Surf Air Mobility (NYSE: SRFM) posts Q1 2026 loss and flags going concern risk
Surf Air Mobility Inc. reported first-quarter 2026 revenue of $25.6 million, up from $23.5 million a year earlier, as on-demand charter growth offset lower scheduled revenue. The company still posted a net loss of $20.3 million, slightly larger than the $18.5 million loss in 2025, and an operating loss of $13.4 million.
Cash fell to $4.2 million from $12.7 million at year-end, with total assets of $120.8 million against $177.4 million of liabilities and a shareholders’ deficit of $63.2 million. Management discloses substantial doubt about the company’s ability to continue as a going concern, citing working capital deficits, negative operating cash flow and defaults on certain tax and debt obligations.
The company carries a $9.9 million federal excise tax liability and $0.9 million in unpaid property taxes, and is in default on a SAFE-T note. Convertible notes measured at fair value total $58.9 million. To fund operations, Surf Air raised $12 million through draws on a share purchase agreement with GEM, issuing 4.35 million shares, and converted $1.9 million of convertible debt into equity. It also issued 3.51 million shares to the holder of its High Trail Convertible Note in lieu of $6 million in cash payments, with related make-whole and put features.
Strategically, the company amended its aircraft purchase agreement with Textron Aviation, reducing firm Cessna Caravan commitments to four aircraft in 2026, and entered a new agreement with BETA Technologies to buy 25 all-electric CX300 ALIA aircraft, with options for up to 75 more through 2030, representing more than $90 million in future purchase commitments. Management is pursuing cost controls, technology investments and additional financing options but notes that failure to secure capital or meet strategic plans could materially affect its ability to operate.
Positive
- None.
Negative
- Substantial doubt about going concern: Management explicitly states substantial doubt about the company’s ability to continue as a going concern due to recurring losses, negative operating cash flows, working capital deficits, and dependence on external financing.
- Tax and debt defaults: The company is in default on approximately $9.9M of federal excise taxes, about $0.9M of property taxes, and a SAFE-T note, with related IRS liens and ongoing settlement efforts.
- Highly leveraged, dilutive capital structure: Total liabilities of $177.4M include $58.9M of convertible notes at fair value, equity-linked financing through the GEM share purchase agreement, and share issuances in lieu of cash under the High Trail Convertible Note.
Insights
Revenue is growing, but liquidity pressure and tax and debt defaults drive a stressed credit profile.
Surf Air Mobility shows modest top-line growth, with Q1 2026 revenue of $25.6M versus $23.5M a year earlier, and a reduced operating loss. However, the balance sheet and cash flow position remain strained, with only $4.2M in cash and a shareholders’ deficit of $63.2M.
The company reports total liabilities of $177.4M, including $58.9M of convertible notes at fair value and a $9.9M federal excise tax liability recorded in accrued expenses. It is also in default on certain tax obligations and a SAFE-T note. These factors, together with negative operating cash flow of $12.3M, underpin management’s disclosure of substantial doubt about its ability to continue as a going concern.
Funding relies heavily on equity-linked structures, such as a share purchase agreement with GEM that provided $12M of advances in Q1, and share issuances tied to the High Trail Convertible Note. Future disclosures around additional SPA draws, compliance with High Trail covenants, and progress resolving tax liabilities will be important for understanding how the capital structure evolves through 2026 and beyond.
Key Figures
Key Terms
going concern financial
redeemable common stock financial
Essential Air Service regulatory
SAFE-T note financial
High Trail Convertible Note financial
Share Purchase Agreement financial
f
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
[Mark One]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter)
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(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of May 8, 2026,
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements, including statements regarding the Company’s future results of operations and financial position, business strategy and plans and objectives of management for future operations are forward-looking statements. Forward-looking statements may be identified by the use of words such as “estimate,”, “plan,”, “project,”, “forecast,”, “intend,”, “will,”, “expect,”, “anticipate,”, “believe,”, “seek,”, “target,”, “designed to” or other similar expressions that predict or indicate future events or trends, although the absence of these words does not mean that a statement is not forward-looking. The Company cautions readers of this Quarterly Report on Form 10-Q that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond the Company’s control, that could cause the actual results and outcomes, and the timing of actual results and outcomes, to differ materially from the expected results. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of financial and performance metrics, projections of market opportunity and market share, potential benefits and the commercial attractiveness to its customers of the Company’s products and services, the Company’s dependence on third-party partnerships in the development of fully-electric and hybrid-electric powertrains, the potential success of the Company’s marketing and expansion strategies and the Company’s ability to continue as a going concern. These statements are based on various assumptions, whether or not identified in this Quarterly Report on Form 10-Q, and on the current expectations of the Company’s management, and are not predictions of actual results and outcomes. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied upon, by any investor as a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. These forward-looking statements are subject to a number of risks and uncertainties, including:
All forward-looking statements included herein attributable to the Company or any person acting on any party’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, the Company undertakes no obligations to update these forward-looking statements for any reason, including to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.
TABLE OF CONTENTS
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Special Note Regarding Forward Looking Information |
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PART I. |
FINANCIAL INFORMATION |
1 |
Item 1. |
Financial Statements |
1 |
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Unaudited Condensed Consolidated Balance Sheets |
1 |
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Unaudited Condensed Consolidated Statements of Operations |
2 |
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Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Deficit |
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Unaudited Condensed Consolidated Statements of Cash Flows |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
28 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
34 |
Item 4. |
Controls and Procedures |
34 |
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PART II. |
OTHER INFORMATION |
37 |
Item 1. |
Legal Proceedings |
37 |
Item 1A. |
Risk Factors |
37 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
41 |
Item 3. |
Defaults Upon Senior Securities |
41 |
Item 4. |
Mine Safety Disclosures |
41 |
Item 5. |
Other Information |
41 |
Item 6. |
Exhibits |
42 |
Signatures |
43 |
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Surf Air Mobility Inc.
Unaudited Condensed Consolidated Balance Sheets
March 31, 2026 and December 31, 2025
(in thousands, except share and per share data)
(Unaudited)
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March 31, |
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December 31, |
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Assets: |
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Current assets: |
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Cash |
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$ |
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$ |
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Accounts receivable, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Restricted cash |
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Property and equipment, net |
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Intangible assets, net |
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Operating lease right-of-use assets |
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Finance lease right-of-use assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Shareholders’ Deficit: |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Deferred revenue |
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Current maturities of long-term debt |
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Operating lease liabilities, current |
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Finance lease liabilities, current |
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SAFE notes at fair value, current |
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Convertible notes at fair value, current |
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Due to related parties, current |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt, net of current maturities |
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Convertible notes at fair value, long term |
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Operating lease liabilities, long term |
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Finance lease liabilities, long term |
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Due to related parties, long term |
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Other long-term liabilities |
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Total liabilities |
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$ |
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$ |
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Commitments and contingencies (Note 10): |
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Redeemable Common Stock: |
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Common Stock, $ |
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Shareholders’ deficit: |
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Preferred Stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total shareholders’ deficit |
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$ |
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$ |
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Total liabilities, redeemable common stock, and shareholders’ deficit |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
Surf Air Mobility Inc.
Unaudited Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2026 and 2025
(in thousands, except share and per share data)
(Unaudited)
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Three Months Ended March 31, |
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2026 |
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2025 |
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Revenue |
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$ |
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$ |
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Operating expenses: |
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Cost of revenue, exclusive of depreciation and amortization |
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Technology and development |
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Sales and marketing |
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General and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Operating loss |
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$ |
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$ |
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Other income (expense): |
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Changes in fair value of financial instruments carried at fair value, net |
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$ |
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$ |
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Interest expense |
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Gain on extinguishment of debt |
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— |
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Other expense, net |
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Total other income (expense), net |
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$ |
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$ |
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Loss before income taxes |
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Income tax benefit |
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Net loss |
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$ |
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$ |
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Net loss per share applicable to common shareholders, basic and diluted |
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$ |
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$ |
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Weighted-average number of common shares used in net loss per share applicable to common shareholders, basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Surf Air Mobility Inc.
Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Deficit
Three Months Ended March 31, 2026 and 2025
(in thousands, except share data)
(Unaudited)
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Common Shares |
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Number of |
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Amount |
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Additional Paid-In Capital |
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Accumulated |
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Total Shareholders' Deficit |
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Balance at January 1, 2025 |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock related to restricted shares |
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— |
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— |
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— |
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— |
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Issuance of common stock under software license agreement |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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Balance at March 31, 2025 |
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Common Shares |
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Number of |
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Amount |
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Additional Paid-In Capital |
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Accumulated |
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Total Shareholders' Deficit |
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Balance at January 1, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of common stock related to convertible note conversions |
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— |
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— |
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Issuance of common shares under Share Purchase Agreement |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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Balance at March 31, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Surf Air Mobility Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2026 and 2025
(in thousands)
(Unaudited)
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Three Months Ended March 31, |
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2026 |
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2025 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Loss on sale of fixed assets |
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Non-cash operating lease expense |
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Gain on extinguishment of debt |
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— |
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Stock-based compensation expense |
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Changes in fair value of financial instruments carried at fair value, net |
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Non-cash transaction costs for issuance of HT Shares |
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— |
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Amortization of debt discounts and debt issuance costs |
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Deferred income taxes |
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( |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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( |
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Prepaid expenses and other current assets |
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( |
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Other assets |
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Accounts payable |
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Due to related parties |
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( |
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( |
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Accrued expenses and other current liabilities |
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( |
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Deferred revenue |
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( |
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Operating lease liabilities |
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( |
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( |
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Other liabilities |
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( |
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Cash flows used in operating activities |
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$ |
( |
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$ |
( |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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( |
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( |
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Proceeds from the sale of fixed assets |
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— |
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Internal-use software development costs |
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( |
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( |
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Net cash used in investing activities |
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$ |
( |
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$ |
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Cash flows from financing activities: |
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Payments of borrowings on convertible notes |
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( |
) |
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— |
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Proceeds from borrowings on long-term debt |
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— |
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Principal payments on long-term debt |
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( |
) |
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( |
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Proceeds from sales and advances under Share Purchase Agreement |
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Proceeds from (payments on) collateralized borrowings, net of repayment |
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Payment of finance lease obligations |
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( |
) |
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( |
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Net cash provided by financing activities |
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$ |
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$ |
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Increase in cash, cash equivalents and restricted cash |
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( |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Surf Air Mobility Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Description of Business
Organization
Surf Air Mobility Inc. (“Surf Air Mobility,” or the “Company”), a Delaware corporation, is a regional air mobility platform that aims to transform regional flying. The Company currently operates one of the largest commuter airlines in the United States by scheduled departures as well as an expanding on-demand charter marketplace for passengers in the U.S. and globally. The Company’s operations provide scale, distribution and real-world operating data to validate and, eventually, deploy the software and technology offerings it is currently developing to support the modernization of air operations and the adoption of next-generation aircraft.
The Air Mobility business is an established regional air mobility platform providing scheduled service and an on-demand charter marketplace to passengers in the U.S. and globally. Current initiatives surrounding the Air Technology business seek to drive an innovative platform developing a proprietary, AI-enhanced aviation software operating system as well as technology and services to enable electrification across the regional air mobility sector.
The Company was incorporated in 2021 and became the ultimate parent of both Surf Air Global Limited (“Surf Air”) and Southern Airways Corporation (“Southern”) in July of 2023 following the Company’s public listing on the New York Stock Exchange (“NYSE”). For 2025, the Company’s combined network served over
Surf Air Mobility’s predecessor company, Surf Air, was formed in 2016 and, prior to its reorganization into Surf Air Mobility, aimed to expand the category of regional air travel, connecting underutilized regional airports and private terminals to create a “shared private” customer experience and a high frequency “commercial-like” air service, using small turboprop aircraft. Surf Air provided both scheduled routes and on-demand charter flights operated by third parties that operate under Part 135 of Title 14 of the U.S. Code of Federal Regulations (“Part 135”). Surf Air drove the early stages of development of the Company’s current efforts to develop electrified powertrain technology, including the establishment of relationships with key commercial partners who, as a group, the Company believes can deliver novel hardware and software solutions that can make electrified flight possible for operators across the Part 135 industry, starting with the Company’s owned and operated fleet.
Liquidity and Going Concern
The Company has incurred losses from operations, negative cash flows from operating activities and has a working capital deficit. In addition, the Company is currently in default of certain excise and property taxes as well as certain debt obligations. These tax and debt obligations are classified as current liabilities on the Company’s Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025. As discussed in Note 10, Commitments and Contingencies, on May 15, 2018, the Company received a notice of a tax lien filing from the Internal Revenue Service (“IRS”) for unpaid federal excise taxes for the quarterly periods from October 2016 through September 2017 in the amount of $
5
The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The airline industry and the Company’s operations are cyclical and highly competitive. The Company’s success is largely dependent on the ability to raise debt and equity capital, achieve a high level of aircraft and crew utilization, increase flight services and the number of passengers flown, and continue to expand into regions profitably throughout the United States.
The Company’s prospects and ongoing business activities are subject to the risks and uncertainties frequently encountered by companies in new and rapidly evolving markets. Risks and uncertainties that could materially and adversely affect the Company’s business, results of operations or financial condition include, but are not limited to the ability to (i) raise additional capital (or financing) to fund operating losses, (ii) refinance its current outstanding debt, (iii) maintain efficient aircraft utilization, primarily through the proper utilization of pilots and managing market shortages of maintenance personnel and critical aircraft components, (iv) sustain ongoing operations, (v) attract and maintain customers, (vi) integrate, manage and grow recent acquisitions and new business initiatives, (vii) obtain and maintain relevant regulatory approvals, and (viii) measure and manage risks inherent to the business model.
The Company historically has funded its operations and capital needs primarily through the net proceeds received from the issuance of various debt instruments, convertible securities, related party funding, and preferred and common stock financing arrangements and expects to continue to do so, as available. In particular, as market conditions permit, the Company may raise additional funds through sales of equity (including through the SPA (see Note 8, Share Purchase Agreement and GEM Mandatory Convertible Security) with GEM Global Yield LLC SCS (“GEM”)) or convertible debt, using proceeds (as available) to strengthen the Company’s balance sheet, among other things.
During the three months ended March 31, 2026, the Company received $
The Company is currently implementing operational improvements and stringent operating expenses management to improve the profitability of its airline operations. In parallel, the Company is advancing its technology initiatives, including its software technology platform and electrification programs. In addition, the Company continues to evaluate strategies to obtain additional funding for future operations. These strategies may include, but are not limited to, obtaining additional equity financing, issuing additional debt or entering into other financing arrangements, forming joint venture and other partnerships, and restructuring operations to grow revenues and decrease expenses. There can be no assurance that the Company will be successful in achieving its strategic plans, or that new financing will be available to the Company in a timely manner or on acceptable terms, if at all. If the Company is unable to raise sufficient financing when needed or events or circumstances occur such that the Company does not meet its strategic plans, the Company will be required to take additional measures to conserve liquidity, which could include, but are not necessarily limited to, reducing certain spending, altering or scaling back development plans, including plans to further develop our software technology platforms and to equip our regional airline operations with fully-electric or hybrid-electric aircraft, or reducing funding of capital expenditures, which could have a material adverse effect on the Company’s financial position, results of operations, cash flows, and ability to achieve its intended business objectives. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Note 2. Summary of Significant Accounting Policies
Interim Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, the interim financial statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2025 and the related notes, as included in the Company’s Form 10-K filed on March 12, 2026. The information herein reflects all material adjustments, including normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for the period presented. The results
6
for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the year ending December 31, 2026.
Except to the extent discussed below, there have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2026 from those disclosed in the notes to the Company’s consolidated financial statements for the year ended December 31, 2025.
Basis of Presentation and Principles of Consolidation
The condensed consolidated financial statements include the assets, liabilities, and operating results of the Company. All intercompany balances and transactions have been eliminated in consolidation.
Cash and Restricted Cash
Cash and restricted cash consists of cash on hand held in commercial bank accounts. The Company classifies all cash with use limited by contractual provisions as restricted cash. As of March 31, 2026 and December 31, 2025 the Company had restricted cash of $
Accounts Receivable, Net
Accounts receivable primarily consist of amounts due from the U.S. Department of Transportation (“DOT”) in relation to certain air routes served by the Company under the Essential Air Service (“EAS”) program, amounts due from airline business partners, and pending transactions with credit card processors. Receivables from the U.S. DOT and our business partners are typically settled within 30 days. All accounts receivable are reported net of an allowance for credit losses, which was not material as of March 31, 2026, and December 31, 2025. The Company has considered past and future financial and qualitative factors, including the age of unpaid receivables, payment history and other credit monitoring indicators, when establishing the allowance for credit losses.
Collateralized Borrowings
The Company has a revolving accounts receivable financing arrangement that allows the Company to borrow a designated percentage of eligible accounts receivable, as defined, up to a maximum unsettled amount of $
Accordingly, the accounts receivable remain on the Company’s Condensed Consolidated Balance Sheets until paid by the customer and cash proceeds from the financing arrangement are recorded as collateralized borrowing in Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets, with attributable interest expense recognized over the life of the related transactions. Interest expense and contractual fees associated with the collateralized borrowings are included in interest expense and other expense, net, respectively, in the accompanying Condensed Consolidated Statements of Operations.
Redeemable Common Stock
The Company accounts for certain shares of common stock that are subject to redemption features as temporary equity in accordance with the guidance in Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, and related SEC interpretive guidance. These shares are classified outside of permanent equity (i.e., in mezzanine equity) because they are redeemable upon the occurrence of events that are not solely within the Company’s control.
The Company has issued shares of common stock that are subject to a contingent redemption feature, whereby holders have the right to require the Company to repurchase such shares for cash upon the occurrence of specified events, including a failure to maintain the effectiveness of a registration statement covering the resale of such shares. As the redemption feature is outside the Company’s control, these shares are presented as redeemable common stock in the mezzanine section of the Condensed Consolidated Balance Sheets.
Redeemable common stock is initially recorded at its issuance date fair value, net of issuance costs. Subsequently, the Company evaluates the probability of the redemption event occurring and, if it becomes probable that the shares will become redeemable, the Company accretes the carrying value of the redeemable common stock to its redemption value over the period from the date it becomes probable to the earliest redemption date. Changes in the carrying value are recorded as adjustments to additional paid-in capital, or accumulated deficit if additional paid-in capital is insufficient.
If redemption is not probable, the Company does not accrete the carrying amount to redemption value until such time that redemption becomes probable.
7
Restricted Stock Unit Awards
The grant date fair value of restricted stock units (“RSUs”) is estimated based on the fair value of the Company’s common stock on the date of grant. RSUs vest upon the satisfaction of a service-based vesting condition and the compensation expense for these RSUs is recognized on a straight-line basis from the date of grant over the requisite service period.
Performance-Based Restricted Stock Units
During the three months ended March 31, 2026 and the year ended December 31, 2025, the Company granted performance-based restricted stock units (“PRSUs”) to employees, which will vest upon the achievement of an adjusted EBITDA metric for the year ending December 31, 2025 as well as a service period of four years from the date of grant. The grant date fair value of these PRSUs was determined based on the Company’s stock price the business day immediately preceding the grant date. Expense attribution for these awards is based on a probability assessment regarding the achievement of the financial metric. The Company will record compensation expense on a cumulative basis to reflect the grant date fair value of shares expected to vest over the service period of each award.
During 2023, the Company granted founder PRSUs (“founder PRSUs”) that contain a market condition in the form of future stock price targets. The grant date fair value of the founder PRSUs was determined using a Monte Carlo simulation model and the Company estimates the derived service period of the founder PRSUs. The grant date fair value of founder PRSUs containing a market condition is recorded as stock-based compensation over the derived service period. Provided that each founder continues to be employed by the Company, either directly or as a non-employee consultant, stock-based compensation expense is recognized over the derived service period, regardless of whether the stock price goals are achieved. If the stock price goals are met sooner than the derived service period, any unrecognized compensation expenses related to the founder PRSUs will be expensed during the period in which the stock price targets are achieved.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of income and expense during the reporting period.
On an ongoing basis, the Company evaluates its estimates using historical experience and other factors including the current economic and regulatory environment as well as management’s judgment. Items subject to such estimates and assumptions include: revenue recognition and related allowances, valuation allowance on deferred tax assets, certain accrued liabilities, useful lives and recoverability of long-lived assets, fair value of assets acquired and liabilities assumed in acquisitions, legal contingencies, assumptions underlying convertible notes and convertible securities carried at fair value and stock-based compensation. These estimates may change as new events occur and additional information is obtained and such changes are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates, and any such differences may be material to the Company’s condensed consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires public entities to disaggregate, in a tabular presentation, certain income statement expenses into different categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The guidance is effective for fiscal years beginning after December 15, 2026, with early adoption permitted, and may be applied retrospectively. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU simplifies the capitalization guidance by removing all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout ASC 350-40. The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years. Adoption of this ASU can be applied prospectively for reporting periods after its effective date; or follow a modified transition approach that is based on the status of the respective projects and whether software costs were capitalized before the date of adoption; or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and related disclosures.
8
Note 3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
Prepaid software |
|
$ |
|
|
$ |
|
||
Prepaid marketing |
|
|
|
|
|
|
||
Engine reserves |
|
|
|
|
|
|
||
Prepaid interest |
|
|
|
|
|
|
||
Vendor operator prepayments |
|
|
|
|
|
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Note 4. Property, Plant and Equipment, Net
Property and equipment, net, consists of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
Aircraft, equipment and rotable spares |
|
$ |
|
|
$ |
|
||
Equipment purchase deposits |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Office, vehicles and ground equipment |
|
|
|
|
|
|
||
Internal-use software |
|
|
|
|
|
|
||
Property and equipment, gross |
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
The Company recorded depreciation expense of $
The Company recorded a loss of $
Note 5. Intangible Assets, Net
Intangibles assets, net, consists of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
EAS contracts |
|
$ |
|
|
$ |
|
||
Tradenames and trademarks |
|
|
|
|
|
|
||
Software |
|
|
|
|
|
|
||
Other intangibles |
|
|
|
|
|
|
||
Intangible assets, gross |
|
|
|
|
|
|
||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Intangible assets, net |
|
$ |
|
|
$ |
|
||
The Company recorded amortization expense of $
9
Expected future amortization as of March 31, 2026 is as follows (in thousands):
|
|
Amount |
|
|
Remainder of 2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Note 6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
Accrued compensation and benefits |
|
$ |
|
|
$ |
|
||
Accrued professional services |
|
|
|
|
|
|
||
Excise and franchise taxes payable |
|
|
|
|
|
|
||
Collateralized borrowings |
|
|
|
|
|
|
||
Software license fee payable |
|
|
|
|
|
|
||
Accrued Monarch legal settlement |
|
|
|
|
|
|
||
Accrued major maintenance |
|
|
|
|
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|
||
Interest and commitment fee payable |
|
|
|
|
|
|
||
Other accrued liabilities |
|
|
|
|
|
|
||
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
Collateralized Borrowings
The Company has a revolving accounts receivable financing arrangement that allows the Company to borrow a designated percentage of eligible accounts receivable, as defined in the agreement, up to a maximum unsettled amount of $
For the three months ended March 31, 2026, the Company borrowed a total of $
As of March 31, 2026 the Company was in compliance with all covenants.
Accrued Compensation and Benefits
The Company maintains incentive compensation programs under which payouts are based on a combination of performance metrics and are subject to discretionary adjustments by the Company’s board of directors (the “Board”).
As of December 31, 2025, the Company recorded an accrual of $
Accrued Professional Services
During the fourth quarter of 2024, the Company entered into agreements with several professional service firms engaged in support
10
of the Company’s July 27, 2023 direct listing on the NYSE. These agreements modify the payment terms of prior service agreements to be contingent on future equity or debt financing by the Company. The Company originally estimated that a total of $
Note 7. Financing Arrangements
The Company’s long-term debt obligations consist of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
Note payable to bank, fixed interest rate of |
|
|
— |
|
|
|
|
|
Note payable to a financing company, fixed interest rate of |
|
|
|
|
|
|
||
Notes payable to Clarus Capital, fixed interest rate of |
|
|
|
|
|
|
||
Note payable to Skywest, fixed interest rates of |
|
|
|
|
|
|
||
Note payable to Tecnam, fixed interest rate of |
|
|
|
|
|
|
||
Long-term debt, gross |
|
|
|
|
|
|
||
Current maturities of long-term debt |
|
|
( |
) |
|
|
( |
) |
Long-term debt, net of current maturities |
|
$ |
|
|
$ |
|
||
Future maturities of total long-term debt as of March 31, 2026 are as follows (in thousands):
|
|
Amount |
|
|
Remainder of 2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
The Company is subject to customary affirmative covenants and negative covenants on all of the above notes payable. As of March 31, 2026, the Company was in compliance with all covenants in the loan agreements.
Fair Value of Convertible Instruments
The Company has elected the fair value option for the convertible notes, which requires them to be remeasured to fair value each reporting period with changes in fair value recorded in Changes in fair value of financial instruments carried at fair value, net, on the Condensed Consolidated Statements of Operations, except for change in fair value that results from a change in the instrument specific credit risk which is presented separately within other comprehensive income. The fair value estimate includes significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.
High Trail Convertible Note
On November 12, 2025, the Company closed a $
The High Trail Convertible Note may be converted at an initial conversion price of approximately $
11
The Holder will have the option to require the Company to partially redeem the High Trail Convertible Note on the first and fifteenth day of each month beginning March 1, 2026 in an amount equal to the greater of (a)
The Company is subject to comprehensive negative and affirmative covenants, including, inter alia, restrictions on its ability to incur indebtedness, create liens, make investments, declare or pay cash dividends or repurchase equity, and transfer or sell material assets, in each case subject to certain enumerated exceptions. The Company must also maintain a minimum liquidity of $
The High Trail Convertible Note is partially backstopped by a letter of credit issued by HSBC Bank USA, N.A. and arranged by Park Lane, a related party, and in connection therewith, the Company had entered into an amended reimbursement agreement with Park Lane (see Note 16, Related Party Balances and Transactions).
In March 2026, the Company and the Holder entered into an agreement, by which the Company issued
The Company has recorded transaction costs associated with the issuance of the HT Shares totaling $
12
LamVen Note
During the year ended December 31, 2025, LamVen LLC (“LamVen”) transferred $
During January 2026, the holder of the New Convertible Note converted the remaining $
PFG Convertible Note Purchase Agreement
On June 21, 2023, the Company entered into a convertible note purchase agreement (the “Convertible Note Purchase Agreement”) with Partners for Growth V.L.P. (“PFG”) for a senior unsecured convertible promissory note for an aggregate principal amount of $
On November 14, 2024, the Company amended the Convertible Note Purchase Agreement, which had an outstanding principal amount of $
The Convertible Note Purchase Agreement accrues interest at the greater of (i) SOFR (subject to a
PFG has the right to convert, at its option, the amounts outstanding under the Convertible Note Purchase Agreement into common stock of the Company, at a conversion price of $
During the year ended December 31, 2025, the Company made principal payments of $
As of March 31, 2026, the Company was in compliance with all covenants under the Convertible Note Purchase Agreement.
Fair value of convertible notes (in thousands):
|
|
Fair Value at |
|
|||||
|
|
March 31, 2026 |
|
|
December 31, 2025 |
|
||
High Trail Note |
|
$ |
|
|
$ |
|
||
New Convertible Note |
|
|
— |
|
|
|
|
|
Convertible Note Purchase Agreement |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Convertible notes at fair value, current |
|
|
( |
) |
|
|
( |
) |
Convertible notes at fair value, long-term |
|
$ |
|
|
$ |
|
||
Fair Value of SAFE-T Notes
The Company’s SAFE-T notes are carried at fair value, with fair value determined using Level 3 inputs. The Company determined that the SAFE-T instruments should be classified as liabilities based on evaluating the characteristics of the instruments, which contained both debt and equity-like features. The SAFE-T instrument matured in July 2019, but the holder has elected not to effect an equity conversion of the instrument. Subsequent changes in the fair value of the SAFE-T notes are recorded as part of changes in fair value of financial instruments carried at fair value, net within the Consolidated Statements of Operations. As of March 31, 2026 and December 31, 2025, the value of the SAFE-T notes was $
13
Note 8. Share Purchase Agreement and GEM Mandatory Convertible Security
Share Purchase Agreement
During 2020, the Company entered into a Share Purchase Agreement (“SPA”) with GEM and an entity affiliated with GEM to provide incremental financing in the event the Company completed a business combination transaction with a SPAC, IPO, or direct listing. On May 17, 2022, February 8, 2023, and September 18, 2023, the SPA was amended to increase the maximum aggregate shares of the Company’s common stock that may be required to be purchased by GEM from $
On June 15, 2023, July 21, 2023, and July 24, 2023, the SPA was further amended to modify the number of shares of the Company’s common stock to be issued to GEM at the time of a public listing transaction of the Company from an amount equal to
The Company has accounted for the shares issuance contracts under the SPA, as amended, as derivative financial instruments which are recorded at fair value within Other long-term liabilities on the Condensed Consolidated Balance Sheets.
For the three months ended March 31, 2026, the Company received total proceeds of $
As of March 31, 2026, the Company had $
GEM Mandatory Convertible Security
On March 1, 2024, the Company entered into a mandatory convertible security purchase agreement (the “MCSPA”) with GEM. Pursuant to the MCSPA, the Company has agreed to issue and sell to GEM, and GEM has agreed to purchase from the Company, a mandatory convertible security with a par amount of up to $
During the year ended December 31, 2025, the Company made payments against the outstanding principal of the Mandatory Convertible Security totaling $
14
Note 9. Fair Value Measurements
The following tables summarize the Company’s financial liabilities that are measured at fair value on a recurring basis in the condensed consolidated financial statements (in thousands):
|
|
Fair Value Measurements at March 31, 2026 Using: |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Convertible notes at fair value |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
SAFE-T notes at fair value |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
New LamVen Note |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
GEM Derivative |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
HT Side Letter Agreement |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liability classified warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total financial liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
|
|
Fair Value Measurements at December 31, 2025 Using: |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Convertible notes at fair value |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
SAFE-T notes at fair value |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
New LamVen Note |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Liability classified warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total financial liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
The following table provides a reconciliation of the Company’s financial liabilities that are measured at fair value using inputs classified as Level 3 (in thousands):
|
|
Convertible Notes at Fair Value |
|
|
SAFE Notes |
|
|
New LamVen Note |
|
|
GEM Derivative |
|
|
HT Side-Letter Agreement |
|
|
Liability Classified Warrants |
|
||||||
Balance at December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||||
Change in fair value |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Debt and equity financing issuances |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Transfers |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Conversions into common stock |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Payments and share settlement |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance at March 31, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Long-Term Debt
The carrying amounts and fair values of the Company’s long-term debt obligations were as follows (in thousands):
|
|
As of March 31, 2026 |
|
|
As of December 31, 2025 |
|
||||||||
|
|
Carrying Amount |
|
Fair Value |
|
|
Carrying Amount |
|
Fair Value |
|
||||
Long-term debt, including current maturities |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
||||
In assessing the fair value of the Company’s long-term debt, including current maturities, the Company primarily uses an estimation of discounted future cash flows of the debt at rates currently applicable to the Company for similar debt instruments of comparable maturities and comparable collateral requirements.
15
Note 10. Commitments and Contingencies
Software License Agreements
On May 18, 2021, and later modified during July 2025 and November 2025, the Company executed
As of both March 31, 2026 and December 31, 2025, the Company had capitalized $
In July 2025, the Company and Palantir modified the enterprise term of the existing software license agreement. In addition to a two-year extension, the Company will be Palantir’s exclusive partner with respect to the configuration and sale of software to part
Licensing, Exclusivity and Aircraft Purchase Arrangements
Textron Agreement
On September 15, 2022, the Company entered into agreements with Textron Aviation Inc. and one of its affiliates (collectively, “TAI”), for engineering services and licensing, sales and marketing, and aircraft purchases, which became effective as of the Company’s direct listing on July 27, 2023 (“TAI Effective Date”).
The engineering services and licensing agreement provides, among other things, that TAI will provide the Company with certain services in furtherance of development of an electrified powertrain technology (the “SAM System”). The engineering agreement requires payment by the Company as such services are provided by TAI. Under this agreement, the Company agrees to meet certain development milestones by specified dates, including issuance of a supplemental type certificate by the Federal Aviation Administration (“FAA”). Should the Company fail to meet certain development milestones, TAI has the right to terminate the collaboration agreement. The Company is currently complying with necessary development milestones under this agreement.
The licensing agreement grants the Company a nonexclusive license to certain technical information and intellectual property for the purpose of developing an electrified propulsion system for the Cessna Caravan aircraft, and to assist in obtaining Supplemental Type Certificates (“STCs”) from the FAA, including any foreign validation by any other aviation authority, for electrified propulsion upfits/retrofits of the Cessna Caravan aircraft. The licensing agreement provides for payment by the Company of license fees aggregating $
Under the sales and marketing agreement, the parties agreed to develop marketing, promotional and sales strategies for the specifically configured Cessna Grand Caravans and further agreed to: (i) include Cessna Grand Caravans fitted with the SAM System (the “SAM Aircraft”) in sales and marketing materials (print and digital) distributed to authorized dealers, (ii) prominently display the SAM Aircraft on their respective websites and social media, (iii) include representatives of the Company and TAI at trade show booths, (iv) market the SAM Aircraft and conversions to SAM Aircraft to all owners of pre-owned Cessna Grand Caravans, and (v) not advertise or offer any third-party-developed electrified variants of the Cessna Grand Caravan. Certain technologies for aircraft propulsion are specifically carved out from TAI’s agreement to exclusively promote the SAM System for Cessna Grand Caravans. The sales and marketing agreement provides for payment by the Company of exclusivity fees aggregating $
16
Under the aircraft purchase agreement, the Company may purchase from TAI
In February 2026, the Company and TAI amended their aircraft purchase agreement, pursuant to which commitments for firm deliveries of
BETA Aircraft Purchase and Strategic Agreements
In March 2026, the Company entered into an agreement with BETA Technologies (“BETA”) to purchase
Jetstream Agreement
On October 10, 2022, the Company and Jetstream Aviation Capital, LLC (“Jetstream”) entered into an agreement (the “Jetstream Agreement”) that provides for a sale and/or assignment of purchase rights of aircraft from the Company to Jetstream and the leaseback of such aircraft from Jetstream to the Company within a maximum aggregate purchase amount of $
Palantir Joint Venture
On August 9, 2024, the Company entered into a joint venture agreement (the “JV Agreement”) with Palantir. Pursuant to the JV Agreement, the Company established Surf Air Technologies in order to develop, market, sell, maintain, and support an artificial intelligence-powered software platform for the advanced air mobility industry, to provide operators of all types of aircraft, amongst other software products and solutions, with systems for the management of planes, airline operations, and customer facing applications.
In lieu of the consummation of the JV Agreement, on July 2, 2025, the Company and Palantir modified their existing software license agreement, as an expansion and enhancement of the overall relationship between the companies. In addition to a two-year extension, the Company will be Palantir’s exclusive partner with respect to the configuration and sale of software to part
Guarantees
The Company indemnifies its officers and directors for certain events or occurrences arising as a result of the officer or director serving in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential future amount the Company could be required to pay under these indemnification agreements is unlimited. The Company believes its insurance would cover any liability that may arise from the acts of its officers and directors and as of March 31, 2026 the Company is not aware of any pending claims or liabilities.
The Company enters into indemnification provisions under agreements with other parties in the ordinary course of business, typically with business partners, contractors, customers, landlords and investors. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of its activities or, in some cases, as a result of the indemnified party’s activities under the agreement. These indemnification provisions sometimes include indemnifications relating to representations the Company has made with regards to intellectual property rights. These
17
indemnification provisions generally survive termination of the underlying agreement. The maximum potential future amount the Company could be required to pay under these indemnification provisions is unlimited.
Legal Contingencies
In 2017, the Company acquired Rise U.S. Holdings, LLC (“Rise”). Prior to the close of the acquisition, Rise Alpha, LLC and Rise Management, LLC (both of which are wholly-owned subsidiaries of Rise and hereinafter referred to as the “Rise Parties”), were served with a petition for judgment by Menagerie Enterprises, Inc. (“Monarch Air”), relating to breach of contract for failure to pay Monarch Air pursuant to the terms and conditions of a flight services agreement with Monarch Air, which occurred prior to the Company’s acquisition of Rise. The Rise Parties filed numerous counterclaims against Monarch Air, including fraud, breach of contract and breach of fiduciary duty. Rise, a subsidiary of the Company, was named as a party in the lawsuit. During 2018 and 2019, certain summary judgments were granted in favor of Monarch Air.
On November 8, 2021, the Rise Parties entered into a final judgment in respect of litigation to finally resolve all claims raised by Monarch Air, and the Rise Parties agreed to pay actual damages of $
The Company is also a party to various other claims and matters of litigation incidental to the normal course of its business, none of which were considered to have a potential material impact on the Company as of March 31, 2026. However, the resolution of, or increase in any accruals for, one or more matters may have a material adverse effect on the Company’s results of operations and cash flows.
FAA Matters
Our operations are highly regulated by several U.S. government agencies, including the U.S. DOT, the FAA and the Transportation Security Administration. Requirements imposed by these regulators (and others) may restrict the ways we may conduct our business, as well as the operations of our third-party aircraft operators. Failure to comply with such requirements may result in fines and other enforcement actions by the regulators.
Tax Commitment
On May 15, 2018, the Company received notice of a tax lien filing from the IRS for unpaid federal excise taxes for the quarterly periods from October 2016 through September 2017 in the amount of $
During 2018, the Company defaulted on its property tax obligations in various California counties in relation to fixed assets, plane usage and aircraft leases. Additionally, Los Angeles County had previously imposed a tax lien on four of the Company’s aircraft due to the late filing of the Company’s 2022 property tax return. During 2025 the Company finalized remediation of the late filing, inclusive of the completion of county audits, and made payment on all property taxes due to Los Angeles County that were underlying the prior aircraft liens. The Company’s total outstanding property tax liability including penalties and interest is $
18
Note 11. Disaggregated Revenue
The disaggregated revenue for the three months ended March 31, 2026 and 2025 were as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Scheduled |
|
$ |
|
|
$ |
|
||
On-Demand |
|
$ |
|
|
$ |
|
||
Total revenue |
|
$ |
|
|
$ |
|
||
The revenue deferred and recognized for the three months ended March 31, 2026 and 2025 were as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Deferred revenue, beginning of period |
|
$ |
|
|
$ |
|
||
Revenue deferred |
|
|
|
|
|
|
||
Revenue recognized |
|
|
( |
) |
|
|
( |
) |
Deferred revenue, end of period |
|
$ |
|
|
$ |
|
||
Deferred revenue principally represents tickets sold for future travel on the Company’s flights. The balance fluctuates with seasonal travel patterns. The contract duration of passenger tickets is generally one to
Note 12. Redeemable Common Stock and Shareholders’ Deficit
Redeemable Common Stock
Redeemable common stock is comprised of
Registered Direct Offerings
On March 31, 2025, the Company entered into a securities purchase agreement with an investor relating to the offering and sale in a registered direct offering of an aggregate of
On June 25, 2025, the Company entered into a securities purchase agreement with certain investors relating to the offering and sale in a registered direct offering of an aggregate of
As part of these offerings, the Company issued warrants to purchase up to
19
The Company received gross proceeds from these offerings of $
Private Placements
During May 2025, the Company sold
On November 10, 2025, the Company entered into a securities purchase agreement with certain investors relating to the offering and sale in a private placement of an aggregate of
The Company received net proceeds from these private placement offerings of $
Warrants
A summary of warrant activity associated with equity financings as of March 31, 2026 is set forth below:
|
|
Number of Warrants Outstanding |
|
|
Weighted Average Contractual Term (in years) |
|
|
Aggregate Intrinsic Value (in thousands) |
|
|
Weighted |
|
||||
Outstanding at December 31, 2025 |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Granted |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Canceled |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Outstanding at March 31, 2026 |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Exercisable at March 31, 2026 |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Note 13. Stock-Based Compensation
Stock Options
A summary of stock option activity for the three months ended March 31, 2026 is set forth below:
|
|
Number |
|
|
Weighted Average Contractual Term (in years) |
|
|
Aggregate Intrinsic Value (in thousands) |
|
|
Weighted |
|
||||
Outstanding at December 31, 2025 |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Granted |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Canceled |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Outstanding at March 31, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercisable at March 31, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
20
As of March 31, 2026, unrecognized compensation expense related to the unvested portion of the Company’s share options was approximately $
Warrants
A summary of common stock warrant activity for the three months ended March 31, 2026 is set forth below:
|
|
Number of Warrants Outstanding |
|
|
Weighted Average Contractual Term (in years) |
|
|
Aggregate Intrinsic Value (in thousands) |
|
|
Weighted |
|
||||
Outstanding at December 31, 2025 |
|
|
|
|
|
|
|
$ |
— |
|
|
$ |
|
|||
Granted |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Canceled |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Outstanding at March 31, 2026 |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Exercisable at March 31, 2026 |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
As of March 31, 2026, unrecognized compensation expense related to the unvested portion of the Company’s common stock warrants was approximately $
Equity-based awards granted in the form of warrants are not considered granted under the terms of the 2023 Plan and are often subject to separate registration rights that those included under the 2023 Plan.
The Company has also granted warrants as a component of equity financing transactions, which were granted fully vested as of the respective transaction dates (see Note 12, Redeemable Common Stock and Shareholders’ Deficit). No compensation expense has been recorded for these transactions.
Restricted Stock Units
During the three months ended March 31, 2026, the Company issued
A summary of RSU activity for the three months ended March 31, 2026 is set forth below:
|
|
Number of RSUs |
|
|
Weighted |
|
||
Unvested RSUs at December 31, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested/shares issued |
|
|
— |
|
|
|
— |
|
Forfeited, cancelled, or expired |
|
|
— |
|
|
|
— |
|
Unvested RSUs at March 31, 2026 |
|
|
|
|
$ |
|
||
As of March 31, 2026, unrecognized compensation expense related to the unvested portion of the Company’s RSUs was approximately $
21
Restricted Share Purchase Agreement (“RSPA”)
A summary of RSPA activity for the three months ended March 31, 2026 is set forth below:
|
|
Number |
|
|
Weighted |
|
||
Unvested RSPAs at December 31, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
— |
|
|
|
— |
|
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
— |
|
|
|
— |
|
Unvested RSPAs at March 31, 2026 |
|
|
|
|
|
|
||
As of March 31, 2026, the unrecognized compensation expense related to the unvested portion of the Company’s RSPAs was $
Performance-Based Restricted Stock Units
During the three months ended March 31, 2026, the Company issued
A summary of PRSU activity for the three months ended March 31, 2026 is set forth below:
|
|
Number |
|
|
Weighted |
|
||
PRSUs at December 31, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Shares issued |
|
|
— |
|
|
|
— |
|
Forfeited, cancelled, or expired |
|
|
— |
|
|
|
— |
|
PRSUs at March 31, 2026 |
|
|
|
|
$ |
|
||
As of March 31, 2026, the unrecognized compensation expense related to the unvested portion of the Company’s PRSUs was $
A summary of stock-based compensation expense recognized for the three months ended March 31, 2026 and 2025 is as follows (in thousands):
|
|
For The Three Months Ended March 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Stock Options |
|
$ |
|
|
$ |
|
||
RSUs |
|
|
|
|
|
|
||
RSPAs |
|
|
|
|
|
|
||
PRSUs |
|
|
|
|
|
|
||
Warrants |
|
|
|
|
|
|
||
Other |
|
|
— |
|
|
|
— |
|
Total Stock Based Compensation |
|
$ |
|
|
$ |
|
||
22
Note 14. Segment Reporting
The Company and its chief operating decision maker (“CODM”), which is the Company’s chief executive officer, organize and manage the Company on a consolidated basis, and, accordingly, the Company operates as a single operating and reportable segment, namely its Air Mobility segment.
The Air Mobility segment derives revenues from two categories of services:
Scheduled Air Service – revenue from operating scheduled commercial air service flights which are sold to the public primarily on a per seat basis, and through subsidized EAS revenue awards from the Department of Transportation.
On-Demand – revenue from on-demand flights created for customers on an ad-hoc, by request basis.
The accounting policies of the Air Mobility segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance for the Air Mobility segment and decides how to allocate resources based on net loss as reported on the Condensed Consolidated Statements of Operations. The measure of segment assets is reported on the Condensed Consolidated Balance Sheets as total consolidated assets.
In addition to consolidated financial metrics used in assessing the Air Mobility segment,
|
|
Three Months Ended March 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
|
|
|
|
|
|
|
||
Revenue |
|
$ |
|
|
$ |
|
||
Operating Expenses: |
|
|
|
|
|
|
||
Aircraft expenses |
|
$ |
|
|
$ |
|
||
Pilot expenses |
|
|
|
|
|
|
||
Other (1) |
|
|
|
|
|
|
||
Cost of revenue, exclusive of depreciation and amortization |
|
|
|
|
|
|
||
Technology and development |
|
|
|
|
|
|
||
Sales and marketing |
|
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Total operating expenses |
|
|
|
|
|
|
||
Operating loss |
|
$ |
( |
) |
|
$ |
( |
) |
Other income (expense): |
|
|
|
|
|
|
||
Changes in fair value of financial instruments carried at fair value, net |
|
$ |
( |
) |
|
$ |
|
|
Interest expense |
|
|
( |
) |
|
|
( |
) |
Gain on extinguishment of debt |
|
|
- |
|
|
|
|
|
Other expense, net |
|
|
( |
) |
|
|
( |
) |
Total other income (expense), net |
|
$ |
( |
) |
|
$ |
|
|
Loss before income taxes |
|
|
( |
) |
|
|
( |
) |
Income tax benefit |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
(1) Other costs of revenue are comprised of personnel costs related to customer service operations, station expenses, reservation systems and passenger re-accommodation/ re-booking on other carriers.
The Company does not have intra-entity sales or transfers. All of the Company’s long-lived assets are located in the United States and revenue is substantially earned from flights throughout the United States.
23
Note 15. Income Taxes
The Company’s provision for income taxes for the three months ended March 31, 2026 and 2025, was a benefit of $
The Company is subject to income tax examinations by the U.S. federal and state tax authorities. There were no ongoing income tax examinations as of March 31, 2026. In general, tax years 2011 and forward remain open to audit for U.S. federal and state income tax purposes.
Note 16. Related Party Balances and Transactions
Term Notes
The Company entered into term note agreements with LamVen, a related entity affiliated with a co-founder of the Company, with aggregate principal amounts of $
On May 22, 2023, the Company entered into an additional term note agreement in exchange for $
On June 15, 2023, the Company entered into a $
LamVen Note
On November 14, 2024, the Company entered into a secured convertible promissory note (the “LamVen Note”) in aggregate principal amount of $
The LamVen Note accrues interest at the greater of (i) SOFR (subject to a
At the election of LamVen from time to time, on one or more occasions, the outstanding principal amount of the LamVen Note (or any portion thereof), together with all accrued but unpaid interest thereon, can be converted into a number of shares of common stock, using a conversion price per share equal to the Minimum Price, as defined in New York Stock Exchange Listed Company Manual Section 312.04(h) (the “Minimum Price”); provided, however, that LamVen shall not be able to convert the LamVen Note if so doing would increase LamVen’s beneficial ownership interest in the Company to 10% or more of the Company’s then outstanding common stock.
In addition, on November 14, 2024, the outstanding principal and the interest of the existing LamVen Note of $
The obligations under the LamVen Note are guaranteed by certain of the Company’s subsidiaries, and subject to a security interest on assets of the Company and the subsidiary guarantors, subject to certain exceptions.
The conversion feature embedded in the LamVen Note failed to satisfy the requirements for the derivative scope exception for contracts indexed in the Company’s own stock. The conversion feature of the LamVen Note required bifurcation from the host contract. The embedded derivative was initially measured at fair value of $
24
During the year ended December 31, 2025, LamVen transferred $
Park Lane Reimbursement Agreement
On November 14, 2024, in connection with the letter of credit backstopping a 4-year credit agreement with certain affiliates of Comvest Partners as lenders, the Company entered into a Reimbursement Agreement with Park Lane, an entity affiliated with a co-founder of the Company (the “Reimbursement Agreement”), such that if the letter of credit is drawn upon, the Company will be required to reimburse Park Lane for the drawn amount of the letter of credit and pay interest to Park Lane at
The obligations under the Reimbursement Agreement are guaranteed by certain of the Company’s subsidiaries, and subject to a security interest on assets of the Company and the subsidiary guarantors, subject to certain exceptions. The Reimbursement Agreement contains certain representations and warranties, covenants and events of default.
Park Lane appointed an observer to the Board, a right that was granted in the Reimbursement Agreement.
On November 12, 2025, the Company entered into an amendment to the Reimbursement Agreement, to add the letter of credit, used in support of the High Trail Convertible Note to the scope of the Reimbursement Agreement. As consideration for Park Lane’s commitment to provide credit support for the letter of credit over a three year period, the Company issued
Other Transactions
The Company previously leased
JA Flight Services and BAJ Flight Services
The Company previously leased a total of
The Company recorded $
Schuman Aviation
As of March 31, 2026, the Company leased six aircraft from Schuman Aviation Ltd. (“Schuman”), an entity which is owned by Richard Schuman, a former employee and shareholder of the Company. All leases consist of
The Company recorded approximately $
25
Additionally, the Company has an existing agreement with Schuman, whereby Schuman agreed not to fly any of its Makani Kai airline routes servicing the Hawaiian Islands commuter airspace for a period of
Advisory Services Agreement with Proxima Centauri, LLC
Proxima Centauri, LLC (“Proxima Centauri”), an entity wholly-owned by David Anderman, a member of the Board, provided advisory services to the Company for a monthly fee of $
Advisory Services Agreement with LamVen LLC
LamVen provides advisory services to the Company for an annual fee of $
Advisory Services Agreement with SRS Ventures LLC
SRS Ventures LLC, an entity associated with Sudhin Shahani, a co-founder and Board member of the Company, provides advisory services to the Company for an annual fee of $
Note 17. Supplemental Cash Flows
Supplemental cash flow information for the three months ended March 31, 2026 and 2025 (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Supplemental cash flow information |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Common stock issued under Software License Agreement |
|
$ |
— |
|
|
$ |
|
|
Issuance of Common shares related to Convertible Notes conversions |
|
$ |
|
|
$ |
— |
|
|
Purchases of property and equipment included in accounts payable and accrued expenses |
|
$ |
|
|
$ |
|
||
Issuance of redeemable common stock related to High Trail Convertible Note |
|
$ |
|
|
$ |
— |
|
|
Issuance of common stock as settlement of advances under Share Purchase Agreement |
|
$ |
|
|
$ |
— |
|
|
Note 18. Net Loss per Share Applicable to Common Stockholders, Basic and Diluted
The Company calculates basic and diluted net loss per share attributable to common stockholders using the two-class method required for companies with participating securities. The Company considers preferred stock to be participating securities as the holders are entitled to receive dividends on a pari passu basis in the event that a dividend is paid on shares of common stock.
The following table sets forth the computation of net loss per share applicable to common shareholders (in thousands, except share data and per share amounts):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average number of common shares used in net loss per share applicable to common shareholders, basic and diluted |
|
|
|
|
|
|
||
Net loss per share applicable to common shareholders, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
26
The Company excluded the following potential shares of common stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Excluded securities: |
|
|
|
|
|
|
||
Options to purchase common shares |
|
|
|
|
|
|
||
Warrants to purchase common shares |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
|
||
Unvested RSPAs |
|
|
|
|
|
|
||
Convertible notes (as converted to common shares) |
|
|
|
|
|
|
||
GEM Derivative |
|
|
|
|
|
— |
|
|
Mandatory Convertible Security |
|
|
|
|
|
|
||
Total common shares equivalents |
|
|
|
|
|
|
||
Note 19. Subsequent Events
Registered Direct Offering
On April 20, 2026, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with LamVen LLC (“LamVen”), an existing investor, and another institutional investor, relating to the offering and sale in a registered direct offering (the “Offering”) of an aggregate of
The Company received gross proceeds from the Offering in the aggregate amount of approximately $
Promissory Note
On April 20, 2026, the Company, Southern Airways Express, and Southern Airways Pacific, LLC (South Airways Express and South Airways Pacific, LLC, collectively, the "Borrowers") entered into a promissory note with LamVen (the “2026 LamVen Note”) in an aggregate principal amount of up to $
Upon the later of (i) July 19, 2026 and (ii) the date of an initial Advance under the 2026 LamVen Note, the Borrowers will pay an origination fee in the amount of $
27
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis is intended to help the reader understand the Company’s results of operations and financial condition. This discussion and analysis is provided as a supplement to, and should be read in conjunction with, the information included in Item 1. Financial Statements in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to the Company’s plans and strategy for its business, includes forward-looking statements that involve risks and uncertainties. The Company’s actual results and outcomes, and the timing of its results and outcomes, may differ materially from management’s expectations as a result of various factors, including but not limited to those discussed in the section entitled “Special Note Regarding Forward-Looking Statements” included in this Quarterly Report on Form 10-Q and the sections entitled “Risk Factors” included within this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (“SEC”) on March 12, 2026.
Overview of the Business
Surf Air Mobility Inc. (“Surf Air Mobility,”, the “Company,”, “us,”, “we” or “our”), a Delaware corporation, is a regional air mobility platform that aims to transform regional flying. The Company currently operates one of the largest commuter airlines in the United States by scheduled departures as well as an expanding on-demand charter marketplace for passengers in the U.S. and globally. The Company’s operations provide scale, distribution and real-world operating data to validate and, eventually, deploy the software and technology offerings it is currently developing to support the modernization of air operations and the adoption of next-generation aircraft.
The Air Mobility business is an established regional air mobility platform providing scheduled service and an on-demand charter marketplace to passengers in the U.S. and globally. Current initiatives surrounding the Air Technology business seek to drive an innovative platform developing a proprietary, AI-enhanced aviation software operating system as well as technology and services to enable electrification across the regional air mobility sector.
The Company was incorporated in 2021 and became the ultimate parent of both Surf Air Global Limited (“Surf Air”) and Southern Airways Corporation (“Southern”) in July of 2023 following the Company’s public listing on the New York Stock Exchange (“NYSE”). For 2025, the Company’s combined network served over 300,000 passengers with approximately 62,000 scheduled departures. We expect the combination of our legacy networks will continue to provide the basis for our expanded, nationwide regional air mobility platform.
Our predecessor company, Surf Air, was formed in 2016 and prior to its reorganization into Surf Air Mobility, aimed to expand the category of regional air travel, connecting underutilized regional airports and private terminals to create a “shared private” customer experience and a high frequency “commercial-like” air service, using small turboprop aircraft. Surf Air provided both scheduled routes and on-demand charter flights operated by third parties that operate under Part 135 of Title 14 of the U.S. Code of Federal Regulations (“Part 135”). Surf Air drove the early stages of development of our current efforts to develop electrified powertrain technology, including the establishment of relationships with key commercial partners who, as a group, we believe can deliver novel hardware and software solutions that can make electrified flight possible for operators across the Part 135 industry, starting with our owned and operated fleet.
Operating Environment
Since 2020, the Company has been incurring expenses to support the development of the technology of its digital platform with the aim of enabling the regional air mobility market to operate at scale and to enhance the user’s ability to make informed decisions based on multiple first and third-party data sources as well as connected aircraft, and the Company expects these development expenses to continue to be incurred. Additionally, the Company is developing fully-electric and hybrid-electric powertrain technologies with its commercial partners to electrify existing fleets and new aircraft. As a result, the Company expects to incur significant costs in the future to support the development of this technology.
In addition to incremental costs incurred in the execution of the Company’s near and long-term business strategy, the Company has experienced inflationary pressures, which have materially increased the Company’s costs for aircraft fuel, wages and benefits and other goods and services critical to its operations during 2024 and 2025 and believes perceived recessionary risks have impacted the 2025 results. For example, perceived recessionary risks, as a result of tariff or trade uncertainty or otherwise, as well as shifting travel patterns, may cause companies and individuals to reduce travel for either professional or personal reasons, and drive higher prices in the supply chain the Company relies upon. In addition, the Company has incurred greater than expected losses and negative cash flows from operating activities due to inefficient aircraft utilization, primarily caused by an underutilization of pilots and a shortage of maintenance personnel and critical aircraft components, which, in aggregate, have challenged the Company’s ability to serve its customers as desired and, in turn, cover expenses, specifically related to its scheduled service offerings.
28
As such, the extent to which global events and market inflationary impacts will affect our financial condition, liquidity and future results of operations is uncertain. Given the uncertainty regarding the length, and intensity, of these factors, the Company cannot reasonably estimate their impact on its future results of operations, cash flows or financial condition. The Company continues to actively monitor its financial condition, liquidity, operations, suppliers, industry and workforce. As the Company does not currently, and does not intend in the foreseeable future to, enter into any transactions to hedge fuel costs, or otherwise fix labor costs, the Company will continue to be fully exposed to fluctuations in prices of material operating costs.
During January 2025, the Company utilized an abundance of caution and voluntarily cancelled a significant number of scheduled flights due to maintenance concerns. The Company took actions to mitigate these concerns and returned its operations to full schedule during the first quarter of 2025. The most significant financial impacts of these cancellations were lost revenues, lost operating income, decreased operating cash flows, and unplanned maintenance costs.
Following the passage of the FAA Reauthorization Act of 2024, and resulting changes to the administration of the Essential Air Service Program, we have been subject to increased competition for certain subsidized routes. As a result, we expect to face increased and continued competition when bidding for or renewing Essential Air Service contracts, which could impact our ability to retain existing routes or the level of subsidy associated with those routes.
Key Operating Measures
In addition to the data presented in our condensed consolidated financial statements, we use the following key operating measures commonly used throughout the air transport industry to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions. The following table summarizes key operating measures for each period presented below, which are unaudited.
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
Increase/ |
|
|
% |
|
||||
Scheduled Flight Hours(1) |
|
|
11,061 |
|
|
|
13,090 |
|
|
|
(2,029 |
) |
|
|
(16 |
)% |
On-Demand Flights(2) |
|
|
832 |
|
|
|
620 |
|
|
|
212 |
|
|
|
34 |
% |
Scheduled Passengers(3) |
|
|
65,376 |
|
|
|
66,638 |
|
|
|
(1,262 |
) |
|
|
(2 |
)% |
Headcount(4) |
|
|
571 |
|
|
|
654 |
|
|
|
(83 |
) |
|
|
(13 |
)% |
Scheduled Departures(5) |
|
|
12,503 |
|
|
|
13,717 |
|
|
|
(1,214 |
) |
|
|
(9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(1)Scheduled Flight Hours represent actual flight time from takeoff through landing that were flown in the period and excludes departures for maintenance or repositioning events. This metric only measures flight hours for flights that generated scheduled revenue and does not include flight hours for flights that generated on-demand revenue. |
|
|||||||||||||||
(2)On-Demand Flights represent the number of flights that generate on-demand revenue taken by customers on the Company's aircraft or third-party operated aircraft during the period. |
|
|||||||||||||||
(3)Scheduled Passengers represent the number of passengers flown during the period for scheduled service. |
|
|||||||||||||||
(4)Headcount represents all full-time and part-time employees at the end of the period. |
|
|||||||||||||||
(5)Scheduled Departures represent the number of takeoffs in the period, agnostic of operator and excludes departures for maintenance or repositioning events. This metric only measures takeoffs that generated scheduled revenue and does not include takeoffs that generated on-demand revenue. |
|
|||||||||||||||
29
Results of Operations
Results of the Company’s Operations for the Three Months Ended March 31, 2026 and 2025
The following table sets forth our condensed consolidated statements of operations data for the three months ended March 31, 2026 and 2025 (in thousands, except percentages):
|
|
Three months ended March 31, |
|
|
Change |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
||||
Revenue |
|
$ |
25,613 |
|
|
$ |
23,506 |
|
|
$ |
2,107 |
|
|
|
9 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue, exclusive of depreciation and amortization |
|
|
25,946 |
|
|
|
24,706 |
|
|
|
1,240 |
|
|
|
5 |
% |
Technology and development |
|
|
2,445 |
|
|
|
2,680 |
|
|
|
(235 |
) |
|
|
(9 |
)% |
Sales and marketing |
|
|
1,966 |
|
|
|
1,653 |
|
|
|
313 |
|
|
|
19 |
% |
General and administrative |
|
|
6,059 |
|
|
|
10,886 |
|
|
|
(4,827 |
) |
|
|
(44 |
)% |
Depreciation and amortization |
|
|
2,552 |
|
|
|
2,148 |
|
|
|
404 |
|
|
|
19 |
% |
Total operating expenses |
|
|
38,968 |
|
|
|
42,073 |
|
|
|
(3,105 |
) |
|
|
(7 |
)% |
Operating loss |
|
|
(13,355 |
) |
|
|
(18,567 |
) |
|
|
5,212 |
|
|
|
(28 |
)% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Changes in fair value of financial instruments carried at fair value, net |
|
|
(3,613 |
) |
|
|
5,396 |
|
|
|
(9,009 |
) |
|
|
(167 |
)% |
Interest expense |
|
|
(1,224 |
) |
|
|
(3,895 |
) |
|
|
2,671 |
|
|
|
(69 |
)% |
Gain on extinguishment of debt |
|
|
— |
|
|
|
39 |
|
|
|
(39 |
) |
|
|
(100 |
)% |
Other expense, net |
|
|
(2,109 |
) |
|
|
(1,492 |
) |
|
|
(617 |
) |
|
|
41 |
% |
Total other income (expense), net |
|
|
(6,946 |
) |
|
|
48 |
|
|
|
(6,994 |
) |
|
NM |
|
|
Loss before income taxes |
|
|
(20,301 |
) |
|
|
(18,519 |
) |
|
|
(1,782 |
) |
|
|
10 |
% |
Income tax benefit |
|
|
39 |
|
|
|
53 |
|
|
|
(14 |
) |
|
|
(26 |
)% |
Net loss |
|
$ |
(20,262 |
) |
|
$ |
(18,466 |
) |
|
$ |
(1,796 |
) |
|
|
10 |
% |
Revenue
Revenue increased by $2.1 million, or 9%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase in revenue was attributable to the following changes in scheduled and on-demand revenues (in thousands, except percentages):
|
|
For The Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
||||
Scheduled |
|
$ |
15,461 |
|
|
$ |
17,783 |
|
|
$ |
(2,322 |
) |
|
|
(13 |
)% |
On-Demand |
|
|
10,152 |
|
|
|
5,723 |
|
|
|
4,429 |
|
|
|
77 |
% |
Total revenue |
|
$ |
25,613 |
|
|
$ |
23,506 |
|
|
$ |
2,107 |
|
|
|
9 |
% |
Scheduled revenue decreased $2.3 million, or 13%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The decrease in scheduled revenue was primarily related to the exiting of unprofitable routes, partially offset by higher completion factors.
On-Demand revenue increased $4.4 million, or 77%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase in on-demand revenue was related to a focus on larger jet charter sales, driving higher average revenue per charter flight, as well as increase in the number of charter flights flown.
Operating Expenses
Cost of Revenue, exclusive of depreciation and amortization
Cost of revenue increased by $1.2 million, or 5%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The decrease of $3.0 million in scheduled cost of revenue was primarily attributable to a reduction in block hours flown as a result of exiting unprofitable routes, partially offset by investments to improve operations. The increase of $4.2 million
30
in on-demand cost of revenue was primarily associated with achieving higher revenue performance, slightly offset by improving on-demand margins with higher volumes.
Technology and Development
Technology and development expenses decreased by $0.2 million, or 9%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The flat technology and development expense is due to a similar mix of product development activities related to the Company’s Surf O/S platform.
Sales and Marketing
Sales and marketing expenses increased by $0.3 million, or 19%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to an increase of $0.3 million in external marketing initiatives.
General and Administrative
General and administrative expenses decreased by $4.8 million, or 44%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The decrease in general and administrative expense was driven primarily by a $2.7 million reduction in short term incentive bonus accruals, a $1.3 million decrease in compensation expense, a $0.5 million decrease in stock-based compensation expense, and a $0.3 million decrease in other general expenses.
Depreciation and Amortization
Depreciation and amortization expenses increased by $0.4 million, or 19%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. This was primarily due to overall increases in aircraft depreciation due to capital expenditures subsequent to March 31, 2025.
Other Income/(Expense)
Other expense, net increased by $7.0 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This was primarily attributable to a $9.0 million increase in losses from changes in fair value of financial instruments, primarily due to the impact of changes in price of our common stock on valuations of convertible notes and the GEM Global Yield LLC SCS (“GEM”) mandatory convertible security, and a $0.6 million increase in other expense, primarily driven by non-cash transaction costs. This was offset by a $2.7 million decrease in interest expense due to restructuring of high interest debt in favor of zero-coupon, convertible, obligations.
Net Loss
The increase in net loss of $1.8 million, or 10%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, was primarily attributable to increases in other expense of $7.0 million. This was partially offset by an increase in revenue of $2.1 million, coupled with decreases in operating expenses of $3.1 million.
31
Cash Flow Analysis
The following table presents a summary of our cash flows (in thousands):
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
||||
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating activities |
|
$ |
(12,252 |
) |
|
$ |
(15,804 |
) |
|
$ |
3,552 |
|
|
|
22 |
% |
Investing activities |
|
|
(3,539 |
) |
|
|
782 |
|
|
|
(4,321 |
) |
|
|
(553 |
)% |
Financing activities |
|
|
7,347 |
|
|
|
542 |
|
|
|
6,805 |
|
|
|
1,256 |
% |
Net change in cash and cash equivalents |
|
$ |
(8,444 |
) |
|
$ |
(14,480 |
) |
|
$ |
6,036 |
|
|
|
42 |
% |
Cash Flow from Operating Activities
For the three months ended March 31, 2026, net cash used in operating activities was $12.3 million, primarily driven by a net loss of $20.3 million. Operating outflows were partially offset by depreciation and amortization expense of $2.6 million, stock-based compensation expense of $1.4 million, and changes in fair value of financial instruments of $3.6 million.
For the three months ended March 31, 2025, net cash used in operating activities was $15.8 million, driven by a net loss of $18.5 million. These operating outflows were partially offset by depreciation and amortization expense of $2.1 million and losses on disposals of fixed assets of $0.7 million.
Cash Flow from Investing Activities
For the three months ended March 31, 2026, net cash used in investing activities was $3.5 million, a decrease of $4.3 million compared to the three months ended March 31, 2025. The increase was driven by an increase of $1.6 million in purchases of property and equipment and internal use software development costs, partially offset by a decrease in proceeds from the sale of fixed assets of $2.7 million.
Cash Flow from Financing Activities
For the three months ended March 31, 2026, net cash provided by financing activities was $7.3 million, primarily from $12.0 million in advances under the GEM Share Purchase Agreement (as defined below), partially offset by $4 million in borrowings under convertible note agreements.
Liquidity and Capital Resources
The Company has incurred losses from operations, negative cash flows from operating activities and has a working capital deficit. In addition, the Company is currently in default of certain excise and property taxes as well as certain debt obligations. These tax and debt obligations are classified as current liabilities on the Company’s Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025. As discussed in Note 10, Commitments and Contingencies, on May 15, 2018, the Company received a notice of a tax lien filing from the Internal Revenue Service (“IRS”) for unpaid federal excise taxes for the quarterly periods from October 2016 through September 2017 in the amount of $1.9 million, including penalties and interest as of the date of the notice. The Company agreed to a payment plan (the “Installment Plan”) whereby the IRS would take no further action and remove such liens at the time such amounts have been paid. In 2019, the Company defaulted on the Installment Plan. Defaulting on the Installment Plan can result in the IRS nullifying such plan, placing the Company in default and taking collection action against the Company for any unpaid balance. The Company is currently in default of these obligations, with a total outstanding federal excise tax liability, including accrued penalties and interest, of $9.9 million included in accrued expenses and other current liabilities on the Company’s Condensed Consolidated Balance Sheet as of March 31, 2026. The Company has also defaulted on its property tax obligations in various California counties in relation to fixed assets, plane usage and aircraft leases. The Company’s total outstanding property tax liability including penalties and interest is approximately $0.9 million as of March 31, 2026. Additionally, Los Angeles County had previously imposed a tax lien on four of the Company’s aircraft due to the late filing of the Company’s 2022 property tax return. During the year ended December 31, 2025, the Los Angeles County tax liens were released as the Company finalized remediation of the late filing, inclusive of the completion of county audits, and made payments of $1.0 million on all property taxes due to Los Angeles County that were underlying the prior aircraft liens. As of March 31, 2026, the Company was also in default of the Simple Agreements for Future Equity with Token allocation (“SAFE-T”) note, where the note matured in July 2019 (see Note 7, Financing Arrangements). The SAFE-T note is subordinate to most of the Company’s debt obligations (see Note 7, Financing Arrangements); therefore, the Company cannot pay the outstanding balance prior
32
to paying amounts due under more senior debt obligations. The SAFE-T note had an outstanding principal amount of $0.5 million as of March 31, 2026 and December 31, 2025.
The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The airline industry and the Company’s operations are cyclical and highly competitive. The Company’s success is largely dependent on the ability to raise debt and equity capital, achieve a high level of aircraft and crew utilization, increase flight services and the number of passengers flown, and continue to expand into regions profitably throughout the United States.
The Company’s prospects and ongoing business activities are subject to the risks and uncertainties frequently encountered by companies in new and rapidly evolving markets. Risks and uncertainties that could materially and adversely affect the Company’s business, results of operations or financial condition include, but are not limited to the ability to (i) raise additional capital (or financing) to fund operating losses, (ii) refinance its current outstanding debt, (iii) maintain efficient aircraft utilization, primarily through the proper utilization of pilots and managing market shortages of maintenance personnel and critical aircraft components, (iv) sustain ongoing operations, (v) attract and maintain customers, (vi) integrate, manage and grow recent acquisitions and new business initiatives, (vii) obtain and maintain relevant regulatory approvals, and (viii) measure and manage risks inherent to the business model.
The Company historically has funded its operations and capital needs primarily through the net proceeds received from the issuance of various debt instruments, convertible securities, related party funding, and preferred and common stock financing arrangements and expects to continue to do so, as available. In particular, as market conditions permit, the Company may raise additional funds through sales of equity (including through the Share Purchase Agreement (the “Share Purchase Agreement”) with GEM) or convertible debt, using proceeds (as available) to strengthen the Company’s balance sheet, among other things.
During the three months ended March 31, 2026, the Company received $12 million in advances under the Share Purchase Agreement with GEM, of which $8.3 million had been settled through the issuance of 4,350,412 shares of the Company’s common stock. As of March 31, 2026, the contractual terms allow the Company to make further advances of up to $85.5 million under the Share Purchase Agreement. Additionally, the Company has the ability to draw an additional $251.4 million under the Share Purchase Agreement, subject to daily volume limitations and GEM’s requirement to hold less than 10% of the fully-diluted shares of the Company. As of March 31, 2026, GEM held 0% of the then fully-diluted shares of the Company. At March 31, 2026, the daily volume limitations under the Share Purchase Agreement significantly restricted our ability to take additional draws under the Share Purchase Agreement to approximately 8.6 million shares per draw. Additionally, the Company’s ability to draw upon the Share Purchase Agreement is contingent on the Company’s common stock being listed on a national exchange.
The Company is currently implementing operational improvements and stringent operating expenses management to improve the profitability of its airline operations. In parallel, the Company is advancing its technology initiatives, including its software technology platform and electrification programs. In addition, the Company continues to evaluate strategies to obtain additional funding for future operations. These strategies may include, but are not limited to, obtaining additional equity financing, issuing additional debt or entering into other financing arrangements, forming joint venture and other partnerships, and restructuring operations to grow revenues and decrease expenses. There can be no assurance that the Company will be successful in achieving its strategic plans, or that new financing will be available to the Company in a timely manner or on acceptable terms, if at all. If the Company is unable to raise sufficient financing when needed or events or circumstances occur such that the Company does not meet its strategic plans, the Company will be required to take additional measures to conserve liquidity, which could include, but are not necessarily limited to, reducing certain spending, altering or scaling back development plans, including plans to further develop our software technology platforms and to equip our regional airline operations with fully-electric or hybrid-electric aircraft, or reducing funding of capital expenditures, which could have a material adverse effect on the Company’s financial position, results of operations, cash flows, and ability to achieve its intended business objectives. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Commitments
The Company has entered into various contractual arrangements related to the build-out of the Company’s air service fleet, the development of its proprietary hybrid and electric aircraft technology, and the build out of its aircraft as a service platform. These arrangements include commitments for payments pursuant to licensing agreements, which routinely contain provisions for guarantees or minimum expenditures during the terms of the contracts. The Company also enters into long-term debt arrangements that include
33
periodic interest and principal payments. Additionally, the Company routinely enters into noncancelable lease agreements for aircraft and operating locations, which contain minimum rental payments.
The timing and nature of these commitments are expected to have an impact on our liquidity and capital requirements in future periods. Refer to the Notes to the accompanying condensed consolidated financial statements included in Part I, Item 1 for additional information relating to our long-term debt, operating and finance leases, related party term notes, and commitments.
Critical Accounting Policies and Estimates
The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Our most significant estimates and judgments involve difficult, subjective, or complex judgments made by management. Actual results may differ from these estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2026 as compared to those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
JOBS Act
The Company currently qualifies as an “emerging growth company” under the JOBS Act. Accordingly, the Company has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. The Company’s utilization of these transition periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the transition periods afforded under the JOBS Act.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the ordinary course of operating our business, we are exposed to market risks. Market risk represents the risk of loss that may impact our financial position or results of operations due to adverse changes in financial market prices and rates. Except as indicated below, there has been no material change in our exposure to market risk from that described in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2025.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure. It should be noted that, because of inherent limitations, our disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the disclosure controls and procedures are met.
As required by Rule 13a-15(b) under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2026. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2026, due to material weaknesses in our internal control over financial reporting described below.
Material Weaknesses in Internal Control Over Financial Reporting
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As of March 31, 2026, material weaknesses existed in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses are as follows:
These material weaknesses contributed to the following additional material weaknesses:
These material weaknesses resulted in audit adjustments to substantially all of our accounts, which were recorded prior to the issuance of the consolidated financial statements as of December 31, 2021 and 2020 and for the years then ended, and as of June 30, 2022 and 2021 and for the six-month periods then ended. Subsequently, these material weaknesses also resulted in misstatements to revenue, deferred revenue, accrued expenses, additional paid-in capital and stock-based compensation expense to the consolidated financial statements as of December 31, 2022 and 2023 and for the years then ended. These material weaknesses also resulted in misstatements to prepaid expenses and other current assets and sales and marketing to the consolidated financial statements as of and for the quarter ended September 30, 2023. Additionally, these material weaknesses could result in a misstatement of substantially all of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Remediation Plans to Address Material Weaknesses
As of the date of this Quarterly Report, we have executed on the following remediation actions:
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Our remediation plan includes the following actions that are ongoing:
We are prioritizing the above actions to complete our remediation plan. We believe that these actions, when fully implemented, will remediate the deficiencies described above. The deficiencies will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively. As we continue to evaluate and improve the applicable controls, management may take additional remedial measures or modify the remediation plan described above.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Inherent Limitation on the Effectiveness of Internal Control over Financial Reporting and Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected or preventable.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. Except as set out in Item 1 “Financial Statements - Note 10 - Commitments and Contingencies - Legal Contingencies,” we are not currently party to any legal proceedings, the outcome of which, if determined adversely, we believe would individually or in the aggregate, have a material adverse effect on our business, financial condition or results of operations.
ITEM 1A. RISK FACTORS
Except for the risk factors below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025:
We, as well as our strategic partners, have limited experience to date in the development, manufacturing and operation at scale of fully-electric and hybrid-electric powertrains, and we may fail to realize the desired return on our investments with respect to fully-electric and hybrid-electric powertrains.
In March 2026 we announced that we had entered into an aircraft purchase agreement with BETA Technologies for the purchase of 25 all-electric aircraft, with an option to add an additional 75 aircraft, and in April 2026 we announced that we had eliminated up to $100 million in planned Cessna Caravan electrification spending as we continue to explore partner paths to advance the electrification of the Caravan.
If we fail to execute our plans to develop, acquire, implement and service fully-electric and hybrid-electric powertrain solutions in our fleet then we may not be able to generate sufficient revenue to achieve the desired return on our investment. Our and our strategic partners’ ability to develop and produce fully-electric and hybrid-electric powertrain solutions of sufficient quality and appeal to customers on schedule and at scale is unproven. There can be no assurance as to whether our current or future third-party strategic partners will be able to develop efficient, automated, low-cost production capabilities and processes and/or obtain reliable sources of component supply to allow for the quality, price, engineering, design and volumes necessary to successfully develop, deploy and implement fully-electric and hybrid-electric powertrains within our fleet. Moreover, unlike the market for electric automobiles, the commercialization of electric and hybrid-electric aircraft remains unproven. Although we believe that the component technology to electrify small aircraft exists today, any delay in the development, manufacture and launch of electrification technology could adversely affect our brand, operations and the delivery of our growth strategy, particularly if it results in a failure to expand our market share in the regional air mobility market as anticipated and could require us to incur additional costs, or impacts the development and attractiveness of our software solutions, such as SurfOS. Even if our strategic partners are successful in developing fully-electric and hybrid-electric powertrains and reliably sourcing component supply, we do not know whether they will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond our or their control such as problems with suppliers and vendors, regulatory approval delays, force majeure events, delays in meeting commercialization schedules, or failure to satisfy the requirements of customers and potential customers. Any such failure could have a material adverse effect on our business, financial condition and results of operations.
As a new entrant into the nascent market of operating hybrid-electric and battery electric aircraft, we anticipate that we will face risks and significant challenges that would impact our ability to, among other things:
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If we fail to adequately address any or all of these risks and challenges, our business, financial condition and results of operations may be materially and adversely affected.
Our competitors may incorporate electrified aircraft before us, either in general or in specific markets, or we may otherwise not be able to fully capture a first mover advantage.
While we strive to be the first to market providing air mobility services with electrified aircraft, we expect this industry to be increasingly competitive and it is possible that our competitors could get to market before us, either generally or in specific markets. The timing for providing air mobility services with electrified aircraft is dependent on our third-party strategic partners ability to finalize certain aspects of the design, engineering, component procurement, testing, build out and manufacturing plans in a timely manner and on their ability to execute these plans within the current timeline and upon regulatory approval by the FAA, which can be a lengthy and unpredictable process.
Even if we are first to provide air mobility services with electrified aircraft, we may not fully realize the benefits we anticipate, and we may not receive any competitive advantage or may be overcome by other competitors. New companies or existing aerospace companies may launch different products from those offered by our strategic partners and suppliers, which may result in new entrants into our markets or improved services by our competitors.
Additionally, our competitors may benefit from our efforts in developing consumer and community acceptance for electrified aircraft and air mobility, making it easier for them to obtain the permits and authorizations required to operate an air mobility service in the markets in which we intend to launch or in other markets. If our competitors get to market before us, or we are overcome by other competitors, it could have a material adverse effect on our business, financial condition, results of operations and prospects.
The planned fully-electric and hybrid-electric powertrain solutions may not result in the operating cost savings we anticipate, which could negatively impact the future economics of our network operations as well as our ability to successfully sell and market our planned future Aircraft-as-a-Service strategy.
In developing our business strategy for future aircraft electrification and network expansion, we have assumed implementing fully-electric technology will result in operating cost savings of approximately 50% compared to current combustion powertrain technologies, with more limited range and payload characteristics, and hybrid-electric technology will result in operating cost savings of approximately 25% compared to current internal combustion powertrain technologies, while maintaining similar performance characteristics. If these assumptions change by a material amount, our network expansion plans could be negatively impacted and we would be unlikely to be able to develop significant future revenues and earnings from our planned Aircraft-as-a-Service initiative.
Our fully-electric and hybrid-electric aircraft may require maintenance at frequencies or at costs which are unexpected and could adversely affect our business and operations.
Our fully-electric and hybrid-electric aircraft will be highly technical products that will require maintenance and support. We are still developing our understanding of the long-term maintenance profile of the fully-electric and hybrid-electric aircraft, and if useful lifetimes are shorter than expected, this may lead to greater maintenance costs than previously anticipated. If our future fully-electric and hybrid-electric aircraft and related equipment require maintenance more frequently than we plan for or at costs that exceed our estimates, that would disrupt the operation of our service and could have a material adverse effect on our business, financial condition and results of operations.
Crashes, accidents or incidents of aircraft involving us or our competitors could have a material adverse effect on our business, financial condition and results of operations.
The operation of aircraft is subject to various risks, and we expect demand for our air mobility services to be impacted by accidents or other safety issues regardless of whether such accidents or issues involve our aircraft.
Crashes, accidents or incidents involving our aircraft, or involving aircraft operating our powertrains, once developed, are possible. Any such occurrence would negatively impact our business, financial condition and results of operations in a number of ways. An
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accident or incident involving an aircraft operated by us or by a third-party operator on our behalf or using our powertrains, could result in significant potential claims of injured passengers and others, as well as repair or replacement of a damaged aircraft and its consequential temporary or permanent loss from service. For example, in January 2024, a Southern flight was forced to make an emergency landing following take-off in severe weather from Dulles International Airport in Virginia. Substantial claims resulting from an accident in excess of our related insurance coverage would harm our operational and financial results. Moreover, any aircraft accident or incident, even if fully insured or due to reasons not attributable to us or our operations or products, could result in negative public perception that our operations are less safe or reliable than other providers and have a material adverse effect on our reputation, business and results of operations. Safety issues experienced by a particular model of aircraft could impact consumer confidence in that particular aircraft type or the air transportation services industry as a whole, or result in a regulatory body grounding that particular aircraft model. If we or other operators experience accidents with aircraft models that we operate, obligating us to take such aircraft out of service until the cause of such accidents is determined and rectified, we might lose revenues and might lose customers. The value of the aircraft model might also be permanently reduced in the secondary market if the model were to be considered less desirable for future service.
Moreover, such accidents or incidents could also have a material impact on our ability to obtain or maintain FAA certification for our aircraft in a timely manner, or at all.
If our personnel, third-party contractors with whom we have arrangements, our aircraft, other types of aircraft or other companies in the industry are involved in a public incident, accident, catastrophe or regulatory enforcement action, we could be exposed to significant reputational harm and/or potential legal liability. The insurance we carry may be inapplicable or inadequate to cover any such incident, accident, catastrophe or action. In the event that our insurance is inapplicable or inadequate, we may be forced to bear substantial losses from an incident or accident.
Further, as we deploy and incorporate fully-electric and hybrid-electric aircraft in our fleet we may be exposed to additional risks, including that demand for our products and services will be negatively impacted by accidents or incidents involving such powertrains (including during test flights of prototypes). Such events could impact confidence in not just our products and services, but the development of electrification technology as a whole. This could have a material adverse effect on our future growth, financial condition and results of operations.
We are substantially dependent upon our relationships with our strategic partners, and we are or may be subject to risks associated with such strategic alliances. Our reliance on these arrangements, and the loss of any such alliances or arrangements or failure to identify future opportunities could affect our growth plans.
In March 2026 we announced that we had entered into an aircraft purchase agreement with BETA Technologies for the purchase of 25 all-electric aircraft, with an option to add an additional 75 aircraft, and in April 2026 we announced that we had eliminated up to $100 million in planned Cessna Caravan electrification spending as we continue to explore partner paths to advance the electrification of the Caravan. We have also entered into collaborations with third parties for the development of SurfOS, as more fully described in “Risks Related to the Development of the SurfOS Software Platform - Our collaborations to develop SurfOS create risks through technology dependence, potential collaborator misalignment, relationship challenges, and funding uncertainties that could significantly impact the Company’s business.”
Such strategic business relationships will be a critical component in the growth and success of our business and, in particular, our ability to develop and commercialize SurfOS and deploy fully-electric and hybrid-electric powertrains and related aircraft within our fleet. However, there are no assurances that we will be able to timely meet all of the conditions of these agreements, if at all, maintain these relationships or continue to identify or secure suitable business relationship opportunities in the future, or that our competitors will not capitalize on such opportunities before we do. Moreover, identifying such opportunities could require substantial management time and resources, and negotiating and financing relationships involves significant costs and uncertainties.
If any conflicts arise between our strategic partners and us, the other party may act in a manner adverse to us and could limit our ability to implement our business strategies, which could impact our projected business timelines. Our strategic partners may also develop, either alone or with others, products in related fields that are competitive with our products. Specifically, conflicts with our key strategic partners could adversely impact our ability to develop and commercialize SurfOS or incorporate electrified aircraft into our fleet, which, in turn could have a material adverse effect on our prospects, business, financial condition and results of operation.
If we are unable to successfully maintain, source and execute on strategic relationship opportunities in the future related to electrification or other technologies relevant to our competitive position, or if any of our agreements with our strategic partners were to be terminated, our overall growth could be impaired, and there could be a material adverse effect on our business, financial condition and results of operations.
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Aircraft purchase agreements are often subject to indexed price escalation clauses which could subject us to unanticipated expenses.
Commercial aircraft sales contracts are often entered into years before the aircraft are delivered. In order to help account for economic fluctuations between the contract date and delivery date, aircraft pricing generally consists of a fixed amount as modified by price escalation formulas derived from labor, commodity and other price indices, the actual escalation amounts of which are outside of the purchaser’s control. Escalation factors can fluctuate significantly from period to period and changes in escalation amounts can significantly impact expenses and operating margins. The terms and conditions of the aircraft purchase agreements may contain price escalation clauses and future purchase orders with other suppliers may also contain price escalation clauses yet to be determined, and there is no assurance that they will be determined in a manner that will mitigate the risks described above.
If we fail to adequately protect our intellectual property rights, our competitive position could be impaired and we may lose market share, generate reduced revenue and incur costly litigation to protect our rights.
Our success depends in part on our ability to protect our intellectual property rights, including trademarks and service marks applicable to our operating entities and, in the future once developed, certain technologies and software that we expect to be deployed in our aircraft or that we expect to utilize in arranging air transportation. To date, we have relied primarily on trademarks to distinguish us from our competitors, and trade secrets and other forms of legal protection and contractual agreements to establish and protect our proprietary rights.
We expect that in the future we will rely on patents, copyrights, and trade secrets to protect any proprietary technology we develop. We routinely enter into agreements with employees, consultants, third parties and other relevant persons and take other measures to protect our intellectual property rights, such as limiting access to our trade secrets and other confidential information. However, we cannot guarantee that we have entered into or will enter into such an agreement with each person that has access to such information or that the steps we take to protect our intellectual property will otherwise be adequate. For example, unauthorized parties may attempt to obtain and use information that we regard as proprietary and, if successful, may potentially harm our ability to compete, accelerate the development programs of our competitors, and/or our competitive position in the market. Moreover, our agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to ours, and there can be no assurance that our counterparties will comply with the terms of these agreements, or that we will be able to successfully enforce such agreements or obtain sufficient remedies if they are breached. There can be no assurance that the intellectual property rights we own or license will offer us meaningful protection for our business, provide competitive advantages or will not be challenged or circumvented by our competitors.
Further, obtaining and maintaining patent, copyright, and trademark protection can be costly, and we may choose not to, or may fail to, pursue or maintain such forms of protection for our technology, products or services in the United States or foreign jurisdictions, which could harm our ability to obtain or maintain a competitive advantage in such jurisdictions. It is also possible that we will fail to identify patentable aspects of our technology before it is too late to obtain patent protection, that we will be unable to devote the resources needed to file and prosecute patent applications for such technology, or that we will inadvertently abandon them by failing to comply with all procedural, documentary, payment, and similar obligations during the patent prosecution process. Even if we obtain patent protection in future, we cannot assure you that such patents would be sufficiently broad to protect our proprietary technology to prevent competitors or other third parties from using the same or similar technologies. Failure to comply with legal requirements to maintain a patent, copyright, or trademark registration can result in lapse or cancellation of the patent, copyright, or trademark registration, which could result in the loss of patent or trademark rights. If this occurs, we may not be able to exclude our competitors from using patented technology that we have developed or our trademarks. Also, patents, copyrights, and trademark registrations may be challenged in court or administrative proceedings.
The laws of some countries do not protect proprietary rights to the same extent as the laws of the United States, and mechanisms for enforcement of intellectual property rights in some foreign countries may be inadequate to prevent other parties from infringing our proprietary technology. To the extent we expand our international activities, our exposure to unauthorized use of our technologies and proprietary information may increase. We may also fail to detect unauthorized use of our intellectual property, or be required to expend significant resources to monitor and protect our intellectual property rights, including engaging in litigation, which may be costly, time-consuming, and divert the attention of management and resources, and may not ultimately be successful. If we fail to meaningfully establish, maintain, protect and enforce our intellectual property rights, there could be a material adverse effect on our business, financial condition and results of operations.
We may enter into strategic partnerships in the future with respect to electrification of aircraft, including the Cessna Caravan, that do not give us any intellectual property rights or exclusivity of such technology.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
(a) None.
(b) Not applicable.
(c) Rule 10b5-1 Trading Plans or Other Preplanned Trading Arrangements
During the three months ended March 31, 2026, none of our directors or officers (as defined in Section 16 of the Exchange Act),
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Item 6 – Exhibits
The following documents are filed or furnished as exhibits to this Quarterly Report:
Exhibit Number |
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Description of Document |
10.1* |
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Amendment to Senior Secured Convertible Note due 2028 and Security Agreement, dated as of April 24, 2026 by and among Surf Air Mobility Inc. and certain of its subsidiaries, High Trail Special Situations LLC, and each of the Holders signing thereto. |
31.1* |
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Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2* |
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Certification of Principal Financial and Accounting Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1§ |
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Certification of Principal Executive Officer and Principal Financial and Accounting Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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101.INS* |
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Inline XBRL Instance Document |
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101.SCH* |
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Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
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104* |
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Cover Page Interactive Data File (embedded within the Inline XBRL document). |
* Filed herewith.
§ Furnished herewith. This certification is not deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act whether made before or after the date hereof, regardless of any general incorporation language in such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Surf Air Mobility Inc. (Registrant) |
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Date: May 11, 2026 |
/s/ Deanna White |
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Deanna White Chief Executive Officer (Principal Executive Officer) |
Date: May 11, 2026 |
/s/ Oliver Reeves |
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Oliver Reeves Chief Financial Officer (Principal Financial and Accounting Officer) |
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