Volato Group, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes. This discussion contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2025 and elsewhere in this Quarterly Report. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section to “we,” “us,” “our,” and “the Company” are intended to mean the business and operations of Volato Group, Inc. Overview of Our Business Our historical mission has been to provide our customers more time for the rest of their lives by providing convenient and high-quality travel by using the right aircraft for the mission and by developing proprietary technology designed to make the travel experience more seamless. Our revenue is generated through airplane sales and software-as-a-service subscriptions. In September 2024, we entered into an agreement with flyExclusive, a leading provider of private jet charter services, to transition our aircraft ownership program fleet operations to flyExclusive. This move was intended to bring substantial cost savings and provide Volato with the opportunity to focus on what it believes to be its high-growth areas, including aircraft sales and products and services utilizing our proprietary software. Volato sought to benefit from the margins on aircraft sales without the burden of operational costs, while also generating revenue from its proprietary software, including the Vaunt platform, Volato’s empty leg consumer app. In the fourth quarter of 2024, we transferred the aircraft lease agreements to flyExclusive and have no further obligations under the aircraft lease agreements or control over such flight operations. Items related to our aircraft ownership program fleet operations are included in discontinued operations. Recent Developments On July 28, 2025, the Company entered into the Merger Agreement with Merger Sub and M2i, pursuant to which Merger Sub will merge with and into M2i, with M2i surviving the Merger as a wholly-owned subsidiary of Volato. The Merger is subject to approval by the Company’s stockholders and various other customary closing conditions. M2i’s business focuses on providing its partners with access to turnkey solutions, facilitating expanded business opportunities, securing offtake agreements, influencing strategic government policy, and engaging with aligned organizations and laboratories. M2i specializes in the development and execution of a complete global value supply chain for critical minerals, including the creation of a private critical minerals reserve. Upon consummation of the Merger it is currently expected that M2i’s stockholders will own approximately 85% of the combined company. In July 2025, the Company began development of an enterprise AI “Artificial Intelligence” platform that deploys autonomous agents within Microsoft 365 environments to automate workflows, synthesize information across systems, and execute multi-step business processes; the platform includes optional deterministic document processing capabilities for applications requiring enhanced reliability and auditability, such as contract analysis and regulatory filings. 32 Table of Contents On October 16, 2025, pursuant to the Securities Purchase Agreement the Company issued a fourth tranche Convertible Note in the principal amount of $2.2 million for a purchase price of $2.0 million, representing an original issue discount of ten percent (10%). The Convertible Note matures on October 16, 2026. On October 1, 2025, the Company entered into a Fourth Amendment (the “Amendment”) to Aircraft Management Services Agreement (as amended the “Agreement”) with flyExclusive to bring the Agreement in line with Company’s anticipated shift in operations, new business directives, and to better accommodate the proposed Merger with M2i. The Amendment served to, (i) modify the term of the Agreement; (ii) grant flyExclusive, subject to certain terms and conditions, the right to purchase certain aviation-related assets from the Company and assume certain obligations of the Company (the “flyExclusive Asset Option”); (iii) grant the Company, subject to certain terms and conditions, the right to sell certain aviation-related assets to flyExclusive and assign certain obligations of the Company to flyExclusive (the “Company Asset Option,” and collectively with the flyExclusive Asset Option, the “Asset Options”); (iv) obligate flyExclusive to pay the Company $100,000 upon execution of the Amendment as settlement of net payables owed by flyExclusive to the Company under the terms of the Agreement (the “Net Payables Obligation”); and (v) modify the material terms of flyExclusive’s right to cause the Company to merge with and into a wholly owned subsidiary of flyExclusive (the “flyExclusive Merger Option”), including that the flyExclusive Merger Option is to be only exercisable in the event that the Company and M2i terminate the Merger Agreement. The purchase price for the Asset Options and the Net Payables Obligations may be paid by flyExclusive in cash or shares of flyExclusive Class A common stock, at the sole discretion of flyExclusive. flyExclusive elected to pay the Net Payables Obligation by issuing the Company 20,576 shares of Class A common stock. As consideration for the execution of the Amendment, flyExclusive agreed to pay $2,000,000 to the Company, in cash or shares of flyExclusive Class A common stock, in exchange for the right to receive either (i) the net proceeds that the Company receives from the sale of a certain G280 aircraft, which is expected to be delivered to the Company pursuant to an existing agreement (the “G280 Agreement”) with Gulfstream Aerospace Corporation (“Gulfstream”), or (ii) if, and only if, Gulfstream provides written consent, assignment of the G280 Agreement from the Company to flyExclusive subject to the execution of an asset purchase agreement relating solely to the transfer of the G280 Agreement. flyExclusive elected to pay all of the $2,000,000 in shares of its Class A common stock and issued an aggregate of 411,523 shares of its Class A common stock to the Company. On December 16, 2025 the Company announced a stock dividend of shares of flyExclusive stock to Volato shareholders of record as of December 26, 2025. The dividend was effected in January 2026. On March 6, 2026, the Company signed amendment number five to the Agreement with flyExclusive, pursuant to which the Company sold certain unused intellectual property assets for $1.3 million payable in cash or shares of flyExclusive’s Class A common stock. Such assets represent a portion of the total assets which were anticipated to be sold under one of the Asset Options as described above. Following the sale of the intellectual property assets pursuant to the fifth amendment, there is $700,000 in remaining assets that may be sold to flyExclusive under the terms of the Agreement, as amended. On May 7, 2026, the shareholders of the Company approved the Merger. 33 Table of Contents Key Factors Affecting Results of Operations We believe that the below key factors have affected our financial condition and results of operations and may continue to have a significant effect. In addition, upon closing the Merger our financial condition and results of operations will be impacted by those of M2i and its industry. Airplane Sales During 2025, we took delivery of three Gulfstream G280 aircraft, which were delivered and sold to third parties. We do not expect to take delivery of additional aircraft in 2026. Costs and Expense Management In 2022 and 2023, we invested in the core business systems, processes and people required to safely operate a growing, publicly traded private aviation company. In September 2024, we entered into an agreement with flyExclusive to transition our fleet operations to flyExclusive. This move resulted in substantial cost savings and provided us with the opportunity to focus on what we believe to be our high-growth areas, including aircraft sales and proprietary software. We have benefited from the margins on aircraft sales without the burden of operational costs, while also generating revenue from our proprietary software, including the Vaunt platform, our empty leg consumer app. Economic Conditions The private aviation industry is volatile and affected by economic cycles and trends. Our financial performance is susceptible to economically driven changes in demand for our Vaunt platform. Historically, our cost structure and private aviation demand levels had been greatly impacted by the price of jet fuel, pilot salaries and availability, changes in government regulations, consumer confidence, safety concerns, and other factors. 34 Table of Contents Results of Operations Comparison of three months ended March 31, 2026 and 2025 The following table sets forth our results of operations for the three months ended March 31, 2026 and 2025 (in thousands, except percentages): Three Months Ended March 31, Change In 2026 2025 $ % Revenue $ 997 $ 25,483 $ (24,486 ) (96 )% Costs and expenses: Cost of revenue 294 20,987 (20,693 ) (99 )% Selling, general and administrative 3,050 1,970 1,080 55 % Total costs and expenses 3,344 22,957 (19,613 ) (85 )% Operating income (loss) (2,347 ) 2,526 (4,873 ) (193 )% Other income (expenses): Other income, net 26 1,181 (1,155 ) (98 )% Gain on sale of asset 1,094 — 1,094 N/M Loss from change in fair value of financial instruments (1,378 ) (849 ) (529 ) 62 % Interest income (expense), net 27 (2,400 ) 2,427 (101 )% Other income (expenses), net (231 ) (2,068 ) 1,837 (89 )% Income (loss) before provision for income taxes and discontinued operations (2,578 ) 458 (3,036 ) (663 )% Provision for (benefit from) incomes taxes 5 98 (93 ) N/M Net income (loss) from continuing operations (2,583 ) 360 (2,943 ) (818 )% Net income (loss) from discontinued operations, net of taxes (51 ) 95 (146 ) (154 )% Net income (loss) $ (2,634 ) $ 455 $ (3,089 ) (679 )% N/M - the percentage change is not meaningful 35 Table of Contents Revenue Revenue consists of the following (in thousands, except percentages): Three Months Ended March 31, Change In 2026 2025 $ % Aircraft sales $ — $ 25,100 $ (25,100 ) (100 )% Subscription 997 383 614 160 % Total $ 997 $ 25,483 $ (24,486 ) (96 )% Revenue decreased by $25.1 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The decrease in revenue was the result of a decrease in aircraft sales of $25.0 million, as we did not take delivery of aircraft during the year, and an increase in subscription based revenue of $0.6 million during the three months ended March 31, 2026 compared to the prior year period. The increase in subscription based revenues is attributable to our Vaunt platform. Cost of Revenue Cost of revenue comprises expenses tied to the associated revenue streams: aircraft sales and subscription based revenue. Aircraft sales cost of revenue is the purchase price of the aircraft. Subscription cost of revenue includes costs we incur related to our proprietary software, the Vaunt platform. Cost of revenue consists of the following (in thousands, except percentages): Three Months Ended March 31, Change In 2026 2025 $ % Aircraft sales $ — $ 20,930 $ (20,930 ) (100 )% Subscription 294 57 237 416 % Total $ 294 $ 20,987 $ (20,693 ) (99 )% Cost of revenue decreased by $20.9 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The decrease in cost of revenue was primarily a result of a decrease in aircraft sales as we purchased and took delivery of one aircraft during the three months ended March 31, 2025. Selling, general and administrative Selling, general and administrative expenses increased by $1.1 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase in selling, general and administrative is primarily related to a $0.5 million increase in accounting, legal and other professional fees as we work toward the merger with M2i, a $0.4 million increase related to professional fees and software development for our Vaunt platform and $0.2 million increase in salaries and wages for our Parslee platform. Gain (loss) on change in fair value of financial instruments For the three months ended March 31, 2026, the loss on the change in fair value of financial instruments relates to a non-cash loss on the Investment in M2i share exchange of $0.8 million, a loss on the Investment of flyExclusive of $174 thousand, a loss on the fair value of the aviation asset of $0.3 million and a loss on the change in the fair value of the Convertible Notes of $60 thousand. 36 Table of Contents For the three months ended March 31, 2025, the loss on the change in fair value of financial instruments relates to the fair value adjustment on the 2024 Convertible Notes resulting in a non-cash loss of $0.8 million during the three months ended March 31, 2025. Gain on sale of asset Gain on sale of asset, consists of the sale of mission control software to flyExclusive with the fifth amendment on March 6, 2026. Interest Income (expense), Net Interest income (expense) net, primarily consists of interest related to the note receivable and the sale of the GC Aviation, Inc in March 2025. Interest income (expense), net primarily consists of interest related to our aircraft brokerage and services agreement with OgaraJets LLC and the pre-delivery payment agreement with SAC Leasing G280 LLC as of March 31, 2025. Liquidity and Capital Resources Overview Our principal sources of liquidity have historically consisted of financing activities, including proceeds from the issuance of stock, borrowings under our credit facilities, and proceeds from sales of debt and equity securities. We additionally generate revenue through sales subscriptions to our software application. As of March 31, 2026, we had $2.0 million of cash and cash equivalents. Our primary needs for liquidity are to fund working capital, debt service requirements, and for general corporate purposes. We believe the primary factors that could affect our liquidity include whether the closing conditions under the Securities Purchase Agreement are met (or waived) such that we are able to issue one or more additional convertible notes under that arrangement, our ability to raise additional funds on favorable terms, the timing and extent of spending on software development and other growth initiatives, our ability to manage our expense, and overall economic conditions. To the extent that our current liquidity is insufficient to fund future activities, we will need to raise additional capital. We may attempt to raise additional capital through the sale of equity securities, through debt financing arrangements, or both. Raising additional capital by issuing equity securities will dilute the ownership of existing stockholders. The occurrence of additional debt financing would result in debt service obligations, and any future instruments governing such debt could provide for operating and financing covenants that could restrict our operations. In the event that additional capital is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. Except for our 2025 fiscal year, we have historically incurred negative cash flows from operating activities and significant losses from operations. Management believes that its current cash position, along with proceeds from future debt and/or equity financings, when combined with prudent expense management, will allow the Company to continue as a going concern and to fund its operations for at least one year from the date of this Quarterly Report. There are no assurances, however, that management will be able to raise capital or debt on terms acceptable to the Company. If the Company is unable to obtain sufficient additional capital or debt on terms acceptable to the Company, the Company may be required to reduce the near-term scope of its planned development and operations, which could delay implementation of the Company’s business plan and harm its business, financial condition, and operating results. These above matters raise substantial doubt about the Company’s ability to continue as a going concern. 37 Table of Contents Cash Flows The following table summarizes our cash flows for the three months ended March 31, 2026, and 2025 (in thousands): Three Months Ended March 31, 2026 2025 Net cash used in operating activities $ (2,573 ) $ (312 ) Net cash (used in) provided by investing activities (176 ) 21 Net cash used in financing activities (46 ) (1,133 ) Net decrease in cash and restricted cash $ (2,795 ) $ (1,424 ) Cash Flow from Operating Activities Net cash used in operating activities for the three months ended March 31, 2026 was $2.5 million. The cash outflow from operating activities consisted of our net loss of $2.6 million, non-cash items of $0.4 million, a change in net operating assets and liabilities of $0.3 million and a change in net assets and liabilities for discontinued operations of $0.2 million. The change in net operating assets and liabilities was primarily a result of an increase in prepaid and other current assets of $0.6 million, an increase in member deposits and deferred revenue of $0.6 million and an increase in contract assets of $0.2 million. Net cash used in operating activities for the three months ended March 31, 2025 was $0.3 million. The cash outflow from operating activities consisted of our net income of $0.4 million, non-cash items of $1.1 million, a change in net operating assets and liabilities of $0.3 million, and a change in net assets and liabilities for discontinued operations of $1.5 million. The change in net operating assets and liabilities was primarily as a result of a decrease in customer deposits and deferred revenue of $2.1 million and a decrease in deposits of $1.8 million. Cash Flow from Investing Activities Net cash used in investing activities for the three months ended March 31, 2026 was $0.2 million. The cash flow from investing activities consisted of the purchase of property and equipment. Net cash provided by investing activities for the three months ended March 31, 2025 was $21 thousand. The cash flow from investing activities consisted of the sale of property and equipment. Cash Flow from Financing Activities Net cash used in financing activities for the three months ended March 31, 2026 was $46 thousand. Cash flow used in financing activities consisted primarily of the issuance of costs of share issuances. Net cash used in financing activities for the quarter ended March 31, 2025 was $1.1 million. Cash flow used in financing activities consisted of the repayment on loans of $1.1 million. Sources of Liquidity To date, we have financed our operations primarily as a result of the 2023 business combination, sales of preferred stock, borrowings of long-term and short-term debt, loans and convertible notes. As of March 31, 2026, we had negative working capital of approximately $2.5 million and our primary source of liquidity was cash totaling $1.9 million. Based on our recent trends, we expect to fund our operations in 2026 from our cash on hand, cash from operations, or one or more sales of convertible promissory notes in accordance with the Securities Purchase Agreement described in Note 2 and Note 8 to our unaudited financial statements in this Quarterly Report and potentially additional sales of equity or debt securities (including potential sales of common stock in our at-the-market sales program described below and elsewhere in this Quarterly Report). The Company believes it has the ability to generate and obtain enough cash to meet its obligations for the next 12 months. 38 Table of Contents The Company entered into the pre-delivery payment agreement on October 5, 2022, with SAC Leasing G280 LLC to obtain loans in the aggregate amount of $40.5 million for the purchase of four (4) Gulfstream G280 aircraft to be delivered in 2024 and 2025. The maturity date was the earlier of the delivery date of the aircraft or September 14, 2025, which is thirty-five (35) months from the date of funding. The purchase agreement contracts were assigned to SAC Leasing G280 LLC as collateral on this credit facility. In the third quarter of 2024, $9.0 million was repaid to SAC Leasing G280 LLC as a result of the delivery of the first Gulfstream G280. In the first quarter of 2025, an additional $19.5 million was repaid to SAC Leasing G280 LLC as a result of the delivery of the second Gulfstream G280 and the return of $9.0 million in deposits related to the fourth Gulfstream G280. After the delivery of the second Gulfstream G280 and the deposit return related to the fourth Gulfstream G280, the outstanding balance of the credit facility from SAC Leasing G280 LLC was $8.5 million, net. In the second quarter of 2025, with the delivery of the third G280, the remaining outstanding balance of the SAC Leasing G280 LLC credit facility was paid in full. On March 27, 2026, the Company entered into an ATM Sales Agreement with Curvature Securities, LLC (the “Agent”), pursuant to which the Agent will act as the Company’s sole sales agent or principal with respect to the offer and sale from time-to-time of shares of the Company’s Class A Common Stock, having an aggregate gross sales price of an aggregate of up to $3.7 million. In April 2026, the Company received $3.6 million in net proceeds from the sale of stock under our at-the-market program. Contractual Obligations and Commitments Our principal contractual commitments consist of obligations under our convertible promissory notes and operating leases. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of our operations is based on our consolidated financial statements and accompanying notes, which have been prepared in accordance with GAAP. Certain amounts included in or affecting the consolidated financial statements presented in this Quarterly Report and related disclosure must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the consolidated financial statements are prepared. Management believes that the accounting policies set forth below comprise the most important “critical accounting policies” for the company. A “critical accounting policy” is one which is both important to the portrayal of our financial condition and results of operations and that involves difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management evaluates such policies on an ongoing basis, based upon historical results and experience, consultation with experts and other methods that management considers reasonable in the particular circumstances under which the judgments and estimates are made, as well as management’s forecasts as to the manner in which such circumstances may change in the future. Revenue Recognition Revenues are recognized on a gross basis and presented on the consolidated statements of operations net of rebates, discounts, and taxes collected concurrent with revenue-producing activities. The transaction price in the Company’s contracts with its customers is fixed at the time control of goods and services are transferred to the customer. Therefore, the Company does not estimate variable consideration or perform a constraint analysis for our contracts. The Company determines revenue recognition pursuant to Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, through the following steps: 1. Identification of the contract, or contracts, with a customer. 39 Table of Contents 2. Identification of the performance obligation(s) in the contract. 3. Determination of the transaction price. 4. Allocation of the transaction to the performance obligation(s) in the contract. 5. Recognize revenue when or as the entity satisfies a performance obligation. The Company generated revenue primarily through: (i) the sale of aircraft and (ii) our Vaunt software-as-a-subscription platform. Revenue is recognized when control of the promised service is transferred to a customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies, as a performance obligation, each promise to transfer a good or service to a customer that is distinct. To identify its performance obligations, the Company considers all of the goods and services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. For each revenue stream, we evaluate whether our obligation is to provide the good or service itself, as the principal or to arrange for the good or service to be provided by the other party, as the agent, using the control model. In such circumstances, the Company is primarily responsible for satisfying the overall performance obligation with the customer and is considered the principal in the relationship. Revenue from aircraft sales is recognized upon the delivery of the aircraft. Stock-Based Compensation The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. The Company recognizes the cost of services received in exchange for awards of equity instruments based on the grant-date fair value of equity awards. This cost is recognized as expense over the employee’s requisite vesting period or over the nonemployee’s period of providing goods or services. Any forfeitures of stock-based compensation are recorded as they occur. The Company utilizes the Black Scholes valuation model to value the issuance of stock-based compensation. See Note 14, “Shareholders’ Equity (Deficit)” of the accompanying Notes to Consolidated Financial Statements. JOBS Act We are an “emerging growth company” as defined in the JOBS Act. The JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to use this extended transition period under the JOBS Act until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. The Company’s financial statements have not been impacted by the JOBS Act as of March 31, 2026. We have chosen to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company” we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404 of SOX, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (United States) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation-related items, such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. We may remain an emerging growth company until the last day of the fiscal year ending after the fifth anniversary of our IPO, although circumstances could cause us to lose that status earlier, including if we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act or if we have total annual gross revenue of $1.235 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.0 billion in non-convertible debt during any three year period before that time, we would cease to be an emerging growth company immediately. Recent Accounting Pronouncements For further information on recent accounting pronouncements, see Note 2 “Summary of Significant Accounting Policies” of the accompanying consolidated financial statements included elsewhere in this Quarterly Report. 40 Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.