Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provide information which Jet.AI's management believes is relevant to an assessment and understanding of its consolidated results of operations and financial condition. You should read the following discussion and analysis of Jet.AI's financial condition and results of operations together with the historical audited annual consolidated financial statements as of and for the years ended December 31, 2025 and 2024, and the related notes that are included elsewhere in this Report.

Certain of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to plans and strategy for Jet.AI's business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in "Item 1A - Risk Factors," Jet.AI's actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Factors that could cause or contribute to such differences include, but are not limited to, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Report. We assume no obligation to update any of these forward-looking statements.

Percentage amounts included in this Report have not in all cases been calculated on the basis of rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Report may vary from those obtained by performing the same calculations using the figures in the consolidated financial statements included elsewhere in this Report. Certain other amounts that appear in this Report may not sum due to rounding.

Unless otherwise indicated, all information in this Report gives effect to a 1-for-225 reverse stock split of our common stock that became effective on November 12, 2024, and all references to shares of common stock outstanding and per share amounts give effect to the reverse stock split.

Overview

The Company was founded in 2018 by Michael Winston, its Executive Chairman. The Company, directly and indirectly through its subsidiaries, historically has been principally involved in (i) the sale of fractional and whole interests in aircraft, (ii) the sale of jet cards, which enable holders to use certain of the Company's and other's aircraft at agreed-upon rates, (iii) the operation of a proprietary booking platform, which functions as a prospecting and quoting platform to arrange private jet travel with third-party carriers as well as via the Company's leased and managed aircraft, (iv) direct chartering of its HondaJet Elite aircraft by Cirrus Aviation Services, (v) aircraft brokerage and (vi) monthly management and hourly operation of customer aircraft.

Currently we offer the following SaaS software to aircraft owners and operators generally:

	●	Reroute AI:recycles aircraft waiting to embark to their next revenue flight into prospective new charter bookings to destinations within specific operational parameters.
	●	DynoFlight:enables aircraft operators to estimate aircraft emissions then purchase carbon removal credits via our DynoFlight application programming interface API.

In 2024 and 2025, we launched CharterGPT, our AI-enhanced booking app, and Ava, our agentic AI model, respectively.

In 2025 the Company began transitioning its primary focus to AI data center operations and assets. As part of that transition, in 2025 the Company acquired an approximately 49.9% ownership interest in AIIA Sponsor Ltd. (as previously defined, "Sponsor"), the sponsor of AI Infrastructure Acquisition Corp. (NYSE: AIIA) (as previously defined, "AI Acquisition"), a special purpose acquisition company that completed its initial public offering in October 2025. See "Investment in AIIA Sponsor" below for further discussion.

Potential Sale of Aviation Business Assets

On February 13, 2025, the Company, entered into the Original Merger Agreement with flyExclusive, Merger Sub, and SpinCo. On May 6, 2025, the parties entered into an Amended and Restated Agreement and Plan of Merger and Reorganization (as previously defined, the "Merger Agreement"). Pursuant to the Merger Agreement, (i) as a condition to closing on the Merger Agreement, the Company will effect the Distribution, (ii) Merger Sub will merge with and into SpinCo to effect the Merger, with SpinCo surviving the Merger as a wholly owned subsidiary of flyExclusive and (iii) as consideration for the Merger, the Company's existing stockholders will have the right to receive shares of Class A common stock of flyExclusive. Additionally, the Company's stockholders will continue to own and hold their existing shares of the Company's common stock as of closing of the Merger.

The Merger Agreement amends, restates, replaces and supersedes the Original Merger Agreement in its entirety. Except as follows, the material terms of the Transactions were unchanged in the Merger Agreement. The Merger Agreement, among other things, amended the Original Merger Agreement to provide that eighty percent of the merger consideration shares will be issued upon the closing, and twenty percent of the merger consideration shares will be held in reserve by flyExclusive until a final post-closing purchase price is determined. Once the final post-closing purchase price is determined, flyExclusive will only issue additional merger consideration shares from the reserve on a dollar for dollar basis up to the lesser of the final purchase price and the initial purchase price.

On February 11, 2026, the parties entered into an amendment to the Merger Agreement (as previously defined, the "Amendment"), which (i) eliminates the closing condition that would have required the Company to execute a new securities purchase agreement with a third-party investor, pursuant to which the Company would have issued the investor a warrant to purchase up to $50 million worth of shares of a newly-designated series of preferred stock, and (ii) provides the Company with the ability to explore and negotiate potential post-closing strategic transactions, provided that any such transaction must be conditioned upon the closing of the Transactions and consummated after the closing of the Transactions.

In connection with executing the Original Merger Agreement, the Company, SpinCo, and flyExclusive entered into the Separation and Distribution Agreement pursuant to which the Company will effect the Separation by transferring the business, operations, services and activities of the Company's fractional and jet card business to SpinCo and will no longer operate a fractional and jet card consummate the Distribution. After the Separation and Distribution, the Company will no longer operate a fractional or jet card business. The Company will continue to operate and retain its software and intellectual property assets, but will cease to hold its aircraft fractional, jet card and management assets. The Transactions are subject to various conditions to closing, including the receipt of stockholder approval, and are expected to close during the second quarter of 2026.

Joint Venture

On June 26, 2025, we entered into the JV Agreement with Consensus Core pursuant to which we and Consensus Core agreed to establish a joint venture allowing us to collaborate in developing data centers. In furtherance of this collaboration, we and Consensus Core entered into the Contribution Agreement with Consensus Core and Convergence Compute on July 2, 2025. Pursuant to the Contribution Agreement, we contributed $300,000 to Convergence Compute at the first closing of the transactions contemplated by the JV Agreement and acquired a 0.5% equity interest in Convergence Compute. Ultimately, we have agreed to contribute up to an aggregate $20 million to Convergence Compute in five tranches that are each tied to specific project development milestones.

On November 7, 2025, we announced that the milestones associated with the second closing-including the contribution by Consensus Core of all equity interests of its data center project located in Midwestern Canada (as previously defined, the "Midwest Project") to Convergence Compute-had been substantially completed and we have since contributed the $1.7 million in connection with the second milestone. As a result, we and Consensus Core each received a 17.5% equity interest in the Midwest Project and we received an additional 0.5% equity interest in Convergence Compute.

In connection with the third closing under the Contribution Agreement, Consensus Core will contribute all equity interests in its data center project located in Maritime Canada (as previously defined, the "Maritime Project") to Convergence Compute. As a result of this contribution, we and Consensus Core each will receive a 17.5% equity interest in the Maritime Project and we will receive an additional 0.5% equity interest in Convergence Compute. If all five closings contemplated by the Contribution Agreement occur, we will hold an aggregate equity interest of 2.5% of Consensus Core, an equity interest of 17.5% in the Midwest Project, and an equity interest of 17.5% in the Maritime Project.

Results of Operations

The following table sets forth our results of operations for the periods indicated:

		For the Year Ended December 31,
		2025				2024
Revenues		$	9,177,767			$	14,022,628
Cost of revenues			9,477,806				14,987,245
Gross loss			(300,039	)			(964,617	)
Operating Expenses:
General and administrative (including stock-based compensation of $1,626,102 and $4,287,236, respectively)			8,746,440				10,752,048
Sales and marketing			779,004				687,785
Research and development			244,237				162,152
Total operating expenses			9,769,681				11,601,985
Operating loss			(10,069,720	)			(12,566,602	)
Other (income) expense:
Interest expense			-				167,054
Other income			(182,194	)			(221	)
Unrealized gain on other investments			(14,477,000	)			-
Total other (income) expense			(14,659,194	)			166,833
Income (loss) before provision for income taxes			4,589,474				(12,733,435	)
Provision for income taxes			-				-
Net income (loss)		$	4,589,474			$	(12,733,435	)
Less deemed dividend from warrant exchange offer			-				(540,255	)
Less cumulative preferred stock dividends			-				(109,303	)
Net income (loss) to common stockholders		$	4,589,474			$	(13,382,993	)
Weighted average shares outstanding - basic			3,026,488				279,201
Weighted average shares outstanding - Diluted			13,766,617				279,201
Net income (loss) per share - basic		$	1.52			$	(47.93	)
Net income (loss) per share - Diluted		$	0.33			$	(47.93	)

Revenues

Revenues for 2025 totaled $9.2 million, a $4.8 million decrease from revenues of $14.0 million for fiscal 2024, and were comprised of approximately $4.8 million of revenues related to our CharterGPT software app and Cirrus charter services (being $3.0 million in software-related revenue and $1.8 million in revenue from the chartering of our HondaJets by our operating partner Cirrus), $3.2 million in services revenue from the management of customers' aircraft, $1.1 million in Jet Card revenue for hours flown and other charges based on hours flown, and $159,000 in other revenue. The primary reason for the decrease was due to a reduction in Cirrus charter, software app, and Jet Card revenues of $2.1 million, $1.2 million, and $1.2 million, respectively, in the 2025 period due to the planned sale of the Company's aviation assets to flyExclusive. Upon the closing of the proposed transaction with flyExclusive we will cease to generate revenues from our legacy Jet Card and fractional programs.

The following table sets forth a breakout of revenue components by subcategory for the years ended December 31, 2025 and 2024.

		Year Ended December 31,
		2025				2024
Software App and Cirrus Charter		$	4,804,747			$	8,128,997
Jet Card and Fractional Programs			1,053,357				2,288,036
Management and Other Services			3,319,663				3,605,595
Total		$	9,177,767			$	14,022,628

The Company recognized $3.0 million in revenue related to app-generated services and software revenues related to charter bookings made through its CharterGPT app in 2025, a decrease of $1.2 million, or 29.0%, from $4.2 million in 2024, reflecting reduced brokerage staff for the CharterGPT app and aviation piece(s) that will be retained after the flyExclusive transaction.

The Company recognized $3.2 million in service revenue in 2025, a decrease of $405,000, or 11.3 %, from $3.6 million in 2024, relating to reduced flying by the owners of the Company's managed aircraft. During 2025, the Company sold 20 prepaid flight hours under its jet card and fractional programs, amounting to $116,000, and recognized $948,000 of revenue for 168 flight hours flown or forfeited, as well as $105,000 in additional charges. These additional charges primarily represent charges for cost reimbursements such as a fuel component adjustment to adjust for changes in fuel prices relative to the jet card and fractional contracts' base fuel price and reimbursement of federal excise taxes. Prepaid flight hours are recognized as revenue as the flight hours are used or forfeited. At December 31, 2025, the Company recorded deferred revenue of $443,126 on its consolidated balance sheets, which includes $259,000 related to jet card prepayments for which the related travel had not yet occurred, $184,000 with respect to customer prepayments associated with software app transactions, and $315 with respect to the management of aircraft.

In 2024, we sold 285 prepaid flight hours amounting to approximately $1.7 million and recognized approximately $2.1 million of revenue for 348 flight hours flown or forfeited, as well as additional charges of approximately $208,000. At December 31, 2024, the Company recorded deferred revenue of $1,319,746 on its consolidated balance sheets.

The decrease in flight hours sold and flown primarily resulted from the planned sale of the Company's aviation assets to flyExclusive.

The following table details the flight hours sold and flown or forfeited, as well as the associated deferred revenues and recognized revenues, respectively, and additional charges for the years ended December 31, 2025 and 2024:

		For the Year Ended December 31,
		2025				2024
Deferred revenue at the beginning of the year (1)		$	1,319,746			$	1,779,794
Prepaid flight hours sold
Amount		$	116,000			$	1,662,250
Total Flight Hours			20				285
Prepaid flight hours flown
Amount		$	948,470			$	2,080,371
Total flight hours			168				348
Additional charges		$	104,887			$	207,665
Total flight hour revenue		$	1,053,357			$	2,288,036
Deferred revenue at the end of the year (2)		$	443,126			$	1,319,746

(1)	Deferred revenue at December 31, 2024 and 2023 also includes $212,278 and $268,818, respectively, with respect to customer prepayments associated with software app transactions and $16,233 and $0, respectively, with respect to the management of aircraft.
(2)	Deferred revenue at December 31, 2025 and 2024 also includes $184,046 and $212,278, respectively, with respect to customer prepayments associated with software app transactions and $315 and $16,233, respectively, with respect to the management of aircraft.

In addition to its software app and jet card revenues, the Company also generates revenue through the direct chartering of its HondaJet aircraft by Cirrus. During 2025, this revenue amounted to approximately $1.8 million, a decrease of $2.1 million, or 53.6%, from $3.9 million in the prior year. The decreased revenue was a result of the decreased chartering of the Company's HondaJet fleet, as well as reduced pilot availability in 2025 as compared to 2024 resulting from the planned sale of the Company's aviation assets to flyExclusive.

Management and Other Service revenues totaled $3.3 million in 2025, a decrease of $286,000, or 7.9%, from $3.6 million in 2024. The Company continued to provide aircraft management services throughout 2025.

Cost of Revenues

Our cost of revenue is comprised of payments to Cirrus for the maintenance and management of our fleet aircraft, commissions to Cirrus for their arranging for charters on our aircraft, aircraft lease expense, federal excise tax relating to jet card and third-party charters, and payments to third-party aircraft operators for both charter flights booked through CharterGPT, as well as the cost of subcharters for covering jet card flights when our HondaJets were unavailable. The management of our aircraft by Cirrus covers all our aircraft regardless of whether the aircraft are used for program flight hours or charter flights and includes expenses such as fuel, pilot wages and training costs, aircraft insurance, maintenance and other flight operational expenses.

During 2025, the Company operated three HondaJets, one King Air 390i and one CJ4. As a result of the decrease in jet card and Cirrus charter flight activity, operating expenses related to the operation of the Company's aircraft and payments to Cirrus for their management decreased $3.5 million from $9.3 million in 2024 to $5.8 million in 2025, and aircraft lease payments decreased $56,000 from $1.4 million in 2024 to $1.3 million in 2025. The Company also incurred third-party charter costs of approximately $2.1 million in 2025, a $1.6 million decrease over 2024, as a result of the reduction in ad hoc charters and a reduced need for subcharters used for covering jet card flights when our HondaJets were unavailable. Federal excise tax and merchant fees relating to charter flights decreased $356,000 in 2025 to $281,000 from $637,000 in 2024. In total, it cost $9.5 million to operate these five aircraft in 2025, compared to $15.0 million to operate four aircraft in 2024.

Gross Loss

The resulting gross loss totaled $300,000 for 2025, compared to $965,000 for the 2024 fiscal year. The decreased gross loss was a result of decreased pilot, fuel, training and maintenance costs, together with lower utilization on our HondaJets.

Total Operating Expenses

In 2025, the Company's operating expenses decreased by approximately $1.8 million from 2024 due to an approximate $2.0 million decrease in selling, general and administrative expenses, offset by a $91,000 increase in sales and marketing expenses and a $82,000 increase in research and development costs. Excluding non-cash stock-based compensation of $1.6 million and $4.3 million in 2025 and 2024, respectively, general and administrative expenses rose by approximately $656,000 primarily due to a $436,000 increase in board of director fees, a $253,000 increase in Directors and Officers insurance costs, an increase in professional legal service expenses of $190,000 with a substantial portion of these expenses during the 2025 period related to the potential flyExclusive transaction, an increase in wages of $160,000, offset by a decrease in consulting fees of $46,000, a decrease in regulatory fees of $88,000, and a decrease in dues and subscriptions of $57,000.

The Company's sales and marketing expenses increased by about $91,000 to $779,000 in 2025 from $688,000 in 2024. These expenses are mainly linked to promoting the Company and its programs, including transitioning its primary focus to AI data center operations and assets.

Research and development expenses increased $82,000 to $244,000 in 2025 from $162,000 in 2024, due to continued development work on additional software offerings.

Operating Loss

As a result of all of the above, in 2025 the Company recognized an operating loss of approximately $10.1 million, which was a decrease in loss of approximately $2.5 million when compared to the prior year. The decrease in operating loss was primarily due to the reduced gross loss and the decrease in general and administrative expenses resulting from the decrease in non-cash stock-based compensation expenses that resulted from the non-cash vesting of employee stock options as well as the decrease in consulting costs.

Other (Income) Expense

During 2025, the Company recognized approximately $14.7 million in other income, net, compared to $167,000 in other expense for the 2024 fiscal year. Other income in 2025 was driven primarily by a $14.5 million unrealized gain from the change in fair value of the Company's other investments (see "Investment in AIIA Sponsor" below), $182,000 in other income comprised of interest income and dividend income, and the elimination of interest expense of $167,000 in 2024 related to the Bridge Agreement (defined below) that was fully repaid in March 2024.

Net Income (Loss) to Common Stockholders

The Company recorded net income of $4.6 million for the year ended December 31, 2025, compared to a net loss of $12.7 million for the year ended December 31, 2024, a favorable change of $17.3 million. The swing from net loss to net income was driven by the $14.5 million non-cash unrealized gain on the change in fair value of other investments, together with a $2.5 million improvement in operating loss. Excluding the non-cash fair value gain, the Company would have recorded a net loss of approximately $9.9 million for the year ended December 31, 2025.

There were no deemed dividends or cumulative preferred stock dividends in 2025, compared to a $540,000 deemed dividend from the Company's warrant exchange offer and $109,000 in cumulative preferred stock dividends in 2024. Accordingly, net income to common stockholders was $4.6 million in 2025 compared to a net loss to common stockholders of $13.4 million in 2024.

Net income per share - basic and diluted was $1.52 and $0.33, respectively for 2025, compared to net loss per share - basic and diluted of $(47.93) for 2024, based on weighted average shares outstanding of 3,026,488, 13,766,617 and 279,201, respectively. The significant increase in weighted average shares outstanding reflects common stock issuances during 2024 and 2025, including shares issued upon conversion of Series B Preferred Stock.

Liquidity and Capital Resources

Overview

As of December 31, 2025, the Company's cash and cash equivalents were approximately $1.8 million, compared to $5.9 million at December 31, 2024. There was a liquidity reserve of $500,000 in a separate bank account pledged as security to an aircraft lessor, which the Company records as restricted cash on its balance sheet as of December 31, 2025, as well as a maintenance reserve of approximately $690,000 for this leased aircraft. As of December 31, 2025, current liabilities exceeded current assets by approximately $1.5 million. Of the $3.7 million in current liabilities, approximately $443,000 represents deferred revenue that will be satisfied through delivery of services rather than cash payments.

During the year ended December 31, 2025, the Company raised: (1) $11.0 million from the exercise of the Ionic Warrant for the issuance of shares of Series B Preferred Stock, and (2) approximately $713,000 from sales of common stock under its ATM Sales Agreement and otherwise. These proceeds were partially offset by offering costs of approximately $2.5 million.

The Company also incurred negative cash flows from operating activities and continues to have an accumulated deficit of approximately $48.0 million as of December 31, 2025. While the Company recorded net income of $4.6 million in 2025, this was driven by the non-cash fair value unrealized gain on other investments; as operating cash flows remained negative at $8.2 million.

The Company expects to continue to incur operating losses for at least the next 12 months. To fund its on-going obligations and operations, the Company intends to rely on funds available from potential sales of equity and debt securities, including shares of common stock that are expected to occur from time to time under its at-the-market sales program (further described below) effected in accordance with the Equity Distribution Agreement dated November 21, 2025, as amended in January 2026. The Company also has the ability to reduce cash burn to preserve capital. In the absence of external financing the Company is prepared to cut its cash utilization by ceasing marketing and customer acquisition, suspending software development, streamlining operations, and servicing only existing customers. Such a reduction would allow the Company to continue to operate for a year or more by management's estimate.

Ionic / Hexstone Transaction

General

On March 28, 2024, the Company entered into a Securities Purchase Agreement and related documents described below for a private placement with Ionic Ventures, LLC (as defined above, "Ionic"), which closed on March 29, 2024, which we collectively refer to as the "Ionic Transaction." At the initial closing, the Company initially issued to Ionic (a) 150 shares of its Series B Convertible Preferred Stock ("Series B Preferred Stock") and (b) 1,111 shares of common stock. In addition, the Company issued to Ionic a warrant to purchase up to 1,500 shares of Series B Preferred Stock (the "Ionic Warrant"). At the initial closing, the Company received gross proceeds of $1,500,025, reflecting payment for the Series B Preferred Stock and the common stock, in connection with the Ionic Transaction. This amount excludes the proceeds from the exercise of the Ionic Warrant.

Other Transaction Documents and Subsequent Agreements

The Ionic Warrant exercise price was initially set at $10,000 per share of Series B Preferred Stock, subject to adjustment for certain events, such as a stock split, issuance of additional shares as a dividend or otherwise. As of the date of this Report, Ionic has fully exercised the Ionic Warrant for a total of 1,500 shares of Series B Preferred Stock, resulting in gross proceeds to the Company of $15.0 million.

Conversions of Series B Preferred Stock; Warrant Exercises

Starting in October 2024, and through the date of this Report, Ionic has converted in full the 150 shares of Series B Preferred Stock issued at the initial closing, the 50 additional shares issued in connection with a letter agreement entered into in September 2024, and all 1,500 shares of Series B Preferred Stock issued pursuant to the full exercise of the Ionic Warrant. Those conversions, in total, resulted in the issuance of 43,796,343 shares of Common Stock (as adjusted to give effect to the reverse stock split).

On October 28, 2024, Ionic partially exercised the Ionic Warrant for 150 additional shares of Series B Preferred Stock, resulting in total proceeds to the Company of $1.5 million. On November 14, 2024, Ionic partially exercised the Ionic Warrant for 250 additional shares, resulting in proceeds of $2.5 million. On January 23, 2025, Ionic partially exercised the Ionic Warrant for 250 additional shares, resulting in proceeds of $2.5 million. On February 27, 2025, Ionic exercised the remainder of the Ionic Warrant for 850 additional shares, resulting in proceeds of $8.5 million.

From the closing of the Ionic Transaction through December 31, 2025, Ionic sold an aggregate of 3,625,610 shares of our common stock, comprised of: (i) 1,466,578 shares sold pursuant to Rule 144; (ii) 133,777 shares sold under a registration statement on Form S-1 (Reg. No. 333-279385); (iii) 600,000 shares sold under our registration statement on Form S-3 (Reg. No. 333-283207); (iv) 1,269,255 shares sold under our registration statement on Form S-3 (Reg. No. 333-284504); and (v) 156,000 shares sold under our registration statement on Form S-3 (Reg. No. 333-289982). As of December 31, 2025, Ionic held 300 shares of Series B Preferred Stock.

During 2026, Ionic sold an additional 10,129,504 shares pursuant to Rule 144. As of the date of this Report, Ionic holds no shares of our Series B Preferred Stock or common stock.

During 2026, Hexstone Capital, LLC (who was assigned certain rights or shares by Ionic) sold an aggregate of 30,041,229 shares of our common stock, comprised of: (i) 1,800,000 shares sold under our registration statement on Form S-3 (Reg. No. 333-289982); and (ii) 28,241,229 shares sold pursuant to Rule 144. As December 31, 2025, Hexstone held 450 shares of our Series B Preferred Stock.

Share Purchase Agreement

The Company entered into a Share Purchase Agreement on August 4, 2022, with GEM Yield LLC SCS and GEM Yield Bahamas Limited (together, "GEM"), which provides for potential future equity purchases of up to $40 million, subject to certain conditions. The agreement expires on August 11, 2026. Through early 2024, the Company drew down $2,550,024 under this facility and has not utilized it since. In consideration for GEM's commitment, the Company paid GEM a commitment fee equal to $800,000 in shares of common stock. In October 2024, the Company issued 36,886 shares of common stock to satisfy in full the outstanding commitment fee payable discussed in Note 7 to the consolidated financial statements in this Report and 58,447 shares of common stock under the Share Purchase Agreement with GEM for total consideration of $2.5 million.

On August 10, 2023, the Company issued GEM a warrant (as subsequently amended, the "GEM Warrant") granting it the right to purchase up to 6% of the outstanding common stock of the Company on a fully diluted basis as of the date of listing of our common stock on Nasdaq. Accordingly, the warrant exercise price was reduced to $5.51 per share as of December 31, 2025. The warrant may be exercised by payment of the per share amount in cash or through a cashless exercise.

The Company did not effect any drawdowns under this agreement in 2025, and does not expect to effect any drawdowns in 2026.

Investment in AIIA Sponsor

In July 2025, the Company made a capital contribution of approximately $2.7 million to Sponsor, which serves as the sponsor of AI Acquisition, in exchange for 1,912,833 units comprising ordinary shares and preference shares (together, the "Sponsor Equity Interest"). The Company's contribution represents an approximate 49.9% interest in the Sponsor. AI Acquisition is a special purpose acquisition company that intends to focus on opportunities with companies and/or strategic assets in high-impact private technology companies advancing artificial intelligence and machine learning capabilities, as well as those involved in building, operating, or enabling next-generation data center infrastructure. Sponsor was founded and organized by certain of the Company's executive officers and directors.

On October 6, 2025, AI Acquisition completed its initial public offering, selling an aggregate of 13,800,000 Units at a price of $10.00 per unit, resulting in total gross proceeds of $138,000,000. In connection with the initial public offering, Sponsor purchased 269,000 private placement units at $10.00 per unit. At the close of the offering, Sponsor held 4,600,000 Class B ordinary shares of AI Infrastructure and 269,000 private placement units.

As of December 31, 2025, the fair value of the Sponsor Equity Interest was $17,137,000, as determined using a probability weighted expected return method as described in Note 4 to the consolidated financial statements in this Report. During the year ended December 31, 2025, the Company recognized an unrealized gain of $14,477,000 in other income related to the change in fair value of this investment. This non-cash gain was the primary driver of the Company's swing from a net loss to net income during 2025.

The Company's Sponsor Equity Interest is a level 3 fair value measurement that requires significant unobservable inputs, including the probability of AIIA consummating a business combination. An increase or decrease in any of the unobservable inputs could result in a material change in the estimated fair value. See Note 4 to the consolidated financial statements for additional information regarding the fair value methodology.

Bridge Agreement

On September 11, 2023, the Company entered into a binding term sheet ("Bridge Agreement") with eight investors to provide the Company $500,000 of short-term bridge financing. The Bridge Agreement provided for the issuance of promissory notes, in an aggregate principal amount of $625,000, reflecting a 20% original issue discount. The notes bore interest at 5% per annum and matured on March 11, 2024. In March 2024, the Company fully repaid the Bridge Agreement in the amount of approximately $683,000, representing principal, redemption premium and interest.

Other Equity Issuances and Settlement Arrangements

Maxim Payment and Settlement Agreement

On August 10, 2023, the Company entered into a settlement agreement ("Maxim Settlement Agreement") with Maxim Group LLC, the underwriter for the Company's initial public offering ("Maxim"). Pursuant to the Maxim Settlement Agreement, the Company issued (a) 1,200 shares of common stock and (b) 1,127 Series A Preferred Shares in an amount equal in value to $1,127,000. The Series A Preferred Shares accrue a dividend at the rate of 8% per annum, payable quarterly.

During the year ended December 31, 2024, the Company issued 10,167 shares of common stock upon the conversion of 551 shares of Series A Preferred Shares. In November 2024, the Company redeemed in full the remaining 576 shares of Series A Preferred for an aggregate redemption price of $663,740, which included cumulative unpaid preferred stock dividends totaling $87,740. As a result of this redemption there are no shares of Series A Preferred issued and outstanding as of December 31, 2025 or December 31, 2024.

Warrants

On various dates at the end of December 2023 and through early 2024, the Company entered a number of separate warrant exchange agreements with various unaffiliated second-party warrant holders with respect to warrants to purchase an aggregate of 6,605 shares of our common stock (the "Exchanged Warrants"). Pursuant to these warrant exchange agreements, the Company issued an aggregate of 6,605 shares of common stock to those warrant holders in exchange for the surrender and cancellation of the Exchanged Warrants.

In December 2023 and January 2024, holders of an aggregate of 400 and 287 public warrants, respectively, were exercised for an equal number of shares of our common stock, generating net proceeds to us of $1,777,475.

At the Market Offering

On November 21, 2025, we put an ATM ("At the Market") program, in place to allow us to sell shares of our common stock under that program from time to time through Maxim Group LLC ("Maxim") as agent in an at-the-market offering under a prospectus supplement for aggregate sales proceeds of up to $10.0 million (the "ATM Program"). The ATM Program was amended twice in January 2026 to increase the amount that may be sold under the ATM Program by an additional 7.9 million and an additional $35.1 million, respectively (subject to any limitations imposed under SEC rules). The common stock is distributed at the market prices prevailing at the time of sale. As a result, prices of the common stock sold under the ATM Program may vary between purchasers and during the period of distribution. The ATM Agreement provides that Maxim is entitled to compensation for its services at a commission rate of 3.0% of the gross sales price per share of common stock sold. During 2025, we sold 751,426 shares of our common stock under the ATM Program at an average price of $0.95 per share for net proceeds of $713,372 after commissions and sale expenses.

Cash Flows

As of December 31, 2025, the Company's cash and cash equivalents were approximately $1.8 million. There was a liquidity reserve of $500,000 in a separate bank account pledged as security to an aircraft lessor, which the Company records as restricted cash on its consolidated balance sheets at December 31, 2025 and 2024, as well as a maintenance reserve of approximately $690,000 for the leased aircraft which is included in deposits and other assets in the consolidated balance sheets.

The following table summarizes our cash flows for the years ended December 31, 2025 and 2024:

		For the Year Ended December 31,
		2025				2024
Net cash used in operating activities		$	(8,225,095	)		$	(8,225,594	)
Net cash used in investing activities			(5,075,000	)			(2,409,372	)
Net cash provided by financing activities			9,246,971				14,407,050
(Decrease) increase in cash and cash equivalents		$	(4,053,124	)		$	3,772,084

Cash Flow from Operating Activities

Net cash used in operating activities for the year ended December 31, 2025 was $8.2 million compared to $8.2 million for the year ended December 31, 2024. Despite the Company recording net income of $4.6 million in 2025, cash used in operations remained elevated because the $14.5 million unrealized gain on the change in fair value of other investments was a non-cash item. The non-cash unrealized gain was partially offset by $1.6 million in stock-based compensation expense, $540,000 in non-cash operating lease costs, and $3,000 in depreciation and amortization. Changes in operating assets and liabilities included a $1.3 million increase in accounts payable, a $109,000 decrease in other current assets, and a $35,000 decrease in accounts receivable, which were offset by a $877,000 decrease in deferred revenue, a $526,000 decrease in operating lease liability, and a $515,000 decrease in accrued liabilities.

Cash Flow from Investing Activities

Net cash used in investing activities for the year ended December 31, 2025 was $5.1 million as compared to $2.4 million in 2024. The increase in cash used in investing activities was driven by: (i) $2.7 million invested in other investments (the capital contribution to Sponsor), (ii) $1.7 million in additional aircraft deposits, and (iii) $765,000 contributed to the Company's joint venture with Consensus Core. Investing activities in 2024 primarily consisted of $2.4 million in aircraft deposits.

Cash Flow from Financing Activities

Net cash provided by financing activities for the year ended December 31, 2025 was $9.2 million, compared to $14.4 million in 2024. Cash provided by financing activities in 2025 consisted primarily of $11.0 million in proceeds from the exercise of the Ionic Warrant for shares of Series B Preferred Stock and $713,000 from sales of our common stock, partially offset by $2.5 million in offering costs. The decrease in cash provided by financing activities compared to 2024 reflects the fact that 2024 included $11.9 million in proceeds from the sale of common stock, $4.0 million from Ionic Warrant exercises, $1.5 million from the sale of Series B Preferred Stock, and $742,000 from warrant exercises, partially offset by $1.9 million in offering costs, $1.2 million for the redemption of Series A and Series A-1 Preferred Stock, and $669,000 in note repayments.

Aircraft Financing Arrangements

In November 2021 and April 2022, the Company entered into two separate five-year leasing arrangements for the acquisition of two of its HondaJet Elite aircraft. At any time during their term, the Company has the option to purchase either aircraft from the lessor at the aircraft's fair market value at that time. The leasing arrangements also require the Company to hold a combined liquidity reserve of $500,000 in a separate bank account pledged as security to the lessor, which the Company records as restricted cash on its balance sheet, as well as a maintenance reserve of approximately $690,000 for one of the leased aircraft. Events of default under the leasing arrangements include, among other things, failure to make the monthly payments (with a 10-day cure period), default on other indebtedness, breaches of covenants related to insurance and maintenance requirements, change of control or merger, insolvency and a material adverse change in the Company's business, operations or financial condition. Please see Note 7 to the Company's financial statements for the year ended December 31, 2025 for a further description of these leasing arrangements.

As of December 31, 2025, future minimum lease payments under the Company's operating lease totaled $503,250, with $7,468 of imputed interest, resulting in a lease liability of $495,782, all of which is classified as current.

Critical Accounting Estimates

Going Concern and Management Plans

The Company has limited operating history and has incurred losses from operations since its inception. These matters raise concern about the Company's ability to continue as a going concern.

During the next twelve months, the Company intends to fund its operations with capital from its operations, and proceeds from sales of debt or equity securities. The Company could, if necessary, reduce cash burn to preserve capital. There are no assurances, however, that management will be able to raise capital on terms acceptable to the Company. If the Company is unable to obtain sufficient amounts of additional capital, the Company may be required to reduce the near-term scope of its planned development and operations, which could delay implementation of the Company's business plan and harm its business, financial condition and operating results. The consolidated balance sheets do not include any adjustments that might result from these uncertainties.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of expenses during the reporting period. Making estimates requires management to exercise significant judgement. Actual results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change in the near-term relate to the fair value of options granted and the fair value of other investments. Although considerable variability is likely to be inherent in these estimates, management believes that the amounts provided are reasonable.

Revenue Recognition

In applying the guidance of ASC 606, the Company determines revenue recognition through five steps: (i) identification of the contract(s) with a customer; (ii) identification of the performance obligations; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as, a performance obligation is satisfied.

Revenue is derived from a variety of sources including, but not limited to, (i) fractional/whole aircraft sales, (ii) fractional ownership and jet card programs, (iii) ad hoc charter through the Company's booking app and CharterGPT, (iv) direct chartering of its HondaJet Elite aircraft by Cirrus, and (v) aircraft management. Revenue is recognized upon transfer of control of the Company's promised services. Deferred revenue represents customer prepayments for which the Company has not yet satisfied its performance obligations.

Stock-Based Compensation

The Company accounts for stock awards under ASC 718, Compensation-Stock Compensation. Under ASC 718, stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee's requisite vesting period or over the nonemployee's period of providing goods or services. The fair value of each stock option or warrant award is estimated on the date of grant using the Black-Scholes option valuation model. During the years ended December 31, 2025 and 2024, stock-based compensation expense of $1,626,102 and $4,287,236, respectively, was recognized. As of December 31, 2025, there was approximately $192,000 in unrecognized stock-based compensation, which will be recognized through September 2027.

Trend Information

The Company's business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with local, state, federal and foreign governmental policy decisions. A host of factors beyond Jet.AI's control in the aviation and artificial intelligence industries, respectively, could cause fluctuations in these conditions. Adverse conditions in aviation in particular may include but are not limited to: changes in the airline industry, fuel and operating costs, changes to corporate governance best practices for executive flying, general demand for private jet travel, regulations on carbon emissions from aviation and market acceptance of the Company's business model. These adverse conditions could affect the Company's financial condition and the results of operations.

In May 2025, the Company entered into an Amended and Restated Agreement and Plan of Merger with flyExclusive, Inc. (NYSE American: FLYX) for the sale of the Company's aviation business assets in an all-stock transaction, with closing expected in the first or second quarter of 2026. Upon closing, the Company intends to operate primarily as an AI data center infrastructure company. This strategic transition is expected to materially change the Company's revenue composition, cost structure, and operating profile in future periods.