered to be more economical than the Company’s products and services. For example, beginning in 2008 and in connection with weakened macroeconomic conditions, the corporate and executive jet aviation industry, and companies that utilize corporate jets, experienced intensified political and media scrutiny. It is likely that the current economic downturn will impact demand for private jet travel for some time.

 

Any of these factors that cause the demand for private jet travel to decline may also result in delays that could reduce the attractiveness of private air charter travel versus other means of transportation, particularly for shorter distance travel, which represents our primary market currently. Delays also frustrate passengers, affecting the Company’s reputation and potentially reducing fleet utilization and charter bookings as a result of flight cancellations and increase costs. The Company may experience decreased demand, as well as a loss of reputation, in the event of an accident involving one of its aircraft or an aircraft booked through our platform or any actual or alleged misuse of its platform or aircraft by customers in violation of law. Demand for the Company’s product and services may also decline due to actions that increase the cost of private air charter travel versus other forms of transportation, particularly efforts aimed at addressing climate change such as carbon tax initiatives or other actions. Any of the foregoing circumstances or events which reduced the demand for private jet charters could negatively impact the Company’s ability to establish its business and achieve profitability.

 

The Company faces a high level of competition with numerous market participants with greater financial resources and operating experience.

 

The private air travel industry is extraordinarily competitive. Factors that affect competition in this industry include price, reliability, safety, regulations, professional reputation, aircraft availability, equipment and quality, consistency and ease of service, willingness, and ability to serve specific airports or regions, and investment requirements. The Company plans to compete against private jet charter and fractional jet companies as well as business jet charter companies. Both the private jet charter companies and the business jet charter companies have numerous competitive advantages that enable them to attract customers. Jet.AI’s access to a smaller aircraft fleet and regional focus puts it at a competitive disadvantage, particularly with respect to its appeal to business travelers who want to travel overseas.

 

The fractional private jet companies and many of the business jet charter companies have access to larger fleets of aircraft and have greater financial resources, which would permit them to more effectively service customers. Due to the Company’s relatively small size, it is more susceptible to their competitive activities, which could prevent the Company from attaining the level of sales required to sustain profitable operations.

 

Recent consolidation in the industry, such as VistaJet’s acquisitions of XOJET and JetSmarter and Wheels Up’s acquisition of Delta Private Jets as well as Gama Aviation, a business jet services company, and increased consolidation in the future could further intensify the competitive environment the Company faces.

 

There can be no assurance that the Company’s competitors will not be successful in capturing a share of our present or potential customer base. The materialization of any of these risks could adversely affect the Company’s business, financial condition, and results of operations.

 

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Aviation businesses are often affected by factors beyond their control including: air traffic congestion at airports; airport slot restrictions; air traffic control inefficiencies; natural disasters; adverse weather conditions, such as hurricanes or blizzards; increased and changing security measures; changing regulatory and governmental requirements; new or changing travel-related taxes; or the outbreak of disease; any of which could have a material adverse effect on the Company’s business, results of operations and financial condition.

 

Like other aviation companies, the Company’s business is affected by factors beyond its control, including air traffic congestion at airports, airport slot restrictions, air traffic control inefficiencies, natural disasters, adverse weather conditions, increased and changing security measures, changing regulatory and governmental requirements, new or changing travel-related taxes, or the outbreak of disease. Factors that cause flight delays frustrate passengers and increase operating costs and decrease revenues, which in turn could adversely affect profitability. In the United States, the federal government singularly controls all U.S. airspace, and aviation operators are completely dependent on the FAA to operate that airspace in a safe, efficient, and affordable manner. The air traffic control system, which is operated by the FAA, faces challenges in managing the growing demand for U.S. air travel. U.S. air-traffic controllers often rely on outdated technologies that routinely overwhelm the system and compel aviation operators to fly inefficient, indirect routes resulting in delays and increased operational cost. In addition, there are currently proposals before Congress that could potentially lead to the privatization of the United States’ air traffic control system, which could adversely affect the Company’s business.

 

Adverse weather conditions and natural disasters, such as hurricanes, winter snowstorms or earthquakes, can cause flight cancellations or significant delays. Cancellations or delays due to adverse weather conditions or natural disasters, air traffic control problems or inefficiencies, breaches in security or other factors may affect the Company to a greater degree than its competitors who may be able to recover more quickly from these events, and therefore could have a material adverse effect on the Company’s business, results of operations and financial condition to a greater degree than other air carriers. Any general reduction in passenger traffic could have a material adverse effect on the Company’s business, results of operations and financial condition.

 

The operation of aircraft is subject to various risks, and failure to maintain an acceptable safety record may have an adverse impact on our ability to obtain and retain customers.

 

The operation of aircraft is subject to various risks, including catastrophic disasters, crashes, mechanical failures, and collisions, which may result in loss of life, personal injury and/or damage to property and equipment. The Company may experience accidents in the future. These risks could endanger the safety of its customers, personnel, third parties, equipment, cargo, and other property (both the Company’s and that of third parties), as well as the environment. If any of these events were to occur, the Company could experience loss of revenue, termination of customer contracts, higher insurance rates, litigation, regulatory investigations, and enforcement actions (including potential grounding of the Company’s fleet and suspension or revocation of its operating authorities) and damage to its reputation and customer relationships. In addition, to the extent an accident occurs with an aircraft the Company operates or charters, the Company could be held liable for resulting damages, which may involve claims from injured passengers and survivors of deceased passengers. There can be no assurance that the amount of the Company’s insurance coverage available in the event of such losses would be adequate to cover such losses, or that the Company would not be forced to bear substantial losses from such events, regardless of its insurance coverage.

 

Moreover, any aircraft accident or incident, even if fully insured, and whether involving the Company or other private aircraft operators, could create a public perception that the Company is less safe or reliable than other private aircraft operators, which could cause customers to lose confidence and switch to other private aircraft operators or other means of transportation. In addition, any aircraft accident or incident, whether involving the Company or other private aircraft operators, could also affect the public’s view of industry safety, which may reduce the amount of trust by customers.

 

The Company incurs considerable costs to maintain the quality of (i) its safety program, (ii) its training programs and (iii) its fleet of aircraft. The Company cannot guarantee that these costs will not increase. Likewise, the Company cannot guarantee that its efforts will provide an adequate level of safety or an acceptable safety record. If the Company is unable to maintain an acceptable safety record, the Company may not be able to retain existing customers or attract new customers, which could have a material adverse effect on its business, financial condition, and results of operations.

 

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The supply of pilots to the airline industry is limited and may negatively affect the Company’s operations and financial condition. Increases in labor costs may adversely affect the Company’s business, results of operations and financial condition.

 

The Company’s pilots are subject to stringent pilot qualification and crew member flight training standards, which among other things require minimum flight time for pilots and mandate strict rules to minimize pilot fatigue. The existence of such requirements effectively limits the supply of qualified pilot candidates and increases pilot salaries and related labor costs. A shortage of pilots would require the Company to further increase its labor costs, which would result in a material reduction in its earnings. Such requirements also impact pilot scheduling, work hours and the number of pilots required to be employed for the Company’s operations.

 

In addition, the Company’s operations and financial condition may be negatively impacted if it is unable to train pilots in a timely manner. Due to an industry-wide shortage of qualified pilots, driven by the flight hours requirements under the FAA qualification standards and attrition resulting from the hiring needs of other industry participants, pilot training timelines have significantly increased and stressed the availability of flight simulators, instructors, and related training equipment. As a result, the training of the Company’s pilots may not be accomplished in a cost-efficient manner or in a manner timely enough to support the Company’s operational needs.

 

Pilot attrition may negatively affect the Company’s operations and financial condition.

 

In recent years, the Company has observed significant volatility in pilot attrition as a result of pilot wage and bonus increases at other industry participants and the growth of cargo, low-cost and ultra-low-cost airlines. If attrition rates are higher than the availability of replacement pilots, the Company’s operations and financial results could be materially and adversely affected.

 

The Company is exposed to operational disruptions due to maintenance.

 

The Company’s fleet requires regular maintenance work, which may cause operational disruption. The Company’s inability to perform timely maintenance and repairs can result in its aircraft being underutilized which could have an adverse impact on its business, financial condition, and results of operations. On occasion, airframe manufacturers and/or regulatory authorities require mandatory or recommended modifications to be made across a particular fleet which may mean having to ground a particular type of aircraft. This may cause operational disruption to and impose significant costs on the Company. Moreover, as the Company’s aircraft base increases, maintenance costs could potentially increase.

 

Significant increases in fuel costs could have a material adverse effect on the Company’s business, financial condition, and results of operations.

 

Fuel is essential to the operation of the Company’s aircraft and to the Company’s ability to carry out its transport services. Fuel costs are a key component of the Company’s operating expenses. A significant increase in fuel costs may negatively impact the Company’s revenue, margins, operating expenses, and results of operations. While the Company may be able to pass increases in fuel costs on to its customers, increased fuel surcharges may affect the Company’s revenue and retention if a prolonged period of high fuel costs occurs. To the extent there is a significant increase in fuel costs that affects the amount the Company’s customers choose to fly, it may have a material adverse effect on the Company’s business, financial condition, and results of operations.

 

If efforts to continue to build a strong brand identity and improve member satisfaction and loyalty are not successful, the Company may not be able to attract or retain members, and its operating results may be adversely affected.

 

The Company must continue to build and maintain strong brand identity for its products and services, which have expanded over time. The Company believes that strong brand identity will continue to be important in attracting members. If the Company’s efforts to promote and maintain its brand are not successful, the Company’s operating results and our ability to attract members and other customers may be adversely affected. From time to time, the Company’s members and other customers may express dissatisfaction with its products and service offerings, in part due to factors that could be outside of the Company’s control, such as the timing and availability of aircraft and service interruptions driven by prevailing political, regulatory, or natural conditions. To the extent dissatisfaction with the Company’s products and services is widespread or not adequately addressed, the Company’s brand may be adversely impacted and its ability to attract and retain members may be adversely affected. With respect to the Company’s planned expansion into additional markets, the Company will also need to establish its brand and to the extent it is not successful, the Company’s business in new markets would be adversely impacted.

 

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Any failure to offer high-quality customer support may harm the Company’s relationships with its customers and could adversely affect the Company’s reputation, brand, business, financial condition, and results of operations.

 

Through the Company’s marketing, advertising, and communications with its customers, the Company sets the tone for its brand as aspirational but also within reach. The Company’s strives to create high levels of customer satisfaction through the experience provided by its team and representatives. The ease and reliability of its offerings, including its ability to provide high-quality customer support, helps the Company attract and retain customers. The Company’s ability to provide effective and timely support is largely dependent on its ability to attract and retain skilled employees who can support the Company’s customers and are sufficiently knowledgeable about the Company’s product and services. As the Company continues to grow its business and improve its platform, it will face challenges related to providing quality support at an increased scale. Any failure to provide efficient customer support, or a market perception that the Company does not maintain high-quality support, could adversely affect the Company’s reputation, brand, business, financial condition, and results of operations.

 

The demand for the Company’s services is subject to seasonal fluctuations.

 

Demand for the Company’s services will fluctuate over the course of the year and is higher in the summer season and during holiday periods. During periods of higher demand, the Company’s ability to provide agreed upon levels of service to its customers may deteriorate, which could have a negative impact on the Company’s reputation and its ability to succeed.

 

Changes in laws or regulations, or a failure to comply with any laws or regulations, may adversely affect our business, investments, and results of operations.

 

We are subject to laws and regulations enacted by national, regional, and local governments. The Company’s business is subject to significant regulation by the FAA, the TSA (Transportation Security Administration) as well as “know your customer” obligations and other laws and regulations. The laws and regulations concerning the selling of the Company’s product or services may change and if they do then the selling of the Company’s product or service may no longer be possible or profitable. In addition, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments, and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and our results of operations.

 

The Company’s failure to attract and retain highly qualified personnel in the future could harm its business.

 

The Company believes that its future success will depend in large part on its ability to retain or attract highly qualified management, technical and other personnel. The Company may not be successful in retaining key personnel or in attracting other highly qualified personnel. If the Company is unable to retain or attract significant numbers of qualified management and other personnel, the Company may not be able to grow and expand its business.

 

Risks Relating to Ownership of Common Stock

 

The Company has never paid cash dividends on its capital stock, and Jet.AI does not anticipate paying dividends in the foreseeable future.

 

The Company has never paid cash dividends on its capital stock and currently intends to retain any future earnings to fund the growth of its business, other than mandatory dividend payments on its preferred stock, subject to Delaware law. Any determination to pay dividends in the future will be at the discretion of the Jet.AI Board and will depend on Jet.AI’s financial condition, operating results, capital requirements, general business conditions and other factors that the Jet.AI Board may deem relevant. As a result, capital appreciation, if any, of Jet.AI’s Common Stock will be the sole source of gain for the foreseeable future.

 

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The Company’s stock price may be volatile, and you may not be able to sell shares at or above the price at which you purchase shares or realize any value on your warrants.

 

Fluctuations in the price of the Common Stock could contribute to the loss of all or part of your investment. If an active market for our securities develops and continues, the trading price of Common Stock could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control.

 

Factors affecting the trading price of our Common Stock may include:

 

  the realization of any of the risk factors presented in this prospectus;
     
  actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to Jet.AI;
     
  failure to meet or exceed financial estimates and projections of the investment community or that Jet.AI provides to the public;
     
  issuance of new or updated research or reports by securities analysts or changed recommendations for the industry in general;
     
  announcements of significant acquisitions, strategic partnerships, joint ventures, collaborations, financings, or capital commitments;
     
  the volume of Common Shares available for public sale;
     
  operating and stock price performance of other companies that investors deem comparable to Jet.AI;
     
  Jet.AI’s ability to market new and enhanced products and technologies on a timely basis;
     
  changes in laws and regulations affecting Jet.AI’s business;
     
  Jet.AI’s ability to meet compliance requirements;
     
  commencement of, or involvement in, litigation involving Jet.AI;
     
  changes in financial estimates and recommendations by securities analysts concerning Jet.AI or the market in general;
     
  the timing and magnitude of investments in the growth of the business;
     
  actual or anticipated changes in laws and regulations;
     
  additions or departures of key management or other personnel;

 

  increased labor costs;
     
  disputes or other developments related to intellectual property or other proprietary rights, including litigation;
     
  the ability to market new and enhanced solutions on a timely basis;
     
  sales of substantial amounts of Common Stock by Jet.AI’s directors, executive officers, or significant stockholders, or the perception that such sales could occur, including as a result of transactions under that certain Share Purchase Agreement, dated as of August 4, 2022 (the “Share Purchase Agreement”), between Jet Token and GEM Yield LLC SCS and GEM Yield Bahamas Limited (together with GEM Yield LLC SCS, “GEM”), and that certain Forward Purchase Agreement, dated August 6, 2023, between the Company and (i) Meteora Capital Partners, LP, (ii) Meteora Select Trading Opportunities Master, LP, and (iii) Meteora Strategic Capital, LLC (such parties, collectively, “Meteora”), which was amended on August 31, 2023 and October 2, 2023 (as amended, the “Forward Purchase Agreement”);

 

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  trading volume of our Common Stock, including as a result of transactions under the Share Purchase Agreement and the Securities Purchase Agreement;
     
  changes in capital structure, including future issuances of securities or the incurrence of debt and the terms thereof; and
     
  general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

 

Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to Jet.AI could depress our stock price regardless of our business, prospects, financial conditions, or results of operations. A decline in the market price of Jet.AI’s securities also could adversely affect its ability to issue additional securities and its ability to obtain additional financing in the future.

 

Anti-takeover provisions contained in the Company’s Certificate of Incorporation and applicable laws could impair a takeover attempt.

 

The Company’s Certificate of Incorporation afford certain rights and powers to the Jet.AI Board that could contribute to the delay or prevention of an acquisition that it deems undesirable. Any of the foregoing provisions and terms that have the effect of delaying or deterring a change in control could limit the opportunity for stockholders to receive a premium for their shares of our securities, and could also affect the price that some investors are willing to pay for our securities.

 

If we fail to comply with the continued listing requirements of Nasdaq, we would face possible delisting, which would result in a limited public market for our shares, limit our ability to access existing liquidity facilities and make obtaining future financing more difficult for us.

 

Our Common Stock is currently listed on Nasdaq under the symbol “JTAI”. On December 1, 2023, the Company received a notification letter (the “ Initial Notice Letter”) from the Nasdaq Listing Qualifications Staff of Nasdaq notifying the Company that its amount of stockholders’ equity had fallen below the $10 million required minimum for continued listing on The Nasdaq Global Market  set forth in Nasdaq Listing Rule 5450(b)(1)(A) (the “Minimum Stockholders’ Equity Requirement”). The Company’s stockholders’ deficit as of December 31, 2023 was $(3,963,039). The Initial Notice Letter also noted that as of September 30, 2023, the Company did not meet The Nasdaq Global Market alternative listing criteria for the “Market Value” standard or the “Total Assets / Total Revenues” standard. The Initial Notice Letter further noted that the Company may consider applying to transfer the Company’s securities to The Nasdaq Capital Market, which would require the Company to, among other things, meet The Nasdaq Capital Market’s continued listing requirements.

 

In accordance with Nasdaq rules and as stated in the Initial Notice Letter, the Company submitted a plan to regain compliance with the Minimum Stockholders’ Equity Requirement, which involved a proposed transfer to The Nasdaq Capital Market as well as a number of capital raising measures that the Company intended to take. Nasdaq provided written confirmation of its acceptance of the Company’s compliance plan and granted the Company an extension through May 29, 2024 to evidence completion of its plan.

 

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On April 15, 2024, the Company received an additional notification letter from Nasdaq (the “Second Notice Letter”) stating that the Company was not in compliance with Nasdaq Listing Rule 5450(a)(1), as the minimum bid price of the Company’s Class A Common Stock had been below $1.00 per share for 30 consecutive business days (the “Minimum Bid Price Requirement”). The notification of noncompliance has no immediate effect on the listing or trading of the Company’s Common Stock on The Nasdaq Global Market. The Company has 180 calendar days, or until October 14, 2024, to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the minimum bid price of the Company’s Common Stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-calendar day grace period. In the event the Company does not regain compliance with the Minimum Bid Price Requirement by October 14, 2024, the Company may be eligible for an additional 180-calendar day compliance period if it elects to transfer to The Nasdaq Capital Market to take advantage of the additional compliance period offered on that market. To qualify, the Company would be required to meet the continued listing requirements for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of its intention to cure the bid price deficiency during the second compliance period. The Company’s failure to regain compliance during this period could result in delisting. The Company intends to actively monitor the bid price of its Common Stock and may, if appropriate, consider implementing available options to regain compliance with the Minimum Bid Price Requirement.

 

On May 30, 2024, the Company received an additional notification letter from Nasdaq (the “Third Notice Letter”) stating that the Company had not regained compliance with the Minimum Stockholders’ Equity Requirement for continued listing discussed in the Initial Notice Letter, which it was required to meet by May 29, 2024 pursuant to its compliance plan. The Third Notice Letter notified the Company that, unless the Company requested an appeal hearing before the Nasdaq Hearings Panel (the “Panel”) by June 6, 2024, trading of the Company’s Common Stock would be suspended at the opening of business on June 10, 2024, and a Form 25-NSE would be filed with the SEC, which would remove the Company’s securities from listing and registration on The Nasdaq Stock Market (such notification, the “Delisting Notice”).

 

As directed in the Third Notice Letter, the Company timely requested a hearing before the Panel and paid the applicable fee to appeal the Delisting Notice. The Delisting Notice has no immediate effect on the listing or trading of the Company’s Common Stock. The Company’s hearing request stayed the suspension of trading on the Company’s securities, and the Company’s securities will continue to trade on The Nasdaq Global Market until the hearing process concludes and the Panel issues a written decision. While the Company can provide no assurances that the Panel will grant the Company’s request for a suspension of delisting or will permit the Company’s continued listing on The Nasdaq Global Market after the hearing process concludes, the Company is working diligently to cure the deficiencies set forth in the Delisting Notice and plans to regain compliance with the continued listing requirements as soon as practicable. Should the Company regain compliance and receive a moot notice from Nasdaq in advance of the hearing before the Panel, then no hearing would take place.

 

Management has completed an application to transfer its securities to The Nasdaq Capital Market tier and filed both a registration statement and preliminary proxy statement in connection with its private placement with Ionic Ventures, LLC (“Ionic”; such private placement, the “Ionic Transaction”), as discussed in the section of this Prospectus/Offer to Exchange entitled “Management’s Discussion and Analysis of Financial Condition and Results Of Operations – The Ionic Transaction.” Through its recent transfer application to The Nasdaq Capital Market tier and the Ionic Transaction, the Company expects to meet the “Equity” standard of the continued listing requirements of The Nasdaq Capital Market, which requires listed companies to maintain minimum stockholders’ equity of $2.5 million. The Company has been actively executing its compliance plan, including by utilizing its existing GEM facility and receiving gross proceeds of $1.5 million of the $16.5 million to be funded pursuant to the Ionic Transaction.

 

Although the Company believes it will be able to achieve compliance with The Nasdaq Capital Market’s continued listing requirements, there can be no assurance that the Company will be able to regain compliance with such requirements or maintain compliance with any other listing requirements within the time frame required by Nasdaq or at all, particularly if the Company’s stock price trades below $1.00 for a sustained period. Furthermore, there can be no assurance that the Company will be able to satisfy the requirements necessary to transfer the listing of its Common Stock to The Nasdaq Capital Market. Nasdaq’s determination that we fail to meet the continued listing standards of Nasdaq may result in our securities being delisted from Nasdaq as set forth in the Delisting Notice.

 

A delisting of our Common Stock and listed warrants and our inability to list on another national securities market could negatively impact us by: (i) reducing the liquidity and market price of our Common Stock and listed warrants; (ii) reducing the number of investors willing to hold or acquire our Common Stock and listed warrants, which could negatively impact our ability to raise equity financing; (iii) limiting our ability to use certain registration statements to offer and sell freely tradable securities, thereby limiting our ability to access the public capital markets; and (iv) impairing our ability to provide equity incentives to our employees. In addition, a delisting of our Common Stock would prevent us from being able to access financing under the Share Purchase Agreement. Furthermore, the Company may have to pay all or a portion of the $800,000 commitment fee due under the Share Purchase Agreement in cash if its shares are no longer listed. The Company may not have sufficient funds to be able to pay such fee. See the section of this Prospectus/Offer to Exchange entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

 

Stockholders may experience dilution of their ownership interest due to the issuance of additional Common Shares upon the conversion of the Series B Preferred Stock, especially since the Series B Preferred Stock has fluctuating conversion rates that are set at a discount to market prices of our Common Shares during the period immediately following conversion.

 

We have raised approximately $1.5 million in financing through the issuance of, among other securities, shares of Series B Preferred Stock in the Ionic Transaction, and may issue additional shares of Series B Preferred Stock upon exercise of a warrant issued in the private placement for up to $15,000,000. The shares of Series B Preferred Stock automatically convert into shares of our Common Stock, subject to certain conditions and limitations, by the tenth trading day following their issuance at a conversion price based 90% of the trading price of our Common Stock, or 80% in the event we are delisted from Nasdaq. See the section of this Prospectus/Offer to Exchange entitled “Management’s Discussion and Analysis of Financial Condition and Results Of Operations – The Ionic Transaction.” This could result in material dilution to existing stockholders of the Company. Because the conversion price is based upon the trading prices of our shares at the time of conversion, the number of shares into which the Series B Preferred Stock may be converted may increase without an upper bound. If the trading prices of our shares are low when the conversion price of the convertible debt is determined, we would be required to issue a greater number of shares to the converting holder, which could cause substantial dilution to our stockholders. In addition, if any or all of the holders Series B Preferred Stock convert and then sell our Common Stock, this could result in an imbalance of supply and demand for our Common Stock and reduce our stock price significantly. The further our stock price declines, the further the adjustment of the conversion price will fall and the greater the number of shares we will have to issue upon conversion, resulting in further dilution to our stockholders. Because a market price-based conversion formula can lead to dramatic stock price reductions and corresponding negative effects on both a company and its stockholders, convertible security financings with market price-based conversion ratios have colloquially been called “floorless,” “toxic,” and “death spiral,” convertibles.

 

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The issuances of additional Common Shares under the Share Purchase Agreement and the GEM Warrant may result in dilution of future Jet.AI stockholders and have a negative impact on the market price of Common Stock.

 

The proceeds from the Business Combination, Forward Purchase Agreement, and our existing cash and cash equivalents may not be sufficient to meet our working capital needs and we intend to draw on the Share Purchase Agreement to meet our cash needs. Further, our estimates may prove to be inaccurate, and we could spend our capital resources faster than we currently expect. Further, changing circumstances, some of which may be beyond our control, could also cause us to spend capital significantly faster than we currently anticipate, and we may need to seek additional funding sooner than planned. To the extent this occurs, it could impose significant dilution on the Company’s stockholders.

 

In addition to shares to be sold to GEM upon a drawdown, the Share Purchase Agreement entitles GEM to receive (i) payment of a commitment fee of $800,000 payable in either cash or Common Stock and (ii) a warrant that is exercisable to purchase up to 2,179,447 Common Shares on a fully diluted basis, subject to exercisability currently being limited to 4.99% of the Company’s outstanding Common Stock after giving effect to such exercise, at an exercise price of $8.60 per share (subject to potential reduction in August 2024) (the “GEM Warrant”). The shares issuable pursuant to the GEM Warrant were calculated on a fully diluted basis as of the closing of the Business Combination, which calculation included shares issuable upon exercise of the Redeemable Warrants, the Private Placement Warrants, the Merger Consideration Warrants, Jet Token options. and Jet Token RSU Awards. If the Redeemable Warrants, the Private Placement Warrants, Merger Consideration Warrants, Jet Token options, and/or Jet Token RSU Awards are not exercised in full or at all, and GEM exercises the GEM Warrant, then GEM could hold significantly more than 6% of the outstanding Common Stock of Jet.AI on a non-diluted basis.

 

If the average closing price of Jet.AI’s Common Stock for the 10 trading days following the first anniversary of the date of listing is less than 90% of the then-current exercise price of the GEM Warrant, then the exercise price of the GEM Warrant will be adjusted to 110% of our then current trading price.

 

The issuances of Common Stock pursuant to the GEM Warrant and the Share Purchase Agreement would result in dilution of future Jet.AI stockholders and could have a negative impact on the market price of Common Stock and Jet.AI’s ability to obtain additional financing. See the section of this Prospectus/Offer to Exchange entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Overview – Share Purchase Agreement” for a description of the GEM Warrant.

 

A significant portion of Jet.AI’s total outstanding shares are restricted from immediate resale following the consummation of the Business Combination, but may be sold into the market in the near future. This could cause the market price of the Common Stock to drop significantly, even if our business is doing well.

 

Oxbridge’s Sponsor holds approximately 45.5% of the Company’s Common Stock. Pursuant to the terms of the Lock-Up Agreements, the Founder Shares, as well as Common Shares held by Michael Winston and George Murnane, the Interim CEO and Interim CFO of the Company, may not be transferred until the earlier to occur of (a) one year after the Closing or (b) the date after the Closing on which we complete a liquidation, merger, stock exchange or other similar transaction with an unaffiliated third party that results in all of stockholders having the right to exchange their stock for cash, securities or other property.

 

Certain existing stockholders purchased our securities at a price below the current trading price of such securities, and may experience a positive rate of return based on the current trading price.

 

Given the relatively lower purchase prices that some of our stockholders paid to acquire some of their securities compared to the current trading price of our Common Shares, these stockholders in some instances may earn a positive rate of return on their investment, which may be a significant positive rate of return, depending on the market price of our Common Shares at the time that such stockholders choose to sell their Common Shares.

 

Public stockholders may not be able to experience the same positive rates of return on securities they purchase due to the low price at which some of our stockholders, particularly the Sponsor and Meteora, acquired shares of our Common Stock or the prices at which GEM may receive shares at the time of a drawdown under the Share Purchase Agreement.

 

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Sales of Common Stock, or the perception of such sales, by us, our significant stockholders or the Selling Stockholder in the public market or otherwise could cause the market price for Common Stock to decline and the Selling Stockholder may receive significant proceeds.

 

The sale of Common Shares in the public market or otherwise, particularly sales by the Sponsor and our officers or directors following the expiration of lock-up restrictions expiring in August 2024, by the Selling Stockholder or the perception that such sales could occur, could harm the prevailing market price of shares of our Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that is deemed appropriate. Resales of Common Stock may cause the market price of our securities to drop significantly, even if our business is doing well.

 

Certain stockholders purchased or were issued securities at prices that may be significantly below the trading price of our Common Stock:

 

  Sponsor paid approximately $0.009 per share, for 2,875,000 Class B Ordinary Shares; and
  Sponsor and Maxim paid approximately $1.00 per warrant, for 5,760,000 Private Placement Warrants.

 

In connection with an extraordinary general meeting of Oxbridge shareholders in November 2022, in which Oxbridge asked its shareholders to vote to extend the date by which Oxbridge had to consummate a business combination, the holders of 10,313,048 Class A Ordinary Shares or approximately 90.0% of the shares with redemption rights at the time exercised their right to redeem their shares for cash at a redemption price of approximately $10.22 per share, for an aggregate redemption amount of $105,424,960. Subsequently, in connection with the Business Combination, holders of 1,144,215 of Oxbridge’s Class A Ordinary Shares, or approximately 96.4% of the shares with redemption rights at the time, exercised their right to redeem their shares for cash at a redemption price of approximately $11.10 per share, for an aggregate redemption amount of $12,655,017. On August 8, 2023, pursuant to the Forward Purchase Agreement, Meteora purchased 663,556 of the Class A Ordinary Shares from third parties through a broker in open market transactions or by reversing previously submitted redemption requests and waived its redemption rights with respect to these shares. Furthermore, Meteora purchased an additional 548,127 such shares.

 

We have an effective registration statement (SEC File No. 333-274432) covering the resale of up to 32,330,074 Common Shares held by, or available upon exercise of warrants or other convertible securities by, certain of our stockholders, as well as the issuance by us of Common Shares upon exercise of our outstanding warrants. Given the substantial number of Common Shares registered for potential resale by these stockholders, the sale of shares by them, or the perception in the market that they intend to sell shares, could increase the volatility of the market price of our Common Stock or result in a significant decline in the public trading price of our Common Stock. Many of these stockholders have or may acquire their shares at a significant discount to the market price of our Common Stock. This will create an incentive for such stockholders to sell shares of our Common Stock because they purchased the shares at prices lower than the then-current trading price.

 

If securities or industry analysts do not publish or cease publishing research or reports about Jet.AI, its business or its market, or if they change their recommendations regarding the Common Stock adversely, the price and trading volume of the Common Stock could decline.

 

The trading market for the Common Stock will be influenced by the research and reports that industry or securities analysts may publish about Jet.AI, its business, its market, or its competitors. If any of the analysts who may cover Jet.AI change their recommendation regarding the Common Stock adversely, or provide more favorable relative recommendations about its competitors, the price of the Common Stock would likely decline. If any analyst who may cover Jet.AI were to cease their coverage or fail to regularly publish reports on Jet.AI, we could lose visibility in the financial markets, which could cause the stock price or trading volume of Jet.AI securities to decline.

 

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The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

 

We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including (a) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (b) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (c) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. As a result, our shareholders may not have access to certain information they deem important. We will remain an emerging growth company until the earliest of: (a) the last day of the fiscal year (i) following August 16, 2026, the fifth anniversary of our IPO of units, which closed on August 16, 2021, (ii) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time), or (iii) in which we are deemed to be a large accelerated filer, which means the market value of our the Common Shares that are held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter; and (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

 

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

We cannot predict if investors will find our Common Stock less attractive because we will rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our share price may be more volatile.

 

Risks Related to Our Warrants and the Offer and Consent Solicitation

 

The Warrant Amendments, if approved, will allow us to require that all outstanding Warrants be exchanged for Common Shares at a ratio that is 10% less than the Exchange Ratio applicable to Warrants in the Offer.

 

If we complete the Offer and Consent Solicitation and obtain the requisite approval of the Warrant Amendments by the requisite number of Warrantholders, the Company will have the right to require holders of all Warrants that remain outstanding after the closing of the Offer to exchange each of their Warrants for a number of Common Shares equal to 10% less than the number of Common Shares such Warrantholder would have received as Exchange Consideration had their Warrants been exchanged pursuant to the applicable Exchange Ratio in the Offer. However, even though as a result of the approval of the Warrant Amendments we intend to require an exchange of all remaining outstanding Warrants, we would not be required to effect such an exchange and may defer doing so, if ever, until most economically advantageous to us.

 

Pursuant to the terms of the Warrant Agreements, the consent of holders of at least a majority of the outstanding Redeemable Warrants and of at least 65% of the outstanding Merger Consideration Warrants is required to approve the Warrant Amendment to each of the respective Warrant Agreements. Therefore, one of the conditions to the adoption of the Warrant Amendments is the receipt of the requisite thresholds of approval from holders of the outstanding Public Warrants. If adopted, we currently intend to require the exchange of all outstanding Warrants to Common Shares as provided in the Warrant Amendments, which would result in the holders of any remaining outstanding Warrants receiving approximately 10% fewer Common Shares than if they had tendered their Warrants in the Offer.

 

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Our Warrants may be exchanged for Common Shares pursuant to the Offer, which will increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

 

The exchange of the Warrants will result in the issuance of additional Common Shares, although there can be no assurance that such Warrant exchange will be completed or that all of the holders of the Warrants will elect to participate in the Offer. Any Warrants remaining outstanding after the completion of the Offer likely will be exercised only if the $11.50 per share exercise price of $11.50 per share in the case of the Redeemable Warrants and the Private Warrants or of $15.00 per share in the case of the Merger Consideration Warrants is below the market price of our Common Stock. To the extent such Warrants are exercised, additional Common Stock will be issued. If we complete the Offer and Consent Solicitation and obtain the requisite approval of the Warrant Amendments by holders of the Warrants, the Company will have the right to require holders of all Warrants that remain outstanding after the closing of the Offer to exchange each of their Warrants for Common Shares in an amount that is 10% less than the Exchange Consideration such Warrantholder would have received had their Warrants been exchanged pursuant to the applicable Exchange Ratio in the Offer. These issuances of Common Shares will result in dilution to our stockholders and increase the number of shares eligible for resale in the public market.

 

We have not obtained a third-party determination that the Offer or the Consent Solicitation is fair to Warrantholders.

 

None of the Company, our affiliates, directors, officers, or employees, or the Information Agent or the Exchange Agent for the Offer and Consent Solicitation is making any recommendations to any Warrantholder as to whether to exchange their Warrants or deliver their consent to the Warrant Amendments. We have not retained, and do not intend to retain, any unaffiliated representative to act on behalf of the Warrantholders for purposes of negotiating the Offer or Consent Solicitation or preparing a report concerning the fairness of the Offer or the Consent Solicitation. You must make your own independent decision regarding your participation in the Offer and the Consent Solicitation.

 

There is no guarantee that tendering your Warrants in the Offer will put you in a better future economic position.

 

We can give no assurance as to the market price of our Common Stock in the future. If you choose to tender some or all of your Warrants in the Offer, future events may cause an increase in the market price of our Common Stock and Warrants, which may result in a lower value realized by participating in the Offer than you might have realized if you did not exchange your Warrants. Similarly, if you do not tender your Warrants in the Offer, there can be no assurance that you can sell your Warrants (or exercise them for Common Shares) in the future at a higher value than would have been obtained by participating in the Offer. In addition, if the Warrant Amendments are adopted, you may receive fewer shares than if you had tendered your Warrants in the Offer. See the risk factor under the heading, “The Warrant Amendments, if approved, will allow us to require that all outstanding Warrants be exchanged for Common Shares at a ratio that is 10% less than the Exchange Ratio applicable to Warrants in the Offer.” You should consult your own individual tax and/or financial advisor for assistance on how this may affect your individual situation.

 

The number of Common Shares offered in the Offer is fixed and will not be adjusted. The market price of our Common Stock may fluctuate, and the market price of the Common Stock when we deliver Common Shares in exchange for your Warrants could be less than the market price at the time you tender your Warrants.

 

The number of Common Shares for each Warrant accepted for exchange is fixed at the number of shares specified on the cover of this Prospectus/Offer to Exchange and will fluctuate in value if there is any increase or decrease in the market price of our Common Stock or the Warrants after the date of this Prospectus/Offer to Exchange. Therefore, the market price of the Common Stock when we deliver Common Share in exchange for your Warrants could be less than the market price at the time you tender your Warrants. The market price of our Common Stock could continue to fluctuate and be subject to volatility during the period of time between when we accept Warrants for exchange in the Offer and when we deliver Common Shares in exchange for Warrants, or during any extension of the Offer Period.

 

The liquidity of the Warrants that are not exchanged may be reduced.

 

If the Warrant Amendments are approved, it is unlikely that any Warrants will remain outstanding following the completion of the Offer and Consent Solicitation. See the risk factor under the heading, “The Warrant Amendments, if approved, will allow us to require that all outstanding Warrants be exchanged for Common Shares at a ratio that is 10% less than the Exchange Ratio applicable to Warrants in the Offer.” However, if any unexchanged Warrants remain outstanding, then the ability to sell such Warrants may become more limited due to the reduction in the amount of the Warrants outstanding upon completion of the Offer and Consent Solicitation. A more limited trading market might adversely affect the liquidity, market price, and price volatility of unexchanged Warrants. In addition, as discussed below, our Warrants may be removed from quotation on Nasdaq. As a result, investors in our Warrants may find it more difficult to dispose of or obtain accurate quotations as to the market value of our Warrants, and the ability of our stockholders to sell our Warrants in the secondary market may be materially limited. If there continues to be a market for our unexchanged Warrants, these securities may trade at a discount to the price at which the securities would trade if the number outstanding were not reduced, depending on the market for similar securities and other factors.

 

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Nasdaq may delist our Public Warrants from trading on its exchange, which could limit the ability of holders of our Public Warrants to make transactions in our Public Warrants.

 

If the Warrant Amendments are approved, it is unlikely that any Warrants will remain outstanding following the completion of the Offer and Consent Solicitation. See the risk factor under the heading, “The Warrant Amendments, if approved, will allow us to require that all outstanding Warrants be exchanged for Common Shares at a ratio that is 10% less than the Exchange Ratio applicable to Warrants in the Offer.” However, if any unexchanged Warrants remain outstanding following the completion of the Offer and Consent Solicitation, we cannot assure you that our Public Warrants, including the Redeemable Warrants that trade under the ticker “JTAIW” or the Merger Consideration Warrants that trade under the ticker “JTAIZ,” will continue to be listed on Nasdaq in the future. In particular, Nasdaq may consider delisting the Redeemable Warrants, the Merger Consideration Warrants, or all of our Public Warrants if it determines that the extent of public distribution or aggregate market value of the outstanding Public Warrants has become so reduced as to make further listing inadvisable, or if it otherwise determines continued listing is unwarranted.

 

If Nasdaq delists our Public Warrants from trading on its exchange and we are unable to list our securities on another national securities exchange, our Public Warrants could be quoted on an over-the-counter market. However, even if this were to occur, holders of Public Warrants could face significant material adverse consequences, including:

 

a limited availability of market quotations for the Warrants;

 

reduced liquidity for the Warrants; and

 

the risk that any market makers that do initially make a market in our unexchanged Warrants eventually cease to do so.

 

THE OFFER AND CONSENT SOLICITATION

 

Participation in the Offer and Consent Solicitation involves a number of risks, including, but not limited to, the risks identified in the section entitled “Risk Factors.” Warrantholders should carefully consider these risks and are urged to speak with their personal legal, financial, investment and/or tax advisor as necessary before deciding whether or not to participate in the Offer and Consent Solicitation. In addition, we strongly encourage you to read this Prospectus/Offer to Exchange in its entirety, and the publicly-filed information about us, before making a decision regarding the Offer and Consent Solicitation.

 

General Terms

 

Until the Expiration Date, we are offering Warrantholders the opportunity to receive 0.3054 Common Shares in exchange for each Redeemable Warrant or Private Warrant they hold and 1.0133 Common Shares in exchange for each Merger Consideration Warrant they hold. Holders of the Warrants tendered for exchange will not have to pay any of the exercise price for the tendered Warrants in order to receive Common Shares in the exchange.

 

No fractional Common Shares will be issued pursuant to the Offer. Instead, any fractional Common Shares to which a Warrantholder would otherwise have been entitled to receive pursuant to the Offer will be aggregated and then rounded up to the nearest whole Common Share. Our obligation to complete the Offer is not conditioned on the receipt of a minimum number of tendered Warrants.

 

As part of the Offer, we are also soliciting from the Warrantholders their consent to the amendment of the Warrant Agreement. If approved, the Warrant Amendments would permit the Company to require that all outstanding Warrants not exchanged in the Offer be exchanged into a number of Common Shares equal to 10% less than the number of Common Shares that would have been received as Exchange Consideration had the Warrants been exchanged pursuant to the applicable Exchange Ratio in the Offer, which would permit us to eliminate all of the Warrants that remain outstanding after the Offer expires. A copy of the Redeemable Warrant Amendment is attached hereto as Annex A. A copy of the Merger Consideration Warrant Amendment is attached hereto as Annex B. We urge you to carefully read the applicable Warrant Amendment in its entirety. Pursuant to the terms of the Warrant Agreements, the consent of holders of at least a majority of the outstanding Redeemable Warrants is required to approve the Redeemable Warrant Amendment and of at least 65% of the outstanding Merger Consideration Warrants is required to approve the Merger Consideration Warrant Amendment and amend the respective Warrant Agreements. See the section of this Prospectus/Offer to Exchange entitled “The Offer and Consent Solicitation – Transactions and Agreements Concerning Our Securities.

 

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Holders who tender Warrants in the Offer will automatically be deemed, without any further action, to have given their consent to approval of the Warrant Amendments, as applicable (effective upon our acceptance of the Warrants tendered). The consent to the Warrant Amendments is a part of the Letter of Transmittal and Consent relating to the Warrants.

 

You cannot tender any Warrants in the Offer without giving your consent to the applicable Warrant Amendments. Thus, before deciding whether to tender any Warrants, you should be aware that a tender of Warrants may result in the approval of the Warrant Amendments.

 

The Offer and Consent Solicitation is subject to the terms and conditions contained in this Prospectus/Offer to Exchange and the Letter of Transmittal and Consent.

 

You may tender some or all of your Warrants into the Offer. If you elect to tender Warrants in response to the Offer and Consent Solicitation, please follow the instructions in this Prospectus/Offer to Exchange and the related documents, including the Letter of Transmittal and Consent.

 

If you tender Warrants, you may withdraw your tendered Warrants at any time before the Expiration Date and retain them on their current terms, or amended terms if the Warrant Amendments are approved, by following the instructions herein. In addition, Warrants that are not accepted by us for exchange by July 25, 2024 may thereafter be withdrawn by you until such time as the Warrants are accepted by us for exchange.

 

Exchange Consideration

 

Warrants Exchanged in the Offer

 

The number of Common Shares that each Warrantholder will receive as Exchange Consideration for the exchange of a Warrant will vary depending on the type of Warrant tendered for exchange. In each case, the Exchange Consideration will be determined according to the applicable Exchange Ratio. In accordance with the RW Exchange Ratio, each Redeemable Warrant or Private Warrant tendered and accepted for exchange in the Offer will be exchanged for 0.3054 Common Shares. In accordance with the MCW Exchange Ratio, each Merger Consideration Warrant tendered and accepted for exchange in the Offer will be exchanged for 1.0133 Common Shares.

 

For the avoidance of doubt, if a holder exchanges more than one Warrant of a particular type in the Offer, then the consideration due in respect of such exchange of such type of Warrants will (in the case of any Warrants held in “street name” through a direct or indirect participant of DTC, to the extent permitted by, and practicable under, DTC’s procedures) be computed based on the total number of Warrants of such type exchanged by such Warrantholder.

 

Warrants Outstanding After the Offer

 

If approved, the Redeemable Warrant Amendment to the Redeemable Warrant Agreement will require that each Redeemable Warrant or Private Warrant that is outstanding upon the closing of the Offer be mandatorily exchanged for 0.2749 Common Shares, which is a ratio of 10% less than the RW Exchange Ratio applicable to Redeemable Warrants or Private Warrants exchanged in the Offer.

 

If approved, the Merger Consideration Warrant Amendment to the Merger Consideration Warrant Agreement will require that each Merger Consideration Warrant that is outstanding upon the closing of the Offer be mandatorily exchanged for 0.9120 Common Shares, which is a ratio of 10% less than the MCW Exchange Ratio applicable to Merger Consideration Warrants exchanged in the Offer.

 

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Corporate History and Information

 

The IPO and Business Combination

 

Prior to completion of the Business Combination, the Company was a blank-check company named Oxbridge, which was incorporated on April 12, 2021 as a Cayman Islands-exempted company for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization, or other similar transaction with one or more businesses or entities. On August 16, 2021, the Company completed its IPO of 11,500,000 units (the “Oxbridge Units”), including 1,500,000 Oxbridge Units that were issued pursuant to the underwriters’ exercise of their over-allotment option in full, with each Oxbridge Unit consisting of one share of Oxbridge’s Class A ordinary shares, par value $0.0001 per share (the “Class A Oxbridge Shares”), and one warrant, where each whole warrant was exercisable to purchase one Class A Oxbridge Share at a price of $11.50 per share.

 

Simultaneously with the closing of its IPO, the Company consummated the private placement of 5,760,000 Private Warrants to the Sponsor and Maxim Partners, the parent company of the representative to the underwriters in its IPO, at an average purchase price of $1.00 per Private Warrant. The Company also issued an aggregate of 2,875,000 of Oxbridge’s Class B ordinary shares, par value $0.0001 per share (the “Class B Oxbridge Shares”), to the Sponsor for an aggregate purchase price of $25,000, or approximately $0.009 per share.

 

On August 10, 2023, in accordance with the Business Combination Agreement dated February 24, 2023, as amended on May 11, 2023: (i) Oxbridge redomiciled as a Delaware corporation and was immediately renamed Jet.AI Inc.; and promptly thereafter, (ii) a subsidiary of Oxbridge merged with and into Jet Token, with Jet Token surviving the merger as a wholly owned subsidiary of the Company; and (iii) Jet Token (as the surviving entity of the first merger) merged with and into a second subsidiary of Oxbridge, with such subsidiary surviving the second merger as a wholly owned subsidiary of the Company. In connection with the Business Combination, security holders of Oxbridge and Jet Token immediately prior to the closing of the Business Combination became security holders of the Company.

 

As a result of the Business Combination:

 

the then-issued and outstanding Class A Oxbridge Shares and Class B Oxbridge Shares were converted, on a one-for-one basis, into Common Shares of the Company;

 

the then-issued and outstanding Oxbridge warrants were converted into an equal number of the Redeemable Warrants, each exercisable for one Common Share;

 

the then-issued and outstanding Oxbridge Units were converted into an equal number of units of the Company, each consisting of one Common Share and one Redeemable Warrant; and

 

the outstanding shares of Jet Token common stock, options to purchase Jet Token common stock, Jet Token warrants, and Jet Token restricted stock unit (“RSU”) awards were converted into the right to receive the number of Common Shares, Merger Consideration Warrants, options to purchase Common Shares, or RSUs of the Company based on the respective exchange ratios set forth in the Business Combination Agreement;

 

Following the Business Combination, on August 11, 2023, the Company’s Common Stock, Redeemable Warrants, and Merger Consideration Warrants began trading on Nasdaq under the new symbols “JTAI,” “JTAIW,” and “JTAIZ,” respectively.

 

The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP, whereby Oxbridge is treated as the acquired company and Jet Token is treated as the acquirer (the “Reverse Recapitalization”). Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Jet Token issuing stock for the net assets of Oxbridge, accompanied by a recapitalization. The net assets of Oxbridge were stated at historical cost, with no goodwill or other intangible assets recorded.

 

On December 21, 2023, the SEC declared effective a Registration Statement on Form S-1 (File No. 333-274432) that the Company filed relating to (i) the issuance by the Company of up to 11,489,334 Common Shares upon the exercise of 11,489,334 outstanding Redeemable Warrants, and (ii) the offer and sale from time to time by certain selling stockholders named in the registration statement of up to 32,330,074 Common Shares, consisting of, among other securities of the Company, 5,760,000 Common Shares issuable upon exercise of the Private Warrants, 2,179,447 Common Shares issuable upon exercise of the GEM Warrant, Common Shares issued to the Sponsor and to Maxim Partners, and other Common Shares issued by the Company in connection with the IPO and the Business Combination.

 

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Our Corporate Contact Information

 

Our principal executive office is located at 10845 Griffith Peak Drive, Suite 200, Las Vegas, Nevada 89135, and our telephone number is (702) 747-4000. Our corporate website address is https://jet.ai/. We do not incorporate the information contained on, or accessible through, our corporate website into this Prospectus/Offer to Exchange and you should not consider it part of this Prospectus/Offer to Exchange or any prospectus supplement that we file. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website.

 

Warrants Subject to the Offer

 

As of June 26, 2024, there are 23,052,625 Warrants outstanding, consisting of: (i) 9,859,220 Redeemable Warrants; (ii) 7,433,405 Merger Consideration Warrants; and (iii) 5,760,000 Private Warrants. Both the Redeemable Warrants and the Private Warrants were issued as part of the IPO. The Merger Consideration Warrants were issued as part of the Business Combination.

 

The Redeemable Warrants and Private Warrants are governed by the Redeemable Warrant Agreement, pursuant to which the registered Warrantholder is entitled to purchase one Common Shares at a price of $11.50 per share, subject to adjustment pursuant to the Redeemable Warrant Agreement, at any time. The terms of the Private Warrants are identical to the Redeemable Warrants, except that the Private Warrants are not redeemable by the Company and are exercisable on a cashless basis so long as they are held by the Initial Private Warrantholders.

 

The Merger Consideration Warrants are governed by the Merger Consideration Warrant Agreement, pursuant to which the registered Warrantholder is entitled to purchase one Common Shares at a price of $15.00 per share, subject to adjustment pursuant to the Merger Consideration Warrant Agreement, at any time. Pursuant to the Offer, we are offering up to an aggregate of 12,334,621 Common Shares (inclusive of potential shares issuable for purposes of rounding fractional amounts) in exchange for all of the Warrants.

 

Offer Period

 

The Offer and Consent Solicitation will expire on the Expiration Date, which is 11:59 p.m., Eastern Time, on July 25 2024, or such later time and date to which we may extend. We expressly reserve the right, in our sole discretion, at any time or from time to time, to extend the length of the Offer Period during which the Offer and Consent Solicitation is open. There can be no assurance that we will exercise our right to extend the Offer Period. During any extension, all Warrantholders who previously tendered Warrants will have a right to withdraw such previously tendered Warrants until the Expiration Date, as extended. If we extend the Offer Period, we will make a public announcement of such extension by no later than 9:00 a.m., Eastern Time, on the next business day following the Expiration Date as in effect immediately prior to such extension.

 

We may withdraw the Offer and Consent Solicitation only if the conditions to the Offer and Consent Solicitation are not satisfied or waived prior to the Expiration Date. Upon any such withdrawal, we are required by Rule13e-4(f)(5) under the Exchange Act to promptly return the tendered Warrants. We will announce our decision to withdraw the Offer and Consent Solicitation by disseminating notice by public announcement or otherwise as permitted by applicable law.

 

At the expiration of the Offer Period, the current terms of the Warrants will continue to apply to any unexchanged Warrants, or the amended terms will apply if the Warrant Amendments are approved, until the Warrants expire according to the applicable Warrant Agreement, unless early exercised, exchanged, or redeemed.

 

Amendments to the Offer and Consent Solicitation

 

We reserve the right at any time or from time to time to amend the Offer and Consent Solicitation, including by increasing or (if the conditions to the Offer are not satisfied) decreasing the Exchange Ratio used to determine the Exchange Consideration issued as Common Shares for every Warrant exchanged in the Offer or by changing the terms of the Warrant Amendments.

 

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If we make a material change in the terms of the Offer and Consent Solicitation or the information concerning the Offer and Consent Solicitation, or if we waive a material condition of the Offer and Consent Solicitation, we will extend the Offer and Consent Solicitation to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the Exchange Act. These rules require that the minimum period during which an offer must remain open after material changes in the terms of the offer or information concerning the offer, other than a change in price or a change in percentage of securities sought, will depend upon the relevant facts and circumstances, including the relative materiality of the changed terms or information.

 

If we increase or decrease the applicable Exchange Ratio of Common Shares issuable upon exchange of a Warrant or the amount of Warrants sought for tender, and the Offer and Consent Solicitation is scheduled to expire at any time earlier than the end of the tenth business day from the date that we first publish, send, or give notice of such an increase or decrease, then we will extend the Offer and Consent Solicitation until the expiration of that ten-business-day period.

 

Other material amendments to the Offer and Consent Solicitation may require us to extend the Offer and Consent Solicitation for a minimum of five business days, and we will need to amend the Registration Statement on Form S-4 of which this Prospectus/Offer to Exchange forms a part for any material changes in the facts set forth in this Registration Statement on Form S-4.

 

Partial Exchange Permitted

 

If you choose to participate in the Offer, you may tender less than all of your Warrants pursuant to the terms of the Offer. No fractional Common Shares will be issued pursuant to the Offer. Instead, any fractional Common Shares to which a Warrantholder would otherwise have been entitled to receive pursuant to the Offer will be aggregated and then rounded up to the nearest whole Common Share. Our obligation to complete the Offer is not conditioned on the receipt of a minimum number of tendered Warrants.

 

Conditions to the Offer and Consent Solicitation

 

The Offer is conditioned upon the following:

 

the Registration Statement, of which this document is a part, shall have become effective under the Securities Act, and shall not be the subject of any stop order or proceeding seeking a stop order;

 

no action or proceeding by any government or governmental, regulatory, or administrative agency, authority, or tribunal or any other person, domestic or foreign, shall have been threatened, instituted, or pending before any court, authority, agency, or tribunal that directly or indirectly challenges the making of the Offer, the tender of some or all of the Warrants pursuant to the Offer, or otherwise relates in any manner to the Offer; and

 

there shall not have been any action threatened, instituted, pending, or taken, or approval withheld, or any statute, rule, regulation, judgment, order, or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced, or deemed to be applicable to the Offer or us, by any court or any authority, agency, or tribunal that, in our reasonable judgment, would or might, directly or indirectly: (i) make the acceptance for exchange of, or exchange for, some or all of the Warrants illegal or otherwise restrict or prohibit completion of the Offer; or (ii) delay or restrict our ability, or render us unable, to accept for exchange or exchange some or all of the Warrants.

 

The Consent Solicitation is conditioned upon receiving the consent of holders of at least 65% of the outstanding Public Warrants (which is the minimum number required to amend the Warrant Agreement).

 

We will not complete the Offer and Consent Solicitation unless and until the registration statement described above is declared effective by the SEC. If the registration statement is not effective at the Expiration Date, we may, in our discretion, extend, suspend, or cancel the Offer and Consent Solicitation, and will inform Warrantholders of such event. If we extend the Offer Period, we will make a public announcement of such extension and the new Expiration Date by no later than 9:00 a.m., Eastern Time, on the next business day following the Expiration Date as in effect immediately prior to such extension.

 

In addition, as to any Warrantholder, the Offer and Consent Solicitation is conditioned upon such Warrantholder desiring to tender Warrants in the Offer delivering to the Exchange Agent in a timely manner the holder’s Warrants to be tendered and any other required paperwork, all in accordance with the applicable procedures described in this Prospectus/Offer to Exchange and set forth in the Letter of Transmittal and Consent.

 

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We may withdraw the Offer and Consent Solicitation only if the conditions of the Offer and Consent Solicitation are not satisfied or waived prior to the Expiration Date. Promptly upon any such withdrawal, we will return the tendered Warrants (and the related consent to the Warrant Amendments will be revoked). We will announce our decision to withdraw the Offer and Consent Solicitation by disseminating notice by public announcement or otherwise as permitted by applicable law.

 

No Recommendation; Warrantholder’s Own Decision

 

None of the Company, our affiliates, directors, officers, or employees, or the Information Agent or the Exchange Agent for the Offer and Consent Solicitation, is making any recommendations to any Warrantholder as to whether to exchange their Warrants or deliver your consent to the Warrant Amendments. Each Warrantholder must make its own decision as to whether to tender Warrants for exchange pursuant to the Offer and consent to the amendment of the Warrant Agreement pursuant to the Consent Solicitation.

 

Procedure for Tendering Warrants for Exchange and Consenting to the Warrant Amendments

 

Issuance of Common Shares upon exchange of Warrants pursuant to the Offer and acceptance by us of Warrants for exchange pursuant to the Offer, and providing your consent to the Warrant Amendments, will be made only if Warrants are properly tendered pursuant to the procedures described below and set forth in the Letter of Transmittal and Consent. A tender of Warrants pursuant to such procedures, if and when accepted by us, will constitute a binding agreement between the tendering holder of Warrants and us upon the terms and subject to the conditions of the Offer and Consent Solicitation. The proper tender of your Warrants will constitute a consent to the applicable Warrant Amendments with respect to each Warrant tendered.

 

Registered Holders of Warrants; Beneficial Owners of Warrants

 

For purposes of the tender procedures set forth below, the term “registered holder” means any person in whose name Warrants are registered on our books or who is listed as a participant in a clearing agency’s security position listing with respect to the Warrants.

 

Persons whose Warrants are held in “street name” through a direct or indirect participant of DTC, such as a broker, dealer, commercial bank, trust company, or other financial intermediary, are not considered registered holders of those Warrants but rather “beneficial owners” of those Warrants. Beneficial owners cannot directly tender Warrants for exchange pursuant to the Offer. Instead, a beneficial owner must instruct its broker, dealer, commercial bank, trust company, or other financial intermediary to tender Warrants for exchange on behalf of the beneficial owner. See the section of this Prospectus/Offer to Exchange entitled “The Offer and Consent Solicitation - Procedure for Tendering Warrants for Exchange – Required Communications by Beneficial Owners.

 

Tendering Warrants Using Letter of Transmittal and Consent

 

A registered holder of Warrants may tender Warrants for exchange using a Letter of Transmittal and Consent in the form provided by us with this Prospectus/Offer to Exchange. A Letter of Transmittal and Consent is to be used if: (i) certificates representing the Warrants are to be physically delivered to the Exchange Agent by such registered holders; or (ii) delivery of Warrants is to be made by book-entry transfer to the Exchange Agent’s account at DTC pursuant to the procedures set forth in the section of this Prospectus/Offer to Exchange entitled “The Offer and Consent Solicitation - Procedure for Tendering Warrants for Exchange - Tendering Warrants Using Book-Entry Transfer”; provided, however, that it is not necessary to execute and deliver a Letter of Transmittal and Consent if instructions with respect to the tender of such Warrants are transmitted through DTC’s Automated Tender Offer Program (“ATOP”). If you are a registered holder of Warrants, unless you intend to tender those Warrants through ATOP, you should complete, execute, and deliver a Letter of Transmittal and Consent to indicate the action you desire to take with respect to the Offer and Consent Solicitation.

 

For Warrants to be properly tendered for exchange pursuant to the Offer using a Letter of Transmittal and Consent, the registered holder of the Warrants being tendered must ensure that the Exchange Agent receives the following: (i) a properly completed and duly executed Letter of Transmittal and Consent, in accordance with the instructions of the Letter of Transmittal and Consent (including any required signature guarantees); (ii) delivery of the Warrants (a) physically to the Exchange Agent, if the Warrants are held in certificated form, or (b) by book-entry transfer to the Exchange Agent’s account at DTC; and (iii) any other documents required by the Letter of Transmittal and Consent.

 

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In the Letter of Transmittal and Consent, the tendering registered Warrantholder must set forth: (i) its name and address; (ii) the number of Warrants being tendered by the holder for exchange; and (iii) certain other information specified in the form of Letter of Transmittal and Consent.

 

In certain cases, all signatures on the Letter of Transmittal and Consent must be guaranteed by an “Eligible Institution” (as defined below). See the section of this Prospectus/Offer to Exchange entitled “The Offer and Consent Solicitation – Procedure for Tendering Warrants for Exchange – Signature Guarantees.

 

If the Letter of Transmittal and Consent is signed by someone other than the registered holder of the tendered Warrants (for example, if the registered holder has assigned the Warrants to a third-party), or if the Common Stock to be issued upon exchange of the tendered Warrants are to be issued in a name other than that of the registered holder of the tendered Warrants, the tendered Warrants must be properly accompanied by appropriate assignment documents, in either case signed exactly as the name(s) of the registered holder(s) that appear on the Warrants, with the signature(s) on the Warrants or assignment documents guaranteed by an Eligible Institution.

 

Any Warrants duly tendered and delivered as described above shall be automatically cancelled upon the issuance of Common Shares in exchange for such Warrants as part of completion of the Offer.

 

Signature Guarantees

 

In certain cases, all signatures on the Letter of Transmittal and Consent must be guaranteed by an “Eligible Institution.” An “Eligible Institution” is a bank, broker, dealer, credit union, savings association, or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit union, savings association, or other entity that is an “eligible guarantor institution,” as that term is defined in Rule 17Ad-15 promulgated under the Exchange Act.

 

Signatures on the Letter of Transmittal and Consent need not be guaranteed by an Eligible Institution if: (i) the Letter of Transmittal and Consent is signed by the registered holder of the Warrants tendered therewith exactly as the name of the registered holder appears on such Warrants and such holder has not completed the box entitled “Special Issuance Instructions” or the box entitled “Special Delivery Instructions” in the Letter of Transmittal and Consent; or (ii) such Warrants are tendered for the account of an Eligible Institution.

 

In all other cases, an Eligible Institution must guarantee all signatures on the Letter of Transmittal and Consent by completing and signing the table in the Letter of Transmittal and Consent entitled “Guarantee of Signature(s).”

 

Required Communications by Beneficial Owners

 

Persons whose Warrants are held in street name through a direct or indirect DTC participant, such as a broker, dealer, commercial bank, trust company, or other financial intermediary, are not considered registered holders of those Warrants, but are “beneficial owners,” and must instruct the broker, dealer, commercial bank, trust company, or other financial intermediary to tender Warrants on their behalf. If you hold your Warrants in street name, your broker, dealer, commercial bank, trust company, or other financial intermediary should have provided you with an “Instructions Form” with this Prospectus/Offer to Exchange. The Instructions Form is also filed as an exhibit to the Registration Statement of which this Prospectus/Offer to Exchange forms a part. The Instructions Form may be used by you to instruct your broker or other custodian to tender and deliver Warrants on your behalf.

 

Tendering Warrants Using Book-Entry Transfer

 

The Exchange Agent has established an account for the Warrants at DTC for purposes of the Offer and Consent Solicitation. Any financial institution that is a participant in DTC’s system may make book-entry delivery of Warrants by causing DTC to transfer such Warrants into the Exchange Agent’s account in accordance with ATOP. However, even though delivery of Warrants may be effected through book-entry transfer into the Exchange Agent’s account at DTC, a properly completed and duly executed Letter of Transmittal and Consent (with any required signature guarantees), or an “Agent’s Message” as described in the next paragraph, and any other required documentation, must in any case also be transmitted to and received by the Exchange Agent at its address set forth in this Prospectus/Offer to Exchange prior to the Expiration Date, or the guaranteed delivery procedures described in the section of this Prospectus/Offer to Exchange entitled “The Offer and Consent Solicitation -Procedure for Tendering Warrants for Exchange - Guaranteed Delivery Procedures” must be followed.

 

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DTC participants desiring to tender Warrants for exchange pursuant to the Offer may do so through ATOP, and in that case the participant need not complete, execute and deliver a Letter of Transmittal and Consent. DTC will verify the acceptance and execute a book-entry delivery of the tendered Warrants to the Exchange Agent’s account at DTC. DTC will then send an “Agent’s Message” to the Exchange Agent for acceptance. Delivery of the Agent’s Message by DTC will satisfy the terms of the Offer and Consent Solicitation as to execution and delivery of a Letter of Transmittal and Consent by the DTC participant identified in the Agent’s Message. The term “Agent’s Message” means a message, transmitted by DTC to, and received by, the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the Warrants for exchange that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and Consent and that our company may enforce such agreement against the participant. Any DTC participant tendering by book-entry transfer must expressly acknowledge that it has received and agrees to be bound by the Letter of Transmittal and Consent and that the Letter of Transmittal and Consent may be enforced against it.

 

Any Warrants duly tendered and delivered as described above shall be automatically cancelled upon the issuance of Common Shares in exchange for such Warrants as part of completion of the Offer.

 

Delivery of a Letter of Transmittal and Consent or any other required documentation to DTC does not constitute delivery to the Exchange Agent. See the section of this Prospectus/Offer to Exchange entitled “The Offer and Consent Solicitation – Procedure for Tendering Warrants for Exchange – Timing and Manner of Deliveries.”

 

Guaranteed Delivery Procedures

 

If a registered holder of Warrants desires to tender its Warrants for exchange pursuant to the Offer, but (i) the procedure for book-entry transfer cannot be completed on a timely basis, or (ii) time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date, the holder can still tender its Warrants if all the following conditions are met:

 

the tender of the Warrants is made by or through an Eligible Institution;

 

the Exchange Agent receives by hand, mail, overnight courier, or facsimile transmission, prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery in the form we have provided with this Prospectus/Offer to Exchange, with signatures guaranteed by an Eligible Institution; and

 

a confirmation of a book-entry transfer into the Exchange Agent’s account at DTC of all Warrants delivered electronically, together with a properly completed and duly executed Letter of Transmittal and Consent with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message in accordance with ATOP), and any other documents required by the Letter of Transmittal and Consent, must be received by the Exchange Agent within two days that Nasdaq is open for trading after the date the Exchange Agent receives such Notice of Guaranteed Delivery.

 

In any case where the guaranteed delivery procedure is utilized for the tender of Warrants pursuant to the Offer, the issuance of Common Shares for those Warrants tendered for exchange pursuant to the Offer and accepted pursuant to the Offer will be made only if the Exchange Agent has timely received the applicable foregoing items.

 

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Timing and Manner of Deliveries

 

UNLESS THE GUARANTEED DELIVERY PROCEDURES DESCRIBED ABOVE ARE FOLLOWED, WARRANTS WILL BE PROPERLY TENDERED ONLY IF, BY THE EXPIRATION DATE, THE EXCHANGE AGENT RECEIVES SUCH WARRANTS BY BOOK-ENTRY TRANSFER, TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND CONSENT OR AN AGENT’S MESSAGE.

 

ALL DELIVERIES IN CONNECTION WITH THE OFFER AND CONSENT SOLICITATION, INCLUDING ANY LETTER OF TRANSMITTAL AND CONSENT AND THE TENDERED WARRANTS, MUST BE MADE TO THE EXCHANGE AGENT. NO DELIVERIES SHOULD BE MADE TO US. ANY DOCUMENTS DELIVERED TO US WILL NOT BE FORWARDED TO THE EXCHANGE AGENT AND THEREFORE WILL NOT BE DEEMED TO BE PROPERLY TENDERED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.

 

THE METHOD OF DELIVERY OF ALL REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE HOLDERS TENDERING WARRANTS. IF DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL WITH RETURN RECEIPT REQUESTED (PROPERLY INSURED). IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.

 

Determination of Validity

 

All questions as to the form of documents and the validity, eligibility (including time of receipt), and acceptance for exchange of any tender of Warrants will be determined by us, in our reasonable discretion, and our determination will be final and binding. We reserve the absolute right to reject any or all tenders of Warrants that we determine are not in proper form or to reject tenders of Warrants that may, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defect or irregularity in any tender of any particular Warrant, whether or not similar defects or irregularities are waived in the case of other tendered Warrants. Neither we nor any other person will be under any duty to give notice of any defect or irregularity in tenders, nor shall any of us or them incur any liability for failure to give any such notice.

 

Fees and Commissions

 

Tendering Warrantholders who tender Warrants directly to the Exchange Agent will not be obligated to pay any charges or expenses of the Exchange Agent or any brokerage commissions. Beneficial owners who hold Warrants in street name through a broker or bank should consult that institution as to whether or not such institution will charge the owner any service fees in connection with tendering Warrants on behalf of the owner pursuant to the Offer and Consent Solicitation.

 

Transfer Taxes

 

We will pay all transfer taxes, if any, applicable to the transfer of Warrants to us in the Offer. If transfer taxes are imposed for any other reason, the amount of those transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. Other reasons transfer taxes could be imposed include (i) if Common Shares are to be registered or issued in the name of any person other than the person signing the Letter of Transmittal and Consent, or (ii) if tendered Warrants are registered in the name of any person other than the person signing the Letter of Transmittal and Consent. If satisfactory evidence of payment of or exemption from those transfer taxes is not submitted with the Letter of Transmittal and Consent, the amount of those transfer taxes will be billed directly to the tendering Warrantholder and/or withheld from any payment due with respect to the Warrants tendered by such Warrantholder.

 

Withdrawal Rights

 

By tendering Warrants for exchange, a holder will be deemed to have validly delivered its consent to the applicable Warrant Amendments. Tenders of Warrants made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. Consents to the Warrant Amendments in connection with the Consent Solicitation may be revoked at any time before the Expiration Date by withdrawing the tender of your Warrants. A valid withdrawal of tendered Warrants before the Expiration Date will be deemed to be a concurrent revocation of the related consents to the Warrant Amendments. Tenders of Warrants and consents to the Warrant Amendments may not be withdrawn after the Expiration Date. If the Offer Period is extended, you may withdraw your tendered Warrants at any time until the expiration of such extended Offer Period. After the Offer Period expires, such tenders are irrevocable, provided, however, that Warrants that are not accepted by us for exchange on or prior to July 25, 2024 may thereafter be withdrawn by you until such time as the Warrants are accepted by us for exchange.

 

To be effective, a written notice of withdrawal must be timely received by the Exchange Agent at its address identified in this Prospectus/Offer to Exchange. Any notice of withdrawal must specify the name of the person who tendered the Warrants for which tenders are to be withdrawn and the number of Warrants to be withdrawn. If the Warrants to be withdrawn have been delivered to the Exchange Agent, a signed notice of withdrawal must be submitted prior to release of such Warrants. In addition, such notice must specify the name of the registered holder (if different from that of the tendering Warrantholder). Withdrawal may not be cancelled, and Warrants for which tenders are withdrawn will thereafter be deemed not validly tendered for purposes of the Offer and Consent Solicitation. However, Warrants for which tenders are withdrawn may be tendered again by following one of the procedures described above in the section entitled “The Offer and Consent Solicitation - Procedure for Tendering Warrants for Exchange” at any time prior to the Expiration Date.

 

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A beneficial owner of Warrants desiring to withdraw tendered Warrants previously delivered through DTC should contact the DTC participant through which such owner holds its Warrants. In order to withdraw Warrants previously tendered, a DTC participant may, prior to the Expiration Date, withdraw its instruction by (i) withdrawing its acceptance through DTC’s Participant Tender Offer Program (“PTOP”) function, or (ii) delivering to the Exchange Agent by mail, hand delivery, or facsimile transmission, notice of withdrawal of such instruction. The notice of withdrawal must contain the name and number of the DTC participant. A withdrawal of an instruction must be executed by a DTC participant as such DTC participant’s name appears on its transmission through the PTOP function to which such withdrawal relates. If the tender being withdrawn was made through ATOP, it may only be withdrawn through PTOP, and not by hard-copy delivery of withdrawal instructions. A DTC participant may withdraw a tendered Warrant only if such withdrawal complies with the provisions described in this paragraph.

 

A holder who tendered its Warrants other than through DTC should send written notice of withdrawal to the Exchange Agent specifying the name of the Warrantholder who tendered the Warrants being withdrawn. All signatures on a notice of withdrawal must be guaranteed by an Eligible Institution, as described above in the section entitled “The Offer and Consent Solicitation - Procedure for Tendering Warrants for Exchange -Signature Guarantees”; provided, however, that signatures on the notice of withdrawal need not be guaranteed if the Warrants being withdrawn are held for the account of an Eligible Institution. Withdrawal of a prior Warrant tender will be effective upon receipt of the notice of withdrawal by the Exchange Agent. Selection of the method of notification is at the risk of the Warrantholder, and notice of withdrawal must be timely received by the Exchange Agent.

 

All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by us, in our sole discretion, which determination shall be final and binding. Neither we nor any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or incur any liability for failure to give any such notification.

 

Acceptance for Issuance of Shares

 

Upon the terms and subject to the conditions of the Offer and Consent Solicitation, we will accept for exchange Warrants validly tendered until the Expiration Date, which is 11:59 p.m., Eastern Time, on July 25, 2024, or such later time and date to which we may extend. The Common Shares to be issued upon exchange of Warrants pursuant to the Offer, along with written notice from Continental Stock Transfer & Trust Company confirming the balance of any Warrants not exchanged, will be delivered promptly following the Expiration Date. In all cases, Warrants will only be accepted for exchange pursuant to the Offer after timely receipt by the Exchange Agent of: (i) book-entry delivery of the tendered Warrants, or, if the Warrants are held in certificated form, physical delivery to the Exchange Agent; (ii) a properly completed and duly executed Letter of Transmittal and Consent, or compliance with ATOP where applicable; (iii) any other documentation required by the Letter of Transmittal and Consent; and (iv) any required signature guarantees.

 

For purposes of the Offer and Consent Solicitation, we will be deemed to have accepted for exchange Warrants that are validly tendered and for which tenders are not withdrawn, unless we give written notice to the Warrantholder of our non-acceptance.

 

Announcement of Results of the Offer and Consent Solicitation

 

We will announce the final results of the Offer and Consent Solicitation, including whether all of the conditions to the Offer and Consent Solicitation have been satisfied or waived and whether we will accept the tendered Warrants for exchange, as promptly as practicable following the end of the Offer Period. The announcement will be made by a press release and by amendment to the Tender Offer Statement on Schedule TO we file with the SEC in connection with the Offer and Consent Solicitation.

 

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Background and Purpose of the Offer and Consent Solicitation

 

A majority of our Board, consisting of disinterested directors with respect to the Offer, approved the Offer and Consent Solicitation on June 26, 2024. The purpose of the Offer and Consent Solicitation is to simplify our share structure and reduce the potential dilutive impact of the Warrants, thereby providing us with more flexibility for financing our operations in the future. The Warrants that are tendered for exchange pursuant to the Offer will be retired and cancelled automatically upon the issuance of Common Shares in exchange for such Warrants pursuant to the Offer.

 

Agreements, Regulatory Requirements, and Legal Proceedings

 

There are no present or proposed agreements, arrangements, understandings, or relationships between us and any of our directors, executive officers, affiliates, or any other person relating, directly or indirectly, to the Offer and Consent Solicitation or to our securities that are the subject of the Offer and Consent Solicitation.

 

Except for the requirements of applicable federal and state securities laws, we know of no federal or state regulatory requirements to be complied with or federal or state regulatory approvals to be obtained by us in connection with the Offer and Consent Solicitation. There are no antitrust laws applicable to the Offer and Consent Solicitation. The margin requirements under Section 7 of the Exchange Act, and the related regulations thereunder, are inapplicable to the Offer and Consent Solicitation.

 

There are no pending legal proceedings relating to the Offer and Consent Solicitation.

 

Interests of Directors and Others

 

We do not beneficially own any of the Warrants.

 

Michael Winston, the Company’s Interim Chief Executive Officer, has indicated his intent to tender the Merger Consideration Warrants beneficially owned by him pursuant to the Offer. Mr. Winston will not receive any benefit by virtue of participation in the Offer or Consent Solicitation that is not shared on a pro rata basis with holders of the outstanding Warrants exchanged pursuant to the Offer. None of our other directors, executive officers, or controlling persons or any of their respective affiliates are required to or have indicated that they will participate in the Offer.

 

The following table lists the Warrants beneficially owned by our directors, officers, controlling person, and other affiliates or related persons as of June 26, 2024:

 

Name 

Aggregate

Number of

Warrants

Beneficially

Owned

  

Percentage of

Warrants

Beneficially

Owned(1)

 
Michael Winston   4,076,288    17.68%

 

(1) Determined based on 23,052,625 Warrants outstanding as of June 26, 2024.

 

Absence of Appraisal or Dissenters’ Rights

 

Warrantholders do not have any appraisal or dissenters’ rights under applicable law in connection with the Offer and Consent Solicitation.

 

Appointed Agents Related to the Offer

 

Exchange Agent

 

Continental Stock Transfer & Trust Company has been appointed the Exchange Agent for the Offer and Consent Solicitation. The Letter of Transmittal and Consent and all correspondence in connection with the Offer and Consent Solicitation should be sent or delivered by each holder of the Warrants, or a beneficial owner’s custodian bank, depositary, broker, trust company, or other nominee, to the Exchange Agent at the address set forth on the back cover page of this Prospectus/Offer to Exchange. We will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable, out-of-pocket expenses in connection therewith.

 

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Information Agent

 

Morrow Sodali LLC has been appointed as the Information Agent for the Offer and Consent Solicitation and will receive customary compensation for its services. Questions concerning procedures for tendering Warrants and requests for additional copies of this Prospectus/Offer to Exchange or the Letter of Transmittal and Consent should be directed to the Information Agent at the address and telephone numbers set forth on the back cover page of this Prospectus/Offer to Exchange.

 

Source and Amount of Funds

 

Because this transaction is an offer to holders to exchange their existing Warrants for our Common Stock, there is no source of funds or other cash consideration being paid by us to, or to us from, those tendering Warrantholders pursuant to the Offer. We estimate that the total amount of cash required to complete the transactions contemplated by the Offer and Consent Solicitation, including the payment of any fees, expenses, and other related amounts incurred in connection with the transactions will be less than approximately $150,000. We expect to have sufficient funds to complete the transactions contemplated by the Offer and Consent Solicitation and to pay fees, expenses, and other related amounts from our cash on hand.

 

Fees and Expenses

 

The expenses of soliciting tenders of the Warrants and the Consent Solicitation will be borne by us. The principal solicitations are being made by mail; however, additional solicitations may be made by facsimile transmission, telephone, or in person by the Information Agent as well as by officers and other employees of the Company and its affiliates.

 

You will not be required to pay any fees or commissions to the Company, the Exchange Agent, or the Information Agent in connection with the Offer and Consent Solicitation. If your Warrants are held through a broker, dealer, commercial bank, trust company or other nominee that tenders your Warrants on your behalf, your broker or other nominee may charge you a commission for doing so. You should consult your broker, dealer, commercial bank, trust company or other nominee to determine whether any charges will apply.

 

Transactions and Agreements Concerning Our Securities

 

Other than as set forth below and (i) in the sections of this Prospectus/Offer to Exchange entitled “Description of Securities” and “Certain Relationships and Related-Party Transactions,” (ii) in the notes to the consolidated financial statements included herein, and (iii) as set forth in our Certificate of Incorporation, there are no agreements, arrangements, or understandings between the Company, or any of our directors or executive officers, and any other person with respect to the securities that are the subject of the Offer and Consent Solicitation.

 

Neither we, nor any of our directors, executive officers, or controlling persons, or any executive officers, directors, managers, or partners of any of our controlling persons, has engaged in any transactions in our Warrants in the last 60 days.

 

Registration Under the Exchange Act

 

The Warrants currently are registered under the Exchange Act. This registration may be terminated upon application by us to the SEC if there are fewer than 300 record holders of the Warrants. We currently do not intend to deregister the Warrants, if any, that remain outstanding after completion of the Offer and Consent Solicitation. Notwithstanding any termination of the registration of our Warrants, we will continue to be subject to the reporting requirements under the Exchange Act as a result of the continuing registration of our Common Stock.

 

Accounting Treatment

 

We expect to account for the exchange of Warrants as a Common Stock issuance and extinguishment of the Warrant liabilities (at fair market value prior to the exchange). The par value of each Common Share issued in the Offer will be recorded as a credit to Common Stock and a corresponding credit to additional paid-in capital. The Offer will not modify the current accounting treatment for the un-exchanged Warrants.

 

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Exchange Agent

 

The depositary and exchange agent for the Offer and Consent Solicitation is:

 

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, NY 10004

Attention: Compliance Department

(212) 509-4000

 

Additional Information; Amendments

 

We have filed with the SEC a Tender Offer Statement on Schedule TO, of which this Prospectus/Offer to Exchange is a part. We recommend that Warrantholders review the Schedule TO, including the exhibits thereto, and our other materials that have been filed with the SEC before making a decision on whether to accept the Offer and Consent Solicitation.

 

We will assess whether we are permitted to make the Offer and Consent Solicitation in all jurisdictions. If we determine that we are not legally able to make the Offer and Consent Solicitation in a particular jurisdiction, we will inform Warrantholders of this decision. The Offer and Consent Solicitation is not made to those holders who reside in any jurisdiction where the offer or solicitation would be unlawful.

 

Our Board recognizes that the decision to accept or reject the Offer and Consent Solicitation is an individual determination that should be based on a variety of factors, and Warrantholders should consult with personal advisors if they have questions about their financial or tax situation.

 

We are subject to the information requirements of the Exchange Act and in accordance therewith file and furnish reports and other information with the SEC. All reports and other documents we have filed or furnished with the SEC, including the Registration Statement on Form S-4 relating to the Offer and Consent Solicitation, or will file or furnish with the SEC in the future, can be accessed electronically on the SEC’s website at www.sec.gov. If you have any questions regarding the Offer and Consent Solicitation or need assistance, you should contact the Information Agent for the Offer and Consent Solicitation. You may request additional copies of this document, the Letter of Transmittal and Consent, or the Notice of Guaranteed Delivery from the Information Agent. All such questions or requests should be directed to:

 

Morrow Sodali LLC

333 Ludlow Street, 5th Floor, South Tower

Stamford, Connecticut 06902

Banks and Brokers Call Collect: (203) 658-9400

All Other Call Toll-Free: (800) 662-5200

Email: JTAI.info@investor.morrowsodali.com

 

We will amend our offering materials, including this Prospectus/Offer to Exchange, to the extent required by applicable securities laws to disclose any material changes to information previously published, sent, or given by us to Warrantholders in connection with the Offer and Consent Solicitation.

 

BUSINESS OF JET.AI

 

Overview

 

Our business strategy combines concepts from fractional jet and charter jet programs with innovations in artificial intelligence, also referred to herein is “AI.” Our purposeful enhancement of price discovery have the potential to produce fairer and more inclusive results for aircraft owners and travelers alike.

 

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We formed our company on June 4, 2018. We developed and, in September 2019, launched our booking platform represented by our iOS app JetToken, which originally functioned as a prospecting and quoting platform to arrange private jet travel with third party carriers. Following our acquisition of HondaJets, we began selling jet cards and fractional ownership interests in our aircraft. In 2023, we launched an AI-enhanced booking app called CharterGPT, as more fully discussed under “ – Our Software Platforms – Our Booking Platform and CharterGPT” and “Strategy - Artificial Intelligence” below.

 

Beginning in 2023, we launched our Jet.AI Operator Platform to provide a B2B software platform for SaaS products. Currently we offer the following SaaS software to aircraft owners and operators generally:

 

  Reroute AI: recycles aircraft waiting to return to base into prospective new charter bookings to destinations within specific distances.
     
  DynoFlight: enables aircraft operators to estimate aircraft emissions then purchase carbon removal credits via our DynoFlight API.

 

We have also established a specific version of a private jet by the seat booking tool called for the Las Vegas Golden Knights and Cirrus Aviation via 380 Software LLC. 380 Software LLC is a by-the-seat charter joint venture between us and Cirrus Aviation.

 

Our strategy involves expanding our fleet of aircraft with larger aircraft capable of traveling longer distances, developing a national jet card program based on third party aircraft, further enhancing the AI functionality of Charter GPT, and expanding upon our B2B software offerings. Our strategy involves expanding our fleet of aircraft with larger aircraft capable of traveling longer distances, further enhancing the AI functionality of Charter GPT, expanding upon Reroute AI and DynoFlight.

 

The Business Combination

 

General

 

On August 10, 2023, Jet.AI Inc., a Delaware corporation (f/k/a Oxbridge Acquisition Corp.), consummated a Business Combination pursuant to the Business Combination Agreement and Plan of Reorganization, dated February 24, 2023, as amended by Amendment No. 1 to the Business Combination Agreement, dated as of May 11, 2023, by and among Oxbridge, the Merger Subs, and Jet Token. Pursuant to the Business Combination Agreement, Oxbridge redomiciled as a Delaware corporation and was immediately renamed Jet.AI Inc., and promptly thereafter, (a) First Merger Sub merged with and into Jet Token with Jet Token surviving the merger as a wholly owned subsidiary of Jet.AI Inc., and (b) Jet Token merged with and into Second Merger Sub.

 

As a result of the Business Combination:

 

the then-issued and outstanding Class A ordinary shares of Oxbridge were converted, on a one-for-one basis, into Jet.AI Common Shares;

 

the then-issued and outstanding Class B ordinary share of Oxbridge were converted, on a one-for-one basis, into Jet.AI Common Shares;

 

the then-issued and outstanding Oxbridge warrants were converted into an equal number of Warrants of Jet.AI, each exercisable for one Common Share;

 

the then-issued and outstanding Oxbridge Units were converted into an equal number of Jet.AI Units, each consisting of one Common Share and one Warrant of Jet.AI;

 

the outstanding shares of Jet Token common stock, including all shares of Jet Token preferred stock that converted into shares of Jet Token common stock, were cancelled and converted into the right to receive a number of Jet.AI Common Shares and a number of Merger Consideration Warrants based on the respective exchange rations set forth in the Business Combination Agreement;

 

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  all outstanding Jet Token options for its common stock, whether or not exercisable and whether or not vested, were converted into options to purchase Jet.AI Common Shares based on the applicable exchange ratio determined in accordance with the Business Combination Agreement;
     
  all outstanding Jet Token warrants were converted into warrants to acquire the number of Common Shares and Merger Consideration Warrants based on the applicable exchange ratio set forth in the Business Combination Agreement, and
     
  the outstanding Jet Token RSU awards were converted into Jet.AI RSU awards based on the applicable exchange ratio determined in accordance with the Business Combination Agreement.

 

As a result of the Business Combination, Jet.AI Inc. has one class of Common Stock, listed on Nasdaq under the ticker symbol “JTAI”, and two classes of Warrants, the Jet.AI Warrants and the Merger Consideration Warrants, listed on Nasdaq under the ticker symbols “JTAIW” and “JTAIZ,” respectively.

 

The foregoing description of the Business Combination does not purport to be complete and is qualified in its entirety by the full text of the Business Combination Agreement and the First Amendment to Business Combination Agreement, which are attached as Exhibit 2.1 and Exhibit 2.2, respectively, to the Registration Statement of which this Prospectus/Offer to Exchange forms a part.

 

Certain Financing Arrangements

 

Prior to and in connection with the Business Combination, we entered into financing arrangements intended to provide us with equity-based financing.

 

In August 2022, Jet Token entered into the Share Purchase Agreement with GEM, which was automatically assigned to the Company upon the Closing of the Business Combination. Under the Share Purchase Agreement, the Company has the right to periodically issue and sell to GEM, and GEM has agreed to purchase, up to $40,000,000 aggregate value of shares of the Company’s common stock during the 36-month period following the date of the Closing of the Business Combination. GEM is not obligated to purchase shares under the Share Purchase Agreement if any purchase of shares would result in GEM and its affiliates beneficially owning, directly or indirectly, at the time of the proposed issuance, more than 9.99% of the number of issued and outstanding shares of Common Stock as of the date of such proposed issuance. In consideration for these services, the Company has agreed to pay GEM a commitment fee equal to $800,000 payable in cash or freely tradable Common Shares at the “Daily Closing Price” of the common stock, at the option of the Company. Pursuant to the Share Purchase Agreement, on August 10, 2023, the Company issued GEM the GEM Warrant, granting it the right to purchase up to 6% of the outstanding common stock of the Company on a fully diluted basis as of the date of listing, with exercisability currently limited to 4.99% of the Company’s common stock outstanding immediately after giving effect to such exercise. The GEM Warrant has a term of three years from the date of issuance and, as of December 31, 2024, had an exercise price of $8.40 per share (subject to potential reduction in August 2024).

 

On August 6, 2023, we entered into the Forward Purchase Agreement with Meteora for OTC Equity Prepaid Forward Transactions. The primary purpose of our entering into this agreement and these transactions was to provide a mechanism whereby Meteora would purchase, and waive their redemption rights with respect to, a sufficient number of Oxbridge Class A ordinary shares to enable Oxbridge to have at least $5,000,000 of net tangible assets, a non-waivable condition to the Closing of the Business Combination and to provide the Company with cash to meet a portion of the transaction costs associated with the Business Combination. Following the Closing of the Business Combination, we paid to Meteora $6,805,651, representing amounts payable by us to Meteora under the Forward Purchase Agreement, net of the aggregate purchase price of the total number of Additional Shares (as defined and discussed below) issued to Meteora under the FPA Funding Amount PIPE Subscription Agreement that the Company and Meteora entered into concurrently with the Forward Purchase Agreement on August 6, 2023 (the “FPA Funding Amount PIPE Subscription Agreement”); and Meteora paid us ½ of the Prepayment Shortfall (as defined below), or $625,000. The Forward Purchase Agreement was amended to provide payment to the Company of an additional $550,000, reflecting payment in full of the amended Prepayment Shortfall of $1,175,000. The Company also received approximately $1.2 million from the issuance of common stock under the Forward Purchase Agreement, including due to early termination of the facility.

 

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In connection with the Business Combination, we also entered into settlement agreements with Maxim Group LLC, the underwriter for the Company’s initial public offering and this offering (“Maxim”), and with the Sponsor, the sponsor of Oxbridge, each providing for the issuance of equity in satisfaction of Oxbridge payment obligations.

 

Please see the section of this Prospectus/Offer to Exchange entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Overview” for a further discussion of the terms of these financing arrangements and other recent financing transactions.

 

Recent Events

 

Our Common Stock is currently listed on Nasdaq under the symbol “JTAI”. On December 1, 2023, the Company received the Initial Notice Letter from the Nasdaq Listing Qualifications Staff of Nasdaq, notifying the Company that it failed to meet the continued listing requirements for The Nasdaq Global Market by not satisfying the Minimum Stockholders’ Equity Requirement. In accordance with Nasdaq rules and as stated in the Initial Notice Letter, the Company submitted a plan to regain compliance, involving a proposed transfer to The Nasdaq Capital Market, which imposes lower listing requirements, as well as a number of capital raising measures that the Company intended to take, including conducting this offering. Nasdaq provided written confirmation of its acceptance of the Company’s compliance plan and granted the Company an extension through May 29, 2024 to evidence completion of its plan.

 

On April 15, 2024, the Company received the Second Notice Letter from Nasdaq, informing the Company that it was not in compliance with Nasdaq Listing Rule 5450(a)(1) due to failing to meet the Minimum Bid Price Requirement. The notification of noncompliance in the Second Notice Letter has no immediate effect on the listing or trading of the Company’s Common Stock on The Nasdaq Global Market. The Company has 180 calendar days, or until October 14, 2024, to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the minimum bid price of the Company’s Common Stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-calendar day grace period. In the event the Company does not regain compliance with the Minimum Bid Price Requirement by October 14, 2024, the Company may be eligible for an additional 180-calendar day compliance period if it elects to transfer to The Nasdaq Capital Market to take advantage of the additional compliance period offered on that market. To qualify, the Company would be required to meet the continued listing requirements for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of its intention to cure the bid price deficiency during the second compliance period. The Company’s failure to regain compliance during this period could result in delisting. The Company intends to actively monitor the bid price of its Common Stock and may, if appropriate, consider implementing available options to regain compliance with the Minimum Bid Price Requirement.

 

On May 30, 2024, the Company received the Third Notice Letter from Nasdaq stating that the Company had not regained compliance with the Minimum Stockholders’ Equity Requirement for continued listing discussed in the Initial Notice Letter, which the Company was required to meet by May 29, 2024 pursuant to its compliance plan. The Third Notice Letter included a Delisting Notice, informing the Company that trading of the Company’s Common Stock would be suspended at the opening of business on June 10, 2024 and a Form 25-NSE would be filed with the SEC to remove the Company’s securities from listing and registration on The Nasdaq Stock Market unless the Company requested an appeal hearing before the Nasdaq Hearings Panel by June 6, 2024.

 

As directed in the Third Notice Letter, the Company timely requested a hearing before the Panel and paid the applicable fee to appeal the Delisting Notice. The Delisting Notice has no immediate effect on the listing or trading of the Company’s Common Stock. By requesting a hearing, the Company stayed the trading suspension, enabling its securities to continue trading on The Nasdaq Global Market until the hearing process concludes and the Panel issues a written decision. While the Company can provide no assurances that the Panel will grant the Company’s request for a suspension of delisting or will permit the Company’s continued listing on The Nasdaq Global Market after the hearing process concludes, the Company is working diligently to cure the deficiencies set forth in the Delisting Notice and plans to regain compliance with the continued listing requirements as soon as practicable. Should the Company regain compliance and receive a moot notice from Nasdaq in advance of the hearing before the Panel, then no hearing would take place.

 

Management has completed an application to transfer its securities to The Nasdaq Capital Market tier and filed both a registration statement and preliminary proxy statement in connection with the Ionic Transaction, which is discussed in the section of this Prospectus/Offer to Exchange entitled “Management’s Discussion and Analysis of Financial Condition and Results Of Operations – The Ionic Transaction.” Through its recent transfer application to The Nasdaq Capital Market tier and the Ionic Transaction, the Company expects to meet the “Equity” standard of the continued listing requirements of The Nasdaq Capital Market, which requires listed companies to maintain minimum stockholders’ equity of $2.5 million. The Company has been actively executing its compliance plan, including by utilizing its existing GEM facility and receiving gross proceeds of $1.5 million of the $16.5 million to be funded pursuant to the Ionic Transaction.

 

Although the Company believes it will be able to achieve compliance with The Nasdaq Capital Market’s continued listing requirements, there can be no assurance that the Company will be able to regain compliance with such requirements or maintain compliance with any other listing requirements within the time frame required by Nasdaq or at all, particularly if the Company’s stock price trades below $1.00 for a sustained period. Furthermore, there can be no assurance that the Company will be able to satisfy the requirements necessary to transfer the listing of its Common Stock to The Nasdaq Capital Market. Nasdaq’s determination that we fail to meet the continued listing standards of Nasdaq may result in our securities being delisted from Nasdaq as set forth in the Delisting Notice.

 

Our Aircraft Operations

 

In July 2021, we leased a HondaJet aircraft under a short-term lease arrangement, which terminated in February 2022, to accelerate our aircraft operations and sales of jet card memberships. We have acquired four HondaJet Elite aircraft under our 2020 Purchase Agreement with Honda Aircraft Company, discussed under “– Our Aircraft” below, all four of which have been sold, but three of which remain part of our fleet, as discussed below, with three of the four aircraft having been delivered in 2022. Great Western Air, LLC (d/b/a Cirrus Aviation Services, LLC) is managing, operating, and maintaining our aircraft and has a growing team of pilots that have been specially trained on the HondaJet at the Flight Safety facility on the Honda Aircraft Company campus in Greensboro, North Carolina. Cirrus has additionally developed a safety co-pilot training program in coordination with the FAA and a local flight training academy for licensed pilots already skilled with the Garmin 1000 avionics suite.

 

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We offer the following programs for our HondaJet Elite aircraft:

 

  Fractional ownership program: This program provides potential owners the ability to purchase a share in a jet at a fraction of the cost of acquiring an entire aircraft. Each 1/5 share guarantees 75 occupied hours of usage per year with 24 hours of notice. The fractional ownership program consists of a down payment, one or more progress payments, a payment on delivery, a monthly management fee and an hourly usage fee. As part of the aircraft purchase agreement, the buyer enters into an aircraft management agreement which lasts three years and, at the end of the contract period, the aircraft is typically sold, and the owners are given their pro-rata share of the sale proceeds. The three-year term is not renewable. Our current contracts do not contemplate the re-fractioning of the aircraft to other buyers at the end of the term, but rather a whole aircraft sale to a single buyer. Monthly management fees are in general subject to an annual CPI-W based step-up. CPI-W is a measure of cost inflation commonly used in long term aviation service contracts with OEMs and engine manufacturers
  Jet card program: A membership in our jet card program generally includes 10, 25 or 50 occupied hours of usage per year with 24 hours of notice. Members generally pay 100% upfront and then fly for a fixed hourly rate over the next twelve months. Those who require guaranteed availability may pay a membership fee for an additional charge. Jet card program members may interchange as a set ratio per aircraft onto any one of twenty jets operated by our partner, Cirrus.

 

In addition to servicing members, fractional owners, and third-party charter clients, our HondaJets are available to address unexpected cancellations or delays on brokered charters. Unlike most of our brokerage competitors, as well as many business jet management companies which require owner approval before their aircraft can be used for third party charter, we believe maintaining a fleet of readily available aircraft to back fill third party charter services provides more reliability and is an attractive selling point for potential clients.

 

In 2022, we entered into agreements with Cirrus under which we will sell jet cards for Cirrus’s aircraft, for a commission for sales and client management services, and we make Cirrus’s aircraft available to our customers for charter bookings at preferred rates and with certain service guarantees. As a result, our jet card members and charter customers have access to twenty of Cirrus’s aircraft in the light, mid, super-mid, heavy, and ultra-long-range categories, comprising the following aircraft: CJ3+, CJ4, Lear 45XR, Citation XLS+, Lear 60, Hawker 900XP, Challenger 300, Challenger 604, Falcon 900EX, Challenger 850, Gulfstream V and Gulfstream G550.

 

In the fourth quarter of 2022, we launched the Onboard Program to allow aircraft owners to contribute their aircraft to the Company’s charter and jet card inventory. The Onboard Program requires one month FAA conformity of aircraft onto the Cirrus Aviation Part 135 certificate, a one-week pilot recertification course for charter operation and execution of a limited management agreement. To date we have a CJ4 customer aircraft managed pursuant to our OnBoard Program.

 

Our Software Platforms

 

Our Booking Platform CharterGPT

 

Our booking platform displays a variety of options across private aircraft types in addition to the pricing of our own aircraft, with a range of prices drawn from a list of thousands of aircraft for hire. We offer users the ability to request a jet and to simultaneously task us with seeking a lower-cost otherwise superior alternative. Our CharterGPT app is directly connected via our application programming interface (API) to Avinode, the major centralized database in private aviation. Through Avinode we can electronically and automatically correspond with operators of private jets who have posted their aircraft for hire. We envision a time when CharterGPT draws upon resources other than Avinode for private aircraft inventory, in particular we contemplate a connection between the inventory found in Reroute AI and CharterGPT.

 

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The CharterGPT app, which we released in the iOS and Android stores in 2023 to replace the charter booking function of our Jet Token App, automates certain of these manual steps involved in charter bookings, and we believe this automation will enable us to scale charter activity with fewer persons than would be normally required. In particular, CharterGPT is designed to do the following: (1) intake travel requirements in natural language and then interact with customers to provide substantive replies and actionable suggestions with quality indistinguishable from an experienced charter professional; (2) power the content behind outbound calls to smaller charter operators to confirm electronic indications of interest communicated via the Avinode centralized booking database of private aircraft; (3) reconcile the natural language terms in a third party jet operator contract with the terms and conditions in the contract the customer signs with us (4) verify that payment for the charter has cleared.

 

Jet.AI Operator Platform

 

Jet.AI provides and continues to develop a B2B software platform for a suite of SaaS products termed “Jet.AI Operator Platform” which currently consists of:

 

Reroute AI

 

In 2024 we launched Reroute AI. Reroute AI software is web-based and enables FAA Part 135 operators to earn revenue on otherwise empty flight legs. When prompted with basic travel itinerary information such as city pair and date of travel, Reroute AI searches its database of empty flight legs and proposes novel combinations of those legs that meet these constraints it has been given. Its database of empty flight legs comes from API integrations with certain other databases and a ChatGPT enhanced scrape of publicly available empty leg lists published by Part 135 operators. An operator may upload its own aircraft tail numbers and empty leg list if for any reason one or both have not already been uploaded into the system. Jet.AI generates revenue from Reroute AI when an operator wishes to book an itinerary proposed by the software that involves the use of aircraft outside that operator’s fleet. In that instance, Jet.AI acts as broker to the operator using Reroute AI’s proposed itinerary and a human in the loop to negotiate the new pricing and new routing of the third party operator’s aircraft.

 

DynoFlight

 

DynoFlight is a software API that we launched at the end of 2023. It enables aircraft operators to track and estimate emissions and then purchase carbon offset credits. DynoFlight offers small to medium sized operators a way to begin tracking and offsetting their carbon credits with advances estimation techniques, compliant practices, and quality credits at prices usually only accessible to operators working at a much larger scale that are buying in bulk. In February 2024, the Company announced a collaboration with FL3XX, a web and app-based aviation management platform, to introduce the DynoFlight carbon offset platform to FL3XX customers. We believe the DynoFlight API may offer an advantage even to large organizations that wish to manage working capital more efficiently (i.e. pay as they fly instead of buying in bulk). We are currently in the process of integrating the DynoFlight API with the FL3XX systems. We believe that, once the DynoFlight API has been integrated with FL3XX and future customers, it will generate monthly and usage-based revenues with modest operating costs limited to server administration and maintenance of the code base.

 

FlightClub – Cirrus Specific

 

The Flight Club API is designed to enable FAA Part 135 operators to function simultaneously under FAA Part 380 which permits sale of private jet service by the seat instead of by whole aircraft. The Flight Club software integrates front end ticketing and payment collection with the flight management systems of an FAA Part 135 operator. It automates the process of filing forms for each flight with DOT and conforms with DOT escrow requirements around ticketing and movement of customer funds. Our initial use case of the Flight Club is through 380 Software LLC, a 50% owned subsidiary founded in co-operation with our operating partner and 50% owner of 380 Software LLC, Cirrus Aviation. The Company retains all rights to the technology powering 380 Software LLC and has granted 380 Software LLC a perpetual non-transferrable license. This initial implementation of the Flight Club permits the owners of Cirrus Aviation-managed aircraft to fly on one another’s planes at a significantly reduced cost when those planes are otherwise flying empty. The operating costs of these flights are typically borne by the previous charter customer who is typically obliged to pay not only the cost of an outbound leg but also the cost of the return leg. The charter customer is typically obliged to pay the cost of the return because the sale of the empty return is an inherently low probability event based on historical industry experience.

 

We are currently focused on our partnership with the Las Vegas Golden Knights and on integrating with their systems to generate seat sales. Once we learn more from the Cirrus and Las Vegas Golden Knight partnerships we will decide whether to expand the availability of Flight Club.

 

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Strategy

 

Aircraft Operations

 

Having successfully executed the HondaJet four aircraft fleet deal and further having sold through all four aircraft, three of which remain part of our fleet, as discussed below, we plan to gradually expand our fleet with super-mid-size aircraft and the help of our operating partner, Cirrus. Cirrus manages a fleet of 30 jets in Las Vegas, where we are headquartered. We have executed a non-binding letter of intent to acquire five new Challenger 3500 aircraft from Bombardier, consisting of three prospective firm orders and two options. Subject to (1) our securing of debt financing to fund the initial fleet purchase down payment and (2) the development of a management, interchange, and support plan with our partner Cirrus, we would then plan to execute a formal fleet purchase agreement, and anticipate being able to secure the first Challenger 3500 delivery in the second quarter of 2026. Once a fleet purchase agreement is in force, we would then look to pre-sell fraction interests in these aircraft with a bias toward larger fractions. Upon delivery, the jets would in turn be managed by Cirrus and listed on their Part 135 certificate. Customers would be expected to make a down payment and progress payments, consistent with fractional industry norms.

 

Given the two-year timeframe prior to delivery, the Company may consider independent development of Part 135 operations, subject to management’s internal return on capital targets and, depending on the level of scale, the prospective benefits of enhanced operational control on customer service.

 

Because all major manufacturers of super-mid or large cabin aircraft such as Gulfstream, Falcon, Bombardier, Embraer, and Textron each have one to three year waiting lists for super-mid-size jets, many of our fractional competitors can only pre-sell, and remain otherwise unable to offer the related service. Our strategy is to allow customers, in advance of delivery, to fly on Cirrus’s managed Challenger 300/350, 604/605 and 850 model Bombardier aircraft. In return the customer would pay a monthly management fee (MMF) and an occupied hourly fee (OHF) at rates substantially similar to those for their Challenger 3500. We believe this “buy and fly” approach may resonate with market participants who may appreciate the convenience of a fractional program without the extraordinarily long wait.

 

Conventional wisdom in private aviation has been that a light jet FAA Part 135 operation presents financial challenges because the lower hourly rate of a light jet leaves little margin to pay a second pilot and remain profitable. Thanks to our partnership with Cirrus, we have addressed this concern by having a typed pilot in command with at least 1,500 hours in jets, 1,000 of which must have been in the HondaJet specifically, fly alongside a co-pilot who has been through an FAA approved ground school developed by Cirrus and Chennault Flying Service. This “safety co-pilot” is permitted to operate the aircraft in the unlikely event the pilot in command is incapacitated or otherwise unable to act. The HondaJet, which has been designated by the FAA for single pilot operation, integrates the Garmin 3000 flight system and by law does not require a second pilot to fly. This safety co-pilot program brings trained pilots who are already schooled in either the Garmin 1000 or Garmin 3000 flight system, gives them additional training on the HondaJet and Garmin 300 system, and then allows them to develop their skills alongside a mentor. Importantly, the presence of this safety co-pilot is regarded by our insurer as sufficient to maintain our present level of premium. The safety pilot does not require a full wage because of their status as a trainee and the professional value they gain from accruing jet flight hours. This lower cost of labor helps the company overcome the traditional costs of paying a second pilot and helps bring a stream of prospective pilot in command candidates. Some safety pilots are newer to aviation while others have had many years of flight training and thousands of hours of flight time on civilian (or military) jet or turboprop aircraft. We believe that the comparatively low cost of entry of the HondaJet and the proven capabilities of the Challenger 3500 are attractive to new and seasoned traveler alike, particularly given our ability to offer interchange between the two aircraft and onto any one of twenty of the thirty aircraft managed by Cirrus. In addition, while some customers have shorter mission profiles and lower passenger loads better suited to the HondaJet others have longer mission profiles with higher passenger loads – and so the HondaJet and the Challenger 3500 (plus Cirrus’s fleet) again make an excellent combination in our view. We have taken a gradual approach to fleet expansion given the capital-intensive nature of aviation and our view that customers should bear the risk (and related tax reward) of owning and maintaining airplanes.

 

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Jet.AI Operator Platform

 

Jet.AI provides and continues to develop a B2B software platform for a suite of SaaS products termed “Jet.AI Operator Platform.” In addition to continuing to develop and enhance Reroute AI and DynoFlight, we may further develop our Flight Club API described above to make it available to Part 135 operators more broadly. We also plan to further enhance our internally developed membership portal.

 

Artificial Intelligence

 

We operate an app in the iOS and Android stores. The app functions as a prospecting and quoting tool for those interested in chartering a private jet. In 2023, we released an enhanced booking app called CharterGPT to automate much of the manual labor in charter bookings for all of the steps between a customer’s firm indication of interest and their arrival at ultimate destination. We believe this automation will enable us to scale charter activity with fewer persons than would be normally required. In particular, CharterGPT is designed to do the following: (1) intake travel requirements in natural language and then interact with customers to provide substantive replies and actionable suggestions with quality indistinguishable from an experienced charter professional; (2) power the content behind outbound calls to smaller charter operators to confirm electronic indications of interest communicated via the Avinode centralized booking database of private aircraft; (3) reconcile the natural language terms in a third party jet operator contract with the terms and conditions in the contract the customer signs with us (4) verify that payment for the charter has cleared.

 

In addition, in 2024, we incorporated the following AI-powered features to offer a continually improving unique and personalized experience to customers:

 

Aircraft Recommendation Engine: Our This feature provides customers greater transparency and understanding of the characteristics of charter relevant to their trips, making it easier for them to make an informed decision. The recommendation engine analyzes a list of available jets based on the travelers request, and considers factors such as budget, preferred aircraft size, age of aircraft, distance of the trip compared with non-stop/range capability, number of passengers, ages and weights of passengers and their respective bags compared with cargo capacity, basic take-off weight limitations, operator safety audit (Argus/Wyvern), cabin amenities such as a fully enclosed lavatory, Wi-Fi availability and years since last interior refurbishment.

 

Customer service: This feature provides intelligent customer service by using natural language processing and machine learning algorithms to understand and respond to initial booking requests. Untrained call center staff and brittle chat bots characterize much of the customer facing experience today in the US. With the advent of AI, we believe that even for high ticket items, consumers will come to expect a natural language interface trained on terabytes of data that relate specifically to their respective purchases.

 

Charter brokerage is labor intensive, and most customers are highly price sensitive. We believe these two factors explain why no charter broker has acquired more than 3-5% of the one million brokered flights that land each year in North America. The back end of the app is expected to provide three features that may address the labor intensity (and hence scalability) of our charter brokerage business. First, each charter operator has its own form of legal contract for carriage and that contract must be reconciled with the terms found in the charter brokers’ agreement with the passenger. Our AI is expected to perform this reconciliation automatically, improving the speed to close with the client and reducing labor costs. Second, many charter operators do not initially respond to electronic requests delivered through the Avinode charter database that powers our app. Our generative chat AI is expected to perform outbound voice calls to prompt aircraft operators to respond to quotes we have requested via the web interface to their Avinode account. Third, we expect to develop our AI to integrate with Schedero (an Avinode-based scheduling application) to generate a trip sheet for a given charter and then to further integrate with Stripe to invoice and confirm payment via credit card, wire, or ACH.

 

In addition, we are developing the following AI-powered features to incorporate into the AI functionality of CharterGPT:

 

Predictive Destination Optimization: CharterGPT is expected to initially make use of information such as airport closures, fuel prices, historical traffic patterns, landing fees, and traveler preferences to then recommend which private airport to select when a traveler’s destination address is serviced by multiple airstrips. For example, Los Angeles is serviced by Los Angeles International Airport (LAX), Van Nuys Airport (KVNY), Burbank Bob Hope Airport (KBUR), John Wayne Airport (KSNA). Landing at an airport farther from one’s ultimate destination may save time if doing so enables faster ground transportation.

 

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Predictive Departure Date: CharterGPT is expected to analyze historical pricing data and forward-looking event data related to a given itinerary to predict the best date to book a flight to obtain the lowest price for their desired charter itinerary. Although approximately thirty-five blackout days a year are widely understood to absorb most domestic private aviation capacity, a variety of lesser appreciated grey-out days centered around key sporting events or entirely new happenings can affect both regional and national pricing.

 

Predictive Departure Time: CharterGPT is expected to use machine learning algorithms to recommend the optimal departure time based on both historical and live weather conditions, air traffic, and other factors, to help customers more reliably arrive at their destination on time.

 

Predictive Ground Transportation: CharterGPT is expected to recommend ground transportation. For example, some airports run out of rental cars at certain times each year because of an annual conference or other recurring special event. Some of our competitors have taken steps to remedy the shortage at some airports by positioning in their own vehicles for customer use.

 

Sales and Marketing

 

Our marketing and advertising efforts are focused on high-net-worth individuals. We have observed that many first-time private flyers came to market beginning in 2020 in an effort to avoid commercial travel and thereby curtail their prospective exposure to COVID-19. We intend to continue to expand our marketing and advertising through the following channels: online marketing, television advertising and event marketing. Paid social media and search engine advertising drive our online marketing. In the past we have launched 15 and 30 second advertising spots that are targeted at high-net-worth individuals and corporate executives through several channels, including CNBC, Fox Business, and The Golf Channel, as well as online through Facebook and Linked-In. We intend to expand social media and event marketing in particular, provided those meet our internal return targets. With respect to event marketing we intend to have a presence at sporting events, business jet industry gatherings and company hosted aircraft static displays.

 

Market Opportunity

 

Over the past 30 years, the market for private jet travel has transformed significantly. First the model of full aircraft ownership transformed into fractional ownership with companies such as NetJets and FlexJet. This was followed by operators offering jet cards and on-demand service through their fleet of aircraft. The latest iteration of private jet travel provides even more flexibility by providing an on-demand service to travelers while leveraging the flight availability of one or more third party carriers. The result of this transformation is a highly segmented industry with numerous market participants offering varying levels of ownership.

 

We believe that by combining the private jet on-demand model with commercial airline flight availability and prospectively the underutilized flight hours of private jet operators, our company will be positioned to provide optimum flexibility and cost efficiency for our clients.

 

Our Aircraft

 

The Company’s aircraft fleet consists of four aircraft – three \HondaJet Elites and one Citation CJ4 Gen 2 aircraft. The Company acquired the three HondaJet Elites pursuant to a Purchase Agreement with Honda Aircraft Company for a multi-aircraft deal for four HondaJet Elites. One of the HondaJet Elites in our current fleet was sold and is now leased by the Company from Western Finance Company. The other two HondaJet Elites in our current fleet were purchased and subsequently financed through the sale of all fractional interests in each of these aircraft. We also acquired a fourth HondaJet Elite pursuant to the Purchase Agreement with Honda Aircraft Company, but we sold this aircraft in June 2022, after we determined, based on our internal financial and legal review, that the sale of the aircraft would offer a net benefit to our stakeholders. The fourth aircraft in our current fleet - the Citation CJ4 Gen 2 aircraft - is wholly owned by one of our customers who committed his aircraft to us via our Onboard Program for management and charter pursuant to our limited management agreement. Under the terms of our management agreement, which has a term of one year that automatically renews unless otherwise terminated by either party upon 30 days prior notice, the customer pays us a monthly management fee for services, including aircraft management services, flight crew services, such as pilot hiring, flight operations services, aircraft maintenance management and other administrative services.

 

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HondaJet Elite aircraft are ideally suited for trips under 3 hours carrying 2-4 passengers plus two pilots. We believe the HondaJet Elite aircraft is one of the most spacious and cost-efficient light jets on the market with ample baggage and interior room (including an enclosed lavatory). The wing mounted engines allow for a tranquil, spacious interior. Engines on the wings mean less weight on the tail and more room in the cabin.

 

As discussed above in “Business – Strategy – Aircraft Operations” above we have executed a non-binding letter of intent to acquire five new Challenger 3500 aircraft from Bombardier, consisting of three prospective firm orders and two options. Subject to (1) our securing of debt financing to fund the initial fleet purchase down payment and (2) the development of a management, interchange, and support plan with our partner Cirrus, we would then plan to execute a formal fleet purchase agreement, and anticipate being able to secure the first Challenger 3500 delivery in the second quarter of 2026. once a fleet purchase agreement is in force, we would then look to pre-sell one quarter, one half or full interest in these aircraft. Upon delivery, the jets would in turn be managed by Cirrus and listed on their Part 135 certificate. Customers would be expected to make a down payment and progress payments, consistent with fractional industry norms.

 

If we include its predecessors the Challenger 300 and Challenger 350, Bombardier has sold over 1,000 serial numbers in the Challenger 3500 line, which in our view remains one of the most popular and reliable super-mid-size jets in the world. The aircraft requires no major scheduled maintenance overhaul in its first two years of service, a testament to the depth of historical experience the manufacturer has developed with this model of aircraft since the Challenger 300 was introduced in 1999. The spacious 8-9 seat stand-up cabin, 43,000 foot flight ceiling and Mach 0.83 capability, make it a leading choice for travelers. After twenty-four years in service the Challenger 300/350/3500 airframe has attracted a sizable community of typed pilots and Bombardier has constructed 41 worldwide service centers (11 in the US) to support utilization.

 

We currently base our fleet at Harry Reid International airport in Las Vegas, NV, a top ten private jet destination and may relocate the fleet based on seasonal travel patterns and the travel patterns of our membership.

 

Based on our experience, and in light of many of our competitors restricting charters on certain “blackout dates,” we estimate that thirty calendar days per year (due to holidays, major sporting events, etc.) it is extremely difficult to fly private without the guaranteed access provided by a jet membership program such as ours. The ability to safely offer guaranteed capacity, on demand, is one of the most important features one can deliver in private aviation. Also, our aircraft give us the ability to attract online visitors with dynamically priced offers.

 

We have entered into an Executive Aircraft Management and Charter Services Agreement with Cirrus. Under this agreement, Cirrus provides management services to us with respect to the marketing, operation, maintenance, and administration of our aircraft. Specifically, following the initial set-up services, Cirrus provides Flight Crew Services, including selection, training, employment and management of the pilots necessary for operating the Company’s Aircraft; Flight Operation Services, including flight scheduling, following and support services; Aircraft Maintenance Services, including maintenance of the Aircraft and/or management of maintenance of the Aircraft performed by third parties, related maintenance support functions and the administration of the Aircraft’s log books, manuals, data, records, reports and subscriptions; Administrative Services, including budgeting, accounting and reporting services; Facility Services, including providing and/or arranging for aircraft hangar and support facilities at the Aircraft’s Operating Base and other locations at which the Aircraft may be situated from time to time; and Insurance Services, including providing insurance policies for the Aircraft.

 

Cirrus is the largest private jet charter company based in Las Vegas. The Cirrus team has been managing and operating aircraft – commercially and privately – for more than 40 years. In addition, Cirrus is:

 

  FAA Eligible On-Demand Approved
  ARG/US Platinum Rated
  Wyvern Recommended

 

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Cirrus maintains, services, and operates our aircraft on our behalf and in compliance with all applicable FAA regulations and certification requirements. Cirrus has the capability to provide substitute aircraft at competitive rates in periods of excess demand for our aircraft.

 

Competition

 

The private air travel industry is extraordinarily competitive. We will compete against private jet charter and fractional jet companies. Established private jet brokerage and fractional companies include but are not limited to, NetJets, FlexJet, VistaGlobal (including JetSmarter powered by XO), SentientJet, WheelsUp, JetSuite, Flight Options, Nicholas Air, Jet Alliance, Executive Air Share, Plane Sense, One Sky Jets, StarJets, Jet Aviation, Volato and Luxury Aircraft Solutions. All compete for passengers with a variety of pricing plans, aircraft types, blackout periods, booking terms, flyer programs and other products and services, including seating, food, entertainment, and other on-board amenities.

 

Both the private jet charter companies and the legacy airlines and low-cost carriers have numerous competitive advantages that enable them to attract both business and leisure travelers. Our competitors may have corporate travel contracts that direct large numbers of employees to fly with a preferred carrier. The enormous route networks operated by our competitors, combined with their marketing and partnership relationships with regional airlines and international alliance partner carriers, allow them to generate increased passenger traffic from domestic and international cities. Our access to smaller aircraft fleet networks and lack of connecting traffic and marketing alliances puts us at a competitive disadvantage, particularly with respect to our appeal to higher-fare business travelers.

 

The fractional private jet companies and the legacy airlines and low-cost carriers each operate larger fleets of aircraft and have greater financial resources, which would permit them to add service in response to our entry into new markets. Due to our relatively small size, we are more susceptible to fare wars or other competitive activities, which could prevent us from attaining the level of traffic or maintaining the level of sales required to sustain profitable operations.

 

In 2018 and 2019, respectively, VistaJet acquired XOJET and JetSmarter, combining its heavy jet subscription-based service targeting multinational corporations and ultra-high net worth individuals with XOJET’s super-midsize jet on demand service and JetSmarter’s digital booking platform for business aviation. In addition, during 2020, Wheels Up acquired Delta Private Jets as well as Gama Aviation, a business jet services company and in 2021 Vista Jet acquired a number of smaller players as well as Apollo Jets. Increased consolidation in our industry could further intensify the competitive environment we face.

 

Intellectual Property

 

We registered a trademark on our brand name, Jet Token, and our logo, with the United States Patent and Trademark Office. We have also purchased our domain name, jettoken.com and operate our website under that domain. We have an application pending with the United States Patent and Trademark Office for Jet.AI. We are the sole owner of the copyrights in and to the software code underlying our App, CharterGPT and the software code underlying our Jet.AI Operator Platform offerings.

 

Employees

 

We have 9 full-time employees, including our Executive Chairman and Interim Chief Executive Officer, our Interim Chief Financial Officer, our Chief Operating Officer, and our Chief Marketing Officer.

 

Regulation

 

Regulations Applicable to the Ownership and Operation of Our Aircraft

 

Once we have leased our aircraft, Cirrus, which will maintain and manage our aircraft, is subject to a high degree of regulation that affects our business, including regulations governing aviation activity, safety standards and environmental standards.

 

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U.S. Department of Transportation (the “DOT”)

 

The DOT primarily regulates economic issues affecting air transportation such as the air carrier’s financial and management fitness, insurance, consumer protection and competitive practices. The DOT has the authority to investigate and bring proceedings to enforce its regulations and may assess civil penalties, revoke operating authority, and seek criminal sanctions. Our operating as an air charter carrier is regulated and certificated by the DOT. The DOT authorizes the carrier to engage in on-demand air transportation within the United States, its territories, and possessions. The DOT can suspend or revoke that authority for cause, essentially stopping all operations.

 

Federal Aviation Administration (the “FAA”)

 

The FAA primarily regulates flight operations, in particular matters affecting air safety, such as airworthiness requirements for aircraft and pilot, mechanic, dispatcher and flight attendant certification. The FAA regulates:

 

  aircraft and associated equipment (and all aircraft are subject to ongoing airworthiness standards),
  maintenance and repair facility certification
  certification and regulation of pilots and cabin crew, and
  management of airspace.

 

In order to engage in air transportation for hire, each air carrier is required to obtain an FAA operating certificate authorizing the airline to operate using specified equipment in specified types of air service. In the case of our leased aircraft, it is a Part 135 license. The FAA has the authority to modify, suspend temporarily or revoke permanently the authority to provide air transportation for failure to comply with FAA regulations. The FAA can assess civil penalties for such failures or institute proceedings for the imposition and collection of monetary fines for the violation of certain FAA regulations. The FAA can revoke authority to provide air transportation on an emergency basis, without notice and hearing, where significant safety issues are involved. The FAA monitors compliance with maintenance, flight operations and safety regulations, maintains onsite representatives and performs inspections of a carrier’s aircraft, employees, and records.

 

The FAA also has the authority to issue maintenance/airworthiness directives and other mandatory orders relating to aircraft and engines, fire retardant and smoke detection devices, collision and windshear avoidance systems, navigational equipment, noise abatement and the mandatory removal and replacement of aircraft parts that have failed or may fail in the future. FAA enforcement authority over aircraft includes the power to ground aircraft or limit their usage.

 

Transportation Security Administration (the “TSA”)

 

The TSA is responsible for oversight of passenger and baggage screening, cargo security measures, airport security, assessment and distribution of intelligence and security research and development. Air carriers are subject to TSA mandates and oversight in connection with screening passenger identities and screening baggage. TSA regulations governing passenger identification, which we will apply at the time of the Company purchase as well as at the time of travel, requires all passengers to provide identification using a valid verifying identity document. In addition, all passengers must provide their full name, date of birth, and gender, which is screened against the travel ban watch list in effect at the time of initial screening and at the time of travel.

 

All air carriers are also subject to certain provisions of the Communications Act of 1934 because of their extensive use of radio and other communication facilities and are required to obtain an aeronautical radio license from the Federal Communications Commission, or the FCC.

 

PROPERTIES OF JET.AI

 

The Company leases space for its corporate headquarters in Las Vegas, Nevada and a satellite office in San Francisco, California, consisting of office space and the use of shared conference facilities.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis provides information which Jet.AI’s management believes is relevant to an assessment and understanding of its consolidated results of operations and financial condition. You should read the following discussion and analysis of Jet.AI’s financial condition and results of operations together with Jet.AI’s audited annual consolidated financial statements as of and for the years ended December 31, 2023 and 2022, and Jet.AI’s unaudited condensed consolidated financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023, in each case together with the related notes thereto and that are included elsewhere in this Prospectus/Offer to Exchange.

 

Certain of the information contained in this discussion and analysis or set forth elsewhere in this Prospectus/Offer to Exchange, including information with respect to plans and strategy for Jet.AI’s business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the sections of this Prospectus/Offer to Exchange entitled “Risk Factors “and “Cautionary Note Regarding Forward-Looking Statements,” Jet.AI’s actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Factors that could cause or contribute to such differences include, but are not limited to, capital expenditures, economic and competitive conditions, regulatory changes, and other uncertainties, as well as those factors discussed below and elsewhere in this Prospectus/Offer to Exchange. We assume no obligation to update any of these forward-looking statements.

 

Percentage amounts included in this Prospectus/Offer to Exchange have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Prospectus/Offer to Exchange may vary from those obtained by performing the same calculations using the figures in the consolidated financial statements included elsewhere in this Prospectus/Offer to Exchange. Certain other amounts that appear in this Prospectus/Offer to Exchange may not sum due to rounding.

 

Business Combination

 

On August 10, 2023, Oxbridge, consummated the Business Combination with Oxbridge, the Merger Subs, and Jet Token. Pursuant to the Business Combination Agreement, Oxbridge redomiciled as a Delaware corporation and was immediately renamed Jet.AI Inc., and promptly thereafter, (a) First Merger Sub merged with and into Jet Token with Jet Token surviving the merger as a wholly owned subsidiary of Jet.AI Inc. and (b) Jet Token merged with and into Second Merger Sub.

 

As a result of the Business Combination:

 

  the then-issued and outstanding Class A ordinary shares of Oxbridge were converted, on a one-for-one basis, into Jet.AI Common Shares;
     
  the then-issued and outstanding Class B ordinary share of Oxbridge were converted, on a one-for-one basis, into Jet.AI Common Shares;
     
  the then-issued and outstanding Oxbridge warrants were converted into an equal number of Warrants, each exercisable for one Common Share;
     
  the then-issued and outstanding Oxbridge Units were converted into an equal number of Jet.AI Units, each consisting of one Common Share and one Warrant;
     
  the outstanding shares of Jet Token common stock, including all shares of Jet Token preferred stock that converted into shares of Jet Token common stock, were cancelled and converted into the right to receive a number of Jet.AI Common Shares and a number of Merger Consideration Warrants based on the respective exchange rations set forth in the Business Combination Agreement;
     
  all outstanding Jet Token options for its common stock, whether or not exercisable and whether or not vested, were converted into options to purchase Jet.AI Common Stock based on the applicable exchange ratio determined in accordance with the Business Combination Agreement;
     
  all outstanding Jet Token warrants were converted into warrants to acquire the number of Jet.AI Common Shares and Merger Consideration Warrants based on the applicable exchange ratio set forth in the Business Combination Agreement; and

 

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  the outstanding Jet Token RSU awards were converted into Jet.AI RSU awards based on the applicable exchange ratio determined in accordance with the Business Combination Agreement.

 

As a result of the Business Combination, Jet.AI Inc. has one class of Common Stock listed on Nasdaq under the ticker symbol “JTAI”, and two classes of Warrants, the Jet.AI Warrants and the Merger Consideration Warrants, listed on Nasdaq under the ticker symbols “JTAIW” and “JTAIZ” respectively.

 

The Business Combination was accounted for as a Reverse Recapitalization in accordance with GAAP, whereby Oxbridge is treated as the acquired company and Jet Token is treated as the acquirer. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Jet Token issuing stock for the net assets of Oxbridge, accompanied by a recapitalization. The net assets of Oxbridge were stated at historical cost, with no goodwill or other intangible assets recorded.

 

The consolidated assets, liabilities, and results of operations prior to the Reverse Recapitalization are those of Jet Token. The shares and corresponding capital amounts and losses per share, prior to the Reverse Recapitalization, have been retroactively restated based on shares reflecting the exchange ratio established in the Business Combination.

 

References in this MD&A to “Jet.AI” or “the Company” refer to Jet Token Inc. prior to the consummation of the Business Combination.

 

Overview

 

Jet.AI, a Delaware corporation, was founded in 2018 by Michael Winston, its Executive Chairman. The Company, directly and indirectly through its subsidiaries, has been principally involved in (i) the sale of fractional and whole interests in aircraft, (ii) the sale of jet cards, which enable holders to use certain of the Company’s and other’s aircraft at agreed-upon rates, (iii) the operation of a proprietary booking platform, which functions as a prospecting and quoting platform to arrange private jet travel with third party carriers as well as via the Company’s leased and managed aircraft, (iv) direct chartering of its HondaJet aircraft by Cirrus, (v) aircraft brokerage and (vi) service revenue from the monthly management and hourly operation of customer aircraft.

 

Beginning in December 2023, we launched our Jet.AI Operator Platform to provide a B2B software platform for SaaS products. Currently we offer the following SaaS software to aircraft owners and operators generally:

 

  Reroute AI: recycles aircraft waiting to embark to their next revenue flight into prospective new charter bookings to destinations within specific operational parameters
     
  DynoFlight: enables aircraft operators to estimate aircraft emissions then purchase carbon removal credits via our DynoFlight API

 

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Results of Operations

 

Comparison of the Years Ended December 31, 2023 and 2022

 

The following table sets forth our results of operations for the periods indicated:

 

   For the Year Ended
December 31,
 
   2023   2022 
         
Revenues  $12,214,556   $21,862,728 
           
Cost of revenues   12,393,089    19,803,739 
           
Gross (loss) profit   (178,533)   2,058,989 
           
Operating Expenses:          
General and administrative (including stock-based compensation of $6,645,891 and $6,492,653, respectively)   11,597,173    9,230,789 
Sales and marketing   573,881    426,728 
Research and development   160,858    137,278 
Total operating expenses   12,331,912    9,794,795 
           
Operating loss   (12,510,445)   (7,735,806)
           
Other expense (income):          
Interest expense   103,615    - 
Other income   (116)   (3)
Total other expense (income)   103,499    (3)
           
Loss before provision for income taxes   (12,613,944)   (7,735,803)
           
Provision for income taxes   2,464    2,400 
           
Net Loss  $(12,616,408)  $(7,738,203)
           
Less cumulative preferred stock dividends   46,587    - 
           
Net Loss to common stockholders  $(12,622,995)  $(7,738,203)
           
Weighted average shares outstanding - basic and diluted   6,326,806    4,409,670 
Net loss per share - basic and diluted  $(2.00)  $(1.75)

 

As discussed more fully below, our results of operations in 2023 and 2022 were impacted significantly by $17.2 million of revenue and $2.1 million of gross profit from fractional sales of all of our then available aircraft in 2022 and the absence of aircraft sales in 2023. Excluding the impact of these fractional sales and despite the increase in our aircraft fleet and charter and jet card/fractional program flight activity, the significant drivers of the decline in gross profit and increase in operating losses resulted from three key factors:

 

  High pilot turnover at the beginning of 2023 that lead to:

 

  an approximate 118% increase in pilot wages from 2022 to 2023 to reduce that turnover, reflected in higher payments to Cirrus; and
     
  increased time when pilots were not available to fly our aircraft due to several months of required onboarding pilot training, increasing our training costs as well as our costs for subcharters to cover these flight hours, which we expect to normalize going forward with the reduced turnover.

 

  Relatively lower per hour pricing for jet cards that we offered from 2021 through June of 2022 to drive customer growth. As of June 2023, we had raised our jet card pricing approximately 17% from our initial price point. However, jet card prices remain fixed for the year term of the contract and, as a result, our two lowest pricing points were being recognized in revenues through June 2023.
     
  An increase in professional service expenses of $1.4 million in large part due to the expenses of our Business Combination in August 2023. While we would expect our professional services expenses to be somewhat more elevated as a public company, they should be significantly lower than $1.4 million on a going forward basis.

 

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We are cautiously optimistic that CharterGPT and ongoing improvement in its AI-powered features will continue to drive growth in our charter revenues and will drive higher broker productivity going forward. Furthermore, at the end of 2023 and beginning of 2024, we launched DynoFlight and Reroute AI, respectively, as part of the Jet.AI Operator Platform. We believe Reroute AI will generate increased revenue for the Company by driving charter demand for repurposed empty flight legs with little incremental operational costs. We also believe that, once the DynoFlight API has been integrated with FL3XX, a web- and app-based aviation management platform, and future customers, it will generate monthly and usage-based revenues with modest operating costs limited to server administration and maintenance of the code base. Furthermore, the Company executed a non-binding letter of intent to acquire five new Challenger 3500 aircraft from Bombardier, consisting of three prospective firm orders and two options. Subject to securing debt financing and the development of a plan with Cirrus for these aircraft, the Company would then pre-sell fractional or whole interests in these aircraft.

 

Comparison of the Three Months Ended March 31, 2024 and 2023

 

The following table sets forth our results of operations for the periods indicated:

 

   Three Months Ended 
   March 31, 
   2024   2023 
         
Revenues  $3,848,598   $1,875,508 
           
Cost of revenues   3,972,954    1,950,526 
           
Gross loss   (124,356)   (75,018)
           
Operating Expenses:          
General and administrative (including stock-based compensation of $1,199,318 and $1,407,044, respectively)   2,546,294    2,488,018 
Sales and marketing   446,600    120,167 
Research and development   32,546    36,319 
Total operating expenses   3,025,440    2,644,504 
           
Operating loss   (3,149,796)   (2,719,522)
           
Other expense (income):          
Interest expense   79,314    - 
Other income   (61)   - 
Total other expense   79,253    - 
           
Loss before provision for income taxes   (3,229,049)   (2,719,522)
           
Provision for income taxes   -    - 
           
Net Loss  $(3,229,049)  $(2,719,522)
Less cumulative preferred stock dividends   29,728    - 
Net Loss to common stockholders  $(3,258,777)  $(2,719,522)
           
Weighted average shares outstanding - basic and diluted   11,441,443    3,902,489 
Net loss per share - basic and diluted  $(0.28)  $(0.70)

 

Revenues

 

Comparison of the Years Ended December 31, 2023 and 2022

 

Revenues for 2023 totaled $12.2 million, a $9.7 million decrease from 2022’s revenues of $21.9 million primarily related to $17.2 million in aircraft sale proceeds in 2022 from the successful fractionalization of the Company’s last HondaJets.

 

The following table sets forth a breakout of revenue components by subcategory for the year ended December 31, 2023 and 2022.

 

   Year Ended 
   December 31, 
   2023   2022 
         
Software App and Cirrus Charter  $7,125,230   $2,004,807 
Jet Card and Fractional Programs   2,847,533    2,257,736 
Management and Other Services   2,241,793    400,185 
Fractional/Whole Aircraft Sales   -    17,200,000 
   $12,214,556   $21,862,728 

 

Software App revenue is the gross amount of charters booked through our app CharterGPT and Cirrus Charter revenue reflects the gross amount of charters on our aircraft booked by Cirrus. Software App revenue was 3.9 million in 2023, compared to 1.0 million in 2022. Cirrus Charter revenue was 3.2 million in 2023, compared to approximately 961,000 in 2022. The increase in Software App and Cirrus Charter revenue reflects primarily a greater number of aircraft operated in 2023 compared to 2022 as well as increased booking through the CharterGPT app. We took delivery of 1 HondaJet in November 2021 and the remaining 2 HondaJets in the third quarter of 2022. We also added a CJ4 aircraft owned by a customer and managed by us to our available fleet of aircraft for charter booking in early 2023.

 

Under our jet card program we charge an hourly rate for flight time. Under our fractional program we charge a monthly fee and hourly fees based on usage. In both case, prepaid flight hours and usage fees are recognized as revenue as the flight hours are used or forfeited and monthly fees are recognized monthly. Deferred revenue at the end of each period reflects prepaid flight hours for which the related travel had not yet occurred. We also record revenue for additional charges, representing primarily charges for cost reimbursements such as a fuel component adjustment to adjust for changes in fuel prices relative to the jet card and fractional contracts’ base fuel price and reimbursement of federal excise taxes. All of these revenues are reflected as Jet Card and Fractional Program revenues. The increase in revenue from Jet Card and Fractional Programs of approximately $590,000 in 2023 compared to 2022 is due to the increase in the number of the Company’s aircraft and a greater number of Jet Card members.

 

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The following table details the flight hours sold and flown or forfeited, as well as the associated deferred revenues and recognized revenues, respectively, and additional charges for the year ended December 31, 2023 and 2022:

 

   For the year ended December 31, 
   2023   2022 
Deferred revenue at the beginning of the year (1)  $933,361    436,331 
Prepaid flight hours sold          
Amount  $3,045,769    2,322,950 
Total Flight Hours   534    439 
           
Prepaid flight hours flown          
Amount  $2,456,354    1,837,720 
Total flight hours   436    350 
           
Additional charges  $391,179    420,016 
Total flight hour revenue  $2,847,533    2,257,736 
           
Deferred revenue at the end of the year (2)  $1,779,794    933,361 

 

(1) Deferred revenue at December 31, 2022 and 2021 also includes $11,800 and $0, respectively, with respect to customer prepayments associated with software app transactions.
(2) Deferred revenue at December 31, 2023 and 2022 also includes $268,818 and $11,800, respectively, with respect to customer prepayments associated with software app transactions.

 

Management and Other Services revenue reflects monthly fees and other expenses from our management of a customer’s CJ4 as well as approximately $220,000 in 2022 from brokerage commissions from an aircraft sale. We began managing the CJ4 in mid-December of 2022.

 

Cost of revenues

 

Our cost of revenue is generally comprised of payments to Cirrus for the maintenance and management of our fleet of aircraft, including the CJ4, commissions to Cirrus for their arranging for charters on our aircraft, aircraft lease expense, federal excise tax relating to jet card and third-party charters, and payments to third-party aircraft operators for their aircraft chartered through our App, as well as the cost of our subcharters for covering jet card flights when our aircraft were unavailable. The management of our aircraft by Cirrus covers all our aircraft regardless of whether the aircraft are used for program flight hours or charter flights and includes expenses such as fuel, pilot wages and training costs, aircraft insurance, maintenance, and other flight operational expenses.

 

As a result of primarily of our increased fleet, the increase in jet card hours flown and additional costs resulting from pilot turn over discussed above, as well as the startup costs relating to the introduction of the CJ4 to our fleet, costs related to the operation of our aircraft and payments to Cirrus for their management increased $3.4 million from $2.0 million in 2022 to $5.4 million in 2023 and aircraft lease payments increased $337,000 from $855,000 in 2022 to $1.2 million in 2023. The Company also incurred third-party charter costs of approximately $5.4 million in 2023, a $4.0 million increase over 2022 reflecting primarily lack of availability of our aircraft due to pilot turnover and increased training time, combined with increased charter activity. Merchant fees and federal excise tax relating to charter flights of $304,000 in 2023 were a $48,000 increase over in 2022.

 

In total, it cost $12.4 million to operate our aircraft in 2023, compared to $4.4 million to operate fewer aircraft on average in 2022. We also incurred $15.2 million in 2022 cost of revenue directly associated with our fractional and whole aircrafts sales.

 

Gross (loss) profit

 

As a result of the foregoing, the Company had a gross loss of approximately $179,000 for 2023, compared to a gross profit of approximately $2.1 million for 2022. The 2022 results were positively affected by the fractionalization of the Company’s HondaJets. Excluding the profit from these fractionalizations, gross profit for 2022 would have been approximately $216,000, with the decline primarily due to increased pilot wages and training, offset by increased flight activity.

 

Total Operating Expenses

 

In 2023, the Company’s operating expenses increased by approximately $2.4 million over the prior year due to an approximate $2.5 million increase in general and administrative expenses. Excluding non-cash stock-based compensation of $6.6 million and $6.5 million in 2023 and 2022, respectively, general and administrative expenses rose by approximately $2.2 million, primarily due to an increase in professional service expenses of $1.4 million in large part due to the expenses of our Business Combination. In addition our insurance expenses increased $58,000 over the 2022 amount of $31,000 due to the significantly higher premiums for D&O insurance as a public company.

 

The Company’s sales and marketing expenses increased by about $147,000 to approximately $574,000 in 2023 from approximately $427,000 in 2022, due to slightly increased marketing spend to promote the Company and its programs.

 

Research and development expenses increased by approximately $24,000 in 2023 over 2022 due to the development and continuing refinement of CharterGPT and our Jet.AI Operator Platform of software products.

 

Operating Loss

 

As a result of all of the above, in 2023 the Company recognized an operating loss of approximately $12.5 million, which was an increase in loss of approximately $4.8 million over 2022. $2.1 million of this decrease is directly attributable to gross profit from fractionalization of our HondaJets in 2022 that did not recur in 2023. The remainder of the decrease, excluding non-cash compensation expenses, resulted from increased pilot wages and costs, increased subcharters, increased professional services expense from the Business Combination and higher D&O insurance costs.

 

Other Expense (Income)

 

During 2023, the Company recognized approximately $104,000 in other expense due primarily due to interest expense 2023 related to the Company’s Bridge Agreement as defined and discussed below.

 

Net Loss to Common Stockholders

 

After deducting cumulative preferred stock dividends of approximately $47,000 in 2023, which have been accruing since the August 2023 issuance date of the Series A and Series A-1 Preferred Stock, net loss to common stockholders increased by $4.9 million.

 

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Comparison of the Three Months Ended March 31, 2024 and 2023

 

The following table sets forth our results of operations for the periods indicated:

 

   Three Months Ended 
   March 31, 
   2024   2023 
         
Revenues  $3,848,598   $1,875,508 
           
Cost of revenues   3,972,954    1,950,526 
           
Gross loss   (124,356)   (75,018)
           
Operating Expenses:          
General and administrative (including stock-based compensation of $1,199,318 and $1,407,044, respectively)   2,546,294    2,488,018 
Sales and marketing   446,600    120,167 
Research and development   32,546    36,319 
Total operating expenses   3,025,440    2,644,504 
           
Operating loss   (3,149,796)   (2,719,522)
           
Other expense (income):          
Interest expense   79,314    - 
Other income   (61)   - 
Total other expense   79,253    - 
           
Loss before provision for income taxes   (3,229,049)   (2,719,522)
           
Provision for income taxes   -    - 
           
Net Loss  $(3,229,049)  $(2,719,522)
Less cumulative preferred stock dividends   29,728    - 
Net Loss to common stockholders  $(3,258,777)  $(2,719,522)
           
Weighted average shares outstanding - basic and diluted   11,441,443    3,902,489 
Net loss per share - basic and diluted  $(0.28)  $(0.70)

 

Revenues

 

Revenues for the first quarter of 2024 totaled $3.8 million, a $1.9 million increase from 2023’s first quarter revenues of $1.9 million, and were comprised of $1.7 million in software-related revenue, $684,000 in charter revenue from the chartering of our Citation CJ4 and HondaJets by our operating partner Cirrus, $677,000 in Jet Card revenue for hours flown and other charges based on hours flown and $800,000 in management and other service revenue from the management of customers’ aircraft.

 

The primary reason for this increase in revenue was due to primarily to significant increases in Software App and Management and Other Services revenues.

 

The following table sets forth a breakout of revenue components by subcategory for the three months ended March 31, 2024 and 2023.

 

   For the Three Months Ended 
   March 31, 
   2024   2023 
         
Software App and Cirrus Charter  $2,371,091   $994,253 
Jet Card and Fractional Programs   677,320    547,545 
Management and Other Services   800,187    333,710 
   $3,848,598   $1,875,508 

 

Software App revenue is the gross amount of charters booked through our app CharterGPT and Cirrus Charter revenue reflects the gross amount of charters on our aircraft booked by Cirrus. Software App revenue was $1.7 million in the first quarter of 2024, compared to $0.5 million in the first quarter of 2023. Cirrus Charter revenue was $0.7 million in the first quarter of 2024, compared to approximately $0.5 million in the first quarter of 2023. The increase in Software App and Cirrus Charter revenue reflects primarily increased utilization of the Company’s Citation CJ4 aircraft during the first quarter of 2024 compared to 2023 as well as increased booking through the CharterGPT app.

 

Under our jet card program we charge an hourly rate for flight time. Under our fractional program we charge a monthly fee and hourly fees based on usage. In both cases, prepaid flight hours and usage fees are recognized as revenue as the flight hours are used or forfeited and monthly fees are recognized monthly. Deferred revenue at the end of each period reflects prepaid flight hours for which the related travel had not yet occurred. We also record revenue for additional charges, representing primarily charges for cost reimbursements such as a fuel component adjustment to adjust for changes in fuel prices relative to the jet card and fractional contracts’ base fuel price and reimbursement of federal excise taxes. All of these revenues are reflected as Jet Card and Fractional Program revenues. The increase in revenue from Jet Card and Fractional Programs of $129,775 in the first quarter of 2024 compared to the first quarter of 2023 is due to higher utilization by our Jet Card clients as well as higher average revenues per flight hour.

 

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The following table details the flight hours sold and flown or forfeited, as well as the associated deferred revenues and recognized revenues, respectively, and additional charges for the first quarter of 2024 and 2023:

 

   For the three months ended March 31, 
   2024   2023 
Deferred revenue at the beginning of the period (1)  $1,779,794   $933,361 
Prepaid flight hours sold          
Amount  $333,000   $742,250 
Total Flight Hours   55    131 
           
Prepaid flight hours flown          
Amount  $636,502   $425,130 
Total flight hours   95    86 
           
Additional charges  $49,052   $122,415 
Total flight hour revenue  $677,320   $547,545 
           
Deferred revenue at the end of the period (2)  $1,395,285   $1,285,762 

 

(1) Deferred revenue at December 31, 2023 and 2022 also includes $268,818 and $11,800, respectively, with respect to customer prepayments associated with software app transactions.

 

(2) Deferred revenue at March 31, 2024 and 2023 also includes $187,811 and $47,081, respectively, with respect to customer prepayments associated with software app transactions.

 

Management and Other Services revenue reflects monthly fees and other expenses from our management of a customer’s CJ4 as well as approximately $10,000 from aircraft brokerage fees. We began managing the CJ4 in mid-December of 2022.

 

Cost of revenues

 

Our cost of revenue is generally comprised of payments to Cirrus for the maintenance and management of our fleet of aircraft, including the CJ4, commissions to Cirrus for their arranging for charters on our aircraft, aircraft lease expense, federal excise tax relating to jet card and third-party charters, and payments to third-party aircraft operators for their aircraft chartered through our App, as well as the cost of our subcharters for covering jet card flights when our aircraft were unavailable. The management of our aircraft by Cirrus covers all our aircraft regardless of whether the aircraft are used for program flight hours or charter flights and includes expenses such as fuel, pilot wages and training costs, aircraft insurance, maintenance and other flight operational expenses.

 

As a result of our increased fleet utilization, the increase in jet card hours flown and additional costs resulting from pilot turn over, costs related to the operation of our aircraft and payments to Cirrus for their management increased $218,000 from $1.2 million in the first quarter of 2023 to $1.4 million in the first quarter of 2024 and aircraft lease payments increased $120,000 from $201,000 in the first quarter of 2023 to $321,000 in the first quarter of 2024. The Company also incurred third-party charter costs of approximately $2.1 million in the first quarter of 2024, a $1.6 million increase over the first quarter of 2023 reflecting primarily lack of availability of our aircraft due to pilot turnover and increased training time, combined with increased charter activity. Merchant fees and federal excise tax relating to charter flights of $161,000 in the first quarter of 2024 were a $94,000 increase over in the first quarter of 2023.

 

In total, it cost $4.0 million to operate our aircraft in the first quarter of 2024, compared to $2.0 million to operate our aircraft in the first quarter of 2023.

 

Gross loss

 

The resulting gross loss totaled approximately $124,356 for the first quarter of 2024, compared to a gross loss of $75,018 for the first quarter of 2023. The gross loss in the first quarter of 2024 was largely driven by increased subcharter costs.

 

Total Operating Expenses

 

In the first quarter of 2024, the Company’s operating expenses increased by $380,936 over the prior year comparable period primarily due to increased sales and marketing expenses. Excluding non-cash stock-based compensation of $1.2 million and $1.4 million in the first quarter of 2024 and 2023, respectively, general and administrative expenses rose by $266,000 primarily due to increases in professional service expense as well as increased insurance costs as a result of our public company directors’ and officers’ insurance.

 

The Company’s sales and marketing expenses increased by $326,433 to $446,600 in the first quarter of 2024 from $120,167 in the first quarter of 2023, due to increased software marketing from the introduction of CharterGPT and DynoFlight.

 

Research and development expenses decreased by $3,773 in the first quarter of 2024 from $36,319 in the first quarter of 2023, due to the reduced utilization of external software consultants.