注1 - Guochun International Inc.（以下簡稱「公司」或「國春」）於2018年8月2日在內華達州成立。到2022年6月27日，公司正在開發一種聊天應用程序，旨在爲用戶在與他人對話時提供變聲的機會以及類似的即時通訊應用程序的全部功能。公司計劃在iOS，Google Play，Amazon和Ethereum平台上開發和發佈移動應用。 Guochun International Inc.打算通過出售品牌廣告和通過消費者交易（包括應用內購買）來產生收入。公司管理層計劃利用各種平台將應用程序分發到全球各地。組織和業務描述
On June 18, 2024, the Company received a notice (the “notice”) from the NYSE American LLC (the “NYSE American”) advising the Company that it is not in compliance with the NYSE American continued listing standards, requiring a company to have stockholders equity of at least $2.0 million if it has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years and Section 1003(a)(ii) of the Company Guide requiring a company to have stockholders’ equity of at least $4.0 million if it has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years. The Company submitted a plan (the “plan”) to the NYSE American LLC on July 18, 2024 outlining actions the Company will take to regain compliance by December 18, 2025. On September 5, 2024, the Company received notice from the NYSE American that it had accepted the Company's plan and granted a plan period through December 18, 2025. During the plan period the Company will be subject to quarterly review to determine if it is making progress consistent with the plan. If the Company does not regain compliance with the NYSE American listing standards by December 18, 2025, or if the Company does not make sufficient progress consistent with its plan, then the NYSE American may initiate delisting proceedings. The notice does not affect the Company's ongoing business operations or its reporting requirements with the United States Securities and Exchange Commission (the “SEC”).
Basis of presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
Reclassifications
Certain amounts in 2023 have been reclassified to conform with the current year’s presentation, primarily to reflect discontinued operations.
Principles of Consolidation
The consolidated financial statements include the Company’s accounts and the accounts of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.
One of the components of the Company’s business model included the sale of aircraft and ownership program. The aircraft ownership program is a model whereby the Company sold each floating fleet aircraft to a limited liability company, (each a “Plane Co”). Each Plane Co, which are owned by third-party owners, leased the aircraft back to the Company for management and charter operations on behalf of the Plane Co under a 14 C.F.R. Part 135 certificate. In September 2024, we announced an agreement with flyExclusive to transition our fleet operations to flyExclusive.
The Company recognized zero bad debt expense during the three and nine months ended September 30, 2024 and $51 thousand and $106 thousand of bad debt expense during the three and nine months ended September 30, 2023.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –(CONTINUED)
Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, which range from three to seven years:
Classification
Life
Machinery and equipment
3-7 years
Automobiles
5 years
Computer and office equipment
5 years
Website development costs
3 years
Computer Software Development
Software development costs are accounted for in accordance with ASC 350-40, Internal Use Software. Internal software development costs are capitalized from the time the internal use software is considered probable of completion until the software is ready for use. Business analysis, system evaluation and software maintenance costs are expensed as incurred.
The capitalized computer software development costs are reported under the section fixed assets, net in the consolidated balance sheet and are amortized using the straight-line method over the estimated useful life of the software, generally three years from when the asset is placed in service. The Company capitalized zero and $241 thousand of internal software development costs during the nine months ended September 30, 2024 and twelve months ended December 31, 2023, respectively. The Company also expenses internal costs related to minor upgrades and enhancements, as it is impractical to separate these costs from normal maintenance activities.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –(CONTINUED)
Revenue recognition
Revenues are recognized on a gross basis and presented on the consolidated statements of operations net of rebates, discounts, and taxes collected concurrent with revenue-producing activities. The transaction price in the Company’s contracts with its customers is fixed at the time control of goods and services are transferred to the customer. Therefore, the Company does not estimate variable consideration or perform a constraint analysis for our contracts.
The Company determines revenue recognition pursuant to ASC 606, Revenue from Contracts with Customers, through the following steps:
1.Identification of the contract, or contracts, with a customer.
2.Identification of the performance obligation(s) in the contract.
3.Determination of the transaction price.
4.Allocation of the transaction to the performance obligation(s) in the contract.
The Company generates revenue primarily through: (i) the sale of aircraft, and (ii) aircraft management services. Revenue is recognized when control of the promised service is transferred to a customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies, as a performance obligation, each promise to transfer a good or service to a customer that is distinct. To identify its performance obligations, the Company considers all of the goods and services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.
For each revenue stream, we evaluate whether our obligation is to provide the good or service itself, as the principal, or to arrange for the good or service to be provided by the other party, as the agent, using the control model. For certain services provided to the customer, primarily in our aircraft management services revenue stream, the Company directs third-party providers to assist in our fulfillment of the performance obligation in contracts with our customers. Any cost reimbursements and third-party costs are recognized in revenue on a gross basis as Volato has pre-negotiated these costs and takes a certain amount of risk that it will not fully recover the costs incurred. 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.
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.
In accordance with ASC 606, contract assets are to be recognized when an entity has the right to receive consideration in exchange for goods or services that have been transferred to a customer. Also, in accordance with ASC 606, contract liabilities are to be recognized when an entity is obligated to transfer goods or services for which consideration has already been received.
Contract liabilities consist of customer prepayments and the aircraft deposits referred to above. Total contract liabilities were $11.8 million and $2.8 million as of September 30, 2024 and December 31, 2023, respectively.
The Company generated revenue during the three and nine months ended September 30, 2024 and 2023, broken down as follows, in thousands:
The following is a summary of finite-lived intangible assets, in thousands:
September 30, 2024
Cost
Accumulated Amortization
Net
Customer relationships
$
301
$
(156)
$
145
$
301
$
(156)
$
145
December 31, 2023
Cost
Accumulated Amortization
Net
Customer relationships
$
301
$
(110)
$
191
$
301
$
(110)
$
191
Intangible asset amortization expense was $15 thousand for the three months ended September 30, 2024 and 2023, respectively. Intangible asset amortization expense was $45 thousand for the nine months ended September 30, 2024, and 2023, respectively.
As of September 30, 2024, future amortization expense is expected to be as follows, in thousands:
Amount
2024
$
14
2025
60
2026
60
2027
11
$
145
Indefinite - Lived Intangible Assets
The following table summarizes the balances of the indefinite-lived intangible assets, in thousands:
September 30, 2024
December 31, 2023
Intangible asset - Part 135 air carrier certificate
$
1,200
$
1,200
The FAA Part 135 air carrier certificate for a total amount of $1.2 million relates to the certificate acquired in connection with the GCA acquisition. During the year ended December 31, 2023, the Company transferred its Fly Dreams operations to GCA and sold its membership interest in Fly Dreams, including the Fly Dreams FAA Part 135 air carrier certificate, with a carrying balance of $163 thousand, for a selling price of $550 thousand, which resulted in a gain in the amount of $387 thousand, which was reported in other income in the consolidated statement of operations for the year ended December 31, 2023. The Company did not recognize any impairment of the GCA FAA Part 135 air carrier certificate as of September 30, 2024 and December 31, 2023.
The Company facilitated the formation of limited liability Plane Co’s, which are then funded by third party members prior to the sale and delivery of an aircraft purchased from Honda Aircraft that entered into the Company’s fractional program.
In October 2024, as part of the agreement with flyExclusive, Volato sold all of its interest in the Plane Co’s to flyExclusive.
The aggregate amount of revenue included in loss from discontinued operations generated from the Plane Co’s totaled $0.8 million and $1.1 million for the three months ended September 30, 2024 and 2023, respectively. The aggregate amount of revenue included in loss from discontinued operations generated from Plane Co’s totaled $3.1 million and $3.3 million for the nine months ended September 30, 2024 and 2023, respectively.
Expenses charged to the Company by Plane Co’s and included in loss from discontinued operations totaled $0.9 million and $0.9 million for the three months ended September 30, 2024 and 2023, respectively. Expenses charged to the Company by Plane Co’s and included in loss from discontinued operations totaled $2.8 million and $2.9 million for the nine months ended September 30, 2024 and 2023, respectively.
Balance due to Plane Co’s amounted to $48 thousand and $259 thousand as of September 30, 2024 and December 31, 2023, respectively.
Aircraft Lease and Charter Services
As part of Volato’s aircraft ownership program, Volato leases a HondaJet HA-420 aircraft from the Company’s equity-method investment, which is 25% owned by DCL H&I, LLC (“DCL”). Dennis Liotta, an affiliate of the Company, and his spouse own 100% of DCL. Under the terms of an aircraft dry lease, 158 LLC pays Volato a monthly management fee of $38 thousand, and Volato AMS pays 158 LLC an hourly rental rate of $1 thousand per revenue flight hour. The lease expires on August 20, 2026.
NOTE 14 – INCOME TAXES
Management has determined that the Company does not have any uncertain tax positions and associated unrecognized benefits that would impact the consolidated financial statements or related disclosures.
The effective tax rate was zero percent for the three and ninemonths ended September 30, 2024 and 2023, respectively. Our effective tax rate for the three and six months ended September 30, 2024 differs from the federal statutory rate of 21%, primarily due to a change in the valuation allowance for deferred assets as of September 30, 2024.
NOTE 15 – SHAREHOLDERS’ EQUITY (DEFICIT)
On December 1, 2023, the Company filed its Second Amended and Restated Articles of Incorporation (the “Certificate of Incorporation”) with the Secretary of State of the State of Delaware. Our Certificate of Incorporation previously authorized the issuance of 81,000,000 shares, consisting of 80,000,000 shares of Common Stock and 1,000,000 shares of preferred stock, $0.0001 par value per share (“Preferred Stock”). On October 28, 2024, the Company filed an amendment to the Certificate of Incorporation to increase the number of authorized shares to 201,000,000 shares consisting of 200,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock. The outstanding shares of Common Stock are duly authorized, validly issued, fully paid and non-assessable.
Preferred Stock
No shares of Preferred Stock have been issued as of September 30, 2024 and December 31, 2023.
Equity Incentive Plans
Summary of the 2021 Plan
The 2021 Equity Incentive Stock Plan (as amended, the “2021 Plan”) became effective on August 13, 2021, and will remain in effect until August 12, 2031, unless terminated earlier by the Company’s board of directors. In connection with the consummation of the Business Combination, the 2021 Plan was amended and restated to reflect the effect of the Closing. As of the effective date of the Business Combination, each then-outstanding unexercised option (whether vested or unvested) to purchase shares of Legacy Volato common stock granted under the 2021 Plan was assumed by the Company and was converted into a stock option to acquire shares of Common Stock in accordance with the Business Combination Agreement.No shares remained available for the grant of awards.
Summary of the 2023 Plan
The 2023 Stock Incentive Plan (the “2023 Plan”) was approved at the special meeting of the shareholders of the Company on November 28, 2023. The 2023 Plan provides for the grant of stock options (both incentive stock options and non-qualified stock options) stock appreciation rights, restricted stock, restricted stock units, performance-based awards, and
other stock- and cash-based awards. The Company has reserved a pool of shares of Common Stock for issuance pursuant to awards under the 2023 Plan equal to 5,608,690 shares. As of September 30, 2024 the Company had 3,128,555 shares available for issuance.
Stock option activity for the periods presented is as follows:
Options
Weighted Average Exercise Price Per Share
Weighted Average Remaining Contractual Term (years)
Aggregate Intrinsic Value (thousands)
Outstanding at December 31, 2023
2,369,169
$
1.43
8.8
$
495
Granted
859,250
$
0.51
—
Cancelled
(986,587)
$
3.03
—
Exercised
(634,298)
$
0.14
—
Outstanding at September 30, 2024
1,607,534
$
0.38
4.6
$
322
Exercisable as of September 30, 2024
1,325,404
$
0.28
3.8
320
The aggregate intrinsic value represents the difference between the exercise price and the fair value of the shares underlying common stock.
The Black-Scholes option pricing model is used by the Company to determine the weighted-average fair value of share-based payments. The Company’s recognizes forfeitures as they occur. The related stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the awards, which is generally four years.
The Black-Scholes option pricing model assumptions used in evaluating our option awards to employees is as follows:
Nine Months ending September 30,
2024
Expected term
6.05 years
Expected volatility
68%
Risk-free interest rate
3.9%
Dividend yield
—
Restricted Stock
In June, 2024 the Company issued time-based restricted stock units and performance-based restricted stock units with market conditions that vest upon the Company’s Common Stock achieving a specific price per share.
Restricted stock unit activity for the period presented is as follows:
Restricted Stock Units
Weighted Average Grant Date Fair Value
Outstanding at December 31, 2023
—
—
Granted
1,576,193
0.75
Vested
(72,050)
0.75
Forfeited
(265,270)
0.75
Outstanding at September 30, 2024
1,238,873
0.75
The performance-based restricted stock units with market conditions was determined using a Monte Carlo simulation model.
Stock based compensation expense was negative $199 thousand and $40 thousand for the three months ended September 30, 2024 and 2023, respectively. Stock based compensation expense was $69 thousand and $63 thousand for the nine months ended September 30, 2024 and 2023, respectively.
Warrants
As of September 30, 2024, there were 13,800,000 public warrants and 15,226,000 private placement warrants issued and outstanding.
Private placement warrants
Simultaneously with the closing of the Company’s initial public offering in 2021, (the “Initial Public Offering”) the Company consummated the private placement of 15,226,000 private placement warrants at a price of $1.00 per private placement warrant to the sponsor and Blackrock, Inc. Each private placement warrant is exercisable for one whole share of Common Stock at a price of $11.50 per share. Such private placement warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are not be redeemable by the Company. The private placement warrants are all exercisable as of September 30, 2024. There was no activity during the period ended September 30, 2024.
Public warrants
Pursuant to the Initial Public Offering, the Company sold 27,600,000 units (the “Units”) at a price of $10.00 per Unit. Each Unit consisted of one share of Common Stock and one-half of one redeemable warrant. Each whole public warrant entitles the holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment. There are 13,800,000 public warrants outstanding as of September 30, 2024.
On September 9, 2024, the Company received a written notice (the “Delisting Notice”) from the staff of NYSE Regulation (the “Staff”) of the NYSE American indicating that the Staff determined that the Company’s public warrants were no longer suitable for listing on the NYSE American based on “abnormally low” price levels, pursuant to Section 1001 of the NYSE American Company Guide. As a result, the Staff determined to commence proceedings to delist the public warrants from the NYSE American. Effective September 10, 2024, trading in the public warrants on the NYSE American was suspended. Subsequent to the delisting, the public warrants began trading on OTC Markets Group Inc. under the trading symbol “SOARW”.
The public warrants will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation. The public warrants are all exercisable as of September 30, 2024. There was no activity during the period ended September 30, 2024.
NOTE 16 – COMMITMENT AND CONTINGENCIES
Honda Aircraft May 2023 Purchase Agreement
On May 5, 2023, the Company entered into the Honda FPA for the purchase and delivery of twenty-three (23) HondaJet HA-420 Aircraft for a total estimated purchase price of $161.1 million with expected delivery between the fourth fiscal quarter of 2023 and the fourth fiscal quarter of 2025. The Company took delivery and sold two aircrafts related to this agreement. On September 10, 2024, the Company received notice from Honda Aircraft that the Honda FPA was terminated. Pursuant to the terms of the agreement, Honda Aircraft will retain the deposits that have been previously paid by the Company and the Company has to enter into individual purchase agreements for each aircraft for which a deposit had previously been paid. During the three and nine months ended the Company recorded a charge for the remaining deposit balance of $1.0 million which is recorded in selling general and administrative expenses.
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 G280 aircraft for total consideration of $79.0 million. The first Gulfstream G280 was delivered in the third quarter of 2024 with the remaining three Gulfstream G280’s expected to be delivered throughout fiscal year 2025. The Company made prepayments totaling $48.0 million and $39.0 million as of September 30, 2024, and December 31, 2023, respectively, of which the $36.0 million remaining is non-refundable, except in some specific circumstances, and would serve as consideration for liquidated damages of $3.0 million per aircraft should the purchase agreement be terminated by the Company.
During the nine months ended September 30, 2024, the Company made additional payments of $9.0 million towards these agreements, of which $9.0 million was funded through the SAC Leasing G280 line of credit (Note 12) and zero was paid by the Company. In September 2024, the Company took delivery of one Gulfstream G280 and received $12.0 million in deposits related to the aircraft, of which $9.0 million paid down the SAC Leasing G280 line of credit and $3.0 million was retained by the Company.
Future minimum payments under the purchase agreements with Gulfstream Aerospace, LP at September 30, 2024, are as follows, in thousands:
Gulfstream G280 Fleet
2024
$
—
2025
23,250
Total expected contractual payments
$
23,250
The Company has a credit facility in place with SAC Leasing G280 under which it has funded $40.5 million of the original $79.0 million due under these purchase agreements with Gulfstream Aerospace LP. The remaining balance to be funded by SAC Leasing G280 is zero as of September 30, 2024.
Operating Leases
The Company leases property under operating leases. For leases with terms greater than 12 months, the Company records the related assets and obligations at the present value of the lease payments over the lease term. Many of the leases contain renewal options and/or termination options that are factored into our determination of lease payments when appropriate. The Company uses its incremental borrowing rate to discount lease payments to present value, as the rates implicit in its leases are not readily determinable. The incremental borrowing rate is based on the estimated interest rate for collateralized borrowing over a similar term of the lease at the commencement date.
Aircraft Leases
During 2022, the Company began leasing an aircraft with a term of five years which has fixed lease payments. The Company recognized an operating lease liability in the amount of the net present value of the future minimum lease payments, and a right-of-use asset. The discount rate used for this lease was 12%, which was determined to be the incremental borrowing rate based on comparative secured financing in the marketplace at the inception of the fixed lease payments.
Lease expense was recognized on a straight-line basis over the lease term. Lease expense related to this lease consisting of fixed and variable lease costs was $78 thousand and $117 thousand for the three months ended September 30, 2024 and 2023, respectively. Lease expense was $312 thousand and $351 thousand for the nine months ended September 30, 2024 and 2023, respectively.
Additionally, the Company leases other aircraft under operating leases with remaining terms ranging from one to five years. These leases require lease payments that are variable and are dependent on flight hours that generate charter revenues, with no minimum lease payment commitments. Because of the variable nature of the lease payments, these leases are not recorded on our consolidated balance sheets as ROU assets and lease liabilities. Certain leases have renewal options to extend lease terms for additional periods ranging from three to twelve months.
Some of the aircraft leases have lease terms of 12 months or less. The Company has made a policy election to classify lease agreements with a lease term of 12 months or less as short-term leases. Accordingly, the Company has not recognized right-of-use assets or lease liabilities related to these lease agreements pursuant to the short-term election. The Company recognizes short-term lease costs on a straight-line basis over the lease term and accrues the difference each period between the amount expensed and the amount paid.
Variable leases costs associated with the aircraft operating leases were $1.9 million and $6.6 million for the three months ended September 30, 2024 and 2023, respectively. Variable lease costs associated with the aircraft operating leases were $7.7 million and $12.0 million for the nine months ended September 30, 2024, and 2023, respectively. Short-term lease costs on the aircraft leases were $40 thousand and $183 thousand for the three months ended September 30, 2024 and 2023, respectively. Short-term lease costs on the aircraft leases were $196 thousand and $513 thousand for the nine months ended September 30, 2024, and 2023, respectively.
In September, 2024 the Company began terminating the aircraft leases as part of the flyExclusive agreement.
Airport Facilities
Our facilities leases are for space at airports throughout the south with remaining terms ranging from one to eleven months. These leases consist of hangar space and office space. The leases have lease terms of 12 months or less. Accordingly, the Company has not recognized right-of-use assets or lease liabilities related to these lease agreements pursuant to the short-term lease election. The Company has made a policy election to not separate lease and non-lease components for these facility leases. Short-term lease costs related to these leases were $21 thousand and $16 thousand for the three months ended September 30, 2024, and 2023, respectively. Short-term lease costs were $57 thousand and $54 thousand for the nine months ended September 30, 2024 and 2023, respectively.
In January 2024, the Company began leasing space for aircraft with a term of 5 years with fixed lease payments. The Company recognized an operating lease liability in the amount of the net present value of the future minimum lease payments, and a right-of-use asset. The discount rate used for this lease was 12%, which was determined to be the incremental borrowing rate based on comparative secured financing in the marketplace at the inception of the fixed lease payments.
Legal Contingencies
From time to time, the Company receives claims of and becomes subject to consumer protection, employment, intellectual property and other commercial litigation related to the conduct and operation of the Company’s business. In connection with such litigation, the Company may be subject to significant damages. We may also be subject to equitable remedies and penalties. Such litigation could be costly and time consuming and could divert or distract Company management and key personnel from its business operations. The Company does not currently believe that any of its outstanding litigation will have a material adverse effect on its financial statements or business. Outstanding litigation related to vendor or customer disputes have been fully accrued in the financial statements at the disputed amount. However, due to the uncertainty of litigation and depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect the Company’s business, results of operations, financial position, or cash flows.
In the Tampa Division of the U.S. District Court, in and for the Middle District of Florida on September 12, 2024, Joshua G. Newsteder, LouAnn Gray, and those similarly situated (the “Plaintiffs”) filed suit against the Volato Group, Inc. and Volato, Inc.(the “Defendants”) citing various allegations including that the termination of employment of 230 employees that occurred on August 30, 2024 violated requirements of the Worker Adjustment and Retraining Notification Act of 1988, 29 U.S.C. § 2101 et. seq. (“WARN Act”) (collectively, the “Dispute”). Plaintiffs are seeking unpaid wages or salary, benefits and other relief deemed by the court as just and proper. Volato Group, Inc. and Volato, Inc. deny all allegations.
NOTE 17 – SUBSEQUENT EVENTS
In October 2024, we released additional customer deposits related to Insider membership program and stretch card agreements as part of the agreement with flyExclusive.
On November 4, 2024, the Company entered into a Settlement Agreement and Stipulation (the "Settlement Agreement”) with Sunpeak Holdings Corporation ("SHC”), which became effective on November 6, 2024, to settle outstanding claims owed to SHC. Pursuant to the Settlement Agreement, SHC has agreed to purchase certain outstanding payables between the Company and designated vendors of the Company totaling approximately $4.7 million (the "Claims”) and will exchange such Claims for a settlement amount payable in shares of common stock of the Company (the "Settlement Shares”). The Settlement Shares shall be priced at the closing price of the Company’s common stock on November 4, 2024, subject to adjustment pursuant to the terms of the Settlement Agreement. The Company shall also issue to SHC, on the issuance date(s), 100,000 freely trading shares pursuant to the agreement.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations (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. 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.
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. Part 135. 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; and
•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; and
•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.
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.
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.
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.
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
2024
2023
$
%
2024
2023
$
%
Revenue
$
40,269
$
3,654
$
36,615
1002
%
$
44,866
$
15,933
$
28,933
182
%
Costs and expenses:
Cost of revenue
33,768
3,335
30,433
913
%
37,812
14,633
23,179
158
%
Selling, general and administrative
4,649
2,152
2,497
116
%
13,484
5,782
7,702
133
%
Total costs and expenses
38,417
5,487
32,930
600
%
51,296
20,415
30,881
151
%
Operating income (loss)
1,852
(1,833)
3,685
(201)
%
(6,430)
(4,482)
(1,948)
43
%
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
Interest expense, net
(3,234)
(805)
(2,429)
302
%
(5,603)
(2,427)
(3,176)
131
%
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
Revenue consists of the following (in thousands, except percentages):
Three Months Ended September 30,
Change In
Nine Months Ended September 30,
Change In
2024
2023
$
%
2024
2023
$
%
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.
Cost of Revenue
Cost of revenue comprises expenses tied to the associated revenue streams: aircraft sales, managed aircraft 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
2024
2023
$
%
2024
2023
$
%
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)
%
Subscription
34
105
(71)
(68)
%
120
134
(14)
(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.
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 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. 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)
Liquidity and Capital Resources
Overview
Our principal sources of liquidity have historically consisted of financing activities, including proceeds from the issuance of stock, borrowings under our credit facilities, and 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 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. 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.
Cash Flows
The following table summarizes our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):
Nine Months Ended September 30,
2024
2023
Net cash used in operating activities
(11,115)
$
(24,119)
Net cash provided by investing activities
(145)
1,436
Net cash provided by financing activities
136
24,958
Net Decrease in cash and restricted cash
$
(11,124)
$
2,275
Cash Flow from Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2024 was $11.1 million. The cash outflow from operating activities consisted of our net loss of $38.7 million, non-cash items of $3.4 million, and a change in net operating assets and liabilities of $24.2 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.
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.
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.
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.
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. Management believes that the accounting policies set forth below comprise the most important “critical accounting policies” for the company. A “critical accounting policy” is one which is both important to the portrayal of our financial condition and results of operations and that involves difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management evaluates such policies on an ongoing basis, based upon historical results and experience, consultation with experts and other methods that management considers reasonable in the particular circumstances under which the judgments and estimates are made, as well as management’s forecasts as to the manner in which such circumstances may change in the future.
Revenue Recognition
We determine revenue recognition pursuant to ASC 606, Revenue from Contracts with Customers, through the following steps:
1.Identification of the contract, or contracts, with a customer.
2.Identification of the performance obligation(s) in the contract.
3.Determination of the transaction price.
4.Allocation of the transaction to the performance obligation(s) in the contract.
5.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. Revenue is recognized when control of the promised service is transferred to a customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies, as a performance obligation, each promise to transfer a good or service to a customer that is distinct. To identify its performance obligations, the Company considers all of the goods and services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.
For each revenue stream, we evaluate whether our obligation is to provide the good or service itself, as the principal, or to arrange for the good or service to be provided by the other party, as the agent, using the control model. For certain services provided to the customer, primarily in our aircraft management services revenue stream, the Company directs third-party providers to assist in our fulfillment of the performance obligation in contracts with our customers. Any cost reimbursements and third-party costs are recognized in revenue on a gross basis as Volato has pre-negotiated these costs and takes a certain amount of risk that it will not fully recover the costs incurred. 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.
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
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.
The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. The Company recognizes the cost of services received in exchange for awards of equity instruments based on the grant-date fair value of equity awards. This cost is recognized as expense over the employee’s requisite vesting period or over the non-employee’s period of providing goods or services. Any forfeitures of stock-based compensation are recorded as they occur.
The Company utilizes the Black Scholes valuation model to value the issuance of stock-based compensation. See Note 15, “Shareholders’ Equity (Deficit)” of the accompanying Notes to Consolidated Financial Statements.
JOBS Act
We are an “emerging growth company” as defined in the JOBS Act. The JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to use this extended transition period under the JOBS Act until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
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 $1.07 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of the end of the period covered by the report, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2024 our disclosure controls and procedures were effective at the reasonable assurance level.
Limitations on the Effectiveness of Controls
Management of the Company, including its chief executive officer and its chief financial officer, does not expect that the Company’s disclosure controls and procedures or its internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Furthermore, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons or by the collusion of two or more persons. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended on September 30, 2024 covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Effective in the second quarter of 2024, we no longer have a financial expert on our board of directors.
From time to time, we are a defendant or plaintiff in various legal proceedings which arise in the normal course of business. As such, we are required to assess the likelihood of any adverse outcomes to these proceedings as well as potential ranges of probable losses. If one or more legal matters were resolved against us in a reporting period for amounts above management’s expectations, our financial condition and operating results for that reporting period could be materially adversely affected.
In the Tampa Division of the U.S. District Court, in and for the Middle District of Florida on September 12, 2024, Joshua G. Newsteder, LouAnn Gray, and those similarly situated (the “Plaintiffs”) filed suit against the Volato Group, Inc. and Volato, Inc.(the “Defendants”) citing various allegations including that the termination of employment of 230] employees that occurred on August 30, 2024 violated requirements of the Worker Adjustment and Retraining Notification Act of 1988, 29 U.S.C. § 2101 et. seq. (“WARN Act”) (collectively, the “Dispute”). Plaintiffs are seeking unpaid wages or salary, benefits and other relief deemed by the court as just and proper. Volato Group, Inc. and Volato, Inc. deny all allegations.
ITEM 1A.RISK FACTORS
There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 26, 2024. Investors should review the risks provided in the Form 10-K prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
The Company did not sell any unregistered securities during the quarter ended September 30, 2024.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The Company repurchased no shares of Common Stock during the quarter ended September 30, 2024.
(a) During the quarter ended September 30, 2024, there was no information required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.
(b) During the quarter ended September 30, 2024, there were no material changes to the procedures by which stockholders may recommend nominees to our board of directors.
(c) During the quarter ended September 30, 2024, no officer or director adopted or terminated (1) a plan, contract, or set of instructions intended to by covered by the 10b5-1 affirmative defense or (2) a written trading arrangement as defined in Item 408(c) of Regulation S-K.
Business Loan and Security Agreement, dated July 26, 2024, between Volato, Inc. and TVT Capital Source LLC (incorporated by reference herein from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 1, 2024).
Aircraft Purchase and Sale Agreement, dated as of August 9, 2024, between Volato, Inc. and TVPX Aircraft Solutions, Inc. (incorporated by reference herein from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 16, 2024).
Aircraft Lease Agreement (S/N 2282), dated as of August 9, 2024, between Volato, Inc. and TVPX Aircraft Solutions, Inc. (incorporated by reference herein from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on August 16, 2024).
Form of Indemnification Agreement (incorporated by reference herein from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 29, 2024).
Form of Stock Option Agreement (incorporated by reference herein from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on August 29, 2024).
Aircraft Management Services Agreement, dated September 2, 2024, between flyExclusive, Inc. and Volato Group, Inc. (incorporated by reference herein from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 3, 2024).
Settlement Agreement and Stipulation dated November 4, 2024 by and between Volato Inc. and Sunpeak
Holdings Corporation (incorporated by reference hereon from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 8, 2024).
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*
XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104*
Cover Page Interactive Data File—the cover page XBRL tags are embedded within the Inline XBRL document contained in Exhibit 101
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned; thereunto duly authorized.