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 Volato is an aviation company advancing the industry with innovative solutions in aviation software and on-demand flight access. Historically, we generated revenue through our aircraft ownership program. This program was a focused commercial strategy including deposit products, charter flights, and aircraft management services. Our aviation experience led to the development of our proprietary software, products, and applications – “Mission Control”, “Vaunt”, and “Parslee”. Mission Control drives efficiency across operations and supports operators in managing fractional ownership, charter, and other services, Vaunt is an experiential private aviation platform that connects travelers to private, empty leg flights, and Parslee is a document intelligence platform that enhances the performance of leading large language models (“LLMs”) by adding deterministic structure and auditability to complex documents such as contracts and SEC filings. With a commitment to advanced technology and customer-focused solutions, we are seeking to build scalable tools to elevate service quality and operational effectiveness in private aviation. In September 2024, we announced an agreement with flyExclusive, Inc. (“flyExclusive”) to transition the management of our aircraft ownership program fleet operations to flyExclusive. Our management expects that this arrangement will provide substantial cost savings to the Company and allow us to focus on high-growth proprietary software sales. 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. On June 4, 2026, the Company delivered written notice to M2i terminating the Merger Agreement and abandoning the transactions contemplated thereby. 31 Table of Contents In 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 Aircraft Management Services 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 Aircraft Management Services Agreement, as amended. On June 7, 2026, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) for the sale by the Company of 6,500,000 shares of the Company’s common stock. The Company received gross proceeds of $2.1 million from the offering. Under the Purchase Agreement the Company also divested its 411,523 shares of flyExclusive Class A common stock the Company had acquired under the terms of the Fourth Amendment to Aircraft Management Services Agreement it entered into in October 2025. On June 28, 2026, the Company entered into a securities purchase agreement, dated June 27, 2026, for the sale by the Company of an aggregate of 11,038,767 shares of the Company’s Class A common stock. The Company received gross proceeds of $1.82 million. 32 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. Airplane Sales During 2025, we took delivery of three Gulfstream G280 aircraft, which were delivered and sold to third parties. We have not and 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 operate a, 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 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. 33 Table of Contents Results of Operations Comparison of three and six months ended June 30, 2026 and 2025 The following table sets forth our results of operations for the three and six months ended June 30, 2026 and 2025 (in thousands, except percentages): Three Months Ended June 30, Change In Six Months Ended June 30, Change In 2026 2025 $ % 2026 2025 $ % Revenue $ 965 $ 24,855 $ (23,890 ) (96 )% $ 1,967 $ 50,338 $ (48,371 ) (96 )% Costs and expenses: Cost of revenue 292 21,088 (20,796 ) (99 )% 586 42,075 (41,489 ) (99 )% Selling, general and administrative 3,193 2,895 298 10 % 6,243 4,865 1,378 28 % Total costs and expenses 3,485 23,983 (20,498 ) (85 )% 6,829 46,940 (40,111 ) (85 )% Operating income (loss) (2,520 ) 872 (3,392 ) (389 )% (4,862 ) 3,398 (8,260 ) (243 )% Other income (expenses): Other income, net (86 ) 3,130 (3,216 ) (103 )% (116 ) 4,311 (4,427 ) (103 )% Gain (loss) on sale of asset (264 ) — (264 ) N/M 830 — 830 N/M Gain (Loss) from change in fair value of financial instruments (218 ) 99 (317 ) (320 )% (1,596 ) (750 ) (846 ) (113 )% Gain from reversal of Investment in M2i 959 — 959 N/M 959 — 959 N/M Interest income (expense), net (26 ) (1,229 ) 1,203 (98 )% 1 (3,629 ) 3,630 (100 )% Other income (expenses), net 365 2,000 (1,635 ) (82 )% 78 (68 ) 146 (215 )% Income (loss) before provision for income taxes and discontinued operations (2,155 ) 2,872 (5,027 ) (175 )% (4,784 ) 3,330 (8,114 ) (244 )% Provision for (benefit from) incomes taxes (1 ) 189 (190 ) N/M 4 287 (283 ) N/M Net income (loss) from continuing operations (2,154 ) 2,683 (4,837 ) (180 )% (4,788 ) 3,043 (7,831 ) (257 )% Net income (loss) from discontinued operations, net of taxes 103 919 (816 ) (89 )% 103 1,014 (911 ) (90 )% Net income (loss) $ (2,051 ) $ 3,602 $ (5,653 ) (157 )% $ (4,685 ) $ 4,057 $ (8,742 ) (215 )% N/M - the percentage change is not meaningful 34 Table of Contents Revenue Revenue consists of the following (in thousands, except percentages): Three Months Ended June 30, Change In Six Months Ended June 30, Change In 2026 2025 $ % 2026 2025 $ % Aircraft sales $ — $ 24,500 $ (24,500 ) (100 )% $ — $ 49,600 $ (49,600 ) (100 )% Subscription 965 355 610 172 % 1,967 738 1,229 167 % Total $ 965 $ 24,855 $ (23,890 ) (96 )% $ 1,967 $ 50,338 $ (48,371 ) (96 )% Revenue decreased by $23.9 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. The decrease in revenue was the result of a decrease in aircraft sales of $24.5 million, as we did not take delivery of aircraft during 2026, and an increase in subscription based revenue of $0.6 million during the three months ended June 30, 2026 compared to the prior year period. The increase in subscription based revenues is attributable to our Vaunt platform. Revenue decreased by $48.4 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The decrease in revenue was the result of a decrease in aircraft sales of $49.6 million, as we did not take delivery of aircraft during 2026, and an increase in subscription based revenue of $1.2 million during the six months ended June 30, 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 June 30, Change In Six Months Ended June 30, Change In 2026 2025 $ % 2026 2025 $ % Aircraft sales $ — $ 21,032 $ (21,032 ) (100 )% $ — $ 41,963 $ (41,963 ) (100 )% Subscription 292 56 236 421 % 586 112 474 423 % Total $ 292 $ 21,088 $ (20,796 ) (99 )% $ 586 $ 42,075 $ (41,489 ) 99 % Cost of revenue decreased by $20.8 million for the three months ended June 30, 2026 compared to the three months ended June 30, 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 June 30, 2025. Cost of revenue decreased by $41.5 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The decrease in cost of revenue was primarily a result of an increase in aircraft sales as we took delivery of our second and third Gulfstream G280 aircraft during 2025. Selling, general and administrative Selling, general and administrative expenses increased by $0.3 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. The increase in selling, general and administrative is primarily related to a $0.6 million increase in a legal settlement accrual, a $0.2 increase in professional fees, a $0.1 increase in salaries and benefits, offset by a decrease of $0.6 million of stock based compensation expense. Selling, general and administrative expenses increased by $1.4 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase in selling, general and administrative is primarily related to $1.0 million in professional, legal and accounting fees, $0.6 million increase in a legal settlement accrual, a $0.3 million increase in salaries and benefits, a $0.2 million increase in advertising and marketing offset by a $0.6 million decrease in stock based compensation. Gain (loss) on change in fair value of financial instruments For the three months ended June 30, 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 $0.2 million. For the six months ended June 30, 2026, the loss on the change in fair value of financial instruments relates to a non-cash loss of $0.5 million on the remaining Investment in M2i, $0.3 million related to the fair value of the aviation asset and a $0.2 million loss on the fair value of the Investment in flyExclusive. 35 Table of Contents Gain from reversal of M2i Investment Gain from the reversal of M2i Investment consist of the reversal of the original losses booked from the Investment in M2i due to the cancellation of Share Purchase agreements with two investors. 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 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 June 30, 2025. Liquidity and Capital Resources Overview Our principal sources of liquidity have historically consisted of financing activities, including 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 June 30, 2026, we had $8.4 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, 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 our 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. 36 Table of Contents Cash Flows The following table summarizes our cash flows for the six months ended June 30, 2026, and 2025 (in thousands): Six Months Ended June 30, 2026 2025 Net cash (used in) provided by operating activities $ (2,855 ) $ 536 Net cash (used in) provided by investing activities (356 ) 30 Net cash provided by financing activities 6,953 141 Net increase in cash and restricted cash $ 3,742 $ 707 Cash Flow from Operating Activities Net cash used in operating activities for the six months ended June 30, 2026 was $2.9 million. The cash outflow from operating activities consisted of our net loss of $4.7 million, non-cash items of $0.1 million, a change in net operating assets and liabilities of $1.7 million and a change in net assets and liabilities for discontinued operations of $0.3 million. The change in net operating assets and liabilities was primarily a result of an increase in deferred revenue and customer deposits of $1.8 million, prepaid and other current assets of $0.2 million, an increase in contract assets, net of $0.5 million, and an increase in account payable and accrued liabilities of $0.5 million, as they are no longer included in discontinued operations. The change in net assets and liabilities for discontinued operations for the six months ended June 30, 2026 was $0.2 million. Net cash provided by operating activities for the six months ended June 30, 2025 was $0.5 million. The cash inflow from operating activities consisted of our net income of $4.1 million, non-cash items of $2.4 million, and a change in net operating assets and liabilities of $2.6 million. The change in net operating assets and liabilities was primarily as a result of a decrease in customer deposits and deferred revenue of $1.5 million and accounts payable and accrued liabilities of $0.9 million, offset by a decrease in deposits of $5.2 million. The change in net assets and liabilities for discontinued operations for the six months ended June 30, 2025 was $3.7 million. Cash Flow from Investing Activities Net cash used in investing activities for the six months ended June 30, 2026 was $0.4 million. The cash flow from investing activities consisted of the purchase of property and equipment. Net cash provided by investing activities for the six months ended June 30, 2025 was $30 thousand. The cash flow from investing activities consisted of the sale of property and equipment. Cash Flow from Financing Activities Net cash provided by financing activities for the six months ended June 30, 2026 was $7.0 million. Cash flow provided by financing activities consisted of proceeds from the at the market offering of $3.6 million, proceeds from the PIPE offering of 2.2 million and proceeds from the registered direct offering of 1.6 million cash received and $0.2 million receivable, offset by cost of share issuance of $0.4 million. Net cash provided by financing activities for the six months ended June 30, 2025 was $141 thousand. Cash flow used in financing activities consisted of the repayment on loans of $1.1 million and the proceeds from the second tranche of the convertible note of $1.4 million. Sources of Liquidity To date, we have financed our operations primarily as a result of the 2023 business combination, sales of stock, borrowings of long-term and short-term debt, loans and convertible notes. As of June 30, 2026, we had working capital of approximately $0.9 million and our primary source of liquidity was cash totaling $8.4 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 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. 37 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 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. The Company does not currently expect to utilize its ATM sales program during the remainer of 2026 due, in part, to limitations imposed under SEC rules. On June 7, 2026, the Company entered into a Securities Purchase Agreement for the sale by the Company of 6,500,000 shares of the Company’s Class A common stock. The Company received gross proceeds of $2.2 million from the offering. On June 27, 2026, the Company entered into a Securities Purchase agreement for the sale by the Company of 11,38,767 shares of the Company’s Class A common stock. The Company received gross proceeds of $1.8 million from the offering. 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. 38 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 12, “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 June 30, 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. 39 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.