UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2023
Or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ________ to ________
Commission
file number: 001-40725
Jet.AI
Inc.
(Exact
Name of Registrant As Specified In Its Charter)
(Address of Principal Executive Offices) (ZIP Code)
(702)747-4000
(Registrant’s
telephone number, including area code)
Securities
to be registered under Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, par value $0.0001 per share JTAI The Nasdaq Stock Market LLC
Securities
to be registered under Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
☐ No ☒
Indicate
by check mark whether the registrant has (1) filed reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes
☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Yes
☒ No ☐
Indicate
by check mark whether the Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See definition 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 Company has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate
by check mark whether the registrant has fi led a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The
aggregate market value of the voting and non-voting common equity held by non-affiliates was $12,902,168as of the last business day
of the registrant’s most recently completed second fiscal quarter. As of March 27, 2024, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was
$6,250,320.
As
of March 27, 2024, there
were 12,205,144
of the Company’s common stock, par value $0.0001, issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the registrant’s definitive proxy statement to be filed for its 2024 Annual Meeting of Stockholders are incorporated by reference
into Part III hereof. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the end of the
fiscal year covered by this Annual Report on Form 10-K.
TABLE
OF CONTENTS
Page
PART I
Item 1 Business 1
Item 1A Risk Factors 12
Item 1B Unresolved Staff Comments 28
Item 1C Cybersecurity 28
Item 2 Properties 29
Item 3 Legal Proceedings 29
Item 4 Mine Safety Disclosures 29
PART II
Item 6 [Reserved] 32
Item 7A Quantitative and Qualitative Disclosures About Market Risk 51
Item 8 Financial Statements and Supplementary Data 51
Item 9A Controls and Procedures 52
Item 9B Other Information 52
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 52
PART III
Item 10 Directors, Executive Officers and Corporate Governance 53
Item 11 Executive Compensation 53
Item 14 Principal Accountant Fees and Services 53
PART IV
Item 15 Exhibits and Financial Statement Schedules 53
Signatures 57
Index to Consolidated Financial Statements 58
i
On
August 10, 2023 (the “Closing Date”), we consummated the previously announced “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 (the “Business Combination Agreement”), by and among the Oxbridge Acquisition
Corp., OXAC Merger Sub I, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of the Company (“First Merger Sub”),
Summerlin Aviation LLC (f/k/a OXAC Merger Sub II, LLC), a Delaware limited liability company and a direct, wholly-owned subsidiary of
the Company (“Second Merger Sub” and, together with First Merger Sub, the “Merger Subs”), and Jet Token Inc.,
a Delaware corporation (“Jet Token”). In connection with the Business Combination, we changed our name from Oxbridge Acquisition
Corp., a Cayman Islands exempted company (Oxbridge”), to Jet.AI Inc.
Unless
otherwise noted in this report, “Jet.AI,” “the Company,” “we,” “us,” “our”
and similar terms refer to are to (a) Oxbridge prior to the Closing of the Business Combination and (b) Jet.AI, Inc. after giving effect
to the Closing of the Business Combination. See “Item 7 – Management’s Discussion and Analysis of Financial Condition
and Results of Operations – Business Combination.”
Some
of the market and industry data contained in this report are based on independent industry publications or other publicly available information.
We believe this information is reliable as of the applicable date of its publication, however, we have not independently verified and
cannot assure you as to the accuracy or completeness of this information. As a result, you should be aware that the market and industry
data contained herein, and our beliefs and estimates based on such data, may not be reliable.
THIS
FILING MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY,
AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE
TO THE COMPANY’S MANAGEMENT. WHEN USED HEREIN, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,”
“ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE
EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS,
WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING
STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
ii
PART
I
Item 1Business
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.
We
formed our company on June 4, 2018. We developed and, in September 2019, launched our booking platform represented by our iOS app JetToken
(the “App”), 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:
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 Acquisition Corp. (“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 (each merger and all other transactions
contemplated by the Business Combination Agreement, the “Business Combination”).
As
a result of the Business Combination:
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 this report.
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 a Share Purchase Agreement, dated as of August 4, 2022 (the “Share Purchase
Agreement”), with GEM Yield LLC SCS and GEM Yield Bahamas Limited (together with GEM Yield LLC SCS, “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 (the “Aggregate Limit”) 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 shares of common stock 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 a warrant (as subsequently amended, 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 an agreement with (i) Meteora Capital Partners, LP (“MCP”), (ii) Meteora Select Trading Opportunities
Master, LP (“MSTO”), and (iii) Meteora Strategic Capital, LLC (“MSC” and, collectively with MCP and MSTO, “Meteora”)
(as amended on August 31, 2023 and October 2, 2023, the “Forward Purchase Agreement”) 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; and Meteora paid us 1⁄2 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.
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 OAC Sponsor Ltd., a Cayman Islands exempted company (the “Sponsor”), the sponsor of Oxbridge, each providing
for the issuance of equity in satisfaction of Oxbridge payment obligations.
Please
see “Item 7 – 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 The Nasdaq Global Market under the symbol “JTAI”. On December 1, 2023, the Company received
a notification letter (the “Letter”) from the Nasdaq Listing Qualifications Staff of Nasdaq notifying the Company that its
failed to meet the continued listing requirements for The Nasdaq Global Market. In accordance with Nasdaq rules and as stated in the
Letter, the Company submitted a plan to regain compliance, involving a proposed transfer to The Nasdaq Capital Markets with lower listing
requirements, as well as a number of capital raising measures that the Company intended to take such as 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. Although the Company believes it will be able to achieve compliance with the Nasdaq Capital Markets
continued listing requirement, there can be no assurance that we will be able to achieve compliance with these requirements within the
time frame required by Nasdaq or at all, particularly if our stock price trades below $1.00 for a sustained period. Furthermore, there
can be no assurance that the Company will be able to maintain compliance with continued listing criteria of the Nasdaq Capital Markets
in the future. Nasdaq’s determination that we fail to meet the continued listing standards of Nasdaq may result in our securities
being delisted from Nasdaq.
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 (DBA
Cirrus Aviation Services, LLC) (“Cirrus”) 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,
NC. 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.
We
offer the following programs for our HondaJet Elite aircraft:
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 App (or CharterGPT) 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.
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.
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.
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 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, WiFi 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.
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 HA-420 aircraft (the “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.
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
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.
U.S.
Department of Transportation (“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 (“FAA”)
The