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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-19 · 127 added, 177 removed, 70 unchanged (81% of the section changed)

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

The following discussion of our financial condition and results of operations (MD&A) should be read in conjunction with our consolidated financial statements and the related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”) and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

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” included in our Annual Report on form 10-K for the year ended December 31, 2023.

Unless the context otherwise requires, references in this MD&A section to “we,” “us,” “our,” and “the Company” are intended to mean the business and operations of Volato Group, Inc.

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, 2024 and elsewhere in the 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 revenue was generated through our aircraft ownership program, a focused commercial strategy which includes deposit products, charter flights and aircraft management services.

Our aircraft ownership program is an asset-lite model whereby we sell each fleet aircraft to a limited liability company (LLC) and sell LLC membership interests to third-party owners.

The LLC then leases the aircraft back to us for management and charter operation on behalf of the LLC under 14 C.F.R.

In turn, program participants (“JetShare owners”) invest in those special purpose entities to fund the aircraft purchase.

We operate the aircraft on behalf of the special purpose entity and enters into charter agreements with the individual JetShare owners to provide preferential access and charter pricing for our HondaJet fleet.

In September 2024, we announced an agreement with flyExclusive a leading provider of private jet charter services, to transition its fleet operations to flyExclusive.

This move is expected 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 proprietary software.

We will continue to take delivery of new aircraft, and these aircraft may become part of flyExclusive's managed fleet.

Volato will benefit from the margins on aircraft sales without the burden of operational costs, while also generating revenue from its proprietary software, including the Vaunt program, Volato’s successful empty leg consumer app.

Financial highlights for the three months ended September 30, 2024 include:

• We generated total revenue of $40.3 million an increase of $36.6 million, or 1002%, compared to the three months ended September 30, 2023 primarily related to an increase from aircraft sales of $38.2 million;

• Income from continuing operations was $1.9 million for the three months ended September 30, 2024, representing a $3.7 million change from the $1.8 million loss during the prior year primarily related to aircraft sales during the current quarter;

• Adjusted EBITDA was $3.2 million for the three months ended September 30, 2024 compared to negative adjusted EBITDA of $1.7 million for the same period last year.

Financial highlights for the nine months ended September 30, 2024 include:

• We generated total revenue of $44.9 million an increase of $28.9 million, or 182%, compared to the nine months ended September 30, 2023 related to an increase in aircraft sales of $32.4 million;

• Loss from continuing operations was $6.4 million for the nine months ended September 30, 2024, representing a $1.9 million decrease in loss from continuing operations over the prior year primarily related to higher aircraft sales of $32.4 million;

• Negative adjusted EBITDA was $4.7 million for the nine months ended September 30, 2024 compared to negative adjusted EBITDA of $4.2 million for the same period last year.

Our mission is 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.

Volato expects 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 successful 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 now included in discontinued operations.

Financial highlights for the quarter ended March 31, 2025 include:

• We generated total revenue of $25.5 million, an increase of $25.4 million compared to 2024, primarily related to an increase in aircraft sales of $25.1 million as we took delivery of our second Gulfstream G280;

• Net income from continuing operations was $0.4 million compared to a net loss of $5.7 million in the first quarter of 2024.

The decrease in net loss from continuing operations was the result of higher plane sale revenue mentioned above, and;

• We generated a net income of $0.5 million, representing a $17.8 million improvement over the same quarter of the prior year.

Key Factors Affecting Results of Operations

We believe that the following factors have affected our financial condition and results of operations and are expected to continue to have a significant effect:

Market Competition

We competed for market share in the highly fragmented private aviation industry.

The top 10 largest operators control approximately 25% of the total flight hours operated in the United States.

For example, there are over 400 light jet operators (excluding air ambulance) offering Part 135 charter services in our primary network service area, flying approximately 293,000 flight hours.

The breadth of operators and the product options (fractional, deposit/card programs, charter) makes the industry highly competitive.

Airplane Sales

We expect to take delivery of three Gulfstream G280 aircraft manufactured by Gulfstream Aerospace Corporation (“Gulfstream”) and sell these airplanes to third parties in 2025.

Our first Gulfstream G280 was delivered and sold to a third party in the third quarter of 2024.

In February 2025, our second GulfStream G280 was delivered and sold to a third party.

Costs and Expense Management

In 2022 and 2023, we invested in the core business systems, processes and people required to safely operate a rapidly growing, publicly traded private aviation company.

In September 2024, we announced an agreement with flyExclusive to transition our fleet operations to flyExclusive.

This move is expected to bring substantial cost savings and provide us with the opportunity to focus on what we believe to be our high-growth areas, including aircraft sales and proprietary software.

We will continue to take delivery of new aircraft, and these aircraft may become part of flyExclusive’s managed fleet.

We will benefit from the margins on aircraft sales without the burden of operational costs, while also generating revenue from its proprietary software, including the Vaunt program, our successful empty leg consumer app.

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 has resulted in substantial cost savings and provides us with the opportunity to focus on what we believe to be our high-growth areas, including aircraft sales and proprietary software.

We will continue to take delivery of and sell new aircraft.

We expect 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, our successful empty leg consumer app.

Economic Conditions

The private aviation industry is volatile and affected by economic cycles and trends.

Our financial performance has been susceptible to economically driven changes in demand particularly for our discretionary charter and deposit products.

Our cost structure and private aviation demand levels has been greatly impacted by the price of jet fuel, pilot salaries and availability, changes in government regulations, consumer confidence, safety concerns, and other factors.

Pilot Availability and Attrition

The competition for pilots has intensified in recent years.

We have relied on increasing pilot pay and benefits to continue to attract qualified applicants including equity compensation.

Our financial performance is susceptible to economically driven changes in demand particularly for our discretionary charter and deposit products.

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.

Results of Operations

Comparison of three and nine months ended September 30, 2024 and 2023

The following table sets forth our results of operations for the three and nine months ended September 30, 2024 and 2023, (in thousands, except percentages):

For the Three Months Ended

September 30, Change In For the Nine Months Ended

September 30, Change In

Comparison of three months ended March 31, 2025 and 2024

The following table sets forth our results of operations for the three months ended March 31, 2025 and 2024 (in thousands, except percentages):

Three Months Ended March 31, Change In

2025 2024 $ %

Revenue $ 40,269 $ 3,654 $ 36,615 1002 % $ 44,866 $ 15,933 $ 28,933 182 %

Revenue $ 25,483 $ 48 $ 25,435 N/M

Costs and expenses:

Cost of revenue 33,768 3,335 30,433 913 % 37,812 14,633 23,179 158 %

Cost of revenue 20,987 52 20,935 N/M

Selling, general and administrative 1,970 4,330 (2,360) (55) %

2 unchanged sentences

Other income (expenses):

Gain from sale of consolidated entity — — — N/M — 387 (387) N/M

Other income 56 76 (20) (26) % 214 243 (29) (12) %

Loss from change in fair value forward purchase agreement — — — N/M (2,982) — (2,982) N/M

Other income, net 1,181 4 1,177 N/M

Loss from change in fair value of financial instruments (849) (227) (622) 274 %

Interest expense, net (2,400) (1,138) (1,262) 111 %

Other income (expenses) (3,178) (729) (2,449) N/M (8,371) (1,797) (6,574) N/M

Loss before provision for income taxes and discontinued operations (1,326) (2,562) 1,236 (48) % (14,801) (6,279) (8,522) 136 %

Provision for incomes taxes 11 — 11 N/M 26 — 26 N/M

Net loss from continuing operations (1,337) (2,562) 1,225 (48) % (14,827) (6,279) (8,548) 136 %

Net loss from discontinued operations (3,098) (9,263) 6,165 (67) % (23,917) (22,924) (993) 4 %

Net loss $ (4,435) $ (11,825) $ 7,390 (62) % $ (38,744) $ (29,203) $ (9,541) 33 %

Other expenses (2,068) (1,361) (707) 52 %

Income (loss) before provision for income taxes and discontinued operations 458 (5,695) 6,153 (108) %

Provision for incomes taxes 98 6 92 N/M

Net income (loss) from continuing operations 360 (5,701) 6,061 (106) %

Net income (loss) from discontinued operations, net of taxes 95 (11,689) 11,784 (101) %

Net income (loss) $ 455 $ (17,390) $ 17,845 (103) %

N/M - the percentage change is not meaningful

Revenue consists of the following (in thousands, except percentages):

Three Months Ended September 30, Change In Nine Months Ended September 30, Change In

Three Months Ended March 31, Change In

2025 2024 $ %

Aircraft sales $ 38,150 $ — $ 38,150 N/M $ 38,150 $ 5,710 $ 32,440 568 %

Managed aircraft 1,803 3,646 (1,843) (51) % 6,171 10,215 (4,044) (40) %

Subscription 316 8 308 N/M 545 8 537 N/M

Total $ 40,269 $ 3,654 $ 36,615 N/M $ 44,866 $ 15,933 $ 28,933 182 %

Revenue increased by $36.6 million, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

The increase in revenue was primarily the result of an increase aircraft sales of $38.2 million during the three months ended September 30, 2024 compared to the prior year period.

The increase in revenue from aircraft sales was the result of the delivery and sale of two HondaJet Elite IIs and one Gulfstream G280.

We have orders for three additional Gulfstream G280s and expect delivery in 2025.

Revenue increased by $28.9 million, or 182%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The increase in revenue was the primarily the result of a increase in revenue from aircraft sales.

The increase in revenue from aircraft sales was the result of the delivery and sale of two HondaJet Elite IIs and one Gulfstream G280.

We have orders for three additional Gulfstream G280 jets and expect delivery in 2025.

Aircraft sales $ 25,100 $ — $ 25,100 100 %

Subscription 383 48 335 698 %

Total $ 25,483 $ 48 $ 25,435 52990 %

Revenue increased by $25.4 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The increase in revenue was the result of an increase in aircraft sales of $25.1 million and subscription based revenue of $335 thousand during the three months ended March 31, 2025 compared to the prior year.

The increase in revenue from aircraft sales was the result of the delivery and sale of our second Gulfstream G280 during the quarter.

We have orders for two additional Gulfstream G280s and expect delivery in 2025.

The increase in subscription based revenues are attributable to our Vaunt platform which began to generate revenue during the 2024 fiscal year.

Cost of Revenue

Cost of revenue comprises expenses tied to the associated revenue streams:

aircraft sales, managed aircraft and subscription based revenue.

aircraft sales and subscription based revenue.

Aircraft sales cost of revenue is our purchase price of the aircraft.

Managed aircraft cost of revenue includes all costs incurred in our managed aircraft including the cost of flight crews, fuel, maintenance, and landing and other airport fees.

Subscription costs includes costs of our proprietary software, the Vaunt program.

Cost of revenue consists of the following (in thousands, except percentages):

Three Months Ended September 30, Change In Nine Months Ended September 30, Change In

Subscription costs includes costs we incur related to our proprietary software, the Vaunt platform.

Costs of revenue consists of the following (in thousands, except percentages):

Three Months Ended March 31, Change In

2025 2024 $ %

Aircraft sales $ 32,036 $ — $ 32,036 N/M $ 32,036 $ 5,440 $ 26,596 489 %

Managed aircraft 1,698 3,230 (1,532) (47) % 5,656 9,059 (3,403) (38) %

Aircraft sales $ 20,930 $ — $ 20,930 100 %

Subscription 57 52 5 10 %

Total $ 33,768 $ 3,335 $ 30,433 N/M $ 37,812 $ 14,633 $ 23,179 158 %

Cost of revenue increased by $30.4 million, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

The increase in cost of revenue was the result of an increase in aircraft sales as we took delivery of aircraft during the three months ended September 30, 2024.

Cost of revenue increased by $23.2 million, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The increase in costs of revenue was the result of an increase in aircraft sales as we took delivery of aircraft during the nine months ended September 30, 2024.

Total $ 20,987 $ 52 $ 20,935 40260 %

Cost of revenue increased by $20.9 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The increase in cost of revenue was primarily a result of an increase in aircraft sales as we took delivery of our second Gulfstream G280 aircraft during the quarter.

Selling, general and administrative

Selling, general and administrative expenses increased by $2.5 million, or 116%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

The increase in selling, general and administrative expenses was primarily related to higher professional fees and other expenses associated with becoming a public company of $0.5 million and higher software and related fees of $0.3 million.

Selling, general and administrative expenses increased by $7.7 million or 133% for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The increase in selling, general and administrative expenses is primarily related to higher salaries of $1.1 million, higher professional fees and other expenses associated with becoming a public company of $2.9 million.

Gain from sale of consolidated entity

Gain on sale of consolidated entity consists of the gain on the sale of Fly Dreams during 2023.

Loss on change in value of forward purchase agreement

As part of the Business Combination, we entered into the Forward Purchase Agreement.

Selling, general and administrative expenses decreased by $2.4 million for the three months ended March 31, 2025 to $2.0 million, compared to the three months ended March 31, 2024.

The decrease in selling, general and administrative is primarily related to the cost savings initiatives implemented during 2024.

Loss on change in fair value of financial instruments

The loss on 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.

For the three months ended March 31, 2024, the loss on change in fair value of $0.2 million was the result of the fair value adjustment on an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Agreement”).

In July 2024, the Forward Purchase Agreement was terminated.

As of September 30, 2024, we recorded a fair value adjustment on the Forward Purchase Agreement resulting in a zero non-cash loss on the change in fair value for the three months ended September 30, 2024 and a non-cash loss of $3.0 million for the nine months ended September 30, 2024.

Interest Expense

Interest expense primarily consists of interest related to our aircraft purchase and sale agreement with TVPX Aircraft Solutions, Inc., the business loan and security agreement with TVT Capital Source LLC, credit facilities and convertible notes and amortization of debt issuance costs.

Interest expense increased $2.4 million, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 primarily as a result of the aircraft purchase and sale agreement and the business loan and security agreement.

Interest expense increased $3.2 million, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily as a result of the aircraft purchase and sale agreement and the business loan and security agreement.

Non-GAAP Financial Measures

Non-GAAP financial measures are an addition, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP and should not be considered as an alternative to any performance measures derived in accordance with GAAP.

We believe that these non-GAAP financial measures of financial results provide useful supplemental information about the Company to investors.

However, there are a number of limitations related to the use of these non-GAAP financial measures and their nearest GAAP equivalents, including that they exclude significant expenses that are required by GAAP to be recorded in Volato’s financial measures.

In addition, other companies may calculate non-GAAP financial measures differently, or may use other measures to calculate their financial performance, and therefore, our non-GAAP financial measures may not be directly comparable to similarly titled measures of other companies.

ADJUSTED EBITDA

We calculate Adjusted EBITDA as net loss adjusted for (i) interest expense, net, (ii) provision for income taxes (benefit) (iii) depreciation and amortization, (iv) equity-based compensation expense, and other non-operating items.

We include Adjusted EBITDA as a supplemental measure for assessing operating performance.

The following table reconciles Adjusted EBITDA to net loss, which is the most directly comparable GAAP measure (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

Adjusted EBITDA 2024 2023 2024 2023

Net loss (4,435) (11,825) (38,744) (29,203)

Net loss from discontinued operations 3,098 9,263 23,917 22,924

Interest expense, net 3,234 805 5,603 2,427

Provision for income tax expense 11 — 26 —

Loss from change in fair value of forward purchase agreement — — 2,982 —

Depreciation and amortization 80 98 241 207

Equity-based compensation expense (199) 40 69 63

Gain from sale of consolidated entity — — — (387)

Other income (56) (76) (214) (243)

Other items not indicative of ongoing operations 1,436 — 1,436 —

Adjusted EBITDA $ 3,169 $ (1,695) $ (4,685) $ (4,212)

Interest expense 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.

Interest expense increased $1.3 million during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 primarily as a result of the aircraft brokerage and services agreement with OgaraJets LLC.

Liquidity and Capital Resources

Our principal sources of liquidity have historically consisted of financing activities, including proceeds from the issuance of stock, borrowings under our credit facilities, and capital raises from convertible debt and preferred stock.

We additionally manage liquidity through the aircraft sales which provides up front deposits from our customers and aircraft usage.

As of September 30, 2024, we had $5.6 million of cash and restricted cash.

During the year ended December 31, 2023, we converted our line of credit from a related party into convertible notes, and therefore have no credit facilities for future borrowings.

Our primary needs for liquidity are to fund working capital, acquisitions, debt service requirements, and for general corporate purposes.

We believe factors that could affect our liquidity include the ability of our OEM partners to meet our delivery schedule and our ability to sell those aircraft, 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 funds.

We additionally managed liquidity through the aircraft sales.

As of March 31, 2025, we had $2.6 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 factors that could affect our liquidity include the ability of Gulfstream to meet our delivery schedule and our ability to sell those aircraft, 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 note 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 funds by issuing equity securities will dilute the ownership of existing shareholders.

Raising additional capital by issuing equity securities will dilute the ownership of existing shareholders.

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 funds are required from outside sources, we may not be able to raise it on terms acceptable to us or at all.

We have incurred negative cash flows from operating activities and significant losses from operations historically and plan to raise additional capital to fund our future operations.

We believe that our current cash position, along with our anticipated margin from aircraft sales and proceeds from future debt and/or equity financings, when combined with prudent cash and expense management, will allow the us continue as a going concern and to fund our operations for at least one year from the date of these financials statements.

If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be adversely affected.

These factors raise substantial doubt regarding our ability to continue as a going concern.

Our inability to raise additional capital or obtain other liquidity on acceptable terms in the near future would have a material adverse effect on our business, prospects, results of operations, liquidity and financial condition.

Furthermore, any decline in the market price of our common stock could make it more difficult for us to sell equity or equity-related securities in the future at a time an price that we deem appropriate.

The following table summarizes our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):

Nine Months Ended September 30,

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.

We have incurred negative cash flows from operating activities and significant losses from operations historically.

Management believes that its current cash position, along with its anticipated margin from aircraft sales and 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 issuance of these financial statements.

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.

The following table summarizes our cash flows for the three months ended March 31, 2025, and 2024 (in thousands):

Three Months Ended March 31,

Net cash used in operating activities $ (312) $ (7,697)

Net cash provided by investing activities (145) 1,436

Net cash provided by financing activities 136 24,958

Net cash provided by (used in) investing activities 21 (56)

Net cash used in financing activities (1,133) (683)

Net decrease in cash and restricted cash $ (1,424) $ (8,436)

Cash Flow from Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2024 was $11.1 million.

Net cash used in operating activities for the quarter ended March 31, 2025 was $0.3 million.

The cash outflow from operating activities consisted of our net income of $0.5 million, non-cash items of $1.1 million, and a change in net operating assets and liabilities of $1.9 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.

The change in net assets and liabilities for discontinued operations for the quarter ended March 31, 2025 was $1.6 million.

Net cash used in operating activities for the quarter ended March 31, 2024 was $7.7 million.

The cash outflow from operating activities consisted of our net loss of $17.4 million, non-cash items of $0.4 million and a change in net operating assets and liabilities of $6.3 million.

The change in net operating assets and liabilities was primarily as a result of an increase in customer deposits and deferred revenue of $8.9 million and an increase in accounts payable and accrued liabilities of $3.0 million.

The change in net assets and liabilities for discontinued operations for the nine months ended September 30, 2024 was $6.1 million.

Net cash used in operating activities for the nine months ended September 30, 2023 was $24.1 million.

The cash outflow from operating activities consisted of our net loss of $29.2 million, non-cash items of $21 thousand, and a change in net operating assets and liabilities of $5.1 million.

The change in net operating assets and liabilities was primarily a result of an increase in accounts payable and accrued liabilities of $2.6 million, an increase in customer deposits and deferred revenue of $4.7 million and a decrease in deposits of $3.9 million.

The change in net assets and liabilities for discontinued operations for the nine months ended September 30, 2023 was $3.9 million.

The change in net assets and liabilities for discontinued operations for the quarter ended March 31, 2024 was $2.9 million.

Cash Flow from Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2024 was $145 thousand related to the purchase of property and equipment.

Net cash provided by investing activities for the nine months ended September 30, 2023 was $1.4 million.

Cash flow from investing activities was primarily attributable to $350 thousand from the sale of consolidated entity offset by 821 thousand to the purchase of property and equipment.

Cash provided by investing activity from discontinued operations for the nine months ended September 30, 2023 was $1.9 million.

Net cash provided by investing activities for the quarter ended March 31, 2025 was $21 thousand.

The cash flow from investing activities consisted of the sale of property and equipment.

Net cash used in investing activities for the quarter ended March 31, 2024 was $56 thousand.

Cash Flow from Financing Activities

Net cash used financing activities for the nine months ended September 30, 2024 was $136 thousand.

Cash flow from financing activities consisted of repayment on loans of $3.9 million offset by proceeds for the issuance of debt of $4.0 million.

Net cash provided by financing activities for the nine months ended September 30, 2023 was $25.0 million.

Cash flow from financing activities was primarily attributable proceeds from the issuance of convertible notes of $12.7 million and proceeds from line of credit of $1.0 million.

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.

Net cash used in financing activities for the quarter ended March 31, 2024 was $0.7 million.

Cash flow used in financing activities consisted of the repayment on loans of $0.4 million.

The cash used in financing from discontinued operations was $0.3 million for the quarter ended March 31, 2024.

Sources of Liquidity

To date, we have financed our operations primarily through the business combination, sale of preferred stock, borrowings of long-term and short-term debt, loans and convertible notes.

As of March 31, 2025, we had a working capital deficit of approximately $18.2 million.

As of March 31, 2025, our primary source of liquidity was cash totaling $2.6 million.

Based on our recent trends, we expect to fund our operations in 2025 from our cash on hand, cash from operations, one or more sales of convertible promissory notes in accordance with the Securities Purchase Agreement described in Note 2 and Note 10 to our unaudited financial statements in this quarterly report and potentially additional sales of equity or debt securities.

The Company believes it has the ability to generate and obtain enough cash to meets its obligations for the next 12 months.

During the year ended December 31, 2022, the Company executed a series of purchase agreements with Gulfstream Aerospace, LP for the acquisition of four (4) Gulfstream G-280 aircraft.

The first Gulfstream G280 was delivered in the third quarter of 2024 and the second Gulfstream G280 was delivered in the first quarter of 2025.

As of March 31, 2025, total consideration due on the remaining two Gulfstream G280s was $41.7 million with expected deliveries in 2025.

The maturity date is 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 G280 LLC as collateral on this credit facility.

In the third quarter of 2024, $9.0 million was repaid to SAC 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 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 was $8.5 million, net.

In July 2024, the Company entered into a business loan and security agreement (the “Loan”) with TVT Capital Sources LLC (the “Lender”), which provides for a term loan in the amount of $4.0 million.

Net proceeds of $3.8 million were received by the Company and used to fund operations.

The Loan bears interest at an annual percentage rate of 165% and matures on January 28, 2025, with principal and interest payments made weekly.

In the first quarter of 2025, the loan was repaid in full.

Contractual Obligations and Commitments

Our principal commitments consist of contractual cash obligations under our credit facilities and other loans, operating leases for certain controlled aircraft.

We have committed to acquire four (4) Gulfstream G-280 aircraft for total consideration of $79.0 million of which $48 million was funded and paid through September 30, 2024.

The first Gulfstream G280 was delivered in the third quarter of 2024 with the remaining three Gulfstream G280s expected to be delivered throughout fiscal year 2025.

Our principal commitments consist of contractual cash obligations under our credit facilities, operating leases and the 2024 Convertible notes.

We have committed to acquire two (2) additional Gulfstream G-280 aircraft for total consideration of $41.7 million with expected deliveries in 2025, of which $15 million was funded and paid through March 31, 2025.

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 on Form 10-Q 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.

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.

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Revenue Recognition

We determine revenue recognition pursuant to ASC 606, Revenue from Contracts with Customers, through the following steps:

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:

Identification of the contract, or contracts, with a customer.

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Allocation of the transaction to the performance obligation(s) in the contract.

Recognition of revenue when, or as the Company satisfies a performance obligation.

The Company generates revenue primarily through:

(i) the sale of aircraft, and (iii) aircraft management services.

The Company generates revenue primarily through:

(i) the sale of aircraft, and (ii) aircraft management services.

(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.

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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 because the Company has the ability to direct the third parties to provide services to our customers.

Intangible Assets

We record our intangible assets acquired in a business combination at cost in accordance with ASC 350, Intangibles – Goodwill and Other.

Following initial recognition, intangible assets are carried at cost less accumulated amortization and impairment losses, if any, and are amortized on a straight-line basis over the estimated useful life of the asset, which was determined based on management’s estimate of the period over which the asset will contribute to our future cash flows.

We periodically reassess the useful lives of our definite-lived intangible assets when events or circumstances indicate that useful lives have significantly changed from the previous estimate.

We review the intangible assets for impairment on an annual basis or if events or changes in circumstances indicate it is more likely than not that they are impaired.

These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale, or disposition of a significant portion of the business, or other factors.

If the carrying amount of a long-lived asset or asset group is determined not to be recoverable, an impairment loss is recognized and a write-down to fair value is recorded.

Goodwill represents the excess of the aggregate purchase price paid over the fair value of the net assets acquired in a business combination.

Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Events or changes in circumstances that could trigger an impairment review include a significant adverse change in business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations.

We have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill.

If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, additional impairment testing is not required.

We test for goodwill impairment annually during the fourth quarter on October 1.

Investment - Equity Method

The Company accounts for its equity method investment at cost, adjusted for the Company’s share of the investee’s earnings or losses, which is reflected in the consolidated statement of operations.

The Company periodically reviews the investment for other than temporary declines in fair value below cost and more frequently when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

Variable Interest Entity (VIE) Accounting

The Company evaluates its ownership, contractual relationships, and other interests in entities to determine the nature and extent of the interests, whether such interests are variable interests and whether the entities are VIEs in accordance with ASC 810, Consolidations.

These evaluations can be complex and involve management’s judgment as well as the use of estimates and assumptions based on available historical information, among other factors.

Based on these evaluations, if the Company determines that it is the primary beneficiary of a VIE, this VIE entity is consolidated into the consolidated financial statements.

Revenue is recognized when control of the promised service is transferred to our member or the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

The aircraft ownership program consists of facilitating the formation of limited liability companies owned by third-party members and subsequently selling an aircraft to the limited liability company.

Under the aircraft ownership program, a customer can purchase an ownership share in a limited liability company which permits the owner to participate in the aircraft revenue share.

Revenue from aircraft sales is recognized upon the delivery of the aircraft.

The Company’s contracts for managing aircraft provide for fixed monthly management fees and reimbursement of operating expenses at a predetermined margin.

Generally, contracts require two months advance deposit of estimated expenses.

Stock-Based Compensation

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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 non-employee’s period of providing goods or services.

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.

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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, 2025.

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 Notes to the Consolidated Financial Statements included herein.

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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Item 2. Management’s Discussion and Analysis