Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
Summary Risk Factors
Our business, financial condition and results of operations are subject to numerous risks and uncertainties, including those relating to the acquired business of our wholly-owned subsidiary, Fly Flyte, Inc. (“FLYTE”) and our recent equity financings. The following is a summary of the principal risks relating to the aviation industry and the FLYTE business that you should consider, in addition to the other information set forth in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed with the SEC on March 31, 2026. This summary is qualified in its entirety by the more detailed discussion of these and other risks set forth in the remainder of this “Risk Factors” section and elsewhere in this Form 10-Q. The occurrence of any of the following risks could materially and adversely affect our business, financial condition, results of operations, cash flows and the trading price of our common stock.
Risks relating to the aviation business of FLYTE
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Demand for private aviation services is sensitive to general economic conditions, including recession, persistent inflation and elevated interest rates, and a decrease in demand could have a material adverse effect on FLYTE’s business.
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The private aviation industry is highly competitive, and many of FLYTE’s competitors have substantially greater resources and broader operations than FLYTE.
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FLYTE relies on a wide range of third-party service providers, and disruptions affecting such providers could adversely affect FLYTE’s operations.
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FLYTE’s ability to operate depends on its ability to attract and retain qualified personnel, including pilots, in a constrained labor market, and labor cost increases, work stoppages or unionization could adversely affect FLYTE’s business.
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Significant or sustained increases in aviation fuel prices, and the limited availability of sustainable aviation fuel at acceptable prices, could materially increase FLYTE’s operating costs.
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FLYTE’s insurance may not be adequate to cover all liabilities that we may incur, and insurance coverage for the aviation industry may become more difficult or expensive to obtain.
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FLYTE is exposed to factors beyond its control, including air traffic congestion, weather, natural disasters, climate change, public health emergencies, terrorist activities and geopolitical instability, any of which could disrupt FLYTE’s operations and harm our business.
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The market for short-range flights, including the urban, regional and advanced air mobility markets, is in early stages of development, and may not develop as anticipated or on a timeline favorable to FLYTE’s business model.
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The safe operation of aircraft is critical to FLYTE’s business, and any accident or incident involving FLYTE or other private aviation operators, or any damage to FLYTE’s reputation or brand, could materially adversely affect demand for FLYTE’s services.
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FLYTE’s customer base is concentrated in certain geographic regions of the United States, making us vulnerable to adverse developments in those regions.
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Risks relating to FLYTE ’ s reliance on third-party aircraft operators
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FLYTE relies on third-party aircraft operators for substantially all flights other than those operated under its Flewber Hops air-taxi service, and any failure of such operators to perform, or any disruption affecting such operators, could materially adversely affect FLYTE’s operations.
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Trends of higher third-party aircraft operator costs, capacity constraints, indemnification obligations to such operators, and potential gaps in insurance coverage relating to third-party operations each expose us to operational and financial risk.
Risks relating to FLYTE ’ s intellectual property and technology
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If FLYTE is unable to adequately protect its intellectual property and its proprietary technology, or if FLYTE is found to infringe the intellectual property rights of others, our business could be materially adversely affected.
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Failures, interruptions or security breaches affecting FLYTE’s technology infrastructure or the third-party platforms on which FLYTE relies (including cloud hosting providers and mobile application marketplaces) could harm FLYTE’s operations, reputation and customer relationships.
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FLYTE’s collection and use of personal information subjects FLYTE to evolving privacy and data protection laws, including the CCPA and the GDPR, the noncompliance with which could result in significant fines, penalties and reputational harm.
Legal and regulatory risks relating to FLYTE ’ s business
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FLYTE is subject to significant governmental regulation by the U.S. Department of Transportation, the Federal Aviation Administration, the Transportation Security Administration and other federal, state and local agencies, and changes in laws or regulations, or new interpretations thereof, could have a material adverse effect on FLYTE’s business.
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Any suspension, revocation, modification or non-renewal of permits, approvals, authorizations or licenses required for FLYTE’s operations could have a material adverse effect on our business.
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FLYTE is subject to environmental, noise and emissions laws and regulations — and to evolving climate-related restrictions on aviation activity — the cost of compliance with which, or the expansion of which to FLYTE’s operations, could materially adversely affect our business.
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FAA or manufacturer operating restrictions, airworthiness directives or similar requirements affecting FLYTE’s owned Cirrus SF50 Vision Jet, or any aircraft type on which FLYTE’s third-party aircraft operators rely, could materially disrupt FLYTE’s operations.
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From time to time, FLYTE may become involved in litigation or regulatory proceedings, the outcome of which is inherently uncertain and which could have a material adverse effect on our business.
Risks relating to dilution from our convertible preferred stock
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Conversion of our outstanding Series B, Series C-1, Series C-2, Series D and Series J Convertible Preferred Stock could result in substantial dilution to our existing common stockholders.
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The issuance and conversion of additional Series C-3 and Series C-4 Convertible Preferred Stock under our existing Securities Purchase Agreements could result in extraordinary additional dilution to our existing common stockholders.
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The conversion price of each of our Series C-1, Series C-2, Series C-3, Series C-4 and Series D Convertible Preferred Stock is subject to a floor that we may waive in our sole discretion, and any such waiver would substantially increase the resulting dilution.
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The existence of these contingent issuance and conversion rights may itself adversely affect the trading price of our common stock.
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Risks Related to the Aviation Business of FLYTE
FLYTE is exposed to the risk of a decrease in demand for private aviation services.
Fly Flyte, Inc. (“FLYTE”) historically has generally provided private aviation services to individuals and individual entities on a per-trip basis, without use of a membership-only program business model. A decrease in demand for private aviation services could materially and adversely impact FLYTE’s operations and revenues. We believe that demand for private aviation services is sensitive to general economic conditions and to customers’ perceptions of the strength of the economy, including the possibility of recession, persistent inflation, elevated interest rates and other macroeconomic factors. A weaker economy or customers’ perception of a weaker economy could result in a decrease in demand for FLYTE’s services leading to future periods in which we generate less revenue from the FLYTE business than we presently expect. If demand for private aviation services decreases, this could result in slower growth, or contraction, in the FLYTE business, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, customers may consider private air travel through FLYTE’s products and services to be a luxury item, especially when compared to commercial air travel. As a result, any general downturn in economic, business and financial conditions which has an adverse effect on customers’ spending habits could cause them to travel less frequently and, to the extent they do travel, to travel using commercial air carriers or other means considered to be more economical. In addition, in cases where sufficient hours of private flight are needed, many of the companies and high-net-worth individuals to whom FLYTE provides products and services have the financial ability to purchase their own jets or operate their own corporate flight department should they elect to do so. These circumstances could negatively impact our cash flows from operations, accelerate our liquidity needs and require us to seek alternate sources of capital, which may not be available or on acceptable terms.
The private aviation industry is subject to intense competition.
Many of the markets in which FLYTE operates are competitive as a result of the continuing expansion of existing private aircraft charter brokerage businesses, on-demand operators, fractional ownership programs, jet card programs, membership-based programs, charter operators and traditional commercial airlines. Some of FLYTE’s competitors have substantially greater financial, technical, marketing and other resources than FLYTE does, longer operating histories, larger customer bases, broader geographic coverage, larger fleets, greater brand recognition and more established relationships with third-party aircraft operators, airports, fixed-base operators and other aviation service providers. We cannot assure investors that FLYTE will be able to compete successfully against current or future competitors, or that competitive pressures will not have a material adverse effect on our business, financial condition and results of operations.
If FLYTE experiences problems with any of its third-party service providers, its operations could be adversely affected.
FLYTE’s reliance upon others to provide essential services on behalf of its operations may limit our ability to control the efficiency, timeliness and regulatory compliance of those services. FLYTE relies on third parties to provide a wide range of essential services, including, but not limited to, third-party aircraft operators, fixed-base operators, fueling services, ground handling, maintenance and repair services, catering, de-icing, baggage handling, security and other operational services. Any failure of, disruption of, or interruption in, the services provided by such third parties, or any deterioration in the financial condition or business operations of such third parties, could have a material adverse effect on FLYTE’s operations, customer service and reputation, and, in turn, could materially and adversely affect our business, financial condition and results of operations.
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The loss of key personnel upon whom FLYTE depends to operate its business, or its inability to attract additional qualified personnel, could materially and adversely affect FLYTE ’ s operations.
We believe that the future success of the FLYTE business will depend in large part on FLYTE’s ability to retain or attract highly qualified management, technical, operational, sales and marketing personnel, including qualified pilots, mechanics and other aviation specialists. Competition for such personnel in the aviation industry is intense, and we may not be able to retain or attract such personnel, or to do so on a cost-effective basis. The loss of one or more members of FLYTE’s senior management team or other key employees, or the failure to attract additional qualified personnel, could have a material adverse effect on FLYTE’s business and on our business, financial condition and results of operations.
The supply of qualified pilots is constrained and may negatively affect FLYTE ’ s operations and financial condition, and increases in labor costs may adversely impact FLYTE ’ s profitability.
The supply of qualified pilots to the aviation industry, including commercial airlines, business aviation operators and private aviation operators, has been constrained for an extended period, and demand for qualified pilots may continue to outpace supply for the foreseeable future. Pilots who operate aircraft for the third-party aircraft operators on which FLYTE’s charter brokerage operations rely, as well as pilots who operate FLYTE’s Cirrus Jet under its Hops air-taxi service, are increasingly being recruited by major commercial airlines and other operators that may offer higher compensation, better benefits or more predictable schedules. Increases in pilot compensation and benefits, including those that may result from collective bargaining, regulatory changes affecting pilot training, qualification or duty-time requirements, or competitive pressures, could substantially increase FLYTE’s labor costs and operating expenses, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, FLYTE’s operations and financial condition may be negatively impacted if it is unable to train or qualify pilots in a timely manner to meet the needs of its operations. On occasion, FLYTE may rely on commercial airlines to fly its pilots to a departure location for a Hops flight. Any disruption to such commercial air travel could adversely impact our ability to operate flights as scheduled and could harm FLYTE’s reputation, business and operating results.
Pilot attrition may negatively affect FLYTE ’ s operations and financial condition.
In recent years, FLYTE has experienced volatility in pilot attrition, including volatility resulting from pilot wage and bonus changes at competing operators. If FLYTE experiences a sustained increase in pilot attrition, our ability to operate flights on time and as scheduled could be impaired, and FLYTE may incur substantial additional costs to recruit, train and retain replacement pilots, any of which could have a material adverse effect on our business, financial condition and results of operations.
FLYTE may be subject to unionization, work stoppages, slowdowns or increased labor costs, and the unionization of pilots or other employees could materially and adversely affect FLYTE ’ s operations.
FLYTE’s business is labor intensive. While FLYTE’s employees and independent contractors, particularly its pilots and other operational personnel, are not currently represented by a labor union, we may not be able to maintain this status in the future. If any of FLYTE’s employees were to unionize, we could be subject to risks of work stoppages, work slowdowns, strikes and other labor disputes, as well as increased labor costs, all of which could have a material adverse effect on FLYTE’s business and operations and, in turn, on our business, financial condition and results of operations.
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Significant increases in fuel costs could have a material adverse effect on FLYTE ’ s business, financial condition and results of operations.
Aviation fuel is essential to the operation of aircraft and to FLYTE’s ability to carry out its transportation services. Fuel costs are subject to wide fluctuations as a result of a number of factors outside of our control, including, but not limited to, changes in global supply and demand, geopolitical events, government taxes and regulations, refining capacity, transportation and storage costs, and seasonality. Significant or sustained increases in aviation fuel prices could materially increase the operating costs of FLYTE’s third-party aircraft operators (which are typically passed through to FLYTE in the form of higher charter rates) and could materially increase the operating costs of FLYTE’s Hops air-taxi service that uses FLYTE’s owned Cirrus Jet.
Additionally, sustainable aviation fuel is not currently readily available at prices that are not prohibitive. In the future, if FLYTE elects, or is required by law or regulation, to operate using sustainable aviation fuel, the increased cost of doing so could have a material adverse effect on our business, financial condition and results of operations.
FLYTE ’ s insurance may become too difficult or expensive to obtain, and if FLYTE is unable to maintain sufficient insurance, our business could be materially and adversely affected.
Hazards are inherent in the aviation industry and may result in loss of life and property, potentially exposing FLYTE and us to substantial liability claims. While FLYTE maintains insurance of types and in amounts that we believe to be customary in the industry, the insurance industry, including aviation insurance, may experience periods of significant cost increases, reduced capacity or restrictive policy terms and conditions, and FLYTE’s insurance coverage may not be adequate to cover all liabilities that we may incur. There can be no assurance that, in the future, FLYTE will be able to obtain insurance coverage of the types and in the amounts that we believe to be appropriate at acceptable cost, or that the coverage FLYTE does obtain will be adequate to protect us from all liabilities and losses that may arise.
The loss of insurance coverage, or a reduction in the level of coverage available to FLYTE, could have a material adverse effect on our business, financial condition and results of operations.
If FLYTE ’ s efforts to continue to build its brand identity and improve customer satisfaction and loyalty are not successful, we may not be able to attract or retain customers, and FLYTE ’ s operating results may be adversely affected.
FLYTE must continue to build and maintain a strong brand identity for its products and services, which have expanded over time. We believe that a strong brand identity will continue to be important in attracting customers and retaining their loyalty. If FLYTE’s efforts to promote and maintain its brand are not successful, our operating results, our customer relationships and our reputation could be adversely affected.
Decreases in repeat bookings by returning customers could adversely affect FLYTE ’ s business and financial results.
A significant portion of FLYTE’s revenue is based on repeat bookings by its returning customers. There can be no assurance that FLYTE’s returning customers will continue to use FLYTE’s products and services in future periods at historical levels, or at all. A decline in repeat bookings, whether as a result of general economic conditions, competitive pressures, customer dissatisfaction, changes in customer preferences, or other factors, could have a material adverse effect on FLYTE’s revenues and on our business, financial condition and results of operations.
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Aviation businesses are often affected by factors beyond their control, including air traffic congestion at airports, air traffic control inefficiencies, adverse weather conditions and increased security measures, any of which could have a material adverse effect on FLYTE ’ s business.
Like other aviation companies, FLYTE’s business is affected by factors beyond our control, including air traffic congestion at airports, air traffic control inefficiencies, adverse weather conditions, increased and enhanced security measures, outbreaks of disease, geopolitical instability, accidents, labor actions and other factors. Each of these factors could result in flight cancellations, delays, diversions or increased costs, any of which could harm FLYTE’s reputation, customer service, operating results, and our business, financial condition and results of operations.
Further, the future implementation by the FAA of the Next Generation Air Transport System could result in changes to aircraft routes and ground operations and may require FLYTE and its third-party aircraft operators to invest in new equipment and training, the cost of which could be substantial.
The market for short-range flights is still in relatively early stages of development, and the UAM, RAM and AAM markets may not develop as anticipated.
FLYTE believes that providing air travelers with access to short-range flights on suitable conventional aircraft, including through the Hops air-taxi service, will enable FLYTE to compete in the developing urban air mobility (“UAM”), regional air mobility (“RAM”) and advanced air mobility (“AAM”) markets. However, the UAM, RAM and AAM markets are still in early stages of development, and the timing, scale and commercial viability of these markets are subject to substantial uncertainty. Currently, there are only a minimal number of electric-powered vertical take-off and landing aircraft and other aircraft using sustainable aviation fuel that are commercially available, and the wider availability of such aircraft is subject to substantial regulatory, technological and commercial uncertainty. If these markets do not develop as anticipated, or develop more slowly than anticipated, or develop with regulatory or technological characteristics that are not favorable to FLYTE’s business model, FLYTE may not realize the benefits we currently expect.
Extreme weather, natural disasters and other adverse events could have a material adverse effect on FLYTE ’ s business, results of operations and financial condition.
Adverse weather conditions and natural disasters, such as hurricanes, winter snowstorms, wildfires or earthquakes, can cause flight cancellations or significant delays. Cancellations or delays due to weather conditions or natural disasters affect FLYTE’s revenue, operating costs, customer satisfaction and reputation. Any general reduction in passenger traffic that may result from adverse weather, natural disasters or other adverse events could have a material adverse effect on our business, results of operations and financial condition.
FLYTE is subject to risks associated with climate change, including the potential increased impacts of severe weather events and regulatory action.
Climate change-related regulatory activity and developments may adversely affect FLYTE’s business and financial results by requiring FLYTE or FLYTE’s third-party aircraft operators to reduce emissions, alter operations, purchase emissions credits, or pay additional taxes, fees or assessments. The potential physical effects of climate change, such as increased frequency and severity of storms, floods, fires, fog, mist, freezing conditions, sea-level rise and other climate-related events, may also adversely affect FLYTE’s operations, increase FLYTE’s operating costs (including insurance, fuel and maintenance costs), reduce customer demand for air travel, or otherwise adversely affect our business, financial condition and results of operations.
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FLYTE ’ s business is primarily focused on certain targeted geographic regions, making us vulnerable to risks associated with having geographically concentrated operations.
FLYTE’s customer base is primarily concentrated in certain geographic regions of the United States, including the northeast, southeast and certain other markets. As a result, our business may be more vulnerable to adverse economic, weather, regulatory, security, public health or other developments in those regions than would be the case for a more geographically diversified operator. Adverse developments in these regions, including local recessions, severe weather, natural disasters, terrorist activity, regulatory changes affecting general aviation, airport closures or capacity constraints, or public health emergencies, could have a disproportionate adverse effect on FLYTE’s revenue and operations and, in turn, on our business, financial condition and results of operations.
The operation of aircraft is subject to various risks, and failure to maintain an acceptable safety record may have an adverse impact on FLYTE ’ s ability to obtain customers and generate revenue.
The operation of aircraft is subject to various risks, including catastrophic disasters, crashes, mechanical failures, collisions, fire, severe weather, terrorist incidents, cybersecurity events, human error and other operational hazards, any of which could result in loss of life, serious injury, property damage or environmental damage. In addition, any aircraft accident or incident, whether involving FLYTE or other private aircraft operators, could adversely affect public perception of the safety of private aviation generally or of the aircraft types or operators on which FLYTE relies, which could in turn reduce demand for FLYTE’s services and adversely affect our business, results of operations and financial condition.
FLYTE incurs considerable costs to maintain the quality of (i) its safety program, (ii) its training programs and (iii) its operational oversight. If FLYTE is unable to maintain an acceptable safety record, or if a serious accident or incident involving FLYTE or its third-party aircraft operators occurs, the resulting reputational, regulatory, operational, insurance and financial consequences could have a material adverse effect on our business, financial condition and results of operations.
Any damage to FLYTE ’ s reputation or brand image could adversely affect our business or financial results.
Maintaining a positive reputation is critical to FLYTE’s business. FLYTE’s reputation or brand image could be adversely affected by, among other things, accidents or incidents involving aircraft operated by FLYTE’s third-party aircraft operators, complaints or negative publicity about FLYTE’s services, customer dissatisfaction, security or data privacy incidents, employee conduct, or actions taken by FLYTE’s third-party service providers. FLYTE operates in a highly visible industry that has significant exposure to social media. Negative publicity, whether or not justified, can spread rapidly through traditional and social media channels. Should FLYTE fail to respond in a timely and appropriate manner to address negative publicity, FLYTE’s brand and reputation could be adversely affected, which in turn could have a material adverse effect on our business, financial condition and results of operations.
Terrorist activities or warnings have dramatically impacted the aviation industry and will likely continue to do so.
The terrorist attacks of September 11, 2001 and subsequent actual or threatened acts of terrorism affecting the aviation industry have had, and any future acts or threatened acts of terrorism would likely have, significant negative impacts on the aviation business, including private aviation. We cannot provide any assurance that future terrorist incidents or threats, or governmental or industry responses to such incidents or threats, will not harm the aviation industry generally, or FLYTE’s operations specifically, in ways that could have a material adverse effect on our business, financial condition and results of operations.
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Risks Related to FLYTE ’ s Reliance on Third-Party Aircraft Operators
FLYTE relies on third-party aircraft operators to provide and operate aircraft. If those third-party aircraft operators fail to perform, FLYTE ’ s business could be materially and adversely affected.
With the exception of flights operated under FLYTE’s air-taxi service using FLYTE’s owned Cirrus Jet, all of FLYTE’s flight services are provided by third-party aircraft operators that are certificated air carriers under Title 14 of the Code of Federal Regulations. Pilots, maintenance, hangar, insurance and fuel are all costs borne by FLYTE’s network of third-party aircraft operators. Should FLYTE experience complications with any of these third-party aircraft operators or their aircraft, FLYTE may need to use alternative aircraft operators to fulfill its commitments to customers. There can be no assurance that suitable alternative aircraft operators would be available on commercially acceptable terms, or at all. Any failure of FLYTE’s third-party aircraft operators to perform to our expectations, or any interruption in services provided by such third-party aircraft operators, could result in delayed, cancelled or substandard flights and could have a material adverse effect on FLYTE’s reputation, customer relationships and our business, financial condition and results of operations.
FLYTE may incur losses on the cancellation or delay of flights, and on flights booked with third-party aircraft operators.
FLYTE’s third-party aircraft operators generally have the ability to cancel, delay or terminate any flight for any reason permitted under their respective regulatory authorizations and contractual arrangements, including weather, mechanical issues, crew availability, regulatory or safety considerations, or unilateral business decisions. FLYTE may incur losses as a result of such cancellations or delays, including the cost of providing alternative transportation, refunds or credits to customers, increased customer dissatisfaction and reputational harm. In addition, if demand for FLYTE’s services grows, FLYTE’s third-party aircraft operators may not be able to match FLYTE’s growth with available aircraft capacity on commercially acceptable terms, or at all, which could limit FLYTE’s ability to grow its business and meet customer demand.
FLYTE faces the risk that any of its third-party aircraft operators may not fulfill their contracts and deliver their services on a timely basis, or at all, and FLYTE is subject to the risk of disruption affecting such operators.
FLYTE operates a significant portion of its flights through a finite number of certificated third-party aircraft operators. The ability of FLYTE’s third-party aircraft operators to effectively satisfy our requirements could be impacted by financial difficulty experienced by any such third-party aircraft operator, damage to its operations caused by fire, terrorist attack, natural disaster, public health emergency or other events, or its inability to hire or retain skilled personnel, including qualified pilots and mechanics. Union strikes or staff shortages among airport workers or certain pilots of third-party aircraft operators may also result in disruption to FLYTE’s operations. In addition, if potential competitors establish cooperative or strategic relationships with the third-party aircraft operators on which FLYTE relies, the availability of capacity to FLYTE could be reduced, and FLYTE’s cost of access to capacity could increase, in each case in ways that could have a material adverse effect on our business, financial condition and results of operations.
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FLYTE may be negatively impacted by increases in third-party aircraft operator costs.
In recent years, there has been a trend of higher third-party aircraft operator costs across the private aviation industry, driven by, among other things, higher pilot compensation, higher maintenance costs, higher insurance costs, higher fuel costs and constraints on the supply of available aircraft. Since FLYTE currently relies on third-party aircraft operators to generate the substantial majority of its revenue, sustained increases in third-party aircraft operator costs could materially compress FLYTE’s margins, particularly to the extent FLYTE is unable to pass through such cost increases to its customers, which could have a material adverse effect on our business, financial condition and results of operations.
FLYTE could suffer losses and adverse publicity stemming from any accident involving aircraft models operated by FLYTE ’ s third-party aircraft operators.
Certain aircraft models on which FLYTE’s third-party aircraft operators rely, including the Cirrus SF50 Vision Jet that FLYTE owns and operates as part of its Hops air-taxi service, have experienced accidents while operated by third parties. If other operators of such aircraft models, or FLYTE itself, experience additional accidents or incidents, regulators may issue operating restrictions or airworthiness directives affecting such aircraft, manufacturers may issue recalls or service bulletins, or public perception of the safety of such aircraft may be adversely affected, any of which could have a material adverse effect on FLYTE’s operations and on our business, financial condition and results of operations.
FLYTE ’ s agreements with third-party aircraft operators may contain obligations for FLYTE to indemnify such third-party aircraft operators against certain claims.
Many of the agreements FLYTE has with third-party aircraft operators include indemnification obligations of FLYTE to those third-party aircraft operators. Although FLYTE generally requires its customers to indemnify FLYTE for many of the claims and damages for which FLYTE is obligated to indemnify its third-party aircraft operators, there can be no assurance that FLYTE’s customers will be financially able to honor those indemnification obligations or that FLYTE’s insurance will cover the resulting exposure. As a result, FLYTE could be required to make payments under such indemnification obligations that exceed the available insurance coverage and any customer indemnification recoveries, which could have a material adverse effect on our business, financial condition and results of operations.
FLYTE may not have sufficient insurance coverage for damages relating to flights provided by third-party aircraft operators.
Incidents related to aircraft operations involving the third-party aircraft operators on which FLYTE relies could result in claims against FLYTE that exceed the insurance coverage available to FLYTE. Additionally, to the extent FLYTE’s third-party aircraft operators maintain insurance covering liability arising from the operation of their aircraft, there can be no assurance that such insurance will be adequate to cover all liabilities that may arise, or that FLYTE will be named as an additional insured or otherwise have the benefit of such coverage. Inadequate insurance coverage could expose FLYTE to material uninsured liabilities and could have a material adverse effect on our business, financial condition and results of operations.
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Risks Related to FLYTE ’ s Intellectual Property and Technology
If FLYTE is unable to adequately protect its intellectual property interests, or is found to be infringing on intellectual property rights of others, FLYTE may incur significant costs or be required to alter or cease using such intellectual property.
FLYTE’s intellectual property includes its trademarks, domain names, website, mobile and web applications, software, trade secrets and certain proprietary algorithms. FLYTE protects its intellectual property through a combination of trademark, copyright and trade secret laws, contracts and technical safeguards. However, the steps FLYTE takes to protect its intellectual property may be inadequate or ineffective, and FLYTE may be unable to prevent competitors from acquiring trademarks or domain names that are similar to, infringe upon or diminish the value of FLYTE’s intellectual property.
In addition, FLYTE’s business is subject to the risk of third parties infringing FLYTE’s intellectual property. FLYTE may not always detect such infringement, and protecting FLYTE’s intellectual property is expensive and time-consuming, may not be successful and may divert management’s attention from other matters. Companies in the aviation and technology industries are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. If FLYTE is found to infringe the intellectual property rights of others, FLYTE could be required to pay damages, alter FLYTE’s products or services or cease using the intellectual property in question, any of which could have a material adverse effect on our business, financial condition and results of operations.
A delay or failure to identify, invest in and implement important technology, business and other initiatives could have a material adverse effect on FLYTE ’ s business.
In order to operate its business, achieve its goals and remain competitive, FLYTE continuously seeks to identify and develop important technology, business and other initiatives, improvements to FLYTE’s booking and operations platforms, and adoption of new aircraft technologies. FLYTE’s business and the aircraft FLYTE operates are characterized by changing technology, the introduction and enhancement of products and services, evolving customer expectations and evolving industry standards. If FLYTE is unable to upgrade its operations or fleet with the latest technological advances in a timely manner, or at all, FLYTE’s ability to compete effectively could be impaired, which could have a material adverse effect on our business, financial condition and results of operations.
A failure in FLYTE ’ s technology or breaches of the security of its information technology infrastructure may adversely affect FLYTE ’ s business, may result in losses, and may damage FLYTE ’ s reputation.
The performance and reliability of the technology that FLYTE and its third-party aircraft operators use are critical to FLYTE’s ability to compete effectively. As part of FLYTE’s ordinary business operations, FLYTE collects and stores sensitive data, including personally identifiable information of its customers, employees and contractors, as well as proprietary information about its business and the businesses of its third-party aircraft operators. Methods used to obtain unauthorized access, disable or degrade service, or sabotage information systems are constantly evolving, and may be difficult to anticipate or detect for long periods of time. Any security breach, cyberattack, ransomware attack, data loss or system failure affecting FLYTE or its third-party service providers could result in the loss or unauthorized disclosure of sensitive data, regulatory investigations, litigation, reputational harm, business interruption, and substantial remediation and notification costs, any of which could have a material adverse effect on our business, financial condition and results of operations.
FLYTE relies on third-party Internet, mobile and other products and services to deliver its mobile and web applications, and any disruption of or interference with these third-party products and services could adversely affect FLYTE ’ s business.
FLYTE’s platform’s continuing and uninterrupted performance is critical to FLYTE’s success. That platform is dependent on a variety of third-party products and services, including cloud hosting providers and other third-party Internet, mobile and software services. FLYTE currently hosts its platform, including its mobile and web-based applications, with third-party hosting providers. Any interruption in, or failure of, these third-party products or services could result in FLYTE’s platform being unavailable, slow or unreliable, which could harm FLYTE’s reputation and FLYTE’s ability to attract and retain customers.
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FLYTE relies on third parties maintaining open marketplaces to distribute FLYTE ’ s mobile and web applications, and any changes by such third parties could adversely affect FLYTE ’ s business.
FLYTE’s mobile applications rely on third parties maintaining open marketplaces, including the Apple App Store and the Google Play Store, for distribution of its app. If any of these third parties changes its terms of service, increases its fees, restricts the availability of FLYTE’s applications, removes FLYTE’s applications from its marketplace, or otherwise impairs the distribution of FLYTE’s applications, FLYTE’s ability to acquire and retain customers could be materially and adversely affected.
Because FLYTE ’ s software could be used to collect and store personal information, privacy concerns in the territories in which FLYTE operates could result in additional cost and liability to FLYTE or inhibit sales of FLYTE ’ s services.
The regulatory framework for privacy and data protection issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. In the United States, these regulations include rules and regulations promulgated under the authority of the Federal Trade Commission, the California Consumer Privacy Act (the “CCPA”) and the California Privacy Rights Act, and other state and federal laws relating to privacy and data security. Internationally, FLYTE may be subject to similar regulations, including the European Union’s General Data Protection Regulation (the “GDPR”) and the United Kingdom GDPR, as applicable. Compliance with these and other privacy and data security laws and regulations could be costly and could require significant changes to FLYTE’s business practices, products and services. Failure to comply with such laws and regulations could subject FLYTE to significant fines, penalties, reputational harm and litigation, any of which could have a material adverse effect on our business, financial condition and results of operations.
Legal and Regulatory Risks Related to FLYTE ’ s Business
FLYTE is subject to significant governmental regulation, and changes in government regulations imposing additional requirements could have a material adverse effect on FLYTE ’ s business.
All interstate air carriers, including FLYTE, are subject to regulation by the U.S. Department of Transportation (the “DOT”), the Federal Aviation Administration (the “FAA”), the Transportation Security Administration (the “TSA”), U.S. Customs and Border Protection (“CBP”) and other federal, state and local agencies, both domestically and, to the extent FLYTE’s third-party aircraft operators conduct international flights, internationally. The laws and regulations enforced by these and other agencies impose substantial requirements on the operation of aircraft, including with respect to safety, maintenance, training, security, operational specifications, environmental matters, consumer protection and air traffic control.
Title 49, U.S. Code, Section 40102 and administrative interpretations thereof issued by the DOT or its predecessor agencies, as well as ongoing interpretive and enforcement actions taken by the DOT and the FAA in respect of charter brokers and on-demand operators, may affect the manner in which FLYTE conducts business. For example, the FAA has, in recent years, issued notices targeting certain air charter operators that the FAA believes are engaged in operations not consistent with applicable regulations. Although we believe FLYTE’s operations comply with applicable regulatory requirements, there can be no assurance that the DOT, FAA or other regulators will not assert positions that could affect FLYTE’s operations or impose additional costs or compliance burdens. Changes in laws and regulations applicable to FLYTE’s business, or new interpretations of existing laws or regulations, could have a material adverse effect on our business, financial condition and results of operations.
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Revocation of permits, approvals, authorizations and licenses will adversely affect FLYTE ’ s business, results of operations and financial condition.
FLYTE’s business requires a variety of federal, state and local permits, approvals, authorizations and licenses. FLYTE’s business depends on the continued effectiveness of such permits, approvals, authorizations and licenses. Any suspension, revocation, modification or non-renewal of any of FLYTE’s material permits, approvals, authorizations or licenses, or any failure by FLYTE to obtain any necessary new or amended permits, approvals, authorizations or licenses, could have a material adverse effect on our business, results of operations and financial condition.
FLYTE is subject to various environmental and noise laws and regulations, which could have a material adverse effect on FLYTE ’ s business, results of operations and financial condition.
FLYTE is subject to increasingly stringent federal, state, local and foreign laws, regulations and ordinances relating to the protection of the environment, including those relating to emissions to the air, discharges to surface and subsurface waters, safe drinking water and the management, disposal and release of, and exposure to, hazardous substances, oils and waste materials. FLYTE is also subject to environmental laws and regulations that require FLYTE to investigate and remediate soil or groundwater contamination, regardless of fault. In addition, FLYTE is subject to noise laws and regulations that may restrict aircraft operations at certain airports or during certain hours.
Climate change-related regulatory developments may also restrict aviation activity. In December 2022, France became the first European nation to institute a ban on domestic commercial flights where train alternatives exist. Other European lawmakers, including in Spain, Germany and Scandinavia, have considered similar restrictions. If similar restrictions are adopted in the United States or other markets in which FLYTE operates, including with respect to private aviation, or if FLYTE’s third-party aircraft operators become subject to such restrictions, our business, results of operations and financial condition could be materially and adversely affected.
Environmental regulation and liabilities, including new or developing laws and regulations, or sustainability initiatives, could increase FLYTE ’ s costs of operations.
In recent years, governments, customers, suppliers, employees and other stakeholders have increasingly focused on environmental, social and governance matters, including the impact of aviation on climate change. New or developing laws and regulations relating to greenhouse gas emissions, sustainable aviation fuel mandates, carbon offset requirements or other environmental matters could materially increase FLYTE’s costs of operations or those of FLYTE’s third-party aircraft operators, which could have a material adverse effect on our business, financial condition and results of operations.
The issuance of operating restrictions applicable to one of the aircraft fleet types FLYTE operates, or on which FLYTE ’ s third-party aircraft operators rely, could have a material adverse effect on our business.
The issuance of FAA or manufacturer operating restrictions, airworthiness directives, mandatory service bulletins, or similar requirements that ground or otherwise restrict the use of this aircraft, or any other aircraft on which FLYTE or its third-party aircraft operators rely, could materially disrupt FLYTE’s operations and require FLYTE to incur additional costs to comply or to procure alternative capacity. Any such disruption could have a material adverse effect on our business, financial condition and results of operations.
FLYTE may become involved in litigation that may materially and adversely affect us.
From time to time, FLYTE may become involved in various legal proceedings relating to matters incidental to the ordinary course of its business, including, but not limited to, regulatory matters, customer disputes, employment matters, intellectual property claims, contractual disputes and personal injury claims relating to aviation operations. The outcome of any such legal proceedings is inherently uncertain, and any adverse outcome, settlement, judgment or regulatory action could have a material adverse effect on our business, financial condition and results of operations.
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Risks Related to Existing and Potential Future Dilution from our Convertible Preferred Stock
Issued shares of our convertible preferred stock are convertible into a substantial number of shares of common stock that, upon conversion, will significantly dilute our existing common stockholders.
As of the date of this Form 10-Q, we have outstanding the following series of our convertible preferred stock, each with a stated value of $1,000 per share, that are convertible into shares of our common stock:
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1,632 shares of our Series B Convertible Preferred Stock (the "Series B Preferred"), originally issued on May 12, 2025 pursuant to the May 2025 PIPE Financing, the conversion price of which was reduced from $6.65 to $1.78 per share pursuant to a letter agreement dated February 6, 2026;
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3,470 shares of our Series C-1 Convertible Preferred Stock (the “Series C-1 Preferred”), issued pursuant to the Securities Purchase Agreements that we entered into on February 6, 2026 and March 9, 2026 (the “Series C Purchase Agreements”);
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3,470 shares of our Series C-2 Convertible Preferred Stock (the “Series C-2 Preferred”), issued on April 21, 2026 pursuant to the Series C Purchase Agreements;
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11,028 shares of our Series D Convertible Preferred Stock (the “Series D Preferred”), of which 5,250 shares were issued on April 20, 2026 to SEG Jets in partial consideration for our acquisition of an initial 19.98% interest in FLYTE and 5,778 shares were issued on April 20, 2026 to Creatd, Inc. (“Creatd”) in partial consideration for our acquisition of the remaining 80.02% interest in FLYTE and 100% of the membership interests of Ponderosa Air, LLC; and
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9,489.488 shares of our Series J Convertible Preferred Stock (the “Series J Preferred”), issued on December 31, 2025 to David A. Jenkins, our Executive Chairman of the Board and Chief Executive Officer, and to FatBoy Capital, L.P., an entity controlled by Mr. Jenkins, in exchange for the termination of certain royalty rights.
The conversion price of each of the Series C-1 Preferred, Series C-2 Preferred and Series D Preferred is variable and is subject to downward adjustment based on the trading price of our common stock at specified dates following the effectiveness of the resale registration statement filed pursuant to the related registration rights agreements. In each case, the conversion price is subject to a floor of $0.35 per share, which we may waive in our sole discretion. The conversion price of the Series B Preferred is fixed at $1.78 per share, subject to customary anti-dilution adjustments. The conversion price of the Series J Preferred is fixed at $1.56 per share, subject to customary anti-dilution adjustments.
Assuming conversion at the floor price (in the case of the Series C-1, Series C-2 and Series D Preferred) and at the applicable fixed conversion price (in the case of the Series B Preferred and the Series J Preferred), our issued and outstanding shares of convertible preferred stock would convert into an aggregate of approximately 58,337,003 shares of our common stock, consisting of:
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approximately 916,854 shares issuable upon conversion of the Series B Preferred;
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approximately 9,914,286 shares issuable upon conversion of the Series C-1 Preferred;
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approximately 9,914,286 shares issuable upon conversion of the Series C-2 Preferred;
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approximately 31,508,572 shares issuable upon conversion of the Series D Preferred; and
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approximately 6,083,005 shares issuable upon conversion of the Series J Preferred.
As of May 8, 2026, we had 2,692,473 shares of our common stock outstanding. The aggregate number of shares of common stock issuable upon conversion of our issued and outstanding shares of convertible preferred stock as described above would represent approximately 2,167% of our common stock outstanding as of May 8, 2026, or, on a post-conversion basis, would result in the dilution of our existing common stockholders to less than approximately 4.4% of our post-conversion outstanding common stock. If we were to waive the $0.35 floor with respect to any of the Series C-1 Preferred, the Series C-2 Preferred or the Series D Preferred, the number of shares of common stock issuable upon conversion of those securities could be substantially greater than the amounts above.
Conversion of the Series B Preferred, the Series C-1 Preferred, the Series C-2 Preferred, the Series D Preferred and the Series J Preferred is also subject to customary beneficial ownership limitations applicable to each holder, which limit individual holders' as-converted ownership to specified thresholds (typically 4.99% or 9.99%) but do not limit the aggregate amount of common stock that may be issued upon conversion to all holders. Therefore, the beneficial ownership limitations do not constrain the aggregate dilution described above.
The market price of our common stock has been, and may continue to be, volatile. A sustained decline in our share price prior to the conversion of the Series C-1 Preferred, the Series C-2 Preferred or the Series D Preferred would significantly increase the number of shares issuable upon conversion of those securities, up to the limit imposed by the $0.35 floor (which we may waive in our sole discretion). Any such conversion would dilute the voting power and economic interests of our existing common stockholders.
We may issue additional series of convertible preferred stock under the Series C Purchase Agreements that, upon issuance and conversion, could result in extraordinary additional dilution to our existing common stockholders.
In addition to the shares of convertible preferred stock currently outstanding, the Series C Purchase Agreements provide for additional issuances of our convertible preferred stock, as follows:
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Series C-3 Preferred Stock. The investors in the Series C Purchase Agreements have agreed to purchase newly designated Series C-3 Convertible Preferred Stock (the “Series C-3 Preferred”), with a stated value of $1,000 per share, for an aggregate purchase price of $3,470,000, subject to the satisfaction of certain closing conditions, including effectiveness of the resale registration statement filed in connection with the Series C Purchase Agreements.
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Series C-4 Preferred Stock. The investors in the Series C Purchase Agreements may elect in their sole discretion to purchase up to an aggregate of $77,806,667.67 of newly designated Series C-4 Convertible Preferred Stock (the “Series C-4 Preferred”), with a stated value of $1,000 per share, in one or more closings.
The conversion price of each of the Series C-3 Preferred and the Series C-4 Preferred is subject to adjustment in a manner substantially similar to the Series C-1 Preferred and Series C-2 Preferred, including a $0.35 floor that we may waive in our sole discretion. See Note 12 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information regarding the terms of the Series C-3 Preferred and Series C-4 Preferred.
Assuming all of the Series C-3 Preferred and the maximum amount of the Series C-4 Preferred are issued, and assuming conversion of each at the $0.35 floor price, the Series C-3 Preferred and the Series C-4 Preferred would convert into an aggregate of approximately 232,219,051 shares of our common stock (consisting of approximately 9,914,286 shares from the Series C-3 Preferred and approximately 222,304,765 shares from the Series C-4 Preferred). Together with the shares of common stock that would be issued upon conversion of our currently outstanding Series C-1 Preferred, Series C-2 Preferred, Series D Preferred and Series J Preferred (as described in the preceding risk factor), the aggregate number of shares of common stock that could be issued upon conversion of all such securities at the relevant conversion prices would be approximately 289,639,200 shares.
As of May 8, 2026, we had 2,692,473 shares of common stock outstanding. The aggregate number of shares of common stock issuable upon conversion of all of our existing and potential future shares of convertible preferred stock described above would represent approximately 10,758% of our common stock outstanding as of May 8, 2026, or, on a post-conversion basis, would result in the dilution of our existing common stockholders to less than approximately 0.9% of our post-conversion outstanding common stock.
The actual number of shares of common stock that may be issued under the Series C Purchase Agreements could be higher than the amounts set forth above if we waive the $0.35 floor in our sole discretion, which we may do at any time. There can be no assurance that we will not waive the floor.
Whether and when these contingent issuances and conversions occur will depend on, among other things, the investors' decisions to exercise their respective rights, the satisfaction of remaining closing conditions, our ability and willingness to waive the floor, and the trading price of our common stock. There can be no assurance that any of these events will occur or will not occur. However, if the investors exercise the Series C-4 right in full and the conversion of all of our convertible preferred stock occurs at or near the floor, the resulting dilution to our existing common stockholders would be extraordinary, and would substantially eliminate the existing common stockholders' relative economic and voting interests in the Company. Moreover, the existence of these contingent issuance and conversion rights may itself adversely affect the trading price of our common stock, as market participants may anticipate the issuance and conversion of these securities and the resulting dilution.
We may not receive any proceeds from the Series C-4 right because exercise of that right is at the investors' option and is not within our control. As a result, we cannot rely on the Series C-4 right to fund our operations. We may also be unable to satisfy the closing conditions to the Series C-3 issuance, in which case we will not receive the related proceeds.
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