Delaware
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4522
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86-2707040
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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Reid Avett
Womble Bond Dickinson (US) LLP
2001 K Street, NW
Suite 400 South
Washington, DC 20006
Telephone: 202-857-4425
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M. Ali Panjwani, Esq.
Pryor Cashman LLP
7 Times Square
New York, NY 10036
Telephone: 212-421-4100
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Large, accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☒
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Smaller reporting company
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☒
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Emerging growth company
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☒
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Per Share
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Per Pre-Funded Warrant and
Accompanying Common Warrant
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Total
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Public offering price(1)
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$
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| |
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Placement Agent Fees(2)
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$
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Proceeds to us, before expenses(3)
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$
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(1)
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The public offering price is $ per share of common stock and $ per pre-funded warrant.
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(2)
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Represents a cash fee equal to seven percent (7%) of the aggregate purchase price paid by investors in this offering up to
$15,000,000 and, a cash fee equal to six percent (6%) of the aggregate purchase price paid by investors above $15,000,000. Notwithstanding the foregoing, we and the placement agent, have agreed that for certain identified investors to a
cash fee equal to three and a half percent (3.5%) of the aggregate purchase price paid by such investors in this offering up to $15,000,000 and, a cash fee equal to three percent (3%) of the aggregate purchase price paid by such
investors above $15,000,000. We have also agreed to reimburse the placement agent for its accountable offering-related legal expenses in an amount up to $125,000 and pay the placement agent a non-accountable expense allowance of
$25,000. See “Plan of Distribution” beginning on page 103 of this prospectus for a description of the compensation to be received by the placement agent.
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(3)
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Does not include proceeds from the exercise of the warrants in cash, if any.
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A.G.P.
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Roth Capital Partners
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•
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We generated total revenue of $13.2 million a decrease of $2.5 million, or 16%, compared to the three months ended March
31, 2023. Revenue from aircraft usage increased by $4.8 million, or 72%, while revenue from plane sales decreased by $5.7 million, during the three months ended March 31, 2024, related to lower plane sales;
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•
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We had 2,926 total flight hours for the three months ended March 31, 2024, representing 39% year-over-year growth;
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•
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We incurred a net loss of $17.4 million for the three months ended March 31, 2024, representing a $9.9 million increase in
loss over the prior year primarily related to lower plane sales, as described above, and increased advertising and marketing spend as well as increased costs related to being a publicly traded company and a rapidly scaling business;
and
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•
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Adjusted negative EBITDA1 was $13.1 million for the three months ended March 31, 2024 compared to adjusted
negative EBITDA of $6.7 million for the same period last year.
|
1
|
Adjusted EBITDA is a non-GAAP financial measure. Please refer to the tables and related notes
in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a reconciliation of Adjusted EBITDA to its most comparable GAAP measure.
|
•
|
We generated total revenue of $73.3 million a decrease of $23.4 million, or 24%, compared to the year ended December 31,
2022. Revenue from aircraft usage increased by $23.4 million, or 162%, while revenue from plane sales decreased by $46.3 million, or 68%, during the year ended December 31, 2023, primarily related to lower plane sales;
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•
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We had 11,273 total flight hours for the year ended December 31, 2023, representing 124% year-over-year growth;
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•
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We incurred a net loss of $52.8 million for the year ended December 31, 2023, representing a $43.5 million increase in loss
over the prior year primarily related to lower plane sales, as described above, and increased costs related to being a publicly traded company and a rapidly scaling business; and
|
•
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Adjusted negative EBITDA was $32.1 million for the year ended December 31, 2023 compared to adjusted negative EBITDA of
$9.0 million for the prior year. The change in adjusted EBITDA was the result of increased costs of being a publicly traded company and a rapidly scaling business, as well as lower plane sales.
|
•
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We generated revenue of $96.7 million for the year ended December 31, 2022, representing 9,058% year-over-year growth,
including growth from Plane Co membership interest sales and acquisitions consummated during 2022;
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•
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We had 6,986 total flight hours representing over 1000%, year-over-year growth;
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•
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We incurred a net loss of $9.4 million for the year ended December 31, 2022, representing a $7.9 million increase in loss
over the prior year; and
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•
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Adjusted EBITDA decreased by $6.8 million in 2022, to adjusted negative EBITDA of $9.0 million for the year ended
December 31, 2022.
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Name and principal position
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Salary
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Adjusted Salary
|
Matthew Liotta, Chief Executive Officer
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$ 310,000
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$2,400
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Keith Rabin, President
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$ 300,000
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$ 277,500
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Nicholas Cooper, Chief Commercial Officer
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$ 290,000
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$—
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Name
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Restricted Stock Units
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Matthew Liotta
|
| |
370,302
|
Keith Rabin
|
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26,877
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Nicholas Cooper
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346,412
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All other executive officers
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245,475
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•
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We have a limited operating history and history of net losses and may continue to experience net losses in the future.
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•
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Significant reliance on HondaJet and Gulfstream aircraft and parts poses risks to our business and prospects.
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•
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We may not be able to successfully implement our growth strategies.
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•
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If we are not able to successfully enter into new markets and services and enhance our existing products and services, our
business, financial condition, and results of operations could be adversely affected.
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•
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We are exposed to the risk of a decrease in demand for private aviation services.
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•
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The private aviation industry is subject to competition.
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•
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The loss of key personnel upon whom we depend on to operate our business or the inability to attract additional qualified
personnel could adversely affect our business.
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•
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We may require substantial additional funding to finance our operations, but adequate additional financing may not be
available when we need it, on commercially acceptable terms, or at all.
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•
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The supply of pilots to the aviation industry is limited and may negatively affect our operations and financial condition.
Increases in our labor costs, which constitute a substantial portion of our total operating costs, may adversely affect our business, results of operations, and financial condition.
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•
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We may be subject to unionization, work stoppages, slowdowns or increased labor costs, and the unionization of our
employees could result in increased labor costs.
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•
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We are exposed to operational disruptions due to maintenance.
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•
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Federal, state, and local tax rules can adversely impact our results of operations and financial position.
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•
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We may not realize the tax benefits from our aircraft ownership program.
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•
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Significant increases in fuel costs could have a material adverse effect on our business, financial condition and results
of operations.
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•
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Some of our business may become dependent on third-party operators to provide flights for our customers. If third-party
operators’ flights, which are required to serve a substantial portion of our business, are not available or do not perform adequately, our costs may increase and our business, financial condition, and results of operations could be
adversely affected.
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•
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If we face problems with any of our third-party service providers, our operations could be adversely affected.
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•
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Our insurance may become too difficult or expensive for us to obtain. Increases in insurance costs or reductions in
insurance coverage may materially and adversely impact our results of operations and financial position.
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•
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If our efforts to continue to build our strong brand identity and achieve high member satisfaction and loyalty are not
successful, we may not be able to attract or retain customers, and our operating results may be adversely affected.
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•
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Any failure to offer high-quality customer support may harm our relationships with our customers and could adversely affect
our reputation, brand, business, financial condition, and results of operations.
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•
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Our business is affected by factors beyond our control including: air traffic congestion at airports; airport slot
restrictions; air traffic control inefficiencies; natural disasters; adverse weather conditions, such as hurricanes or blizzards; increased and changing security measures; changing regulatory and governmental requirements; new or
changing travel-related taxes; or the outbreak of disease; any of which could have a material adverse effect on our business, results of operations, and financial condition.
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•
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Our business is primarily focused on certain targeted geographic markets, making us vulnerable to risks associated with
having geographically concentrated operations.
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•
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The operation of aircraft is subject to various risks, and failure to maintain an acceptable safety record may have an
adverse impact on our ability to obtain and retain customers.
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•
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We could suffer losses and adverse publicity stemming from any accident involving aircraft models operated by third
parties.
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•
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A delay or failure to identify and devise, invest in, and implement certain important technology, business, and other
initiatives could have a material impact on our business, financial condition and results of operations.
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We rely on our information technology systems to manage numerous aspects of our business. A cyber-based attack of these
systems could disrupt our ability to deliver services to our customers and could lead to increased overhead costs, decreased revenues, and harm to our reputation.
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System failures, defects, errors, or vulnerabilities in our website, applications, backend systems, or other technology
systems or those of third-party technology providers could harm our reputation and brand and adversely impact our business, financial condition, and results of operations.
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We will rely on third parties maintaining open marketplaces to distribute our mobile and web applications and we currently
rely on third parties to provide the software we use in certain of our products and services, including the provision of our flight management system. If these third parties interfere with the distribution of our products or services,
with our use of the software, or with the interoperability of our platform with the software, our business would be adversely affected.
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If we are unable to adequately protect our intellectual property interests or are found to be infringing on the
intellectual property interests of others, we may incur significant expense and our business may be adversely affected.
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•
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Any damage to our reputation or brand image could adversely affect our business or financial results.
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As part of our growth strategy, we may engage in future acquisitions that could disrupt our business and have an adverse
impact on our financial condition.
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•
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We are subject to risks associated with climate change, including the potential increased impacts of severe weather events
on our operations and infrastructure.
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•
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Terrorist activities or warnings have dramatically impacted the aviation industry and will likely continue to do so.
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Our operations in the private aviation sector may be subject to risks associated with protests targeting private aviation
services.
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We are subject to significant governmental regulation.
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•
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Because our software could be used to collect and store personal information, privacy concerns in the territories in which
we operate could result in additional costs and liabilities to us or inhibit sales of our software.
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•
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We may become involved in litigation that may materially adversely affect us.
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•
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We are subject to various environmental and noise laws and regulations, which could have a material adverse effect on our
business, results of operations, and financial condition.
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•
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We may incur substantial maintenance costs as part of our leased aircraft return obligations.
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Environmental regulation and liabilities, including new or developing laws and regulations, or our initiatives in response
to pressure from our stakeholders may increase our costs of operations and adversely affect us.
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•
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The issuance of operating restrictions applicable to one of the fleet types we operate could have a material adverse effect
on our business, results of operations, and financial condition.
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Our obligations in connection with our contractual obligations, including long-term leases and debt financing obligations,
could impair our liquidity and thereby harm our business, results of operations, and financial condition.
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•
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Agreements governing our debt obligations include financial and other covenants that provide limitations on our business
and operations under certain circumstances, and failure to comply with any of the covenants in such agreements could adversely impact us.
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•
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If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our
ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired, which may adversely affect investor confidence in us and, as a result, the market price of the Common Stock.
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•
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Sales of Common Stock, or the perception of such sales, by us pursuant to this prospectus in the public market or
otherwise, could cause the market price for our Common Stock to decline.
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•
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Our Certificate of Incorporation designates specific courts as the exclusive forum for substantially all stockholder
litigation matters, which could limit the ability of our Stockholders to obtain a favorable forum for disputes with us or our directors, officers or employees.
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•
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Our management team has limited experience managing a public company.
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The requirements of being a public company may strain our resources, divert our management’s attention, and affect our
ability to attract and retain qualified board members.
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We may never realize the full value of our intangible assets or our long-lived assets, causing us to record impairments
that may materially adversely affect our financial conditions and results of operations.
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We may be subject to securities litigation, which is expensive and could divert our management’s attention.
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Because we became a publicly traded company by means other than a traditional underwritten initial public offering, our
stockholders may face additional risks and uncertainties.
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An active market for our securities may not develop, which would adversely affect the liquidity and price of our
securities.
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If securities or industry analysts do not publish research or reports about our business, if they change their
recommendations regarding our Common Stock, or if our operating results do not meet their expectations, our Common Stock price and trading volume could decline.
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•
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If you purchase shares of our common stock in this offering, you will incur immediate and substantial dilution.
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•
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We have broad discretion in the use of the net proceeds from this offering and may invest or spend the proceeds in ways
with which you do not agree and in ways that may not yield a return on your investment.
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Because there are no current plans to pay cash dividends on the Common Stock for the foreseeable future, you may not
receive any return on investment unless you sell the Common Stock at a price greater than what you paid for it.
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The market price of the Common Stock may be volatile, which could cause the value of your investment to decline.
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•
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2,369,169 shares of common stock issuable upon exercise of options issued under the Company’s 2021 Plan outstanding as of
December 31, 2023, with a weighted-average exercise price of $1.43 per share;
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•
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5,608,690 shares of common stock available for future issuance as of December 31, 2023 under the Company's 2023 Plan;
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•
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2,900,000 shares of common stock available for future issuance as of June 30, 2023 under the Company’s Employee Stock
Purchase Plan;
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•
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13,800,000 shares of common stock issuable upon the exercise of public warrants as of December 31, 2023; and
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•
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15,226,000 shares of common stock issuable upon the exercise of private warrants as of December 31, 2023.
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•
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our ability to successfully implement our growth strategies;
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•
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our ability to expand existing products and service offerings or launch new products and service offerings;
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•
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our ability to achieve or maintain profitability in the future;
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•
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geopolitical events and general economic conditions;
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•
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our ability to grow complementary products and service offerings;
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•
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our ability to adequately integrate past and future acquisitions into our business;
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•
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our ability to respond to decreases in demand for private aviation services and changes in customer preferences;
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•
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our ability to operate in a competitive market;
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•
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our ability to retain or attract key employees or other highly qualified personnel;
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•
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our ability to obtain or maintain adequate insurance coverage;
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•
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our ability to build and maintain strong brand identity for our products and services and expand our customer base;
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•
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our ability to respond to a failure in our technology to operate our business;
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•
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our ability to obtain financing or access capital markets in the future;
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•
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our ability to respond to regional downturns or severe weather or catastrophic occurrences or other disruptions or events;
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•
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our ability to respond to losses and adverse publicity stemming from accidents involving our aircraft;
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•
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our ability to respond to existing or new adverse regulations or interpretations thereof;
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•
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our ability to successfully defend litigation or investigations;
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•
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the impact of changes in U.S. tax laws;
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•
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our public securities’ potential liquidity and trading; and
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•
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other factors detailed under the section entitled “Risk Factors”.
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•
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insufficient revenue to offset liabilities assumed;
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•
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inability to obtain any required third-party approvals;
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•
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requirements to enter into restrictive covenants in connection with obtaining third-party consents;
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•
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inadequate return of capital;
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•
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regulatory or compliance issues, including securing and maintaining regulatory approvals;
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•
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unidentified issues not discovered in due diligence;
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•
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integrating the operations or (as applicable) separately maintaining the operations;
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•
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financial reporting;
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•
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managing geographically dispersed operations;
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•
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potential unknown risks associated with an acquisition;
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•
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unanticipated expenses related to acquired businesses or technologies and their integration into our existing business or
technology;
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•
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the potential loss of key employees, customers or partners of an acquired business; or
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•
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the tax effects of any acquisitions.
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•
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market conditions in our industry or the broader stock market;
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•
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actual or anticipated fluctuations in our financial and operating results;
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•
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actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;
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•
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the financial projections we may provide to the public, any changes in those projections, or our failure to meet those
projections;
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•
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changes in financial estimates prepared by and recommendations provided by securities analysts concerning us or the market in
general;
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•
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the perceived success of the Business Combination;
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•
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the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
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•
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announced or completed acquisitions of businesses, commercial relationships, products, services or technologies by us or our
competitors;
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•
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changes in laws and regulations affecting our business;
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•
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changes in accounting standards, policies, guidelines, interpretations or principles;
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•
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commencement of, or involvement in, litigation involving us;
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•
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changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;
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•
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sales, or anticipated sales, of large blocks of the Common Stock;
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•
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any major change in the composition of the Board or our management;
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•
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general economic and political conditions such as recessions, interest rates, fuel prices, trade wars, pandemics (such as
COVID-19), currency fluctuations and acts of war or terrorism; and
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•
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other risk factors listed under this “Risk Factors” section.
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•
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on an actual basis; and
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•
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On an as adjusted basis to give effect to the sale and issuance by us of 6,849,315 shares of our common stock in this
offering at the public offering price of $0.55 per share, which is the last reported trading price of our common stock on the NYSE American on July 11, 2024, after deducting estimated placement agent fees and transaction expenses
payable by us, but excluding proceeds from any exercise of the Common Warrants being offered in this offering.
|
|
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As of December 31, 2023
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As of March 31, 2024
|
||||||
(in thousands, except share and per share data)
|
| |
Actual
|
| |
As Adjusted
|
| |
Actual
|
| |
As Adjusted
|
Cash and cash equivalents
|
| |
$14,486
|
| |
$17,989
|
| |
$6,442
|
| |
$9,945
|
Debt – credit facility and other loans
|
| |
(29,670)
|
| |
(29,670)
|
| |
(35,033)
|
| |
(35,033)
|
Stockholders’ equity:
|
| |
|
| |
|
| |
|
| |
|
Common stock, $0.0001 par value per share, 80,000,000
shares authorized; 29,251,629 and 28,043,449 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively, actual; shares issued and outstanding, as adjusted
|
| |
3
|
| |
4
|
| |
3
|
| |
4
|
Additional paid-in capital
|
| |
78,410
|
| |
81,913
|
| |
82,743
|
| |
86,246
|
Accumulated deficit
|
| |
(63,662)
|
| |
(63,662)
|
| |
(81,052)
|
| |
(81,052)
|
Total stockholders’ equity (deficit)
|
| |
14,751
|
| |
18,254
|
| |
1,694
|
| |
5,197
|
Total capitalization
|
| |
$(14,919)
|
| |
$(11,416)
|
| |
$(33,339)
|
| |
$(29,836)
|
•
|
2,369,169 and 2,289,159 shares of common stock issuable upon exercise of options issued under the Company’s 2021 Plan
outstanding as of December 31, 2023 and March 31, 2024, respectively, with a weighted-average exercise price of $1.43 and $1.34 per share, respectively;
|
•
|
5,608,690 shares of common stock available for future issuance as of each of December 31, 2023 and March 31, 2024 under
the Company's 2023 Plan;
|
•
|
2,900,000 shares of common stock available for future issuance as each of December 31, 2023 and March 31, 2024 under the
Company’s Employee Stock Purchase Plan;
|
•
|
13,800,000 shares of common stock issuable upon the exercise of public warrants as of each of December 31, 2023 and March 31,
2024; and
|
•
|
15,226,000 shares of common stock issuable upon the exercise of private warrants as of each of December 31, 2023 and
March 31, 2024.
|
Assumed public offering price per share
|
| |
|
| |
$0.55
|
Historical net tangible book value per share as of March 31, 2024
|
| |
$(0.13)
|
| |
|
Increase in as adjusted net tangible book value per share attributable to
this offering
|
| |
$0.12
|
| |
|
As adjusted net tangible book value per share after giving effect to this
offering
|
| |
|
| |
$(0.01)
|
Dilution in as adjusted net tangible book value per share to new investors
in this offering
|
| |
|
| |
$0.56
|
•
|
2,289,159 shares of common stock issuable upon exercise of options issued under the Company’s 2021 Plan outstanding as of
March 31, 2024, with a weighted-average exercise price of $1.34 per share;
|
•
|
5,608,690 shares of common stock available for future issuance as of March 31, 2024 under the Company’s 2023 Plan;
|
•
|
2,900,000 shares of common stock available for future issuance as each of December 31, 2023 and March 31, 2024 under the
Company’s Employee Stock Purchase Plan;
|
•
|
13,800,000 shares of common stock issuable upon the exercise of public warrants as of March 31, 2024; and
|
•
|
15,226,000 shares of common stock issuable upon the exercise of private warrants as of March 31, 2024.
|
1.
|
Improve yourself and those around you. Embrace opportunities to teach and discover. Lead with encouragement and praise.
|
2.
|
Listen with intent. Be engaged and curious while seeking to understand others.
|
3.
|
Have positive interactions. Strengthen relationships by being humble and approachable.
|
4.
|
Be transparent. Foster an environment of trust and lasting relationships.
|
5.
|
Contribute and commit. Embrace the conflict of ideas. Participate and then fully support the decision.
|
•
|
The number of high-net-worth potential customers is growing. This growth has
resulted in an increased demand for exclusive and personalized travel experiences. According to the Global Wealth Report conducted by Credit Suisse, as of the end of 2021 there were 24.48 million U.S. millionaires. This number is
expected to rise by 13% to 27.66 by 2026. According to Forbes, the number of U.S. billionaires rose from 724 in 20217 to 735 in 2023.
|
•
|
The market of potential private flyers is under-penetrated. According to the New
York Times, referencing a study from McKinsey & Company, there are 100,000 regular private jet fliers in the United States, out of some 1.5 million people who could afford to charter a plane. The private jet market remains
under-penetrated. We believe factors like a superior owner and customer experience will add to the well-recognized benefits of increased productivity and convenience that private flying offers, in drawing new demand.
|
•
|
Highly regulated industry creates barriers to entry. The private aviation market is
complex and highly regulated, presenting barriers to scaling, therefore reducing competition, and decreasing price sensitivity. The industry is also subject to significant regulatory oversight by numerous federal agencies. However,
Volato’s business model fits well within this regulatory environment.
|
•
|
Commercial airline service is declining. North American passenger satisfaction with
commercial aviation is in decline across all three segments—first/business, premium economy, and economy/basic economy—down more than 29 points from 2021 to 791 (on a 1,000-point scale). Passengers are responding negatively to increases
in cost, flight crew performance, passenger loads, delays, and communication.
|
•
|
The COVID-19 pandemic increased exposure to private aviation. This led to more
people experimenting with private aviation, increasing engagement with the category. This was fueled by a lack of access to commercial travel, increased passenger sensitivity to traveling with unknown passengers, mask mandates, and
general delays. We expect interest in private aviation to continue to grow, with changes in how people work and live in a post-COVID pandemic environment bolstering foundational demand.
|
•
|
New business models are introducing more people to the benefits of flying private.
Semi-private carriers are introducing a new category of fliers to the benefits of private travel. These carriers provide access to smaller airports, offer reduced travel time, avoid checkpoints, and enable a less stressful customer
experience.
|
•
|
Static industry with little innovation presents opportunities. A lack of innovation
in the industry has contributed to low asset utilization, poor operational and commercial technology, high operational complexity, and antiquated commercial practices, all of which stifle efficiency and scalability. This leads to a lack
of downward pressure on prices. Through Volato’s unique business model, Volato believes there are significant opportunities to take advantage of the growth in the market and its current lack of innovation, low customer satisfaction and
underutilization. Volato believes it has the understanding, knowledge, experience, and capability to effectively address these market opportunities.
|
•
|
The HondaJet is a revolutionary aircraft that combines superior performance, comfort, and efficiency. Its innovative design
features include a unique over-the-wing engine mount, natural laminar flow wing, and advanced flight deck technology.
|
•
|
The HondaJet’s compact size and superior performance make it ideal for business and personal travel, with a range of up to
1,400 nautical miles and a top speed of 422 knots. Its spacious cabin comfortably seats up to six passengers and offers a range of amenities, including a fully enclosed lavatory and Wi-Fi connectivity.
|
•
|
The HondaJet’s advanced safety features include an all-glass cockpit with state-of-the-art avionics, automatic stability
augmentation system, and enhanced flight vision system, making it one of the safest and most advanced light jets on the market.
|
•
|
Does not provide the primary benefits of full aircraft ownership. Key benefits of
owning an aircraft are the same basic “bundle of rights” that come along with ownership of any property, including the rights of possession, control, and enjoyment. In a traditional fractional model, the owner must sacrifice both
control over how much it flies as well as enjoyment of revenue generated from the asset.
|
•
|
Hard for customers to forecast flight usage needs across multi-year programs.
Entitled hour programs require fractional owners to commit to an annual usage level for the length of the program. It is challenging for owners to forecast this accurately resulting in either owners overflying and requiring additional
hours that may not be available or only available at substantially increased prices, or under flying and the program being more expensive than originally forecast.
|
•
|
Depreciation is only applicable for a percentage of flights deemed business use. Many
traditional fractional program owners who use their program for a mix of business and leisure travel are often disappointed to learn they may only be eligible for bonus depreciation on the percentage of their total usage that is deemed
business use, and the leisure portion is not eligible. Additionally, if an aircraft owner’s use is primarily personal, no depreciation is available.
|
•
|
Lack of transparency into aircraft flight operations. In the traditional program,
fractional owners are often not provided detail into their aircraft’s flight operations, and it is generally not transparent how the aircraft is used or monetized outside of the fractional owner’s usage or if any of the owners benefit
from that associated revenue generation.
|
•
|
Fractional owners traditionally accept operational control of their flights and the
liability and risk associated with operational control. Traditional fractional ownership programs require their owners to execute an acknowledgment of operational control, where the fractional owner agrees to accept liability
and risk associated with their flights operated under 14 C.F.R. Part 91(K).
|
•
|
Fractional owners participate in aircraft revenue share. Our program participants
enjoy a revenue share from eligible Volato revenue flights. The revenue share is a set contracted amount per eligible occupied revenue-generating flight hour and is calculated and remitted monthly to each aircraft holding SPE, which
then distributes on a pro-rata basis to its members, the aircraft owners.
|
•
|
Unlimited flight hours regardless of fractional size. By decoupling ownership and
usage, and removing the concept of entitled hours, our HondaJet fractional owners can fly unlimited hours under the terms of the owner’s individual contracts with our air carrier subsidiary. A 1/16th owner can fly as much or
as little as they wish and is not limited by the size of their share.
|
•
|
Favorable tax treatment for owners. Due to the unique nature of our aircraft
ownership structure, our owners may be eligible for depreciation of their aircraft asset through their respective Plane Co LLC interests.
|
•
|
Our unique program benefits influence purchase decision. Traditional programs with
entitled flight hours require customers to factor in anticipated flight hours into their fractional program purchase decisions. In contrast, we believe our owners are basing their purchase decisions based on anticipated flight usage and
their personal financial situation. Our owners may buy a larger share based on their individual tax profile and depreciation benefits, or the larger revenue share they wish to receive as owners of larger shares enjoy preferential hourly
rates and receive a larger revenue share based on the percentage of the owned aircraft.
|
•
|
Transparency into Flight Operations. Our software innovations allow for more
transparency into its flight operations by providing program participants detailed information on their aircraft’s commercial activities and maintenance status.
|
•
|
Transfer of Operational Control and Management. Under 14 C.F.R. Part 135, we assume
operational control of aircraft we operate by way of a lease, which transfers responsibility for aircraft management and liability arising from the operation of the aircraft by us. In contrast, under Part 91K fractional programs, the
owners retain operational control of the aircraft and have potential liability exposure related to the aircraft operations.
|
•
|
Superior Operating Efficiency. The HondaJet’s design and performance profile means
it is not just less expensive to operate but also matches the fuel economy of a turboprop, maintaining the speed and quietness of a jet without incurring extra fuel costs. This efficient operation enables us to offer cost savings to
customers while preserving the jet experience.
|
•
|
Superior Cabin Experience. The over-the-wing engine mount design of the HondaJet
decreases cabin noise, thus enhancing passenger comfort. Despite its smaller size, it provides a comfortable cabin and a larger luggage compartment compared to other jets in its category.
|
•
|
No Compromise. While the HondaJet HA-420 is rated for single-pilot operations, all
of our HondaJet commercial passenger flights are operated with two pilots. This staffing includes safety and service benefits for our customers, while offering a more cost-effective solution.
|
•
|
Aircraft Sales Revenue. We sell aircraft to the LLCs, and the aircraft are subject to
a 5-year leaseback to us. We believe that if we deliver on our brand and product promise then we should see a substantial renewal rate by program participants when the lease expires.
|
•
|
Monthly Management Fee. Program participants under our traditional pricing structure
pay a set monthly management fee, which is subject to an annual increase. Holders of smaller sizes (i.e., 1/8th and 1/16th) pay a premium. Program participants under our low-use pricing structure do not pay a
monthly management fee but pay a premium for their usage. This revenue is included in “aircraft management revenue” in our MD&A.
|
•
|
Charter Flight Revenue. Program participants may book flights on the HondaJet fleet
at preferential hourly rates. Repositioning fees are waived for owner flights departing within an estimated two-hour flight time from select our bases. Fuel is separately charged to the owner at our blended cost. The total flight charge
is invoiced after the flight is completed and the revenue is included in “charter flight revenue” as in our MD&A.
|
|
| |
|
Figure: Flight reviews are output to a Microsoft Teams channel that is open to
the entire company.
|
| |
Figure: Aggregate NPS scores displayed in our proprietary Volato MissionControl
application.
|
|
| |
|
•
|
We generated total revenue of $13.2 million a decrease of $2.5 million, or 16%, compared to the three months ended March 31,
2023. Revenue from aircraft usage increased by $4.8 million, or 72%, while revenue from plane sales decreased by $5.7 million, during the three months ended March 31, 2024, related to lower plane sales;
|
•
|
We had 2,926 total flight hours for the three months ended March 31, 2024, representing 39% year-over-year growth;
|
•
|
We incurred a net loss of $17.4 million for the three months ended March 31, 2024, representing a $9.9 million increase in
loss over the prior year primarily related to lower plane sales, as described above, and increased advertising and marketing spend as well as increased costs related to being a publicly traded company and a rapidly scaling business; and
|
•
|
Adjusted negative EBITDA2 was $13.1 million for the three months ended March 31, 2024 compared to adjusted
negative EBITDA of $6.7 million for the same period last year.
|
•
|
We generated total revenue of $73.3 million a decrease of $23.4 million, or 24%, compared to the year ended December 31,
2022. Revenue from aircraft usage increased by $23.4 million, or 162%, while revenue from plane sales decreased by $46.3 million, or 68%, during the year ended December 31, 2023, primarily related to lower plane sales;
|
2
|
Adjusted EBITDA is a non-GAAP financial measure. Please refer to the tables and related notes
below for a reconciliation of Adjusted EBITDA to its most comparable GAAP measure.
|
•
|
We had 11,273 total flight hours for the year ended December 31, 2023, representing 124% year-over-year growth;
|
•
|
We incurred a net loss of $52.8 million for the year ended December 31, 2023, representing a $43.5 million increase in loss
over the prior year primarily related to lower plane sales, as described above, and increased costs related to being a publicly traded company and a rapidly scaling business; and
|
•
|
Adjusted negative EBITDA was $32.1 million for the year ended December 31, 2023 compared to adjusted negative EBITDA of
$9.0 million for the prior year. The change in adjusted EBITDA was the result of increased costs of being a publicly traded company and a rapidly scaling business, as well as lower plane sales.
|
|
| |
For the Three Months Ended
March 31,
|
| |
Change In
|
||||||
|
| |
2024
|
| |
2023
|
| |
$
|
| |
%
|
Revenue
|
| |
$13,211
|
| |
$15,665
|
| |
$(2,454)
|
| |
(16)%
|
|
| |
|
| |
|
| |
|
| |
|
Costs and expenses:
|
| |
|
| |
|
| |
|
| |
|
Cost of revenue
|
| |
17,492
|
| |
17,363
|
| |
129
|
| |
1%
|
Selling, general and administrative
|
| |
11,742
|
| |
6,215
|
| |
5,527
|
| |
89%
|
Total costs and expenses
|
| |
29,234
|
| |
23,578
|
| |
5,656
|
| |
24%
|
Loss from operations
|
| |
(16,023)
|
| |
(7,913)
|
| |
(8,110)
|
| |
102%
|
Other income (expenses):
|
| |
|
| |
|
| |
|
| |
|
Gain from sale of consolidated entity
|
| |
—
|
| |
387
|
| |
(387)
|
| |
NM
|
Gain from sale of equity-method investment
|
| |
—
|
| |
863
|
| |
(863)
|
| |
NM
|
Other income
|
| |
4
|
| |
42
|
| |
(38)
|
| |
NM
|
Loss from change in fair value forward purchase agreement
|
| |
(227)
|
| |
—
|
| |
(227)
|
| |
NM
|
Interest expense, net
|
| |
(1,138)
|
| |
(894)
|
| |
(244)
|
| |
27%
|
Other expenses
|
| |
(1,361)
|
| |
398
|
| |
(1,759)
|
| |
NM
|
|
| |
|
| |
|
| |
|
| |
|
Loss before provision for income taxes
|
| |
(17,384)
|
| |
(7,515)
|
| |
(9,869)
|
| |
131%
|
Provision for incomes taxes
|
| |
6
|
| |
—
|
| |
6
|
| |
NM
|
Net Loss
|
| |
$(17,390)
|
| |
$(7,515)
|
| |
$(9,875)
|
| |
131%
|
|
| |
Three Months Ended
March 31,
|
| |
Change In
|
||||||
|
| |
2024
|
| |
2023
|
| |
$
|
| |
%
|
Aircraft sales
|
| |
$—
|
| |
$5,710
|
| |
$(5,710)
|
| |
(100)%
|
Aircraft usage
|
| |
11,516
|
| |
6,684
|
| |
4,832
|
| |
72%
|
Managed aircraft
|
| |
1,695
|
| |
3,271
|
| |
(1,576)
|
| |
(48)%
|
Total
|
| |
$13,211
|
| |
$15,665
|
| |
$(2,454)
|
| |
(16)%
|
|
| |
Three Months Ended
March 31,
|
| |
Change In
|
||||||
|
| |
2024
|
| |
2023
|
| |
$
|
| |
%
|
Aircraft sales
|
| |
$—
|
| |
$5,440
|
| |
$(5,440)
|
| |
(100)%
|
Aircraft usage
|
| |
15,982
|
| |
9,064
|
| |
6,918
|
| |
76%
|
Managed aircraft
|
| |
1,510
|
| |
2,859
|
| |
(1,349)
|
| |
(47)%
|
Total
|
| |
$17,492
|
| |
$17,363
|
| |
$129
|
| |
1%
|
|
| |
Year Ended
December 31,
|
| |
Change In
|
||||||
|
| |
2023
|
| |
2022
|
| |
$
|
| |
%
|
Revenue
|
| |
$73,338
|
| |
$96,706
|
| |
$(23,368)
|
| |
(24)%
|
|
| |
|
| |
|
| |
|
| |
|
Costs and expenses:
|
| |
|
| |
|
| |
|
| |
|
Cost of revenue
|
| |
82,025
|
| |
94,280
|
| |
(12,255)
|
| |
(13)%
|
Selling, general and administrative
|
| |
28,822
|
| |
11,611
|
| |
17,211
|
| |
148%
|
Total costs and expenses
|
| |
110,847
|
| |
105,891
|
| |
4,956
|
| |
5%
|
Loss from operation
|
| |
(37,509)
|
| |
(9,185)
|
| |
(28,324)
|
| |
308%
|
Other income (expense):
|
| |
|
| |
|
| |
|
| |
|
Gain from deconsolidation of investments
|
| |
—
|
| |
581
|
| |
(581)
|
| |
(100)%
|
Gain from sale of consolidated entity
|
| |
387
|
| |
—
|
| |
387
|
| |
N/M
|
Gain from sale of equity-method investment
|
| |
883
|
| |
—
|
| |
883
|
| |
N/M
|
Other income
|
| |
180
|
| |
15
|
| |
165
|
| |
N/M
|
Loss from change in value of forward purchase agreement
|
| |
(13,403)
|
| |
—
|
| |
(13,403)
|
| |
N/M
|
Interest expense, net
|
| |
(3,358)
|
| |
(866)
|
| |
(2,492)
|
| |
288%
|
Total other income (expense)
|
| |
(15,311)
|
| |
(270)
|
| |
(15,041)
|
| |
N/M
|
|
| |
|
| |
|
| |
|
| |
|
Net loss before income taxes
|
| |
(52,820)
|
| |
(9,455)
|
| |
(43,365)
|
| |
459%
|
|
| |
|
| |
|
| |
|
| |
|
Provision for income tax expense (benefit)
|
| |
2
|
| |
(55)
|
| |
57
|
| |
(104)%
|
|
| |
|
| |
|
| |
|
| |
|
Net loss before non-controlling interest
|
| |
(52,822)
|
| |
(9,400)
|
| |
(43,422)
|
| |
462%
|
Net income attributable to non-controlling interest
|
| |
—
|
| |
(33)
|
| |
33
|
| |
(100)%
|
Net Loss
|
| |
$(52,822)
|
| |
$(9,367)
|
| |
$(43,455)
|
| |
464%
|
|
| |
Year Ended
December 31,
|
| |
Change In
|
||||||
|
| |
2023
|
| |
2022
|
| |
$
|
| |
%
|
Aircraft sales
|
| |
$21,443
|
| |
$67,695
|
| |
$(46,252)
|
| |
(68)%
|
Aircraft usage
|
| |
37,787
|
| |
14,417
|
| |
23,370
|
| |
162%
|
Managed aircraft
|
| |
14,108
|
| |
14,594
|
| |
(486)
|
| |
(3)%
|
|
| |
Year Ended
December 31,
|
| |
Change In
|
||||||
|
| |
2023
|
| |
2022
|
| |
$
|
| |
%
|
Total
|
| |
$73,338
|
| |
$96,706
|
| |
$(23,368)
|
| |
(24)%
|
|
| |
Year Ended
December 31,
|
| |
Change In
|
||||||
|
| |
2023
|
| |
2022
|
| |
$
|
| |
%
|
Aircraft sales
|
| |
$17,322
|
| |
$58,910
|
| |
$(41,588)
|
| |
(71)%
|
Aircraft usage
|
| |
51,803
|
| |
21,986
|
| |
29,817
|
| |
136%
|
Managed aircraft
|
| |
12,900
|
| |
13,384
|
| |
(484)
|
| |
(4)%
|
Total
|
| |
$82,025
|
| |
$94,280
|
| |
$(12,255)
|
| |
(13)%
|
|
| |
Three Months Ended
March 31,
|
|||
Adjusted EBITDA
|
| |
2024
|
| |
2023
|
Net loss
|
| |
$(17,390)
|
| |
$(7,515)
|
Interest expense, net
|
| |
1,138
|
| |
894
|
Provision for income tax expense
|
| |
6
|
| |
—
|
Loss from change in fair value of forward purchase agreement
|
| |
227
|
| |
—
|
Depreciation and amortization
|
| |
80
|
| |
45
|
Equity-based compensation expense
|
| |
83
|
| |
8
|
Gain from sale of consolidated entity
|
| |
—
|
| |
(387)
|
Gain from sale of equity-method investment
|
| |
—
|
| |
(863)
|
Other income
|
| |
(4)
|
| |
(42)
|
Other items not indicative of our ongoing operating performance(1)
|
| |
2,765
|
| |
1,174
|
Adjusted EBITDA
|
| |
$(13,095)
|
| |
$(6,686)
|
(1)
|
Represents cost incurred related to the cost savings initiative and business realignment.
|
|
| |
Year Ended
December 31,
|
|||
Adjusted EBITDA
|
| |
2023
|
| |
2022
|
Net loss
|
| |
$(52,822)
|
| |
$(9,367)
|
Interest expense, net
|
| |
3,358
|
| |
866
|
|
| |
Year Ended
December 31,
|
|||
Adjusted EBITDA
|
| |
2023
|
| |
2022
|
Provision for income tax expense (benefit)
|
| |
2
|
| |
(55)
|
Loss from change in fair value of forward purchase agreement
|
| |
13,403
|
| |
—
|
Depreciation and amortization
|
| |
200
|
| |
162
|
Equity-based compensation expense
|
| |
82
|
| |
17
|
Net loss attributable to non-controlling interest
|
| |
—
|
| |
(33)
|
Gain from deconsolidation of investments
|
| |
—
|
| |
(581)
|
Gain from sale of consolidated entity
|
| |
(387)
|
| |
—
|
Gain from sale of equity-method investment
|
| |
(883)
|
| |
—
|
Other income
|
| |
(180)
|
| |
(15)
|
Acquisition, integration, and capital raise related expenses(1)
|
| |
167
|
| |
21
|
Other items not indicative of our ongoing operating performance(2)
|
| |
4,918
|
| |
—
|
Adjusted EBITDA
|
| |
$(32,142)
|
| |
$(8,985)
|
(1)
|
Represents non-capitalizable Business Combination expenses in 2023 and acquisition expenses associated with Gulf Coast
Aviation in 2022.
|
(2)
|
Represents cost incurred related to business realignment.
|
|
| |
Three Months Ended
March 31,
|
|||
|
| |
2024
|
| |
2023
|
Net cash used in operating activities
|
| |
$(7,696)
|
| |
$(7,608)
|
Net cash provided by (used in) investing activities
|
| |
(56)
|
| |
1,970
|
Net cash provided by (used in) financing activities
|
| |
(684)
|
| |
5,468
|
Net decrease In Cash and Restricted Cash
|
| |
$(8,436)
|
| |
$(170)
|
|
| |
Year Ended
December 31,
|
|||
|
| |
2023
|
| |
2022
|
Net cash used in operating activities
|
| |
$(30,394)
|
| |
$(21,432)
|
Net cash provided by investing activities
|
| |
1,776
|
| |
5,145
|
Net cash provided by financing activities
|
| |
37,461
|
| |
22,558
|
Net Increase In Cash and Cash Equivalents and Restricted Cash
|
| |
$8,843
|
| |
$6,271
|
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.
|
•
|
$3.0 million CN-001 Note issued to Liotta Family Office, LLC, which is 60% owned by Dennis Liotta (Matthew Liotta’s father),
20% owned by John Liotta (Matthew Liotta’s brother), and 20% owned by Matthew Liotta. The note accrued $165,616 in interest and converted into 529,190 shares of Series A-2 Preferred Stock, which is equal to 537,170 shares of Common
Stock.
|
•
|
$1.0 million CN-001 Note issued to the Matthew D. Liotta 2021 Trust dated January 21st, 2021. The note accrued $27,397 in
interest and converted into 171,748 shares of Series A-2 Preferred Stock, which is equal to 174,338 shares of Common Stock.
|
•
|
$6,001,407.00 CN-002 Note issued to Dennis Liotta, pursuant to the conversion of the Revolving Line of Credit described under
“Working Capital Loans.” The note accrued $11,181 in interest and converted into 678,139 shares of Series A-3 Preferred Stock.
|
Name
|
| |
Age
|
| |
Position
|
Executive Officers
|
| |
|
| |
|
Matthew Liotta
|
| |
46
|
| |
Chair and Chief Executive Officer and Director
|
Nicholas Cooper
|
| |
39
|
| |
Chief Commercial Officer and Director
|
Michael Prachar
|
| |
55
|
| |
Chief Operating Officer
|
Keith Rabin
|
| |
53
|
| |
President
|
Steven Drucker
|
| |
54
|
| |
Chief Technology Officer
|
Mark Heinen
|
| |
54
|
| |
Chief Financial Officer
|
Non-Employee Directors
|
| |
|
| |
|
Christopher Burger
|
| |
48
|
| |
Director
|
Michael Nichols
|
| |
53
|
| |
Director
|
•
|
Class I, whose term will expire at the annual meeting of stockholders to be held in 2027;
|
•
|
Class II, whose term will expire at the annual meeting of stockholders to be held in 2025; and
|
•
|
Class III, whose term will expire at the annual meeting of stockholders to be held in 2026.
|
•
|
select, retain, compensate, evaluate, oversee, and where appropriate, terminate the independent registered public accounting
firm to audit our financial statements;
|
•
|
help to ensure the independence and performance of the independent registered public accounting firm;
|
•
|
approve audit and non-audit services and fees;
|
•
|
review financial statements and discuss with management and the independent registered public accounting firm our annual
audited and quarterly financial statements, the results of the independent audit and the quarterly reviews and the reports and certifications regarding internal controls over financial reporting and disclosure controls;
|
•
|
prepare the audit committee report that the SEC requires to be included in our annual proxy statement;
|
•
|
review reports and communications from the independent registered public accounting firm;
|
•
|
review the adequacy and effectiveness of our internal controls and disclosure controls and procedure;
|
•
|
review our policies on risk assessment and risk management;
|
•
|
review and monitor conflicts of interest situations, and approve or prohibit any involvement in matters that may involve a
conflict of interest or taking of a corporate opportunity;
|
•
|
review the overall adequacy and effectiveness of our legal, regulatory and ethical compliance programs and reports regarding
compliance with applicable laws, regulations and internal compliance programs;
|
•
|
review related party transactions; and
|
•
|
establish and oversee procedures for the receipt, retention and treatment of accounting related complaints and the
confidential submission by our employees of concerns regarding questionable accounting or auditing matters.
|
•
|
reviewing the qualifications of, and recommending to the Board, proposed nominees for election to the Board and its
committees, consistent with criteria approved by the Board;
|
•
|
developing, evaluating, and recommending to the Board corporate governance practices applicable to the Company; and
|
•
|
facilitating the annual performance review of the Board and its committees.
|
•
|
professional ethics and integrity;
|
•
|
judgment, business acumen, proven achievement and competence in one’s field;
|
•
|
the ability to exercise sound business judgment;
|
•
|
tenure on the Board and skills that are complementary to the Board;
|
•
|
an understanding of the Company’s business;
|
•
|
an understanding of the responsibilities required of a Board member;
|
•
|
other time commitments, diversity with respect to professional background; and
|
•
|
the current composition, organization, and governance of the Board and its committees.
|
•
|
oversight of our overall compensation philosophy and compensation policies, plans and benefit programs;
|
•
|
review and recommendation for approval to the Board the compensation for our executive officers and directors;
|
•
|
preparation of the compensation committee report that the SEC requires to be included in our annual proxy statement, if
required; and
|
•
|
administration our equity compensation plans.
|
Name and principal position
|
| |
Year
|
| |
Salary
($)
|
| |
Option
Awards
($)(1)
|
| |
Other(2)
|
| |
Total
($)
|
Matthew Liotta
Chair and Chief Executive Officer
|
| |
2023
|
| |
215,208
|
| |
—
|
| |
5,041
|
| |
220,249
|
|
2022
|
| |
148,333(3)
|
| |
7,381
|
| |
4,098
|
| |
159,812
|
||
Keith Rabin
President(4)
|
| |
2023
|
| |
252,604
|
| |
104,448
|
| |
13,720
|
| |
370,772
|
|
2022
|
| |
154,688(5)
|
| |
12,192
|
| |
6,272
|
| |
173,152
|
||
Nicholas Cooper
Chief Commercial Officer(6)
|
| |
2023
|
| |
207,847
|
| |
—
|
| |
10,392
|
| |
218,239
|
|
2022
|
| |
153,333
|
| |
—
|
| |
4,292
|
| |
157,625
|
(1)
|
Represents the aggregate grant date fair value of option awards granted under the Volato, Inc. 2021 Equity Incentive Stock
Plan, calculated in accordance with Financial Accounting Standards Board ASC Topic 718-Stock Compensation and using the assumptions contained in Note 12 to the financial statements included elsewhere herein.
|
(2)
|
Represents amounts received through the Company’s 401(k) matching policy and life insurance premiums.
|
(3)
|
Mr. Liotta’s annualized salary increased from $120,000 to $160,000 on April 16, 2022, and increased to $310,000 on August 18,
2023.
|
(4)
|
Mr. Rabin was promoted to President of Volato as of May 1, 2023 and previously served as Chief Financial Officer until
November 28, 2023.
|
(5)
|
Mr. Rabin commenced employment with Volato on April 25, 2022. His annualized salary amount was $225,000 and increased to
$300,000 on August 18, 2023.
|
(6)
|
Mr. Cooper’s annualized salary was $120,000 from January 11, 2022 (hire date) to April 15, 2022, $160,000 starting on
April 16, 2022 and increased to $290,000 as of August 18, 2023. Mr. Cooper did not serve as a named executive officer in 2022.
|
|
| |
Option Awards
|
|||||||||
Name
|
| |
Number of
securities
underlying
unexercised
options
(#)
Exercisable(1)
|
| |
Number of
securities
underlying
unexercised
options
(#)
unexercisable
|
| |
Option
exercise
price
($)
|
| |
Option
expiration
date
|
Matthew Liotta
|
| |
146,901
|
| |
—
|
| |
$0.16
|
| |
03/10/2027
|
Keith Rabin
|
| |
—
|
| |
31,442
|
| |
$8.40
|
| |
11/26/2033
|
| |
242,657
|
| |
—
|
| |
$0.14
|
| |
11/15/2032
|
|
| |
239,053(1)
|
| |
—
|
| |
$0.14
|
| |
05/18/2032
|
|
Nicholas Cooper
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
(1)
|
This grant was subsequently cancelled without any exercises and was replaced by the option for 242,657 shares.
|
Name
|
| |
Cash Fees
($)
|
| |
Option
awards
($)(1)
|
| |
Total
($)
|
Joan Sullivan Garrett(2)
|
| |
8,958
|
| |
—
|
| |
8,958
|
Michael D. Nichols(3)
|
| |
6,972
|
| |
—
|
| |
6,972
|
Peter Mirabello(4)
|
| |
6,042
|
| |
—
|
| |
6,042
|
Dana Born(5)
|
| |
7,292
|
| |
—
|
| |
7,292
|
Katherine Arris Wilson(6)
|
| |
7,385
|
| |
—
|
| |
7,385
|
Robert George(7)
|
| |
—
|
| |
156,700
|
| |
156,700
|
(1)
|
Represents the aggregate grant date fair value of option awards granted under the Volato 2021 Equity Incentive Stock Plan
during the 2023 fiscal year, calculated in accordance with Financial Accounting Standards Board ASC Topic 718-Stock Compensation and using the assumptions contained in Note 12 to the financial statements included elsewhere herein.
|
(2)
|
As of December 31, 2023, Ms. Garret held options to purchase 16,608 shares of our common stock. Ms. Garrett’s service to the
board ended on April 17, 2024.
|
(3)
|
As of December 31, 2023 Mr. Nichols held options to purchase 44,069 shares of our common stock.
|
(4)
|
Mr. Mirabello’s service to the board began on December 1, 2023 and ended on April 17, 2024.
|
(5)
|
Dr. Born’s service to the board began on December 1, 2023. Dr. Born’s service to the board ended on April 18, 2024.
|
(6)
|
Ms. Arris-Wilson’s service to the board began on December 1, 2023. Ms. Arris-Wilson’s service to the board ended on April 18,
2024.
|
(7)
|
Mr. George’s board service was to pre-Business Combination Volato, Inc. and ended upon the Closing of the Business
Combination. Mr. George was awarded options with an aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of $156,700 on June 8, 2023; these options expired by their terms without any exercise thereof.
|
•
|
Stock covered by awards granted under the 2021 Plan became shares of Volato Class A common stock;
|
•
|
All references in the 2021 Plan to a number of shares of Volato, Inc. common stock were amended to refer instead to that
number of shares of Common Stock as adjusted by the Exchange Ratio, as defined in the Business Combination Agreement;
|
•
|
Employees and consultants of Volato (or any other affiliate of Volato) became eligible to receive awards under the 2021 Plan;
|
•
|
The Compensation Committee became the administrator of the 2021 Plan; and
|
•
|
Certain other minor technical revisions were made.
|
•
|
The 2023 Plan provides for the grant of stock options (both incentive stock options and nonqualified stock options) stock
appreciation rights, restricted stock, restricted stock units, performance-based awards, and other stock- and cash-based awards.
|
•
|
We have reserved a pool of shares of Common Stock for issuance pursuant to awards under the 2023 Plan equal to 5,608,690
shares.
|
•
|
The 2023 Plan is administered by the Board or, upon delegation by the Board, the Compensation Committee or such committee as
permitted by the 2023 Plan.
|
•
|
Prudent Share Request and Efficient Use of Equity. Under the terms of the
2023 Plan, no more than 20% of the issued and outstanding shares of our Class A Common Stock as of the date of Closing will be authorized for issuance under the plan (subject to adjustment for anti-dilution purposes). We are committed
to the efficient use of equity awards and are mindful to ensure that our equity compensation program does not overly dilute our existing stockholders. To that end, the Compensation Committee will consider potential stockholder dilution,
including burn rate and overhang, in the design and administration of equity awards.
|
•
|
Independent Committee. The 2023 Plan will be administered by the Compensation
Committee. All members of the Compensation Committee are intended to qualify as “independent” under the NYSE listing standards and as “non-employee directors” under Rule 16b-3 adopted under the Exchange Act.
|
•
|
No Discounted Stock Options or SARs and Limit on Option and SAR Terms. Stock
options and stock appreciation rights, or SARs, must have an exercise price or base price, as applicable, equal to or greater
|
•
|
No Stock Option or SAR Repricings Without Stockholder Approval. The 2023 Plan
prohibits the repricing of stock options or SARs without the approval of stockholders. This 2023 Plan provision applies to (i) direct repricings (lowering the exercise price of an option or the base price of an SAR), (ii) indirect
repricings (exchanging an outstanding option or SAR that is under water for cash, for options or SARs with an option price or base price less than that applicable to the original option or SAR, or for another equity award) and (iii) any
other action that would be treated as a repricing under applicable stock exchange rules (subject to anti-dilution adjustments).
|
•
|
Robust Minimum Vesting Requirements for stock-based awards. The 2023 Plan
generally imposes a minimum vesting period of one year for Stock Options, SARs and other stock-based awards other than in the cases of death, disability, retirement or a change in control. The Administrator may provide for the grant of
awards with shorter or no vesting periods but only with respect to awards covering no more than five percent of the shares authorized for issuance under the 2023 Plan and in certain other limited circumstances. We believe that our
vesting and award practices are responsible and further our incentive and retention objectives.
|
•
|
No Automatic “Single Trigger” Vesting Upon Change of Control. The 2023 Plan
provides for double trigger treatment of awards upon a Change of Control and does not provide for automatic “single trigger” change of control vesting. Specifically, awards will vest upon a change of control only if (i) awards are not
assumed, substituted or continued, or (ii) when such awards are assumed, substituted or continued, only if a participant’s employment is terminated beginning six months before and ending one year after the change of control (or such
other period after a change of control as may be stated in a participant’s employment agreement, change in control agreement or similar agreement or arrangement, if applicable after the change of control) and only if such termination of
employment or service is without cause or for good reason. Notwithstanding the prior sentence, unless an individual award agreement expressly provides otherwise, in the event that a participant has entered into, or is a participant in,
an employment agreement, change of control agreement or plan or similar agreement, plan or arrangement with us, the participant will be entitled to the greater of the benefits provided upon a change of control under the 2023 Plan or the
respective employment agreement, change of control agreement or similar agreement, plan or arrangement, and such employment agreement, change of control agreement or similar agreement, plan or arrangement will not be construed to reduce
in any way the benefits otherwise provided to a participant upon the occurrence of a change of control as defined in the 2023 Plan.
|
•
|
Prudent Change of Control Provisions. The 2023 Plan includes prudent “change
of control” triggers such as requiring a change in beneficial ownership of more than 50% of our voting stock or other voting securities or consummation (rather than stockholder approval) of a merger or other transaction in which the
holders of our common stock or other voting securities immediately prior to the transaction have voting control over less than 50% of the voting securities of the surviving corporation immediately after such transaction in order for a
“change of control” to be deemed to have occurred.
|
•
|
Prohibition of Certain Share Recycling, or “Liberal Share Counting”, Practices for
Options and SARs. The 2023 Plan imposes conservative counting and share recycling provisions for awards. For instance, shares subject to awards that are tendered or withheld to satisfy tax withholding requirements, or
payment of an option or SAR exercise price or in connection with net settlement of an award will not be added back for reuse under the 2023 Plan, nor will any shares repurchased on the open market with the portion of the proceeds of an
option exercise that represents payment of the exercise price.
|
•
|
No Grants of “Reload” Awards. The 2023 Plan does not provide for “reload”
awards (the automatic substitution of a new award of like kind and amount upon the exercise of a previously granted award).
|
•
|
Forfeiture and Clawback. The 2023 Plan authorizes the Administrator to
require forfeiture and/or recoupment of plan benefits if a participant engages in certain types of detrimental conduct and to require that a participant be subject to any compensation recovery policy or similar policies that may apply
to the participant or be imposed under applicable laws.
|
•
|
No Dividends or Dividend Equivalents on Unearned Awards. Dividends and
dividend equivalents on awards issued under the 2023 Plan may only be paid if and to the extent the award has vested or been earned, and no dividends may be paid on shares that are subject to options or SARs.
|
•
|
Limits on Transferability of Awards. Unless permitted by the Administrator,
the 2023 Plan does not permit awards to be transferred for value or other consideration.
|
•
|
before the stockholder became an interested stockholder, the board of directors approved either the business combination or
the transaction which resulted in the stockholder becoming an interested stockholder;
|
•
|
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding those shares owned by persons who are directors
and also officers, and employee stock plans, in some instances; or
|
•
|
at or after the time the stockholder became an interested stockholder, the business combination was approved by the board of
directors of the corporation and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least 66 2∕3% of the outstanding voting stock which is not owned by the interested stockholder; or
|
•
|
the business combination is with an interested stockholder who became an interested stockholder at a time when the
restrictions contained in Section 203 did not apply because the corporation’s certificate of incorporation opted out of Section 203.
|
•
|
1% of the total number of shares of such securities then-outstanding; or
|
•
|
the average weekly reported trading volume of such securities during the four calendar weeks preceding the filing of a notice
on Form 144 with respect to the sale.
|
•
|
the issuer of the securities that was formerly a shell company has ceased to be a shell company;
|
•
|
the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
|
•
|
the issuer of the securities has filed all Exchange Act reports and materials required to be filed, as applicable, during the
preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and
|
•
|
at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting
its status as an entity that is not a shell company.
|
•
|
each person who is the beneficial owner of more than 5% of the outstanding shares of common stock;
|
•
|
each of Volato Group’s named executive officers and directors; and
|
•
|
all of Volato Group’s named executive officers and directors as a group.
|
Name of Beneficial Owner
|
| |
Number of
shares of
Common Stock
Beneficially
Owned
|
| |
Percentage of
shares of
outstanding
Common
Stock
|
Greater than 5% Stockholders:
|
| |
|
| |
|
PROOF Acquisition Sponsor I, LLC(1)
|
| |
5,507,813
|
| |
18.66%
|
Vellar Opportunities Fund Master, Ltd.(2)
|
| |
1,512,946
|
| |
5.13%
|
Named Executive Officers and
Directors:(3)
|
| |
|
| |
|
Matthew Liotta(4)
|
| |
5,026,332
|
| |
17.03%
|
Nicholas Cooper(5)
|
| |
3,466,153
|
| |
11.74%
|
Keith Rabin(6)
|
| |
271,162
|
| |
*
|
Christopher Burger(7)
|
| |
8,813
|
| |
*
|
Michael Nichols(8)
|
| |
44,069
|
| |
*
|
All directors and named executive officers as a group (5 individuals)
|
| |
8,816,529
|
| |
29.87%
|
*
|
Less than 1%.
|
(1)
|
The business address of this beneficial owner is 11911 Freedom Drive, Suite 1080 Reston, VA 20190. 16,421 of its shares were
forfeit to PACI in connection with the closing of the Business Combination.
|
(2)
|
The shares beneficially owned by Vellar Opportunities Fund Master, Ltd. (“Vellar”) include shares with shared voting and
dispositive power with each of the following affiliates of Vellar: Cohen & Company LLC, Cohen & Company Inc. and Lester Brafman. The business address of each of these owners is 3 Columbus Circle, Suite 2400, New York, New York
10019. The foregoing information was derived from a Schedule 13G/A filed with the SEC on February 14, 2024.
|
(3)
|
The business address of each of our officers and directors is 1954 Airport Road, Suite 124, Chamblee, Georgia 30341.
|
(4)
|
Mr. Liotta beneficially owns (i) 3,466,153 shares of common stock held by Argand Group LLC in which Mr. Liotta holds shared
voting and dispositive power, (ii) 1,322,118 shares of common stock held by PDK Capital, LLC in which Mr. Liotta has sole voting power and shares dispositive power with his spouse, Jennifer. Liotta, (iii) 3,000 shares of common stock,
(iv) 146,901 shares of common stock underlying options exercisable, (v) 20 shares of common stock held by Ms. Liotta, and (vi) 88,140 shares of common stock underling options exercisable held by Ms. Liotta.
|
(5)
|
Mr. Cooper beneficially owns 3,466,153 shares of common stock held by Hoop Capital LLC in which Mr. Cooper holds shared voting
and investment power.
|
(6)
|
Mr. Rabin beneficially owns 271,162 shares of common stock underlying options exercisable.
|
(7)
|
Mr. Burger beneficially owns 8,813 shares of common stock underlying options exercisable.
|
(8)
|
Mr. Nichols beneficially owns 44,069 shares of common stock underlying options exercisable.
|
•
|
financial institutions or financial services entities;
|
•
|
broker-dealers;
|
•
|
governments or agencies or instrumentalities thereof;
|
•
|
regulated investment companies;
|
•
|
real estate investment trusts;
|
•
|
expatriates or former long-term residents of the U.S.;
|
•
|
persons that actually or constructively own five percent or more of our voting shares;
|
•
|
insurance companies;
|
•
|
dealers or traders subject to a mark-to-market method of accounting with respect to the securities;
|
•
|
persons holding the securities as part of a “straddle,” hedge, integrated transaction or similar transaction;
|
•
|
U.S. holders (as defined below) whose functional currency is not the U.S. dollar;
|
•
|
partnerships or other pass-through entities for U.S. federal income tax purposes and any beneficial owners of such entities;
and;
|
•
|
tax-exempt entities.
|
•
|
an individual who is a citizen or resident of the United States;
|
•
|
a corporation (or other entity taxable as a corporation) organized in or under the laws of the United States, any state
thereof or the District of Columbia; or
|
•
|
an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
|
•
|
a trust, if (i) a court within the United States is able to exercise primary supervision over the administration of the trust
and one or more U.S. persons (as defined in the Code) have authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under Treasury Regulations to be treated as a U.S. person.
|
•
|
an individual who is a citizen or resident of the United States;
|
•
|
a corporation (or other business entity classified as a corporation under U.S. federal income tax law) created or organized
in the United States or under the laws of the United States, any state thereof or the District of Columbia;
|
•
|
an estate the income of which is includible in gross income regardless of source; or
|
•
|
a trust that (A) is subject to the primary supervision of a court within the United States and the control of one or more
U.S. persons, or (B) otherwise has validly elected to be treated as a U.S. domestic trust.
|
•
|
the gain is U.S. trade or business income, as defined above;
|
•
|
the Non-U.S. Holder is an individual who is present in the United States for 183 or more days in the taxable year of the
disposition and meets other conditions (in which case the gain would be subject to a flat 30% tax, or such reduced rate as may be specified by an applicable income tax treaty, which may be offset by certain U.S. source capital losses,
provided the non-U.S holder has timely filed U.S. federal income tax returns with respect to such losses); or
|
•
|
we are or have been a “U.S. real property holding corporation” (a “USRPHC”) under section 897 of the Code at any time during
the shorter of the five-year period ending on the date of disposition and the Non-U.S. Holder’s holding period for the Common Stock.
|
|
| |
Per Share of Common Stock and
Accompanying Common Warrant
|
| |
Per Pre-Funded Warrant and
Accompanying Common Warrant
|
| |
Total
|
||||||
Public offering price
|
| |
|
| |
|
| |
|
| |
|
| |
|
Placement agent fees
|
| |
|
| |
|
| |
|
| |
|
| |
|
Proceeds to us (before expenses)
|
| |
|
| |
|
| |
|
| |
|
| |
|
•
|
may not engage in any stabilization activity in connection with our securities; and
|
•
|
may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other
than as permitted under the Exchange Act, until it has completed its participation in the distribution.
|
•
|
offer, pledge, sell, contract to sell or otherwise dispose of Volato’s securities or any securities convertible into or
exercisable or exchangeable for shares of Common Stock;
|
•
|
enter into any swap or other arrangement that transfers to another. in whole or in part, any of the economic consequences of
ownership of our securities, whether any such transaction is to be settled by delivery of our securities, in cash or otherwise;
|
•
|
make any demand for or exercise any right with respect to the registration of any of our securities;
|
•
|
publicly disclose the intention to make any offer, sale, pledge or disposition of, or to enter into any transaction, swap,
hedge, or other arrangement relating to any of our securities.
|
Unaudited Consolidated Financial Statements
|
| |
|
| | ||
| | ||
| | ||
| | ||
| |
Audited Consolidated Financial Statements
|
|||
| | ||
| | ||
| | ||
| | ||
| | ||
| |
|
| |
March 31,
2024
(unaudited)
|
| |
December 31,
2023
|
ASSETS
|
| |
|
| |
|
Current assets:
|
| |
|
| |
|
Cash
|
| |
$
|
| |
$
|
Restricted cash
|
| |
|
| |
|
Accounts receivable, net
|
| |
|
| |
|
Deposits
|
| |
|
| |
|
Prepaid expenses and other current assets
|
| |
|
| |
|
Total current assets
|
| |
|
| |
|
|
| |
|
| |
|
Property and equipment, net
|
| |
|
| |
|
Operating lease, right-of-use assets
|
| |
|
| |
|
Equity-method investment
|
| |
|
| |
|
Deposits
|
| |
|
| |
|
Forward purchase agreement
|
| |
|
| |
|
Restricted cash
|
| |
|
| |
|
Intangibles, net
|
| |
|
| |
|
Goodwill
|
| |
|
| |
|
Total assets
|
| |
$
|
| |
$
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
| |
|
| |
|
Current liabilities:
|
| |
|
| |
|
Accounts payable and accrued liabilities
|
| |
$
|
| |
$
|
Loan from related party
|
| |
|
| |
|
Operating lease liability
|
| |
|
| |
|
Merger transaction costs payable in shares
|
| |
|
| |
|
Credit facility and other loans
|
| |
|
| |
|
Customer deposits and deferred revenue
|
| |
|
| |
|
Total current liabilities
|
| |
|
| |
|
|
| |
|
| |
|
Deferred income tax liability
|
| |
|
| |
|
Operating lease liability, non-current
|
| |
|
| |
|
Credit facility, non-current
|
| |
|
| |
|
Total liabilities
|
| |
$
|
| |
$
|
COMMITMENTS AND CONTINGENCIES | |
|||||
|
| |
|
| |
|
Shareholders’ equity:
|
| |
|
| |
|
Common Stock Class A, $
|
| |
|
| |
|
Additional paid-in capital
|
| |
|
| |
|
Accumulated deficit
|
| |
(
|
| |
(
|
Total shareholders’ equity
|
| |
|
| |
|
Total liabilities and shareholders’ equity
|
| |
|
| |
$
|
|
| |
For the Three Months Ended
March 31,
|
|||
|
| |
2024
|
| |
2023
|
Revenue
|
| |
$
|
| |
$
|
|
| |
|
| |
|
Costs and expenses:
|
| |
|
| |
|
Cost of revenue
|
| |
|
| |
|
Selling, general and administrative
|
| |
|
| |
|
Total costs and expenses
|
| |
|
| |
|
|
| |
|
| |
|
Loss from operations
|
| |
(
|
| |
(
|
|
| |
|
| |
|
Other income (expenses):
|
| |
|
| |
|
Gain from sale of consolidated entity
|
| |
|
| |
|
Gain from sale of equity-method investment
|
| |
|
| |
|
Other income
|
| |
|
| |
|
Loss from change in fair value forward purchase agreement
|
| |
(
|
| |
|
Interest expense, net
|
| |
(
|
| |
(
|
Other expenses
|
| |
(
|
| |
|
|
| |
|
| |
|
Loss before provision for income taxes
|
| |
(
|
| |
(
|
Provision for incomes taxes
|
| |
|
| |
|
Net Loss
|
| |
$(
|
| |
$(
|
|
| |
|
| |
|
Basic and diluted net loss per share
|
| |
$(
|
| |
$(
|
|
| |
|
| |
|
Weighted average common share outstanding:
|
| |
|
| |
|
Basic and diluted
|
| |
|
| |
|
|
| |
Class A Common Stock
|
| |
Additional
Paid-in
Capital
|
| |
Subscription
Receivable
|
| |
Retained
Deficit
|
| |
Total
Shareholders’
Equity
(Deficit)
|
|||
|
| |
Shares
|
| |
Amount
|
| |||||||||||
Balance as of December 31, 2022, As adjusted
|
| |
|
| |
|
| |
|
| |
(
|
| |
(
|
| |
(
|
Stock-based compensation
|
| |
—
|
| |
—
|
| |
|
| |
—
|
| |
—
|
| |
|
Net loss
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
(
|
| |
(
|
Balance March 31, 2023
|
| |
|
| |
$
|
| |
$
|
| |
$(
|
| |
$(
|
| |
$(
|
|
| |
Class A Common Stock
|
| |
Additional
Paid-in
Capital
|
| |
Retained
Deficit
|
| |
Total
Shareholders’
Equity
(Deficit)
|
|||
|
| |
Shares
|
| |
Amount
|
| ||||||||
Balance December 31, 2023
|
| |
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
Stock-based compensation
|
| |
—
|
| |
—
|
| |
|
| |
—
|
| |
|
Issuance of common stock
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Warrant reclass from in-kind liability to APIC
|
| |
—
|
| |
—
|
| |
|
| |
—
|
| |
|
Net loss
|
| |
—
|
| |
—
|
| |
—
|
| |
(
|
| |
(
|
Balance March 31, 2024
|
| |
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
|
| |
For the Three months ended
March 31,
|
|||
|
| |
2024
|
| |
2023
|
Operating activities:
|
| |
|
| |
|
Net Loss
|
| |
$(
|
| |
$(
|
Adjustments to reconcile net loss to cash used in operating activities:
|
| |
|
| |
|
Depreciation and amortization expense
|
| |
|
| |
|
Stock compensation expense
|
| |
|
| |
|
Gain from sale of equity-method investments
|
| |
|
| |
(
|
Gain from sale of consolidated entity
|
| |
|
| |
(
|
Gain from equity-method investments
|
| |
(
|
| |
(
|
Amortization right-of-use asset
|
| |
|
| |
|
Amortization of debt discount
|
| |
|
| |
|
Change in fair value forward purchase agreement
|
| |
|
| |
|
Changes in assets and liabilities:
|
| |
|
| |
|
Accounts receivable
|
| |
|
| |
|
Prepaid and other current assets
|
| |
|
| |
|
Deposits
|
| |
(
|
| |
(
|
Account payable and accrued liabilities
|
| |
|
| |
|
Operating lease liability
|
| |
(
|
| |
(
|
Customer deposits and deferred revenue
|
| |
|
| |
(
|
Net cash used in operating activities
|
| |
(
|
| |
(
|
Investing activities:
|
| |
|
| |
|
Cash payment for property and equipment
|
| |
(
|
| |
(
|
Proceeds from sale of interest in equity-method investment
|
| |
|
| |
|
Payment for the purchase of equity-method investments
|
| |
|
| |
(
|
Proceeds from the sale of consolidated entity
|
| |
|
| |
|
Net cash provided by (used in) investing activities
|
| |
(
|
| |
|
Financing activities:
|
| |
|
| |
|
Proceeds from lines of credit
|
| |
|
| |
|
Proceeds from issuance of convertible notes
|
| |
|
| |
|
Repayment on loans
|
| |
(
|
| |
(
|
Net cash provided by (used in) financing activities
|
| |
(
|
| |
|
Net decrease in cash
|
| |
(
|
| |
(
|
Cash and restricted cash, beginning of year
|
| |
|
| |
|
Cash and restricted cash, end of period
|
| |
$
|
| |
$
|
Supplemental disclosure of cash flow information:
|
| |
|
| |
|
Cash paid for interest
|
| |
$
|
| |
$
|
Non-Cash Investing and Financing Activities:
|
| |
|
| |
|
Credit facility for aircraft deposits
|
| |
$
|
| |
|
Original debt discount
|
| |
$(
|
| |
|
•
|
Useful lives of property, plant, and equipment.
|
•
|
Assumptions used in valuing equity instruments.
|
•
|
Deferred income taxes and related valuation allowance.
|
•
|
Assessment of long-lived assets impairment.
|
•
|
Assumptions used in the valuation of the forward purchase agreement
|
Classification
|
| |
Life
|
Machinery and equipment
|
| |
|
Automobiles
|
| |
|
Computer and office equipment
|
| |
|
Website development costs
|
| |
|
•
|
Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active
markets that the Company as the ability to access.
|
•
|
Level 2: Inputs to the valuation methodology include:
|
•
|
Quoted prices for similar assets or liabilities in active markets.
|
•
|
Quoted prices for identical or similar assets or liabilities in inactive markets.
|
•
|
Inputs other than quoted prices that are observable for the asset or liability.
|
•
|
Inputs that are derived principally from or corroborated by observable market date by correlation or other means; and
|
•
|
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the
full term of the asset or liability.
|
•
|
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
|
| |
Fair Value Measurements as of March 31, 2024
|
|||||||||
|
| |
Quoted Prices in
Active Markets for
Identical Assets (Level 1)
|
| |
Significant Other
Observable Inputs (Level 2)
|
| |
Significant
Unobservable
Inputs (Level 3)
|
| |
Total
|
Forward Purchase Agreement
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
Total
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
|
| |
Forward Purchase
Agreement
|
Balance December 31, 2023
|
| |
$
|
Change in fair value
|
| |
(
|
Balance March 31, 2024
|
| |
$
|
|
| |
Three months ended
March 31, 2024
|
Volume Weighted average stock price (“VWAP”)
|
| |
$
|
Initial Price
|
| |
$
|
Expected Volatility
|
| |
|
Term
|
| |
|
Risk-free Rate
|
| |
|
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.
|
Aircraft sales
|
| |
$
|
Charter flight revenue
|
| |
|
Aircraft Management revenue
|
| |
|
Total
|
| |
$
|
Aircraft sales
|
| |
$
|
Charter flight revenue
|
| |
|
Aircraft management revenue
|
| |
|
Total
|
| |
$
|
|
| |
March 31, 2024
|
||||||
|
| |
Cost
|
| |
Accumulated
Amortization
|
| |
Net
|
Customer relationships
|
| |
$
|
| |
$(
|
| |
$
|
|
| |
$
|
| |
$(
|
| |
$
|
|
| |
December 31, 2023
|
||||||
|
| |
Cost
|
| |
Accumulated
Amortization
|
| |
Net
|
Customer relationships
|
| |
$
|
| |
$(
|
| |
$
|
|
| |
$
|
| |
$(
|
| |
$
|
|
| |
Amount
|
2024
|
| |
$
|
2025
|
| |
|
2026
|
| |
|
2027
|
| |
|
|
| |
$
|
|
| |
March 31, 2024
|
| |
December 31, 2023
|
Intangible asset - Part 135 certificate
|
| |
$
|
| |
$
|
|
| |
December 31, 2023
|
Transaction costs payable in common stock
|
| |
$
|
Total
|
| |
$
|
|
| |
March 31,
2024
|
| |
December 31,
2023
|
Machine and equipment
|
| |
$
|
| |
$
|
Automobiles
|
| |
|
| |
|
Website development costs
|
| |
|
| |
|
Computer and office equipment
|
| |
|
| |
|
Software development costs
|
| |
|
| |
|
|
| |
|
| |
|
Less accumulated depreciation
|
| |
(
|
| |
(
|
|
| |
$
|
| |
$
|
|
| |
March 31,
2024
|
| |
December 31,
2023
|
Deposits on aircraft
|
| |
$
|
| |
$
|
Other deposits
|
| |
|
| |
|
Total deposits
|
| |
$
|
| |
$
|
Less current portion
|
| |
(
|
| |
(
|
Total deposits, non-current
|
| |
$
|
| |
$
|
|
| |
March 31,
2024
|
| |
December 31,
2023
|
Gulfstream aircraft deposits
|
| |
$
|
| |
$
|
Honda aircraft deposits
|
| |
|
| |
|
Total deposits on aircraft
|
| |
|
| |
$
|
Less current portion
|
| |
(
|
| |
(
|
Total deposits on aircraft non-current
|
| |
$
|
| |
$
|
|
| |
March 31,
2024
|
| |
December 31,
2023
|
Investment in Volato 158 LLC
|
| |
$
|
| |
$
|
|
| |
$
|
| |
$
|
|
| |
March 31,
2024
|
| |
December 31,
2023
|
Dennis Liotta, March 2023 –
|
| |
$
|
| |
$
|
Total notes from related party - current
|
| |
$
|
| |
$
|
|
| |
March 31,
2024
|
| |
December 31,
2023
|
SAC Leasing G280 LLC credit facility,
|
| |
$
|
| |
$
|
Less discounts
|
| |
(
|
| |
(
|
Total credit facility, net of discount
|
| |
$
|
| |
|
|
| |
Options
|
| |
Weighted
Average
Exercise Price
Per Share
|
| |
Weighted
Average
Remaining
Contractual
Term (years)
|
| |
Aggregate
Intrinsic Value
|
Outstanding at December 31, 2023
|
| |
|
| |
$
|
| |
|
| |
$
|
Granted
|
| |
|
| |
$
|
| |
—
|
| |
|
Cancelled
|
| |
(
|
| |
$
|
| |
—
|
| |
|
Exercised
|
| |
(
|
| |
$
|
| |
—
|
| | |
Outstanding at March 31, 2024
|
| |
|
| |
$
|
| |
|
| |
$
|
Exercisable as of March 31, 2024
|
| |
|
| |
$
|
| |
|
| |
—
|
|
| |
Gulfstream
G280 Fleet
|
2024
|
| |
$
|
2025
|
| |
|
Total expected contractual payments
|
| |
$
|
|
| |
December 31,
2023
|
| |
December 31,
2022
|
ASSETS
|
| |
|
| |
|
Current assets:
|
| |
|
| |
|
Cash
|
| |
$
|
| |
$
|
Accounts receivable, net
|
| |
|
| |
|
Deposits
|
| |
|
| |
|
Prepaid expenses and other current assets
|
| |
|
| |
|
Total current assets
|
| |
|
| |
|
|
| |
|
| |
|
Property and equipment, net
|
| |
|
| |
|
Operating lease, right-of-use assets
|
| |
|
| |
|
Equity-method investment
|
| |
|
| |
|
Deposits
|
| |
|
| |
|
Forward purchase agreement
|
| |
|
| |
|
Restricted cash
|
| |
|
| |
|
Intangibles, net
|
| |
|
| |
|
Goodwill
|
| |
|
| |
|
Total assets
|
| |
$
|
| |
$
|
|
| |
|
| |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
|
| |
|
| |
|
Current liabilities:
|
| |
|
| |
|
Accounts payable and accrued liabilities
|
| |
$
|
| |
$
|
Loan from related party
|
| |
|
| |
|
Convertible notes, net
|
| |
|
| |
|
Operating lease liability
|
| |
|
| |
|
Merger transaction costs payable in shares
|
| |
|
| |
|
Credit facility and other loans
|
| |
|
| |
|
Customer deposits and deferred revenue
|
| |
|
| |
|
Total current liabilities
|
| |
|
| |
|
|
| |
|
| |
|
Deferred income tax liability
|
| |
|
| |
|
Operating lease liability, non-current
|
| |
|
| |
|
Credit facility, non-current
|
| |
|
| |
|
Total liabilities
|
| |
$
|
| |
$
|
COMMITMENTS AND CONTINGENCIES (Note 18)
|
| |
|
| |
|
|
| |
|
| |
|
Shareholders’ equity (deficit):
|
| |
|
| |
|
Common Stock Class A, $
|
| |
|
| |
|
Additional paid-in capital
|
| |
|
| |
|
Stock subscriptions receivable
|
| |
|
| |
(
|
Accumulated deficit
|
| |
(
|
| |
(
|
Total shareholders’ equity (deficit) attributable to Volato
Group, Inc.
|
| |
|
| |
(
|
Total shareholders’ equity (deficit)
|
| |
|
| |
(
|
Total liabilities and shareholders’ equity (deficit)
|
| |
|
| |
$
|
|
| |
For the Years Ended
December 31,
|
|||
|
| |
2023
|
| |
2022
|
Revenue
|
| |
$
|
| |
$
|
|
| |
|
| |
|
Costs and expenses:
|
| |
|
| |
|
Cost of revenue
|
| |
|
| |
|
Selling, general and administrative
|
| |
|
| |
|
Total costs and expenses
|
| |
|
| |
|
|
| |
|
| |
|
Loss from operations
|
| |
(
|
| |
(
|
|
| |
|
| |
|
Other income (expenses):
|
| |
|
| |
|
Gain from deconsolidation of investments
|
| |
—
|
| |
|
Gain from sale of consolidated entity
|
| |
|
| |
|
Gain from sale of equity-method investment
|
| |
|
| |
—
|
Other income
|
| |
|
| |
|
Loss from change in fair value forward purchase agreement
|
| |
(
|
| |
|
Interest expense, net
|
| |
(
|
| |
(
|
Other expenses
|
| |
(
|
| |
(
|
|
| |
|
| |
|
Loss before provision for income taxes
|
| |
(
|
| |
(
|
Provision for incomes taxes (benefit)
|
| |
|
| |
(
|
Net Loss before non-controlling interest
|
| |
(
|
| |
(
|
Less: Net Loss attributable to non-controlling interest
|
| |
|
| |
(
|
Net Loss attributable to Volato Group, Inc.
|
| |
$(
|
| |
$(
|
|
| |
|
| |
|
Basic and Diluted net loss per share
|
| |
$(
|
| |
$(
|
|
| |
|
| |
|
Weighted average common share outstanding:
|
| |
|
| |
|
Basic and diluted
|
| |
|
| |
|
|
| |
Series Seed
Convertible
Preferred Stock
|
| |
Class A
Common Stock
|
| |
Additional
Paid-in
Capital
|
| |
Subscription
Receivable
|
| |
Retained
Deficit
|
| |
Non-
controlling
Interest
|
| |
Total
Shareholders’
Equity
(Deficit)
|
||||||
|
| |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||||
Balance December 31, 2021
|
| |
|
| |
$
|
| |
|
| |
$
|
| |
$
|
| |
$(
|
| |
$(
|
| |
$
|
| |
$
|
Retroactive application of conversion of Series Seed to
Class A Common Stock
|
| |
|
| |
(
|
| |
|
| |
—
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Retroactive application of recapitalization (note 1)
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Balance as of December 31, 2021, As adjusted
|
| |
—
|
| |
—
|
| |
|
| |
|
| |
|
| |
(
|
| |
(
|
| |
|
| |
|
Cash collected from subscription receivable
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
| |
—
|
| |
—
|
| |
|
Stock-based compensation
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Change in ownership interest in former subsidiary
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Deconsolidation of former subsidiaries
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
—
|
| |
(
|
| |
(
|
Net loss
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
(
|
| |
(
|
| |
(
|
Balance December 31, 2022
|
| |
—
|
| |
$—
|
| |
|
| |
$
|
| |
$
|
| |
$(
|
| |
$(
|
| |
$
|
| |
$(
|
|
| |
Series Seed
Convertible
Preferred Stock
|
| |
Class A
Common Stock
|
| |
Additional
Paid-in
Capital
|
| |
Subscription
Receivable
|
| |
Retained
Deficit
|
| |
Non-
controlling
Interest
|
| |
Total
Shareholders’
Equity
(Deficit)
|
||||||
|
| |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||||
Balance December 31, 2022
|
| |
0
|
| |
$—
|
| |
|
| |
$
|
| |
$
|
| |
$(
|
| |
$(
|
|
|
$
|
| |
$(
|
Cash collected from subscription receivable
|
| |
0
|
| |
—
|
| |
0
|
| |
—
|
| |
—
|
| |
|
| |
—
|
| |
—
|
| |
|
Stock-based compensation
|
| |
0
|
| |
—
|
| |
0
|
| |
—
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Issuance of common stock to employees
|
| |
0
|
| |
—
|
| |
|
| |
—
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Reverse recapitalization, net of transaction costs
|
| |
0
|
| |
—
|
| |
|
| |
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Exercise of stock options
|
| |
—
|
| |
—
|
| |
|
| |
0
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Issuance of preferred Series A-1 shares, converted to Class A
common stock following business combination
|
| |
—
|
| |
—
|
| |
|
| |
0
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Issuance of preferred Series A-2 and A-3 shares from
conversion of notes payable, converted to Class A common stock following business combination
|
| |
—
|
| |
—
|
| |
|
| |
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Net loss
|
| |
0
|
| |
—
|
| |
0
|
| |
—
|
| |
—
|
| |
—
|
| |
(
|
| |
—
|
| |
(
|
Balance December 31, 2023
|
| |
0
|
| |
—
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
|
| |
For the Years ended
December 31,
|
|||
|
| |
2023
|
| |
2022
|
Operating activities:
|
| |
|
| |
|
Net Loss
|
| |
$(
|
| |
$(
|
Adjustments to reconcile net loss to cash used in operating activities:
|
| |
|
| |
|
Depreciation and amortization expense
|
| |
|
| |
|
Stock compensation expense
|
| |
|
| |
|
Fair value of common stock issued to employees
|
| |
|
| |
|
Gain from sale of equity-method investments
|
| |
(
|
| |
(
|
Gain from sale of consolidated entity
|
| |
(
|
| |
|
Gain (loss) from equity-method investments
|
| |
(
|
| |
|
Deferred income tax benefit
|
| |
|
| |
(
|
Amortization right-of-use asset
|
| |
|
| |
|
Amortization of debt discount
|
| |
|
| |
|
Change in fair value forward purchase agreement
|
| |
|
| |
|
Changes in assets and liabilities:
|
| |
|
| |
|
Accounts receivable
|
| |
(
|
| |
(
|
Prepaid and other current assets
|
| |
(
|
| |
(
|
Deposits
|
| |
(
|
| |
(
|
Account payable and accrued liabilities
|
| |
|
| |
|
Operating lease liability
|
| |
(
|
| |
|
Customers’ deposits and deferred revenue
|
| |
|
| |
|
Net cash used in operating activities
|
| |
(
|
| |
(
|
Investing activities:
|
| |
|
| |
|
Cash payment for property and equipment
|
| |
(
|
| |
(
|
Proceeds from sale of interest in equity-method investment
|
| |
|
| |
|
Payment for acquisition of GCA
|
| |
|
| |
(
|
Payment for the purchase of equity-method investments
|
| |
(
|
| |
|
Proceeds from the sale of consolidated entity
|
| |
|
| |
|
Cash obtained from acquisition of GCA
|
| |
|
| |
|
Net cash provided by investing activities
|
| |
|
| |
|
Financing activities:
|
| |
|
| |
|
Proceeds from lines of credit
|
| |
|
| |
|
Repayments of lines of credit
|
| |
|
| |
(
|
Collection on subscription receivable
|
| |
|
| |
|
Proceeds from issuance of convertible notes
|
| |
|
| |
|
Purchase of forward purchase agreement
|
| |
(
|
| |
|
Proceeds from forward purchase agreement
|
| |
|
| |
|
Proceeds from other loans
|
| |
|
| |
|
Repayment on loans
|
| |
(
|
| |
(
|
Proceeds from business combination
|
| |
|
| |
|
Business combination closing costs
|
| |
(
|
| |
|
Proceeds from the sale of preferred stock
|
| |
|
| |
|
Proceeds from exercise of stock options
|
| |
|
| |
|
Net cash provided by financing activities
|
| |
|
| |
|
Net increase in cash
|
| |
|
| |
|
Cash and restricted cash, beginning of year
|
| |
|
| |
|
Cash and restricted cash, end of period
|
| |
$
|
| |
$
|
|
| |
For the Years ended
December 31,
|
|||
|
| |
2023
|
| |
2022
|
Supplemental disclosure of cash flow information:
|
| |
|
| |
|
Cash paid for interest
|
| |
$
|
| |
$
|
Cash paid for income taxes
|
| |
|
| |
|
Non-Cash Investing and Financing Activities:
|
| |
|
| |
|
Credit facility for the aircraft deposits
|
| |
|
| |
|
Conversion of line of credit to convertible note with related party
|
| |
|
| |
|
Original debt discount
|
| |
|
| |
|
Conversion of preferred stock to common stock class A
|
| |
|
| |
|
Merger transaction cost payable in stock
|
| |
|
| |
|
Liabilities assumed in merger transaction unpaid at 12/31/2023
|
| |
|
| |
|
Initial recognition of right-of-use asset
|
| |
|
| |
|
Fair value adjustment to equity-method investment upon deconsolidation
|
| |
|
| |
|
Acquisition of vehicle – direct finance
|
| |
|
| |
|
Name of Consolidated Subsidiaries or Entities
|
| |
State or
Other Jurisdiction of
Incorporation or
Organization
|
| |
Attributable
Interest
|
Volato, Inc. (Legacy Volato)
|
| |
Georgia
|
| |
|
Gulf Coast Aviation, Inc.
|
| |
Texas
|
| |
|
G C Aviation, Inc.
|
| |
Texas
|
| |
|
Fly Vaunt, LLC
|
| |
Georgia
|
| |
|
Fly Dreams, LLC (until March 3, 2023)
|
| |
Georgia
|
| |
|
•
|
Useful lives of property, plant, and equipment.
|
•
|
Assumptions used in valuing equity instruments.
|
•
|
Deferred income taxes and related valuation allowance.
|
•
|
Assessment of long-lived assets impairment.
|
•
|
Assumptions used in the valuation of the forward purchase agreement
|
Classification
|
| |
Life
|
Machinery and equipment
|
| |
|
Automobiles
|
| |
|
Computer and office equipment
|
| |
|
Website development costs
|
| |
|
•
|
Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active
markets that the Company as the ability to access.
|
•
|
Level 2: Inputs to the valuation methodology include:
|
•
|
Quoted prices for similar assets or liabilities in active markets.
|
•
|
Quoted prices for identical or similar assets or liabilities in inactive markets.
|
•
|
Inputs other than quoted prices that are observable for the asset or liability.
|
•
|
Inputs that are derived principally from or corroborated by observable market date by correlation or other means; and
|
•
|
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full
term of the asset or liability.
|
•
|
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
|
| |
Fair Value Measurements as of December 31, 2023 Using
|
|||||||||
|
| |
Quoted Prices in
Active Markets for
Identical Assets (Level 1)
|
| |
Significant Other
Observable Inputs
(Level 2)
|
| |
Significant
Unobservable
Inputs (Level 3)
|
| |
Total
|
Forward Purchase Agreement
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
Total
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
|
| |
Forward Purchase
Agreement
|
Balance December 31, 2022
|
| |
$
|
Cash funded
|
| |
|
Proceeds
|
| |
(
|
Change in fair value
|
| |
(
|
Balance December 31, 2023
|
| |
$
|
|
| |
For the Year Ended
December 31, 2023
|
Volume Weighted average stock price (“VWAP”)
|
| |
$
|
Initial Price
|
| |
$
|
Expected Volatility
|
| |
|
Term
|
| |
|
Risk-free Rate
|
| |
|
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.
|
Aircraft sales
|
| |
$
|
Charter flight revenue
|
| |
$
|
Aircraft Management revenue
|
| |
$
|
Total
|
| |
$
|
Aircraft sales
|
| |
$
|
Charter flight revenue
|
| |
$
|
Aircraft management revenue
|
| |
$
|
Total
|
| |
$
|
(In thousands)
|
| |
Year Ended
December 31,
2023
|
Cash - PACI trust and cash (net of redemptions)
|
| |
$
|
Gross Proceeds
|
| |
$
|
Less Transaction related expenses and other costs
|
| |
(
|
Less Net liabilities assumed from PACI
|
| |
(
|
Net proceeds from the business combination
|
| |
$
|
|
| |
Class A
Common Stock
|
PACI public shareholders
|
| |
|
PACI’s sponsors
|
| |
|
Company’s employees
|
| |
|
Legacy Volato shareholders(1)
|
| |
|
Legacy Volato Series Preferred investors
|
| |
|
Total shares of Common Stock immediately after closing
|
| |
|
(1)
|
The number of Legacy Volato shares was determined from the shares of Legacy Volato shares outstanding immediately prior to the
closing converted at the exchange ratio of approximately
|
|
| |
March 11, 2022
|
Cash
|
| |
$
|
Other consideration transferred
|
| |
|
Purchase price
|
| |
$
|
|
| |
March 11, 2022
|
Cash
|
| |
$
|
Accounts receivable
|
| |
|
Other current assets
|
| |
|
Fixed Assets
|
| |
|
Certificate
|
| |
|
Customer Relationships
|
| |
|
Deferred tax liability
|
| |
(
|
Accounts Payable and Accrued Expenses
|
| |
(
|
Net Assets Acquired
|
| |
$
|
Goodwill
|
| |
|
Total consideration
|
| |
$
|
|
| |
December 31, 2023
|
||||||
|
| |
Cost
|
| |
Accumulated
Amortization
|
| |
Net
|
Customer relationships
|
| |
$
|
| |
$(
|
| |
$
|
|
| |
$
|
| |
$(
|
| |
$
|
|
| |
December 31, 2022
|
||||||
|
| |
Cost
|
| |
Accumulated
Amortization
|
| |
Net
|
Customer relationships
|
| |
$
|
| |
$(
|
| |
$
|
|
| |
$
|
| |
$(
|
| |
$
|
Fiscal years ending December 31,
|
| |
Amount
|
2024
|
| |
$
|
2025
|
| |
|
2026
|
| |
|
2027
|
| |
|
|
| |
$
|
|
| |
December 31, 2023
|
| |
December 31, 2022
|
Intangible asset – Part 135 certificate
|
| |
$
|
| |
$
|
|
| |
December 31,
2023
|
| |
December 31,
2022
|
Transaction costs payable in common stock
|
| |
$
|
| |
$
|
Total
|
| |
$
|
| |
$
|
|
| |
December 31,
2023
|
| |
December 31,
2022
|
Machine and equipment
|
| |
$
|
| |
$
|
Automobiles
|
| |
|
| |
|
Website development costs
|
| |
|
| |
|
Computer and office equipment
|
| |
|
| |
|
Software development costs
|
| |
|
| |
|
|
| |
|
| |
|
Less accumulated depreciation
|
| |
(
|
| |
(
|
|
| |
$
|
| |
$
|
|
| |
December 31,
2023
|
| |
December 31,
2022
|
Deposits on aircraft
|
| |
$
|
| |
$
|
Other deposits
|
| |
|
| |
|
Total deposits
|
| |
$
|
| |
$
|
Less current portion
|
| |
(
|
| |
(
|
Total deposits, non-current
|
| |
$
|
| |
$
|
|
| |
December 31,
2023
|
| |
December 31,
2022
|
Gulfstream aircraft deposits
|
| |
$
|
| |
$
|
Honda aircraft deposits
|
| |
|
| |
|
Total deposits on aircraft
|
| |
$
|
| |
$
|
Less current portion
|
| |
$(
|
| |
(
|
Total deposits on aircraft non-current
|
| |
|
| |
$
|
|
| |
December 31,
2023
|
| |
December 31,
2022
|
Investment in Volato 158 LLC
|
| |
$
|
| |
$
|
Investment in Volato 239 LLC
|
| |
|
| |
|
|
| |
$
|
| |
$
|
|
| |
December 31,
2023
|
| |
December 31,
2022
|
Dennis Liotta, December 2021 –
|
| |
$
|
| |
$
|
Dennis Liotta, March 2023 –
|
| |
|
| |
|
Total notes from related party - current
|
| |
$
|
| |
$
|
|
| |
December 31,
2023
|
| |
December 31,
2022
|
2022 unsecured convertible notes,
|
| |
$
|
| |
$
|
2023 unsecured convertible notes,
|
| |
|
| |
|
Total unsecured convertible notes, gross
|
| |
|
| |
|
Less unamortized debt discounts
|
| |
|
| |
(
|
|
| |
|
| |
|
Total unsecured convertible notes, net of discount
|
| |
$
|
| |
$
|
Less current portion
|
| |
|
| |
|
Total unsecured convertible notes, net of discount non-current
|
| |
$
|
| |
$
|
|
| |
December 31,
2023
|
| |
December 31,
2022
|
SAC Leasing G280 LLC credit facility,
|
| |
$
|
| |
$
|
Less discounts
|
| |
(
|
| |
(
|
Total credit facility, net of discount
|
| |
$
|
| |
|
|
| |
2023
|
| |
2022
|
Deferred Tax Assets
|
| |
|
| |
|
Allowance for doubtful Accounts
|
| |
$
|
| |
$
|
Investment in Plane Cos LLC
|
| |
|
| |
|
Loss carryforwards
|
| |
|
| |
|
Intangible
|
| |
|
| |
(
|
Interest expense limitations
|
| |
|
| |
|
Other
|
| |
|
| |
|
Total deferred tax assets
|
| |
|
| |
|
Deferred Tax Liabilities
|
| |
|
| |
|
Property and equipment depreciation
|
| |
(
|
| |
(
|
Valuation allowance
|
| |
(
|
| |
(
|
Total deferred tax liabilities
|
| |
(
|
| |
(
|
Net deferred tax assets (liabilities)
|
| |
(
|
| |
(
|
|
| |
2023
|
| |
2022
|
Expected federal income taxes at statutory rate
|
| |
|
| |
|
State and local income taxes
|
| |
|
| |
|
Permanent differences
|
| |
(
|
| |
(
|
Change in valuation allowance
|
| |
(
|
| |
(
|
Other
|
| |
(
|
| |
(
|
Effective income tax rate
|
| |
(
|
| |
|
|
| |
Number of Shares
Authorized
|
| |
Number of Shares
Outstanding As of
December 31,
2023
|
| |
Par
Value
|
Class A Common Stock
|
| |
|
| |
|
| |
$
|
Preferred Stock
|
| |
|
| |
|
| |
$
|
|
| |
Options
|
| |
Weighted
Average
Exercise Price
Per Share
|
| |
Weighted
Average
Remaining
Contractual
Term (years)
|
Outstanding at January 1, 2022
|
| |
|
|
|
$
|
| |
|
Granted
|
| |
|
| |
$
|
| |
—
|
Cancelled
|
| |
|
| |
$—
|
| |
—
|
Exercised
|
| |
|
| |
$—
|
| |
—
|
Outstanding at December 31, 2022
|
| |
|
| |
$
|
| |
|
Granted
|
| |
|
| |
$
|
| |
—
|
Cancelled
|
| |
(
|
| |
$
|
| |
—
|
Exercised
|
| |
(
|
| |
$
|
| |
—
|
Outstanding as of December 31, 2023
|
| |
|
| |
$
|
| |
|
Exercisable as of December 31, 2023
|
| |
|
|
|
$
|
| |
|
|
| |
Options
Outstanding
|
|||
Exercise Price
|
| |
Shares
|
| |
Life (in years)
|
$
|
| |
|
| |
|
$
|
| |
|
| |
|
$
|
| |
|
| |
|
$
|
| |
|
| |
|
$
|
| |
|
| |
|
$
|
| |
|
| |
|
|
| |
|
| |
|
|
| |
For The Year Ending
December31,
|
|||
|
| |
2023
|
| |
2022
|
Expected term
|
| |
|
| |
- |
Expected volatility
|
| |
|
| |
|
Expected dividends
|
| |
|
| |
|
Risk-free interest rate
|
| |
|
| |
|
Forfeitures
|
| |
|
| |
|
|
| |
Warrants
|
| |
Weighted
Average
Exercise Price
Per Share
|
| |
Weighted
Average
Remaining
Contractual
Term (years)
|
Outstanding as of January 1, 2022
|
| |
|
| |
$
|
| |
|
Granted
|
| |
|
|
|
|
| |
|
Cancelled
|
| |
|
|
|
|
| |
|
Exercised
|
| |
|
| |
|
| |
|
Outstanding as of December 31, 2022
|
| |
|
| |
$
|
| |
|
Granted
|
| |
|
| |
|
| |
|
Cancelled
|
| |
|
|
|
|
| |
|
Exercised
|
| |
|
| |
|
| |
|
Outstanding as of December 31, 2023
|
| |
|
| |
$
|
| |
|
Exercisable as of December 31, 2023
|
| |
|
| |
|
| |
|
For the twelve months ended December 31,
|
| |
Gulfstream
G280 Fleet
|
2024
|
| |
$
|
2025
|
| |
|
Total expected contractual payments
|
| |
$
|
For the years ended December 31,
|
| |
Operating
Leases
|
2024
|
| |
$
|
2025
|
| |
|
2026
|
| |
|
2027
|
| |
|
TOTAL
|
| |
|
Less amount representing interest
|
| |
(
|
Present value of net minimum payments
(inc. $
|
| |
$
|
A.G.P.
|
| |
Roth Capital Partners
|
Item 13.
|
Other Expenses of Issuance and Distribution.
|
|
| |
Amount
|
SEC registration fee
|
| |
$3,690
|
FINRA filing fee
|
| |
2,000
|
Accounting fees and expenses
|
| |
20,000
|
Legal fees and expenses
|
| |
175,000
|
Printing expenses
|
| |
2,000
|
Transfer Agent fees and expenses
|
| |
3,000
|
Miscellaneous fees and expenses
|
| |
25,000
|
Total expenses
|
| |
$230,690
|
Item 14.
|
Indemnification of Directors and Officers.
|
Item 15.
|
Recent Sales of Unregistered Securities.
|
Item 16.
|
Exhibits and Financial Statement Schedules.
|
(a)
|
Exhibits
|
Exhibit No.
|
| |
Description
|
| |
Form of Placement Agent Agreement.
|
|
|
| |
|
2.1*
|
| |
Business Combination Agreement, dated as of August 1, 2023, by and among
PROOF Acquisition Corp I, PACI Merger Corp, Inc., and Volato, Inc. (included as Annex A to PROOF Acquisition Corp I’s Registration Statement on Form S-4 (File No. 333-274082), filed with the Securities and Exchange Commission on
August 18, 2023).
|
|
| |
|
3.1*
|
| |
Second Amended and Restated Certificate of Incorporation of Volato Group,
Inc. (included as Annex B to PROOF Acquisition Corp I’s Registration Statement on Form S-4 (File No. 333-274082), filed with the Securities and Exchange Commission on August 18, 2023).
|
|
| |
|
3.2*
|
| |
Second Amended and Restated Bylaws of PROOF Acquisition Corp I
(incorporated by reference to Exhibit 3.5 to PROOF Acquisition Corp I’s Registration Statement on Form S-4 (File No. 333-274082), filed with the Securities and Exchange Commission on August 18, 2023).
|
|
| |
|
4.1*
|
| |
Specimen Class A Common Stock Certificate of Volato Group, Inc
(incorporated by reference herein from the Company’s Current Report on Form 8-K filed with the SEC on December 7, 2023).
|
Exhibit No.
|
| |
Description
|
| |
Description of Capital Stock (incorporated by reference to Exhibit 4.4 to
our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 26, 2024).
|
|
|
| |
|
| |
Form of Pre-Funded Warrant issued in connection with this Offering.
|
|
|
| |
|
| |
Form of Common Stock Warrant issued in connection with this Offering.
|
|
|
| |
|
| |
Form of Securities Purchase Agreement issued in connection with this
Offering.
|
|
|
| |
|
| |
Form of Lock-Up Agreement.
|
|
|
| |
|
| |
Opinion of Womble Bond Dickinson (US) LLP.
|
|
|
| |
|
| |
Volato Group, Inc. 2023 Stock Incentive Plan (incorporated by reference
to Exhibit 10.1 to our Registration Statement on Form S-8 (File No. 333-276874), filed with the Securities and Exchange Commission on February 5, 2024).
|
|
|
| |
|
| |
Volato, Inc. 2021 Equity Incentive Plan (incorporated by reference to
Exhibit 10.2 to our Registration Statement on Form S-8 (File No. 333-276874), filed with the Securities and Exchange Commission on February 5, 2024).
|
|
|
| |
|
| |
Employment Agreement, dated December 1, 2023, between Volato Group, Inc.,
Volato, Inc. and Nicholas Cooper (incorporated by reference herein from the Company’s Current Report on Form 8-K filed with the SEC on December 7, 2023).
|
|
|
| |
|
| |
Employment Agreement, dated December 1, 2023, between Volato Group, Inc.,
Volato, Inc. and Steven Drucker (incorporated by reference herein from the Company’s Current Report on Form 8-K filed with the SEC on December 7, 2023).
|
|
|
| |
|
| |
Employment Agreement, dated December 1, 2023, between Volato Group, Inc.,
Volato, Inc. and Mark Heinen (incorporated by reference herein from the Company’s Current Report on Form 8-K filed with the SEC on December 7, 2023).
|
|
|
| |
|
| |
Employment Agreement, dated December 1, 2023, between Volato Group, Inc.,
Volato, Inc. and Matthew Liotta (incorporated by reference herein from the Company’s Current Report on Form 8-K filed with the SEC on December 7, 2023).
|
|
|
| |
|
| |
Employment Agreement, dated December 1, 2023, between Volato Group, Inc.,
Volato, Inc. and Michael Prachar (incorporated by reference herein from the Company’s Current Report on Form 8-K filed with the SEC on December 7, 2023).
|
|
|
| |
|
| |
Employment Agreement, dated December 1, 2023, between Volato Group, Inc.,
Volato, Inc. and Keith Rabin (incorporated by reference herein from the Company’s Current Report on Form 8-K filed with the SEC on December 7, 2023).
|
|
|
| |
|
10.9*
|
| |
Form of Amended and Restated Registration Rights Agreement, dated
December 1, 2023, by and among PROOF Acquisition Corp I, PROOF Acquisition Sponsor I, LLC and certain other securities holders named therein (incorporated by reference herein from the Company’s Current Report on Form 8-K filed with
the SEC on December 7, 2023).
|
|
| |
|
Exhibit No.
|
| |
Description
|
| |
Form of Lock-up Agreement ((incorporated by reference to Exhibit 10.13 to
PROOF Acquisition Corp I’s Registration Statement on Form S-4 (File No. 333-274082), filed with the Securities and Exchange Commission on August 18, 2023).
|
|
|
| |
|
| |
Pre-Delivery Payment Agreement, dated effective as of October 5, 2022, by
and between Volato, Inc. and SAC Leasing V280, LLC (incorporated by reference herein from the Company’s Current Report on Form 8-K filed with the SEC on December 7, 2023).
|
|
|
| |
|
| |
Form of Employee Invention Assignment, Restrictive Covenants, and
Confidentiality Agreement (incorporated by reference herein from the Company’s Current Report on Form 8-K filed with the SEC on January 16, 2024).
|
|
|
| |
|
| |
Consent of Rose Snyder Jacobs, LLP
|
|
|
| |
|
| |
Consent of Womble Bond Dickinson (US) LLP (included as part of Exhibit 5.1).
|
|
|
| |
|
| |
Power of Attorney (included on signature page of this Registration
Statement).
|
|
|
| |
|
101.INS**
|
| |
XBRL Instance Document-this instance document does not appear in the
Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
| |
|
101.SCH**
|
| |
XBRL Taxonomy Extension Schema Document.
|
|
| |
|
101.CAL**
|
| |
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
| |
|
101.DEF**
|
| |
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
| |
|
101.LAB**
|
| |
XBRL Taxonomy Extension Label Linkbase Document.
|
|
| |
|
101.PRE**
|
| |
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
| |
|
104**
|
| |
Cover Page Interactive Data File (formatted as inline XBRL and contained in
Exhibit 101).
|
|
| |
|
| |
Filing Fee Table.
|
*
|
Previously filed.
|
**
|
Filed herewith.
|
#
|
Indicates management contract or compensatory plan or arrangement.
|
(b)
|
Financial Statements. The financial statements filed as part of this registration statement are listed in the index to the
financial statements immediately preceding such financial statements, which index to the financial statements is incorporated herein by reference.
|
Item 17.
|
Undertakings.
|
(1)
|
To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration
Statement:
|
(i)
|
To include any prospectus required by section 10(a)(3) of the Securities Act.
|
(ii)
|
To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement.
|
(iii)
|
To include any material information with respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration Statement.
|
(2)
|
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
(3)
|
To remove from registration by means of a post-effective amendment any of the Common Stock being registered which remain
unsold at the termination of the offering.
|
(4)
|
That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in
the Registration Statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the Registration Statement or made in a document
incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the Registration Statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or
modify any statement that was made in the registration statement or prospectus that was part of the Registration Statement or made in any such document immediately prior to such date of first use.
|
(5)
|
That, for the purpose of determining our liability under the Securities Act to any purchaser in the initial distribution of
the Common Stock, we undertake that in a primary offering of the Common Stock pursuant to this Registration Statement, regardless of the underwriting method used to sell the Common Stock to the purchaser, if the Common Stock is offered
or sold to such purchaser by means of any of the following communications, we will be a seller to the purchaser and will be considered to offer or sell the Common Stock to such purchaser:
|
(i)
|
Any preliminary prospectus or prospectus of us relating to the offering required to be filed pursuant to Rule 424;
|
(ii)
|
Any free writing prospectus relating to the offering prepared by or on behalf of us or used or referred to by us;
|
(iii)
|
The portion of any other free writing prospectus relating to the offering containing material information about us or the
Common Stock provided by or on behalf of us; and
|
(iv)
|
Any other communication that is an offer in the offering made by us to the purchaser.
|
|
| |
VOLATO GROUP, INC.
|
|||
|
| |
By:
|
| |
/s/ Matthew Liotta
|
|
| |
Name:
|
| |
Matthew Liotta
|
|
| |
Title:
|
| |
Chief Executive Officer
|
Name
|
| |
Title
|
| |
Date
|
|||
/s/ Matthew Liotta
|
| |
Chief Executive Officer and Director
(Principal Executive Officer)
|
| |
July 16, 2024
|
|||
Matthew Liotta
|
| ||||||||
|
| |
|
| |
|
|||
*
|
| |
Chief Financial Officer
(Principal Financial and Accounting
Officer)
|
| |
July 16, 2024
|
|||
Mark Heinen
|
| ||||||||
|
| |
|
| |
|
|||
*
|
| |
Director
|
| |
July 16, 2024
|
|||
Christopher Burger
|
| ||||||||
|
| |
|
| |
|
|||
*
|
| |
Chief Commercial Officer and Director
|
| |
July 16, 2024
|
|||
Nicholas Cooper
|
| ||||||||
|
| |
|
| |
|
|||
*
|
| |
Director
|
| |
July 16, 2024
|
|||
Michael Nichols
|
| ||||||||
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
* By:
|
| |
/s/ Matthew Liotta
|
| |
|
| |
|
|
| |
Matthew Liotta
Attorney-in-fact
|
| |
|
| |
|
Exhibit 4.5
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of [ ], 2024, between Volato Group, Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities Act (as defined below), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:
“Acquiring Person” shall have the meaning ascribed to such term in Section 4.5.
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day other than Saturday, Sunday, or other day on which banking institutions in the State of New York are authorized or required by law to remain closed.
“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount at the Closing and (ii) the Company’s obligations to deliver the Securities, in each case, at the Closing have been satisfied or waived, but in no event later than the second (2nd) Trading Day following the date hereof.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means common stock of the Company, par value $0.0001 per share.
“Common Warrants” means, the common warrants to be delivered to the Purchasers at the Closing in accordance with Section 2.2(a)(iv) hereof, in the form of Exhibit A attached hereto.
“Company Counsel” means Womble Bond Dickinson (US) LLP, with offices located at 2001 K Street, NW, Suite 400 South, Washington, D.C. 20006.
“Disclosure Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.
“Disclosure Time” means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York City time) and before midnight (New York City time) on any Trading Day, 9:01 a.m. (New York City time) on the Trading Day immediately following the date hereof, unless otherwise instructed as to an earlier time by the Placement Agent, and (ii) if this Agreement is signed between midnight (New York City time) and 9:00 a.m. (New York City time) on any Trading Day, no later than 9:01 a.m. (New York City time) on the date hereof, unless otherwise instructed as to an earlier time by the Placement Agent.
“DVP” shall have the meaning ascribed to such term in Section 2.1(v).
“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1€.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exempt Issuance” means the issuance of (a) shares of Common
Stock, restricted stock units or options to employees, consultants, officers, or directors of the Company pursuant to any share or option plan in existence as of the date hereof or subsequently approved by a vote of the stockholders of the Company,
provided that such issuances to consultants are issued as “restricted securities” (as defined in Rule 144), (b) shares of Common Stock upon the exercise or exchange of or conversion of securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange
price or conversion price of such securities or to extend the term (but not, for purposes of clarity, the exercise period of stock options) of such securities, (c) securities issued pursuant to acquisitions or strategic transactions approved by a
majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in
connection therewith during the prohibition period in Section 4.10(a) herein, and provided that any such issuance shall only be to a Person (or to the equity holders of a Person), which is, itself or through its subsidiaries, an operating company or
an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities (for avoidance of doubt, securities issued to a venture arm of a strategic investor shall be deemed an “Exempt Issuance”),
provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights during the prohibition period in Section 4.10(a) herein, (d) issuances of shares of Common Stock to consultants or vendors
of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights during the prohibition period in Section 4.10(a) herein; (e) issuances of shares of Common Stock to existing
holders of the Company’s securities in compliance with the terms of agreements entered into with, or instruments issued to, such holders, provided that such agreements regarding such securities have not been amended since the date of this Agreement
to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities or to extend the term of such securities, except as provided under the existing terms of such agreement and (f)
shares of Common Stock issued to one or more lenders in connection with the Company's entry into a debt financing transaction pursuant to which the Company grants such lenders liens on some or substantially all of the Company's assets and shares of
Common Stock issuable to such lenders upon certain events of default under such debt financing transaction.
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
“GAAP” means generally accepted accounting principles in the United States.
“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(aa).
“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).
“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Lock-Up Agreement” means each Lock-Up Agreement, dated as of the date hereof, by and among the Company and the directors and officers of the Company, in the form of Exhibit C attached hereto.
“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).
“Per Share Purchase Price” equals $[ ], subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of shares of Common Stock that occur between the date hereof and the Closing Date.
“Per Pre-Funded Warrant Purchase Price” equals the Per Share Purchase Price less $0.0001, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions relating to shares of Common Stock that occur after the date of this Agreement.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Placement Agent” means A.G.P./Alliance Global Partners.
“Placement Agent Counsel” means Pryor Cashman LLP, with offices located at 7 Times Square, New York, NY 10036.
“Pre-Funded Warrants” means, collectively, the warrants delivered to the Purchasers at Closing in accordance with Section 2.2(a)(iv) hereof, which Pre-Funded Warrants shall be exercisable immediately upon issuance and shall expire in accordance with the terms thereof, in the form of Exhibit B attached hereto.
“Preliminary Prospectus” means the preliminary prospectus included in the Registration Statement at the time the Registration Statement is declared effective.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Prospectus” means the final prospectus filed pursuant to the Registration Statement.
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.
“Registration Statement” means the effective registration statement with the Commission on Form S-1 (File No. 333-278913), which registers the sale of the Securities and includes any Rule 462(b) Registration Statement.
“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(c).
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 462(b) Registration Statement” means any registration statement prepared by the Company registering additional Securities, which was filed with the Commission on or prior to the date hereof and became automatically effective pursuant to Rule 462(b) promulgated by the Commission pursuant to the Securities Act.
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
“Securities” means the Shares, the Warrants and the Warrant Shares.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Shares” means the shares of Common Stock issued and issuable to each Purchaser pursuant to this Agreement.
“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include locating and/or borrowing shares of Common Stock).
“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for shares of Common Stock, and Pre-Funded Warrants, purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.
“Subsidiary” means any subsidiary of the Company as set forth in the SEC Reports and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the shares of Common Stock are listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the Warrants, the Lock-Up Agreements and all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent” means Continental Stock Transfer & Trust Company, the current transfer agent of the Company, with a mailing address at 1 State Street, 30th Floor, New York, NY, 10004.
“Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.10(b).
“Warrants” means the Common Warrants and the Pre-Funded Warrants.
“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, (i) the number of shares of Common Stock set forth under the heading “Subscription Amount” on the Purchaser’s signature page hereto, at the Per Share Purchase Price, and (ii) Common Warrants exercisable for shares of Common Stock as calculated pursuant to 2.2(a); provided, however, that, to the extent that a Purchaser determines, in its sole discretion, that such Purchaser (together with such Purchaser’s Affiliates, and any Person acting as a group together with such Purchaser or any of such Purchaser’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation, or as such Purchaser may otherwise choose, in lieu of purchasing shares of Common Stock, such Purchaser may elect to purchase Pre-Funded Warrants in lieu of shares of Common Stock in such manner to result in the full Subscription Amount being paid by such Purchaser to the Company. The “Beneficial Ownership Limitation” shall be 4.99% (or, at the election of the Purchaser, 9.99%) of the number of shares of Common Stock, in each case, outstanding immediately after giving effect to the issuance of the Securities on the Closing Date.
Each Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser shall be made available for Delivery Versus Payment (“DVP”) settlement with the Company or its designees. The Company shall deliver to each Purchaser its respective Shares and Warrants as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the office of the Placement Agent or such other location as the parties shall mutually agree. Unless otherwise directed by the Placement Agent, settlement of the Shares shall occur via DVP (i.e., on the Closing Date, the Company shall issue the Shares registered in the Purchasers’ names and addresses and released by the Transfer Agent directly to the account(s) at the Placement Agent identified by each Purchaser; upon receipt of such Shares, the Placement Agent shall promptly electronically deliver such Shares to the applicable Purchaser, and payment therefor shall be made by the Placement Agent (or its clearing firm) by wire transfer to the Company). Notwithstanding anything herein to the contrary, if at any time on or after the time of execution of this Agreement by the Company and an applicable Purchaser through the Closing (the “Pre-Settlement Period”), such Purchaser sells to any Person all, or any portion, of any Shares to be issued hereunder to such Purchaser at the Closing (collectively, the “Pre-Settlement Shares”), such Person shall, automatically hereunder (without any additional required actions by such Purchaser or the Company), be deemed to be a Purchaser under this Agreement unconditionally bound to purchase, and the Company shall be deemed unconditionally bound to sell, such Pre-Settlement Shares to such Person at the Closing; provided, that the Company shall not be required to deliver any Pre-Settlement Shares to such Purchaser prior to the Company’s receipt of the Subscription Amount for such Pre-Settlement Shares hereunder; provided, further, that the Company hereby acknowledges and agrees that the forgoing shall not constitute a representation or covenant by such Purchaser as to whether or not such Purchaser will elect to sell any Pre-Settlement Shares during the Pre-Settlement Period. The decision to sell any Shares will be made in the sole discretion of such Purchaser from time to time, including during the Pre-Settlement Period. Notwithstanding the foregoing, with respect to any Notice(s) of Exercise (as defined in the Warrants) delivered on or prior to 12:00 p.m. (New York City time) on the Closing Date, which may be delivered at any time after the time of execution of this Agreement, the Company agrees to deliver the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Closing Date and the Closing Date shall be the Warrant Share Delivery Date (as defined in the Warrants) for purposes hereunder.
2.2 Deliveries.
(a) | On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following: |
(i) | this Agreement duly executed by the Company; |
(ii) | the Company’s wire instructions, on Company letterhead and executed by the Company’s Chief Executive Officer or Chief Financial Officer; |
(iii) | subject to the third sentence in Section 2.1, a copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver on an expedited basis via The Depository Trust Company Deposit or Withdrawal at Custodian system shares of Common Stock equal to the portion of such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser; |
(iv) | for each Purchaser of Pre-Funded Warrants pursuant to Section 2.1, a Pre-Funded Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to the portion of such Purchaser’s Subscription Amount applicable to Pre-Funded Warrants divided by the sum of the Per Pre-Funded Warrant Purchase Price plus the exercise price per Warrant Share underlying such Pre-Funded Warrants, subject to adjustment therein; |
(v) | the Preliminary Prospectus and the Prospectus (which may be delivered in accordance with Rule 172 under the Securities Act); |
(vi) | a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to [ ]% of such Purchaser’s shares of Common Stock or Pre-Funded Warrants, as applicable, with an exercise price equal to $[ ] per share, subject to adjustment therein; |
(viii) | the duly executed Lock-Up Agreements; |
(ix) | a certificate executed by the Chief Executive Officer and Chief Financial Officer of the Company, dated as of the date of the Closing Date, in form and substance reasonably acceptable to the Placement Agent; |
(x) | a certificate executed by the Secretary of the Company, dated as of the date of Closing, in form and substance reasonable acceptable to the Placement Agent; and |
(xi) | a legal opinion of Company Counsel, in form reasonably acceptable to the Placement Agent and the Purchasers. |
(b) | On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company, the following: |
(i) | this Agreement duly executed by such Purchaser; and |
(ii) | such Purchaser’s Subscription Amount with respect to the Securities purchased by such Purchaser, which shall be made available for DVP settlement with the Company or its designees. |
2.3 Closing Conditions.
(a) | The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met: |
(i) | the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date); |
(ii) | all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and |
(iii) | the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement. |
(b) | The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met: |
(i) | the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein in which case they shall be accurate as of such date); |
(ii) | all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed; |
(iii) | the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement; |
(iv) | there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and |
(v) | from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or any Trading Market, and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred after the date of this Agreement any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing. |
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation made herein to the extent of the disclosures contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:
(a) | Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary, free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded. |
(b) | Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing, and, if applicable under the laws of the jurisdiction in which they are formed, in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective memorandum of association, articles of association, certificate or articles of incorporation, bylaws, operating agreement, or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification. |
(c) | Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors, a committee of the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law. |
(d) | No Conflicts. Except as set forth in Schedule 3.1(d), the execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s memorandum of association, articles of association, certificate or articles of incorporation, bylaws, operating agreement, or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, anti-dilution or similar adjustments acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect. |
(e) | Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus, (iii) notices and/or application(s) to and approvals by each applicable Trading Market for the listing of the applicable Securities for trading thereon in the time and manner required thereby, and (iv) filings required by the Financial Industry Regulatory Authority (“FINRA”) (collectively, the “Required Approvals”). |
(f) | Issuance of the Securities; Registration. The Shares and Warrant Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and non-assessable, free and clear of all Liens imposed by the Company. The Warrants are duly authorized and, when issued in accordance with this Agreement, will be duly and validly issued, fully paid and non-assessable, and free and clear of all Liens imposed by the Company. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement and the Warrants. The Company has prepared and filed the Registration Statement in conformity with the requirements of the Securities Act, including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement. The Registration Statement, which Registration Statement became effective on [ ], 2024, is effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Preliminary Prospectus or the Prospectus has been issued by the Commission and no proceedings for that purpose have been instituted or, to the knowledge of the Company, are threatened by the Commission. The Company, if required by the rules and regulations of the Commission, shall file the Preliminary Prospectus or Prospectus with the Commission pursuant to Rule 424(b). At the time the Registration Statement and any amendments thereto became effective as determined under the Securities Act, at the date of this Agreement and at the Closing Date, the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Preliminary Prospectus, Prospectus and any amendments or supplements thereto, at the time the Preliminary Prospectus, the Prospectus or any amendment or supplement thereto was issued and at the Closing Date, conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. |
(g) | Capitalization. The capitalization of the Company as of the date hereof is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. The Company has not issued any shares since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans or the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans. Except as set forth on Schedule 3.1(g), no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth on Schedule 3.1(g) and as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or securities convertible, exercisable or exchangeable into shares of Common Stock (“Common Stock Equivalents”). The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other securities to any Person (other than the Purchasers). Except as set forth on Schedule 3.1(g), there are no outstanding securities or instruments of the Company or any Subsidiary with any provision that adjusts the exercise, conversion, exchange or reset price under any of such securities. There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any share appreciation rights or “phantom share” plans or agreements or any similar plan or agreement. All of the outstanding shares of the Company are duly authorized, validly issued, fully paid and non-assessable, have been issued in compliance with all federal and state securities laws where applicable, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Except for the Required Approvals, no further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s share capital to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders. |
(h) | SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the one year preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such materials) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with the Preliminary Prospectus and the Prospectus, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with GAAP, except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. |
(i) | Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest financial statements included within the SEC Reports, except as set forth on Schedule 3.1(i), (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and strategic acquisitions and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any of its shares and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company share option plans. Except for the issuance of the Securities contemplated by this Agreement or as set forth on Schedule 3.1(i), no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date that this representation is made. |
(j) | Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents, the Shares or the Warrant Shares (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty, which could result in a Material Adverse Effect. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act. |
(k) | Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all applicable U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. |
(l) | Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case of (i), (ii) and (iii) as could not have or reasonably be expected to result in a Material Adverse Effect. |
(m) | Environmental Laws. The Company and its Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. |
(n) | Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such certificates, authorizations or permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. |
(o) | Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance in all material respects. |
(p) | Intellectual Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement except as would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has no knowledge of any facts that would preclude it from having valid license rights or clear title to the Intellectual Property Rights. The Company has no knowledge that it lacks or will be unable to obtain any rights or licenses to use all Intellectual Property Rights that are necessary to conduct its business. |
(q) | Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage in an amount deemed commercially reasonable. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost. |
(r) | Transactions with Affiliates and Employees. Except as set forth on Schedule 3.1(r), none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company or a Subsidiary and (iii) other employee benefits, including share option agreements under any share option plan of the Company. |
(s) | Sarbanes-Oxley; Internal Accounting Controls. The Company and the Subsidiaries are in material compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(c) and 15d-15(c)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed Form 10-Q under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed Form 10-Q under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Except as set forth on Schedule 3.1(s), since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries. |
(t) | Certain Fees. Except for fees payable to the Placement Agent, no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents (for the avoidance of doubt, the foregoing shall not include any fees and/or commissions owed to the Transfer Agent). Other than for Persons engaged by any Purchaser, if any, the Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents. |
(u) | Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended. |
(v) | Registration Rights. No Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiary. |
(w) | Listing and Maintenance Requirements. The shares of Common Stock are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. Except as previously disclosed in the SEC Reports, the Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently eligible for electronic transfer through The Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees to The Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer. |
(x) | Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s articles of incorporation or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities. |
(y) | Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Preliminary Prospectus or Prospectus. The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve (12) months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and believes, to its best knowledge, that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof. |
(z) | No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of any applicable stockholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated. |
(aa) | Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances, which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(aa) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed by the Company in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others to third parties, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness. |
(bb) | Tax Compliance. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, or as set forth on Schedule 3.1(bb), the Company and its Subsidiaries each (i) has made or filed all federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges, fines or penalties that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its financial statements provision reasonably adequate for the payment of all material tax liability of which has not been finally determined and all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim. |
(cc) | Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA. |
(dd) | Accountants. The Company’s independent registered public accounting firm is as set forth in the Prospectus. To the knowledge and belief of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal year ended December 31, 2024. |
(ee) | Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives. |
(ff) | Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.12 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Shares for any specified term; (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the shares of Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the shares of Common Stock are outstanding, and (z) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents. |
(gg) | Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the shares of Common Stock, (ii) except as previously disclosed in the SEC Reports, sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the shares of Common Stock, or (iii) except as previously disclosed in the SEC Reports, paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Placement Agent in connection with the placement of the shares of Common Stock and Warrants. |
(hh) | Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. The Company’s execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby will not (A) result in a material violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental entity as of the date hereof, (B) conflict with, result in any violation or breach of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) (a “Default Acceleration Event”) of, any agreement, lease, credit facility, debt, note, bond, mortgage, indenture or other instrument (“Contract”) or obligation or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, except to the extent that such conflict, default, or Default Acceleration Event is not reasonably likely to result in a Material Adverse Effect, or (C) result in a breach or violation of any of the terms and provisions of, or constitute a default under, the Company’s articles of incorporation (as the same may be amended or restated from time to time) or bylaws (as the same may be amended or restated from time to time). The Company is not in violation, breach or default under its articles of incorporation (as the same may be amended or restated from time to time) or bylaws (as the same may be amended or restated from time to time). Neither the Company nor, to its knowledge, any other party is in violation, breach or default of any Contract that has resulted in or could reasonably be expected to result in a Material Adverse Effect. Each approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body necessary in connection with the execution and delivery by the Company of this Agreement and the performance of the Company of the transactions herein contemplated has been obtained or made and is in full force and effect, except filings with the Commission required under the Securities Act or the Exchange Act, or filings with the Exchange pursuant to the rules and regulations of the Exchange, in each case that are contemplated by this Agreement to be made after the date of this Agreement. |
(ii) | Stock Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance with the terms of the Company’s stock option plan and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects. |
(jj) | Cybersecurity. (i)(x) To the best of the Company’s knowledge, there has been no security breach or other compromise of or relating to any of the Company’s or any Subsidiary’s information technology and computer systems, networks, hardware, software, data (including the data of its respective customers, employees, suppliers, vendors and any third party data maintained by or on behalf of it), equipment or technology (collectively, “IT Systems and Data”) and (y) the Company and the Subsidiaries have not been notified of, and has no knowledge of any event or condition that would reasonably be expected to result in, any security breach or other compromise to its IT Systems and Data; (ii) the Company and the Subsidiaries are presently in compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification, except as would not, individually or in the aggregate, have a Material Adverse Effect; (iii) the Company and the Subsidiaries have implemented and maintained commercially reasonable safeguards to maintain and protect its material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and Data; and (iv) the Company and the Subsidiaries have implemented backup and disaster recovery technology consistent with commercially reasonable industry standards and practices. |
(kk) | Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”). |
(ll) | U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon the Purchasers’ request. |
(mm) | Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. |
(nn) | Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened. |
(oo) | Promotional Stock Activities. Neither the Company nor any Subsidiary of the Company and none of their respective officers, directors, managers, affiliates or agents have engaged in any stock promotional activity that could give rise to a complaint, inquiry, or trading suspension by the SEC alleging (i) a violation of the anti-fraud provisions of the federal securities laws, (ii) violations of the anti-touting provisions, (iii) improper “gun-jumping”; or (iv) promotion without proper disclosure of compensation. |
3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):
(a) | Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law. |
(b) | Understandings or Arrangements. Such Purchaser is acquiring the Securities as principal for its own account and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws). |
(c) | Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises any Warrants, it will be either (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act, or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. |
(d) | Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. |
(e) | Access to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Such Purchaser acknowledges and agrees that neither the Placement Agent nor any Affiliate of the Placement Agent has provided such Purchaser with any information or advice with respect to the Securities nor is such information or advice necessary or desired. Neither the Placement Agent nor any Affiliate has made or makes any representation as to the Company or the quality of the Securities and the Placement Agent and any Affiliate may have acquired non-public information with respect to the Company which such Purchaser agrees need not be provided to it. In connection with the issuance of the Securities to such Purchaser, neither the Placement Agent nor any of its Affiliates has acted as a financial advisor or fiduciary to such Purchaser. |
(f) | Certain Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms, which terms include definitive pricing terms, of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement or to such Purchaser’s representatives, including, without limitation, its officers, directors, partners, legal and other advisors, employees, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares order to effect Short Sales or similar transactions in the future. |
(g) | No Voting Agreements. The Purchaser is not a party to any agreement or arrangement, whether written or oral, between the Purchaser and any other Purchaser and any of the Company’s stockholders as of the date hereof, regulating the management of the Company, the stockholders’ rights in the Company, the transfer of shares in the Company, including any voting agreements, stockholder agreements or any other similar agreement even if its title is different or has any other relations or agreements with any of the Company’s stockholders, directors or officers. |
(h) | Brokers. Except as set forth on Schedule 3.2(h) or in the Preliminary Prospectus or Prospectus, no agent, broker, investment banker, person or firm acting in a similar capacity on behalf of or under the authority of the Purchaser is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, for which the Company or any of its Affiliates after the Closing could have any liabilities in connection with this Agreement, any of the transactions contemplated by this Agreement, or on account of any action taken by the Purchaser in connection with the transactions contemplated by this Agreement. |
(i) | Independent Advice. Each Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to the Purchaser in connection with the purchase of the Securities constitutes legal, tax or investment advice. |
The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, except as set forth in this Agreement, with respect to locating or borrowing shares in order to effect Short Sales or similar transactions in the future.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Legends. The shares of Common Stock and, if all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the issuance or resale of the Warrant Shares or if the Warrant is exercised via cashless exercise, the Warrant Shares shall be issued free of legends. If at any time following the date hereof the Registration Statement is not effective or is not otherwise available for the sale of the shares of Common Stock, the Warrants or the Warrant Shares, the Company shall immediately notify the holders of the Warrants in writing that such registration statement is not then effective and thereafter shall promptly notify such holders when the registration statement is effective again and available for the sale of the Shares, the Warrants or the Warrant Shares (it being understood and agreed that the foregoing shall not limit the ability of the Company to issue, or any Purchaser to sell, any of the Shares, the Warrants or the Warrant Shares in compliance with applicable federal and state securities laws). The Company shall use commercially reasonable best efforts to keep a registration statement (including the Registration Statement) registering the issuance of the Warrant Shares effective during the term of the Warrants.
4.2 Furnishing of Information; Public Information. Until the earliest of the time that (i) no Purchaser owns Securities, or (ii) the Common Warrants have expired, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act.
4.3 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require stockholder approval prior to the closing of such other transaction unless stockholder approval is obtained before the closing of such subsequent transaction.
4.4 Securities Laws Disclosure; Publicity. The Company shall (a) by the Disclosure Time, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the Exchange Act. From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries or Affiliates, or any of their respective officers, directors, employees or agents, including, without limitation, the Placement Agent, in connection with the transactions contemplated by the Transaction Documents. In addition, effective upon the issuance of such press release, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates, including, without limitation, the Placement Agent, on the one hand, and any of the Purchasers or any of their Affiliates on the other hand, with respect to the transactions contemplated hereby shall terminate and be of no further force or effect. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection with the filing of final Transaction Documents with the Commission, and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b).
4.5 Stockholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.
4.6 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, which shall be disclosed pursuant to Section 4.4, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company reasonably believes constitutes material non-public information, unless prior thereto such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates delivers any material, non-public information to a Purchaser without such Purchaser’s consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a duty to the Company, and of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not to trade on the basis of, such material, non-public information, provided that the Purchaser shall remain subject to applicable law. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
4.7 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and general corporate purposes as well for the satisfaction of any portion of the Company’s debt, and shall not use such proceeds: (a) for the redemption of any shares of Common Stock or Common Stock Equivalents; (b) for the settlement of any outstanding litigation; or (c) in violation of FCPA or OFAC regulations or similar applicable regulations.
4.8 Indemnification of Purchasers. Subject to the provisions of this Section 4.8, the Company will indemnify and hold each Purchaser and its directors, officers, stockholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, stockholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against a Purchaser Party in any capacity (including a Purchaser Party’s status as an investor), or any of them or their respective Affiliates, by the Company or any stockholder of the Company who is not an Affiliate of such Purchaser Party, arising out of or relating to any of the transactions contemplated by the Transaction Documents. For the avoidance of doubt, the indemnification provided herein is intended to, and shall also cover, direct claims brought by the Company against any Purchaser Parties; provided, however, that such indemnification shall not cover any loss, claim, damage or liability to the extent it is finally judicially determined to be attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in any Transaction Document or any conduct by a Purchaser Party which is finally judicially determined to constitute fraud, gross negligence or willful misconduct). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and, except with respect to direct claims brought by the Company, the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel to the applicable Purchaser Party (which may be internal counsel), a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed, or the extent that a loss, claim, damage, or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made. In addition, if any Purchaser Party take action to collect amounts due under any Transaction Documents or to enforce the provisions of any Transaction Documents, then the Company shall pay the costs incurred by such Purchaser Party for such collection, enforcement or action, including, but not limited to, attorneys’ fees and disbursements. The indemnification and other payment obligations required by this Section 4.8 shall be made by periodic payments of the amount thereof during the course of the investigation, defense, collection, enforcement or action, as and when bills are received or are incurred; provided, that if any Purchaser Party is finally judicially determined not to be entitled to indemnification or payment under this Section 4.8, such Purchaser Party shall promptly reimburse the Company for any payments that are advanced under this sentence. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
4.9 Listing of Common Stock. The Company hereby agrees to use commercially reasonable best efforts to maintain the listing or quotation of the shares of Common Stock on each Trading Market on which each is currently listed, and concurrently with the Closing, the Company shall apply to list or quote all of the Shares and Warrant Shares on such Trading Markets and promptly secure the listing of all of the Shares and Warrant Shares on such Trading Markets. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will then include in such application all of the Shares and Warrant Shares, and will take such other action as is necessary to cause all of the Shares and Warrant Shares to be listed or quoted on such other Trading Market as promptly as possible. The Company will then take all action reasonably necessary to continue the listing and trading of the Common Stock on a Trading Market and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market. The Company agrees to use commercially reasonable efforts to maintain the eligibility of the electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.
4.10 Subsequent Equity Sales.
(a) | From the date hereof until ninety (90) days after the Closing Date, neither the Company nor any Subsidiary shall (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents or (ii) file any registration statement or amendment or supplement thereto, other than the Prospectus, or filing a registration statement on Form S-8 in connection with any employee benefit plan, or filing required to maintain the effectiveness of an effective registration statement. |
(b) | From the date hereof until [ ] ([ ]) days after the Closing Date, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its Subsidiaries of shares of Common Stock or Common Stock Equivalents (or a combination of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the shares of Common Stock, or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit or an “at-the-market offering”, whereby the Company may issue securities at a future determined price regardless of whether shares pursuant to such agreement have actually been issued and regardless of whether such agreement is subsequently cancelled; provided, however, that after forty five (45) days after the Closing Date, the entry into and/or issuance of shares of Common Stock in an “at-the-market” offering with the Placement Agent as sales agent shall not be deemed a Variable Rate Transaction. Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages. |
(c) | Notwithstanding the foregoing, this Section 4.10 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance. |
4.11 Equal Treatment of Purchasers. No consideration (including any modification of the Transaction Documents) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of the shares of Common Stock or otherwise.
4.12 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.4, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules. Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4 and (iii) no Purchaser shall have any duty of confidentiality or duty not to trade in the securities of the Company to the Company, any of its Subsidiaries, or any of their respective officers, directors, employees, Affiliates or agents after the issuance of the initial press release as described in Section 4.4. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.
4.13 Exercise Procedures. The form of Notice of Exercise included in the Warrants set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants. No additional legal opinion, other information or instructions shall be required of the Purchasers to exercise their Warrants. Without limiting the preceding sentences, no ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required in order to exercise the Warrants. The Company shall honor exercises of the Warrants and shall deliver Warrant Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.
4.14 Reservations of Shares. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue shares of Common Stock pursuant to this Agreement and the Warrant Shares pursuant to any exercise of the Common Warrants.
4.15 Lock-Up Agreements. The Company shall not amend, modify, waive or terminate any provision of any of the Lock-Up Agreements (or any substantially similar lock-up agreements signed by transferees of the initial parties to the Lock-Up Agreements) except to extend the term of the lock-up period and shall enforce the provisions of each Lock-Up Agreement (or any substantially similar lock-up agreements signed by transferees of the initial parties to the Lock-Up Agreements) in accordance with its terms. If any party to a Lock-Up Agreement (or any substantially similar lock-up agreements signed by transferees of the initial parties to the Lock-Up Agreements) breaches any provision of such agreement, the Company shall promptly use its best efforts to seek specific performance of the terms of such agreement.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before the fifth (5th) Trading Day following the date hereof; provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).
5.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.
5.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, the Preliminary Prospectus and the Prospectus, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.
5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers who purchased at least 50.1% in interest of the sum of (i) the Shares and (ii) the Pre-Funded Warrant Shares initially issuable upon exercise of the Pre-Funded Warrants based on the initial Subscription Amounts hereunder (or, if prior to Closing, the Company and each Purchaser), or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought; provided, that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or at least 50.1% in interest of such disproportionately impacted Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Securities and the Company.
5.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”
5.8 No Third-Party Beneficiaries. The Placement Agent shall be third-party beneficiary of the representations and warranties of the Company in Section 3.1 and the representations and warranties of the Purchasers in Section 3.2. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.8 and this Section 5.8.
5.9 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, stockholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.8, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
5.10 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities for the applicable statute of limitations.
5.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.
5.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that, in the case of a rescission of an exercise of a Warrant, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).
5.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
5.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
5.17 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each Purchaser and its respective counsel have chosen to communicate with the Company through Placement Agent Counsel. Placement Agent Counsel does not represent any of the Purchasers and only represents the Placement Agent. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.
5.18 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
5.19 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.
5.20 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions relating to shares of Common Stock that occur after the date of this Agreement.
5.21 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
VOLATO GROUP, INC. | Address for Notice: | ||
1954 Airport Road, Suite 124 Chamblee, Georgia 30341 |
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By: | |||
Name: | Email: | ||
Title: | Fax: | ||
With a copy to (which shall not constitute notice): | |||
Womble Bond Dickinson (US) LLP 2001 K Street, NW Suite 400 South Washington, D.C. 20006 |
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Email: reid.avett@wbd-us.com | |||
Attention: Reid Avett | Fax:202-261-0095 |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Purchaser: _____________________________________________________
Signature of Authorized Signatory of Purchaser: ______________________________
Name of Authorized Signatory: _____________________________________________
Title of Authorized Signatory: ______________________________________________
Email Address of Authorized Signatory: _______________________________________
Facsimile Number of Authorized Signatory: ____________________________________
Address for Notice to Purchaser:
Address for Delivery of Warrant Shares to the Purchaser (if not same address for notice):
DWAC for Common Stock:
Subscription Amount: $___________________
Shares of Common Stock: ___________________
Shares of Common Stock underlying the Pre-Funded Warrants: ________
Beneficial Ownership Blocker ☐ 4.99% or ☐ 9.99%
Warrant Shares underlying the Common Warrants: ________
Beneficial Ownership Blocker ☐ 4.99% or ☐ 9.99%
EIN Number: ___________________
☐ Notwithstanding anything contained in this Agreement to the contrary, by checking this box (i) the obligations of the above-signed to purchase the securities set forth in this Agreement to be purchased from the Company by the above-signed, and the obligations of the Company to sell such securities to the above-signed, shall be unconditional and all conditions to Closing shall be disregarded, (ii) the Closing shall occur on the second (2nd) Trading Day following the date of this Agreement and (iii) any condition to Closing contemplated by this Agreement (but prior to being disregarded by clause (i) above) that required delivery by the Company or the above-signed of any agreement, instrument, certificate or the like or purchase price (as applicable) shall no longer be a condition and shall instead be an unconditional obligation of the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate or the like or purchase price (as applicable) to such other party on the Closing Date.
[SIGNATURE PAGES CONTINUE]
Exhibit A
Form of Common Warrant
(See Attached)
Exhibit B
Form of Pre-Funded Warrant
(See Attached)
Exhibit C
Form of Lock-Up Agreement
(See Attached)
36
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Security Type
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Security Class Title(1)
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Fee Calculation or
Carry Forward Rule
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Amount Registered
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Proposed Maximum
Offering Price
Per Unit
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Proposed Maximum
Aggregate Offering
Price(1)(2)
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Fee Rate
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Amount of
Registration Fee
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Newly Registered Securities
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Fees to be Paid
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Fees Previously Paid
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Equity
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Common Stock, $0.0001 par value per share (3)
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Rule 457(o)
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-
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$
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3,767,123.25
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$
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0.00014760
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$
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556.03
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Equity
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Pre-Funded Warrants (4)
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Rule 457(g)
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-
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-
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-
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-
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Equity
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Common Warrants(4)
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Rule 457(g)
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-
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-
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-
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-
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Equity
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Common Stock Underlying Pre-Funded Warrants(3)(5)
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Rule 457(o)
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-
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-
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-
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-
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Equity
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Common Stock Underlying Common Warrants(6)
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Rule 457(o)
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-
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$
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3,767,123.25
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$
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0.00014760
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$
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556.03
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Carry Forward Securities
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Carry Forward Securities
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Total Offering Amounts
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$
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7,534,246.50
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$
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0.00014760
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$
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1,112.06
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Total Fees Previously Paid
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3,690.00
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Total Fees Offsets
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Net Fee Due
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$
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0
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(7)
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(1)
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Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), the shares registered hereby also include
an indeterminate number of additional shares of common stock as may from time to time become issuable by reason of stock splits, distributions, recapitalizations or other similar transactions.
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(2)
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Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(o) under the Securities Act.
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(3)
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The proposed maximum aggregate offering price of the common stock will be reduced on a dollar-for-dollar basis based on the
offering price of any pre-funded warrants issued in the offering, and the proposed maximum aggregate offering price of the pre-funded warrants to be issued in the offering will be reduced on a dollar-for-dollar basis based on the offering
price of any common stock issued in the offering. Accordingly, the proposed maximum aggregate offering price of the common stock and pre-funded warrants (including the common stock issuable upon exercise of the pre-funded warrants), if any,
is $3,767,123.25.
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(4)
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No fee pursuant to Rule 457(g) of the Securities Act.
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(5)
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The registrant may issue pre-funded warrants to purchase common shares in the offering. The purchase price of each pre-funded
warrant will equal the price per share at which shares of common shares are being sold to the public in this offering, minus $0.0001, which constitutes the pre-funded portion of the exercise price, and the remaining unpaid exercise price of
the pre-funded warrant will equal $0.0001 per share (subject to adjustment as provided for therein).
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(6)
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As estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act and based
on an assumed per-share exercise price for the warrants of 100% of the public offering price of the common stock and pre-funded warrants; the proposed maximum aggregate offering price of the common stock and pre-funded warrants is
$3,767,123.25.
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(7)
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A registration fee of $3,690.00 has previously been paid in connection with the initial filing of the Registration Statement, filed
with the Securities and Exchange Commission on April 24, 2024. Accordingly, no registration fee is being paid with this Amendment No. 2 to the Registration Statement.
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