[10-Q] SURF AIR MOBILITY INC. Quarterly Earnings Report
Surf Air Mobility Inc. (SRFM) reported Q3 2025 results and raised substantial doubt about its ability to continue as a going concern. Revenue was $29.2 million for the quarter and $80.1 million year-to-date, while the company posted a Q3 net loss of $27.2 million and a nine‑month net loss of $73.7 million. Cash was $7.1 million at September 30, 2025, against total liabilities of $199.3 million and a shareholders’ deficit of $92.6 million.
Management disclosed defaults on certain taxes and debt obligations, including federal excise taxes of $8.9 million and property taxes of approximately $0.8 million, while noting release of prior Los Angeles County aircraft tax liens after payments of $1.0 million. To fund operations, the company received $31.4 million through issuances of common stock (or pre‑funded warrants) and drew $19.0 million under its Share Purchase Agreement with GEM, issuing 5,692,349 shares. Long‑term borrowings include $47.7 million under the Comvest Credit Agreement at SOFR + 5% due in 2028. Shares outstanding were 52,266,051 as of November 7, 2025.
- None.
- None.
Insights
Going‑concern risk highlighted; liquidity remains tight.
SRFM reported a nine‑month net loss of
The filing cites defaults on federal excise taxes of
The company’s ability to remain listed affects access to the GEM facility, and the going‑concern disclosure signals elevated refinancing and dilution risk. Actual impact will depend on future capital raises and operating improvements disclosed in subsequent updates.
f
+
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)
|
4522 |
|
||
(State or other jurisdiction of |
|
(Primary Standard Industrial |
|
(I.R.S. Employer |
(
(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 |
☐ |
|
Accelerated filer |
☐ |
☒ |
|
Smaller reporting company |
||
Emerging growth company |
|
|
|
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 November 7, 2025,
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
|
|
Page |
|
Special Note Regarding Forward Looking Information |
|
PART I. |
FINANCIAL INFORMATION |
1 |
Item 1. |
Financial Statements |
1 |
|
Unaudited Condensed Consolidated Balance Sheets |
1 |
|
Unaudited Condensed Consolidated Statements of Operations |
2 |
|
Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Deficit |
3 |
|
Unaudited Condensed Consolidated Statements of Cash Flows |
5 |
|
Notes to Unaudited Condensed Consolidated Financial Statements |
6 |
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
31 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
41 |
Item 4. |
Controls and Procedures |
41 |
|
|
|
PART II. |
OTHER INFORMATION |
44 |
Item 1. |
Legal Proceedings |
44 |
Item 1A. |
Risk Factors |
44 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
44 |
Item 3. |
Defaults Upon Senior Securities |
44 |
Item 4. |
Mine Safety Disclosures |
44 |
Item 5. |
Other Information |
45 |
Item 6. |
Exhibits |
46 |
Signatures |
47 |
|
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Surf Air Mobility Inc.
Unaudited Condensed Consolidated Balance Sheets
September 30, 2025 and December 31, 2024
(in thousands, except share and per share data)
(Unaudited)
|
|
September 30, |
|
|
December 31, |
|
||
Assets: |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash |
|
$ |
|
|
$ |
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
|
|
|
|
|
||
Finance lease right-of-use assets |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Liabilities and Shareholders’ Deficit: |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued expenses and other current liabilities |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Current maturities of long-term debt |
|
|
|
|
|
|
||
Operating lease liabilities, current |
|
|
|
|
|
|
||
Finance lease liabilities, current |
|
|
|
|
|
|
||
SAFE notes at fair value, current |
|
|
|
|
|
|
||
Due to related parties, current |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Long-term debt, net of current maturities |
|
|
|
|
|
|
||
Convertible notes at fair value, non-current |
|
|
|
|
|
|
||
Operating lease liabilities, long term |
|
|
|
|
|
|
||
Finance lease liabilities, long term |
|
|
|
|
|
|
||
Due to related parties, long term |
|
|
|
|
|
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
|
||
Commitments and contingencies (Note 10) |
|
|
|
|
|
|
||
Shareholders’ deficit: |
|
|
|
|
|
|
||
Common stock, $ |
|
$ |
|
|
$ |
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total shareholders’ deficit |
|
$ |
( |
) |
|
$ |
( |
) |
Total liabilities and shareholders’ deficit |
|
$ |
|
|
$ |
|
||
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 and Nine Months Ended September 30, 2025 and 2024
(in thousands, except share and per share data)
(Unaudited)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total other expense, net |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Loss before income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per share applicable to common stockholders, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average number of shares of common stock used in net loss per share applicable to common stockholders, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 and Nine Months Ended September 30, 2025 and 2024
(in thousands, except share data)
(Unaudited)
|
|
Stockholders’ Equity (Deficit) |
|
|||||||||||||||||
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Number of |
|
|
Amount |
|
|
Additional Paid-In Capital |
|
|
Accumulated |
|
|
Total Shareholders' Deficit |
|
|||||
Balance at June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||
Issuance of common stock related to restricted shares |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of common stock related to performance-based restricted shares |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of common stock related to stock option exercises |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Issuance of common stock related to warrant exercises |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Issuance of common stock under Share Purchase Agreement |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock in settlement of vendor payables |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock under software license agreement |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock related to convertible note conversions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||
|
|
Stockholders’ Equity (Deficit) |
|
|||||||||||||||||
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Number of |
|
|
Amount |
|
|
Additional Paid-In Capital |
|
|
Accumulated |
|
|
Total Shareholders' Deficit |
|
|||||
Balance at June 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||
Issuance of common stock related to restricted shares |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of common stock under Share Purchase Agreement |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Shares received as consideration for Mandatory Convertible Security |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Conversion of Mandatory Convertible Security to common shares |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||
3
|
|
Stockholders’ Equity (Deficit) |
|
|||||||||||||||||
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Number of |
|
|
Amount |
|
|
Additional Paid-In Capital |
|
|
Accumulated |
|
|
Total Shareholders' Deficit |
|
|||||
Balance at December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||
Issuance of common stock related to restricted shares |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of common stock related to performance-based restricted shares |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of common stock related to stock option exercises |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock related to warrant exercises |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of common stock in private placements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of common stock in direct offerings |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Issuance of warrants to placement agents in direct offerings |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Issuance of common stock under Share Purchase Agreement |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Issuance of common stock in settlement of vendor payables |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock under software license agreement |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock related to convertible note conversions |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||
|
|
Stockholders’ Equity (Deficit) |
|
|||||||||||||||||
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Number of |
|
|
Amount |
|
|
Additional Paid-In Capital |
|
|
Accumulated |
|
|
Total Shareholders' Deficit |
|
|||||
Balance at December 31, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||
Issuance of common stock related to restricted shares |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of common stock related to stock option exercises |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock under software license agreement |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock under marketing agreement |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock under Share Purchase Agreement |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Shares received as consideration for Mandatory Convertible Security |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Conversion of Mandatory Convertible Security to common shares |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Surf Air Mobility Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2025 and 2024
(in thousands)
(Unaudited)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Loss (gain) on sale of fixed asset |
|
|
|
|
|
( |
) |
|
Non-cash operating lease expense |
|
|
|
|
|
|
||
Gain on extinguishment of debt |
|
|
( |
) |
|
|
— |
|
Stock-based compensation expense |
|
|
|
|
|
|
||
Changes in fair value of financial instruments carried at fair value, net |
|
|
|
|
|
|
||
Amortization of debt discounts and debt issuance costs |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
( |
) |
|
|
|
|
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
|
|
Other assets |
|
|
|
|
|
|
||
Accounts payable |
|
|
|
|
|
|
||
Due to a related party |
|
|
— |
|
|
|
|
|
Accrued expenses and other current liabilities |
|
|
|
|
|
|
||
Deferred revenue |
|
|
( |
) |
|
|
( |
) |
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Other liabilities |
|
|
( |
) |
|
|
( |
) |
Cash flows used in operating activities |
|
$ |
( |
) |
|
$ |
( |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from the sale of assets |
|
|
|
|
|
— |
|
|
Internal-use software development costs |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
$ |
( |
) |
|
$ |
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Borrowings on long-term debt |
|
|
|
|
|
— |
|
|
Principal payments on long-term debt |
|
|
( |
) |
|
|
( |
) |
Proceeds from sales and advances under Share Purchase Agreement |
|
|
|
|
|
|
||
Principal payments on Mandatory Convertible Security |
|
|
( |
) |
|
|
— |
|
Proceeds from the issuance of common stock, net of transaction expenses |
|
|
|
|
|
— |
|
|
Proceeds from collateralized borrowings, net of repayment |
|
|
|
|
|
|
||
Proceeds from borrowings from related parties |
|
|
— |
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Proceeds from exercise of warrants |
|
|
|
|
|
— |
|
|
Payment of finance lease obligations |
|
|
( |
) |
|
|
( |
) |
Net cash provided by financing activities |
|
$ |
|
|
$ |
|
||
Increase (decrease) in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Surf Air Mobility Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Description of Business
Organization
Surf Air Mobility Inc. (the “Company”), a Delaware corporation, is a regional air mobility platform that aims to transform regional flying. The Company is currently comprised of its Air Mobility business, and has a goal of further developing and enhancing its service and technology offerings through its Air Technology business.
Surf Air Global Limited (“Surf Air”) is a British Virgin Islands holding company and was formed on August 15, 2016. Surf Air is a technology-enabled regional air travel network, offering on-demand charter flights. Its customers consist of regional business and leisure travelers. Headquartered in Hawthorne, California, Surf Air commenced flight operations in June 2013.
The Company was incorporated in 2021 and became the ultimate parent of both Surf Air and Southern Airways Corporation (“Southern”) in July of 2023 following the Company’s public listing on the New York Stock Exchange (“NYSE”).
Reverse Stock Split
On August 16, 2024, the Company effected a
Options, and other like awards, to purchase the Company’s common stock were also adjusted in accordance with their terms to reflect the reverse stock split.
Adjustments resulting from the reverse stock split have been retroactively reflected for all periods presented herein.
At the Company’s 2025 Annual Meeting of Stockholders, the Company’s stockholders approved a proposal to effect a reverse stock split of the Company’s common stock at a reverse stock split ratio ranging from
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 September 30, 2025 and December 31, 2024. 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 $
6
paying amounts due under the Convertible Note Purchase Agreement. The SAFE-T note had an outstanding principal amount of $
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 second amended and restated Share Purchase Agreement (the “Share Purchase Agreement” 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 nine months ended September 30, 2025, the Company received net proceeds of $
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 Caravan 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
7
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 equip 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.
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 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, 2024 and the related notes, as included in the Company’s Form 10-K filed on March 21, 2025. 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 for the nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025.
Except to the extent discussed below, there have been no material changes to the Company’s significant accounting policies during the nine months ended September 30, 2025 from those disclosed in the notes to the Company’s consolidated financial statements for the year ended December 31, 2024.
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 September 30, 2025 and December 31, 2024 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 or (“EAS”) program, amounts due from airline, non-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 September 30, 2025, and December 31, 2024. The Company has considered past and future financial and qualitative factors, including aging, payment history and other credit monitoring indicators, when establishing the allowance for credit losses.
Mandatory Convertible Security
The Company’s Mandatory Convertible Security with GEM, entered into as of August 7, 2024, is a financial instrument whereby GEM is able to convert portions of the par amount, either before or at maturity, into shares of common stock of the Company (the “Mandatory Convertible Security”). Due to certain provisions included in the Mandatory Convertible Security, including potential settlement of the outstanding par amount in a variable number of shares of the Company’s common stock, it has been classified as a liability as of December 31, 2024 and September 30, 2025 (see Note 8, Share Purchase Agreement and GEM Mandatory Convertible Security).
The Company has accounted for the Mandatory Convertible Security as an equity-linked debt instrument, which requires it to be remeasured to fair value at each reporting period with changes in fair value recorded in Changes in fair value of financial instruments carried at fair value, net on the Consolidated Statements of Operations.
8
The fair value of the Mandatory Convertible Security is estimated using a model based on multiple stock price paths developed through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the Company will not be able to satisfy the liability through the issuance of shares of common stock. A Monte Carlo simulation model requires the use of various assumptions, including the underlying stock price, volatility, contractual term, and the risk-free interest rate as of the valuation date. The estimated fair value of the instrument is considered a Level 3 fair value measurement as there are significant inputs not observable in the market. The resulting liability is included as part of Other long-term liabilities on the Condensed Consolidated Balance Sheets.
Collateralized Borrowings
On August 9, 2024, the Company entered into a new revolving accounts receivable financing arrangement that will allow 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.
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. Prior to the Company’s direct listing in July 2023, RSUs granted by the Company vested upon the satisfaction of both service-based vesting conditions and liquidity event-related performance vesting conditions. The liquidity event-related performance vesting conditions were achieved upon the consummation of the Company's direct listing. Stock-based compensation related to such awards was recorded in full, as of the date of the Company’s direct listing. Since the Company’s direct listing in July 2023, the Company has only granted RSUs that vest upon the satisfaction of a service-based vesting condition and the compensation expense for these RSUs is recognized on a straight-line basis over the requisite service period.
The Company has granted founder performance-based restricted stock units (“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. 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. Provided that each founder continues to be employed by the Company, stock-based compensation expense is recognized over the derived service period, regardless of whether the stock price goals 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 December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its financial statements.
9
In November 2024, the FASB issued 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.
Note 3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Prepaid marketing |
|
$ |
|
|
$ |
|
||
Engine reserves |
|
|
|
|
|
|
||
Prepaid software |
|
|
|
|
|
|
||
Vendor operator prepayments |
|
|
|
|
|
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Prepaid fuel |
|
|
|
|
|
|
||
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):
|
|
September 30, |
|
|
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 $
For the three months ended September 30, 2025 any gain or loss on disposal of property and equipment was not material. For the nine months ended September 30, 2025 the Company recorded a loss of $
10
Note 5. Intangible Assets, Net
Intangibles assets, net, consists of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
EAS contracts |
|
$ |
|
|
$ |
|
||
Tradenames and trademarks |
|
|
|
|
|
|
||
Software |
|
|
|
|
|
|
||
Other intangibles |
|
|
|
|
|
|
||
Intangible assets, gross |
|
|
|
|
|
|
||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Intangible assets, net |
|
$ |
|
|
$ |
|
||
The Company recorded amortization expense of $
Expected future amortization as of September 30, 2025 is as follows (in thousands):
|
|
Amount |
|
|
Remainder of 2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Note 6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Software license fee payable |
|
$ |
|
|
$ |
|
||
Accrued professional services |
|
|
|
|
|
|
||
Excise and franchise taxes payable |
|
|
|
|
|
|
||
Accrued compensation and benefits |
|
|
|
|
|
|
||
Collateralized borrowings |
|
|
|
|
|
|
||
Accrued Monarch legal settlement |
|
|
|
|
|
|
||
Accrued major maintenance |
|
|
|
|
|
|
||
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 currently 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 September 30, 2025, the Company borrowed a total of $
11
months ended September 30, 2025 amounted to $
For the nine months ended September 30, 2025, the Company borrowed a total of $
As of September 30, 2025, and December 31, 2024, the outstanding amount due under this facility amounted to $
In addition, during the year ended December 31, 2024, the Company received an advance payment of $
Accrued Professional Services
During the fourth quarter of 2024, the Company entered into agreements with several professional service firms engaged in support 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 estimates that a total of $
Note 7. Financing Arrangements
The Company’s total debt due to unrelated parties consist of the following (in thousands):
|
|
September 30, |
|
|
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 |
|
|
|
|
|
|
||
Comvest Credit Agreement, floating interest rate of SOFR + |
|
|
|
|
|
|
||
Debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Long-term debt, gross |
|
$ |
|
|
$ |
|
||
Current maturities of long-term debt |
|
|
( |
) |
|
|
( |
) |
Long-term debt, net of current maturities |
|
$ |
|
|
$ |
|
||
Future maturities of total debt as of September 30, 2025 are as follows (in thousands):
|
|
September 30, |
|
|
Remainder of 2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
12
The Company is subject to customary affirmative covenants and negative covenants on all of the above notes payable. As of September 30, 2025, 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.
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 July 27, 2023, the Company received $
On November 14, 2024, the Company amended the existing Convertible Note Purchase Agreement with PFG, which had an outstanding principal amount of $
The Convertible Note Purchase Agreement will accrue interest at the greater of (x) 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 $
The obligations under the Convertible Note Purchase 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.
As of September 30, 2025, the Company was in compliance with all covenants under the Convertible Note Purchase Agreement.
Fair value of convertible notes (in thousands):
|
|
Fair Value at |
|
|||||
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Convertible Note Purchase Agreement |
|
$ |
|
|
$ |
|
||
Total |
|
$ |
|
|
$ |
|
||
Fair Value of SAFE Notes
The Company’s SAFE-T note is 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. As of September 30, 2025 and December 31, 2024, the Company was in default of the SAFE-T note, but the holder has elected not to effect an equity conversion of the instrument. The SAFE-T note is subordinate to the Company’s Convertible Note Purchase Agreement; therefore, the Company cannot pay the outstanding balance prior to paying amounts due under the Convertible Note Purchase Agreement. The SAFE-T note had an outstanding principal amount of $
13
Fair value of SAFE-T note (in thousands):
|
|
Fair Value at |
|
|||||
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
SAFE-T |
|
$ |
|
|
$ |
|
||
Total |
|
$ |
|
|
$ |
|
||
Less: SAFE notes at fair value, current |
|
|
( |
) |
|
|
( |
) |
SAFE notes at fair value, long term |
|
$ |
— |
|
|
$ |
— |
|
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 $
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 Consolidated Balance Sheets. During the year ended December 31, 2024, the Company settled $
During the nine months ended September 30, 2025, the Company received total proceeds of $
The fair value of the liability related to the SPA was $
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 $
The Company issued the Mandatory Convertible Security on August 7, 2024. The Mandatory Convertible Security will mature on
14
$
On the Maturity Date, the Company will pay to GEM, at the Company’s option, cash or shares of the Company’s common stock in an amount equal to the then outstanding par amount of the Mandatory Convertible Security divided by the lesser of (a) $
Prior to the Maturity Date, GEM will have the option to convert any portion of the Mandatory Convertible Security into shares of the Company’s common stock at a conversion rate equal to the portion of the par amount to be converted into shares of the Company’s common stock divided by the lesser of (a) the Fixed Conversion Price and (b) the Floating Conversion Price. If, following the conversion by GEM of any portion of the Mandatory Convertible Security into
During the nine months ended September 30, 2025, the Company made payments against the outstanding principal of the Mandatory Convertible Security totaling $
Pursuant to the terms of the MCSPA and the Mandatory Convertible Security, GEM has agreed that, beginning March 1, 2024 and for so long as any shares of the Company’s common stock are beneficially owned by GEM (together with its affiliates and any entity managed by GEM, the “GEM Entities”), the GEM Entities will limit the daily volume of sales of shares of the Company’s common stock then beneficially owned by the GEM Entities to no more than 1/10th of the daily trading volume of shares of the Company’s common stock on the NYSE on the trading day immediately preceding the applicable date of such sales.
The fair value of the liability was estimated using a model based on multiple stock price paths developed through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the Company will not be able to satisfy the liability through the issuance of shares of common stock and taking into account the value of the consideration transferred to the Company upon closing of the MCSPA. This was inclusive of the value of the shares returned to the Company and the cancellation of the share transfers due in settlement of the GEM derivative liability (see Note 9, Fair Value Measurements). For the three and nine months ended September 30, 2025, the Company recorded losses on the change in fair value of financial instruments carried at fair value of $
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Par amount |
|
|
|
|
|
|
||
Expected volatility |
|
|
% |
|
|
% |
||
Discount rate |
|
|
% |
|
|
% |
||
Share price |
|
$ |
|
|
$ |
|
||
Note 9. Fair Value Measurements
The fair values of the convertible notes, SAFE instruments, and derivative liability are based on the estimated values of the notes, SAFE instruments and derivatives upon conversion, which are primarily based the price of the Company’s common stock, borrowing rates applicable to the Company’s credit profile, and expectations regarding share availability to facilitate stock settlement upon
15
conversion. The estimated fair values of these financial liabilities were determined utilizing a combination of the Probability-Weighted Expected Return Method and Monte-Carlo simulations, and are considered a Level 3 fair value measurement.
Assets and liabilities are classified in the hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.
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 September 30, 2025 Using: |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Convertible notes at fair value |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
SAFE notes at fair value |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
LamVen Note |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Mandatory Convertible Security |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total financial liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
|
|
Fair Value Measurements at December 31, 2024 Using: |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Convertible notes at fair value |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
SAFE notes at fair value |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
LamVen Note |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Mandatory Convertible Security |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
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 |
|
|
LamVen Note |
|
|
Mandatory Convertible Security |
|
||||
Balance at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Change in fair value |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
|
|
Conversion of note by third party convertible note holder (Note 16) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Payments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Balance at September 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Long-Term Debt
The carrying amounts and fair values of the Company’s long-term debt obligations were as follows (in thousands):
|
|
As of September 30, 2025 |
|
|
As of December 31, 2024 |
|
||||||||
|
|
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.
16
Note 10. Commitments and Contingencies
Software License Agreements
On May 18, 2021, and later modified during July 2025, the Company executed
As of September 30, 2025 and December 31, 2024, the Company 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 (“STC”) 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: (a) include Cessna Grand Caravans fitted with the SAM System (the “SAM Aircraft”) in sales and marketing materials (print and digital) distributed to authorized dealers, (b) prominently display the SAM Aircraft on their respective websites and social media, (c) include representatives of the Company and TAI at trade show booths, (d) market the SAM Aircraft and conversions to SAM Aircraft to all owners of pre-owned Cessna Grand Caravans, and (e) 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 $
Under the aircraft purchase agreement, the Company may purchase from TAI
17
of
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 Inc. (“Surf Air Technologies”), a subsidiary of the Company, 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 (the “Software Platform”).
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 sufficiently covers liabilities that may arise from the acts of its officers and directors and as of September 30, 2025 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 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 $
18
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 expected to have a material adverse effect on the Company as of September 30, 2025. 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 operator customers. 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 beginning 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 the three months ended September 30, 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 $
19
Note 11. Disaggregated Revenue
The disaggregated revenue for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Scheduled |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
On-Demand |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The revenue deferred and recognized for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
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. Shareholders’ Deficit
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
The Company received gross proceeds from these offerings of $
Private Placements
During the nine months ended September 30, 2025, the Company sold
20
Note 13. Stock-Based Compensation
Stock Options
A summary of stock option activity for the nine months ended September 30, 2025 is set forth below:
|
|
Number of Stock Options Outstanding |
|
|
Weighted Average Contractual Term (in years) |
|
|
Aggregate Intrinsic Value (in thousands) |
|
|
Weighted |
|
||||
Outstanding at December 31, 2024 |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Granted |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Exercised |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
Canceled |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
Outstanding at September 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercisable at September 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of September 30, 2025, unrecognized compensation expense related to the unvested portion of the Company’s share options was approximately $
Warrants
During the nine months ended September 30, 2024, the Company issued
A summary of common stock warrant activity for the nine months ended September 30, 2025 is set forth below:
|
|
Number of Warrants Outstanding |
|
|
Weighted Average Contractual Term (in years) |
|
|
Aggregate Intrinsic Value (in thousands) |
|
|
Weighted |
|
||||
Outstanding at December 31, 2024 |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
Canceled |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Outstanding at September 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercisable at September 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of September 30, 2025, unrecognized compensation expense related to the unvested portion of the Company’s common stock warrants was approximately $
Restricted Stock Units
During the nine months ended September 30, 2025, the Company issued
21
A summary of RSU activity for the nine months ended September 30, 2025 is set forth below:
|
|
Number of RSUs |
|
|
Weighted |
|
||
Unvested RSUs at December 31, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested/shares issued |
|
|
( |
) |
|
|
|
|
Forfeited, cancelled, or expired |
|
|
( |
) |
|
|
|
|
Unvested RSUs at September 30, 2025 |
|
|
|
|
$ |
|
||
As of September 30, 2025, unrecognized compensation expense related to the unvested portion of the Company’s RSUs was approximately $
Restricted Share Purchase Agreement (“RSPA”)
A summary of RSPA activity for the nine months ended September 30, 2025 is set forth below:
|
|
Number of RSPAs |
|
|
Weighted |
|
||
Unvested RSPAs at December 31, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
— |
|
|
|
— |
|
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
— |
|
|
|
— |
|
Unvested RSPAs at September 30, 2025 |
|
|
|
|
$ |
|
||
Some RSPAs were issued for cash while others were issued for promissory notes. The executed promissory note creates an option for the RSPA holder, since they will repay the loan when the fair value of the common stock is greater than the amount of the note. The promissory note contains prepayment features and therefore can be repaid at any time. The maturity date of the RSPA’s is
As of September 30, 2025, the unrecognized compensation expense related to the unvested portion of the Company’s RSPAs was $
Performance-Based Restricted Stock Units
During the nine months ended September 30, 2025, the Company issued
A summary of PRSU activity for the nine months ended September 30, 2025 is set forth below:
|
|
Number of PRSUs |
|
|
Weighted |
|
||
PRSUs at December 31, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Shares issued |
|
|
( |
) |
|
|
|
|
Forfeited, cancelled, or expired |
|
|
( |
) |
|
|
|
|
Unvested PRSUs at September 30, 2025 |
|
|
|
|
$ |
|
||
22
During the three months ended September 30, 2025 the Company accelerated the vesting of approximately
Other
During the three months ended September 30, 2025 the Company issued
A summary of stock-based compensation expense recognized for the three and nine months ended September 30, 2025 and 2024 is as follows (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Stock Options |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
RSUs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
RSPAs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
PRSUs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management Incentive Bonus Plan |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
Other |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total Stock Based Compensation |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
23
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 Consolidated Statements of Operations. The measure of segment assets is reported on the Balance Sheet as total consolidated assets.
In addition to consolidated financial metrics used in assessing the Air Mobility segment,
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
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 income (expense) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
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. |
|
|||||||||||||||
24
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.
Note 15. Income Taxes
The Company’s provision for income taxes for the three months ended September 30, 2025 and 2024, 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 September 30, 2025. In general, tax years 2011 and forward remain open to audit for U.S. federal and state income tax purposes.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law, extending key provisions of the 2017 Tax Cuts and Jobs Act including, but not limited to, federal bonus depreciation and deductions for domestic research and development expenditures. The effects of the new law are reflected in the consolidated financial statements as of and for the periods ended September 30, 2025.
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 (x) SOFR (subject to a 1.00% floor) plus
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 $
25
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 $
In July 2025, LamVen transferred $
Park Lane Reimbursement Agreement
On November 14, 2024, in connection with the letter of credit backstopping the Comvest Credit Agreement, the Company entered into a reimbursement agreement with Park Lane Investments LLC (“Park Lane”) (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.
In connection with the Reimbursement Agreement, Park Lane will have the right to appoint a board observer with respect to the Company.
Other Transactions
As of September 30, 2025, the Company continues to lease
JA Flight Services and BAJ Flight Services
The Company recorded approximately $
Schuman Aviation
As of September 30, 2025, 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 $
26
approximately $
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, an entity wholly-owned by David Anderman, a member of the Company’s Board of Directors, provides advisory services to the Company for a monthly fee of $
Note 17. Supplemental Cash Flows
Supplemental cash flow information for the nine months ended September 30, 2025 and 2024 (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Supplemental cash flow information |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Common stock issued as payment for software license agreement |
|
|
|
|
|
|
||
Issuance of common stock in settlement of vendor payables |
|
|
|
|
|
— |
|
|
Issuance of common stock in settlement of convertible notes |
|
|
|
|
|
— |
|
|
Reclassification of aircraft deposits to data license fees |
|
|
— |
|
|
|
|
|
Common stock received as consideration for Mandatory Convertible Security |
|
|
— |
|
|
|
( |
) |
Conversion of Mandatory Convertible Security |
|
|
— |
|
|
|
|
|
Capitalized interest on convertible notes |
|
|
— |
|
|
|
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
|
— |
|
|
|
|
|
Right-of-use obtained in exchange for new finance lease liabilities |
|
|
— |
|
|
|
|
|
Purchases of property and equipment included in accounts payable |
|
|
|
|
|
|
||
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. As outlined in “Reverse Stock Split” in Note 1, Description of Business, the effects of the seven-for-one reverse stock split for all shares of the Company’s common stock then issued and outstanding, have been applied to outstanding shares of common stock and rights to receive shares of common stock for all periods presented in calculating earnings per share and for presentation within the Condensed Consolidated Statement of Changes in Shareholders’ Deficit.
The following table sets forth the computation of net loss per shares of common stock (in thousands, except share data and per share amounts):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average number of shares of common stock used in net loss per share applicable to common shareholders, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share applicable to common stockholders, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
27
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 September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Excluded securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options to purchase shares of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants to purchase shares of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unvested RSPAs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Convertible notes (as converted to shares of common stock) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mandatory Convertible Security |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total shares of common stock equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 19. Subsequent Events
Financing Transactions
On November 10, 2025, Surf Air Mobility, Inc. (the “Company”) entered into securities purchase agreements (the “Offerings”) with certain institutional investors relating to the offering and sale of:
The Offerings closed on November 12, 2025.
In addition, the Company issued
The Company received gross proceeds from the Offerings of approximately $
The Warrants
28
The exercise price of each of the Warrants is $
The Note
The Note will be the senior secured obligation of the Company, guaranteed by certain of the Company’s subsidiaries. The Note is being sold at
The Note may be converted at an initial conversion rate of
Letter of Credit and Reimbursement Agreement Amendment
In connection with the offering of the Note and the refinancing of existing liabilities of the Company, the Company is required to cause the issuance and delivery of an irrevocable standby letter of credit in an amount equal to $
On November 12, 2025, the Company also entered into an amendment to the Company’s existing reimbursement agreement among the Company and Park Lane, to add the Letter of Credit 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
Aircraft Leases
As of September 30, 2025, the Company continued to lease
In October 2025, the parties amended each of the four leases to waive certain return conditions under the leases in consideration of the Company’s issuance of an aggregate of
Essential Air Service Program and Federal Funding Developments
The Company has multi-year contracts with the United States Department of Transportation’s (“DOT”) to operate Essential Air Service (“EAS”) routes, which helps small communities in the United States maintain a minimum level of scheduled air services. During October 2025, the U.S. Department of Transportation (“DOT”) issued public notices regarding a potential lapse in appropriated funding for the Essential Air Service (“EAS”) program as a result of the federal government shutdown, followed by amended notices extending temporary funding authority through November 18, 2025.
There can be no assurance that funding will continue without interruption [after November 18, 2025] or that appropriations will be made on a timely basis. While the DOT has historically restored and funded EAS obligations retroactively following prior government shutdowns, no commitment to do so has been made in connection with this shutdown and there can be no assurance that Congress will authorize retroactive reimbursement for service provided during a lapse. The Company and its operating subsidiaries have provided, and intend to continue to provide, full scheduled EAS service during the current funding uncertainty. The Company will continue to evaluate operations in coordination with the DOT as circumstances evolve.
Interruptions, reductions, or delays in federal appropriations for the EAS program—or changes in related legislation, regulations, or administrative practices—could affect the timing and amount of subsidy payments and increase the Company’s working capital
29
requirements to the extent it elects to continue operating EAS routes during a funding lapse. The Company monitors these developments closely and will continue to assess their potential impact on liquidity, operating results, and overall business strategy.
30
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, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the U.S. Securities and Exchange Commission (“SEC”) on March 21, 2025, the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 filed with the SEC on May 13, 2025, and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2025 filed with the SEC on August 12, 2025.
Overview of the Business
Surf Air Mobility Inc. (“Surf Air Mobility”, the “Company”, “us”, “we” or “our”) is a regional air mobility platform that aims to transform regional flying. The Company is currently comprised of its Air Mobility business, with the goal of further developing and enhancing its service and technology offerings through its Air Technology business.
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”).
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 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.
Reverse Stock Split
On August 16, 2024, the Company effected a seven-for-one reverse stock split for all shares of the Company’s common stock then issued and outstanding. As a result of the reverse stock split, every seven shares of the Company’s old common stock were converted into one share of the Company’s new common stock. Fractional shares resulting from the reverse stock split were settled by cash payment.
Options, and other like awards, to purchase the Company’s common stock were also adjusted in accordance with their terms to reflect the reverse stock split.
Adjustments resulting from the reverse stock split have been retroactively reflected for all periods presented herein.
At the Company’s 2025 Annual Meeting of Stockholders, the Company’s stockholders approved a proposal to effect a reverse stock split of the Company’s common stock at a reverse stock split ratio ranging from 2:1 to 5:1 inclusive. The Company’s Board of Directors, in its sole discretion, has the authority to decide, at any time prior to December 31, 2025, whether to implement the reverse stock split.
Operating Environment
Since 2020, the Company has been incurring expenses to support the development of the technology of its digital platform with
31
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 as well as new aircraft of the same type. 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 for the first three quarters of 2025. These factors may continue in the future. For example, perceived recessionary risks, as a result of tariff and trade uncertainty or otherwise, 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.
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 have been lost revenues, lost operating income, decreased operating cash flows, and unplanned maintenance costs.
During October 2025, the DOT issued a Notice of Funding Lapse regarding a potential lapse in appropriated funding for the EAS program as a result of the federal government shutdown, followed by Amended Notices of Additional Funding extending temporary funding authority through November 18, 2025. The notices also informed carriers that their election to continue operations subsequent to such period may be at their own risk. While the DOT has historically restored and funded EAS obligations retroactively following prior government shutdowns, no commitment to do so has been made in connection with this shutdown and there can be no assurance that Congress will authorize retroactive reimbursement for service provided during a lapse. The Company and its operating subsidiaries will continue to provide full scheduled EAS service during the current funding uncertainty and intend to evaluate operations in coordination with the DOT as circumstances evolve.
32
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.
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
Increase/ |
|
|
% |
|
||||
Scheduled Flight Hours(1) |
|
|
43,160 |
|
|
|
51,483 |
|
|
|
(8,323 |
) |
|
|
(16 |
)% |
On-Demand Flights(2) |
|
|
2,090 |
|
|
|
2,721 |
|
|
|
(631 |
) |
|
|
(23 |
)% |
Scheduled Passengers(3) |
|
|
225,653 |
|
|
|
266,675 |
|
|
|
(41,022 |
) |
|
|
(15 |
)% |
Headcount(4) |
|
|
620 |
|
|
|
775 |
|
|
|
(155 |
) |
|
|
(20 |
)% |
Scheduled Departures(5) |
|
|
45,958 |
|
|
|
52,094 |
|
|
|
(6,136 |
) |
|
|
(12 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(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. |
|
|||||||||||||||
Results of Operations
Results of the Company’s Operations for the Three Months Ended September 30, 2025 and 2024
The following table sets forth our condensed consolidated statements of operations data for the three months ended September 30, 2025 and 2024 (in thousands, except percentages):
|
|
Three Months Ended September 30, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
Revenue |
|
$ |
29,172 |
|
|
$ |
28,386 |
|
|
$ |
786 |
|
|
|
3 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue, exclusive of depreciation and amortization |
|
|
27,662 |
|
|
|
27,496 |
|
|
|
166 |
|
|
|
1 |
% |
Technology and development |
|
|
2,327 |
|
|
|
5,710 |
|
|
|
(3,383 |
) |
|
|
(59 |
)% |
Sales and marketing |
|
|
2,060 |
|
|
|
1,282 |
|
|
|
778 |
|
|
|
61 |
% |
General and administrative |
|
|
11,200 |
|
|
|
415 |
|
|
|
10,785 |
|
|
|
2,599 |
% |
Depreciation and amortization |
|
|
2,423 |
|
|
|
2,121 |
|
|
|
302 |
|
|
|
14 |
% |
Total operating expenses |
|
|
45,672 |
|
|
|
37,024 |
|
|
|
8,648 |
|
|
|
23 |
% |
Operating loss |
|
|
(16,500 |
) |
|
|
(8,638 |
) |
|
|
(7,862 |
) |
|
|
(91 |
)% |
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Changes in fair value of financial instruments carried at fair value, net |
|
|
(7,415 |
) |
|
|
(1,249 |
) |
|
|
(6,166 |
) |
|
|
(494 |
)% |
Interest expense |
|
|
(3,255 |
) |
|
|
(2,087 |
) |
|
|
(1,168 |
) |
|
|
(56 |
)% |
Other expense |
|
|
(105 |
) |
|
|
(265 |
) |
|
|
160 |
|
|
|
(60 |
)% |
Total other expense, net |
|
|
(10,775 |
) |
|
|
(3,601 |
) |
|
|
(7,174 |
) |
|
|
(199 |
)% |
Loss before income taxes |
|
|
(27,275 |
) |
|
|
(12,239 |
) |
|
|
(15,036 |
) |
|
|
(123 |
)% |
Income tax benefit |
|
|
62 |
|
|
|
(14 |
) |
|
|
76 |
|
|
|
(543 |
)% |
Net loss |
|
$ |
(27,213 |
) |
|
$ |
(12,253 |
) |
|
$ |
(14,960 |
) |
|
|
(122 |
)% |
33
Revenue
Revenue increased by $0.8 million, or 3%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The increase in revenue was attributable to the following changes in scheduled and on-demand revenues (in thousands, except percentages):
|
|
Three months ended September 30, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
Scheduled |
|
$ |
20,586 |
|
|
$ |
22,238 |
|
|
$ |
(1,652 |
) |
|
|
(7 |
)% |
On-Demand |
|
|
8,586 |
|
|
|
6,148 |
|
|
|
2,438 |
|
|
|
40 |
% |
Total revenue |
|
$ |
29,172 |
|
|
$ |
28,386 |
|
|
$ |
786 |
|
|
|
3 |
% |
Scheduled revenue decreased $1.7 million, or 7%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The decrease in scheduled revenue was primarily related to the exiting of unprofitable routes, partially offset by higher completion factors.
On-Demand revenue increased $2.4 million, or 40%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. 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 $0.2 million, or 1%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The decrease of $1.6 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 $2.0 million in on-demand cost of revenue was primarily associated with achieving higher revenue performance.
Technology and Development
Technology and development expenses decreased by $3.4 million, or 59%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The decrease was primarily driven by a decrease in accruals pertaining to the Textron data license of $3.1 million following the completion of the initial license stage.
Sales and Marketing
Sales and marketing expenses increased by $0.8 million, or 61%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to an increase of $0.8 million in external marketing initiatives.
General and Administrative
General and administrative expenses increased by $10.8 million, or 2,599%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The increase in general and administrative expense was driven primarily by a $7.6 million increase in stock-based compensation expense, primarily due to a $8.1 million reversal of expense during the three months ended September 30, 2024 related to a management incentive plan associated with the Company’s acquisition of Southern, partially offset by a net decrease in expense for other equity awards. Additional increases of $3.3 million in salary and compensation were primarily the result of increases in incentive compensation accruals under the Company’s incentive bonus program.
Depreciation and Amortization
Depreciation and amortization expenses increased by $0.3 million, or 14%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. This was primarily due to overall increases in aircraft depreciation due to capital expenditures subsequent to March 31, 2024.
34
Other Income/(Expense)
Other expense, net increased by $7.2 million, or 199%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. This was primarily attributable to a $6.2 million increase in losses from changes in fair value of financial instruments, primarily due to the impact of changes in price of the Company’s common stock on valuations of convertible notes and the GEM MCS, a $1.2 million increase in interest expense due to overall higher borrowings under the Comvest Credit Agreement and LamVen Note, partially offset by a $0.2 million decrease in other loss. Elements of other expense, net are are typically non-cash and do not affect the core operations of our business or liquidity.
Net Loss
The increase in net loss of $14.9 million, or 123%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, was primarily attributable to increases in operating expenses of $8.6 million and increases in other expense of $7.1 million. These were partially offset by an increase in revenue of $0.8 million.
35
Results of Operations
Results of the Company’s Operations for the Nine Months Ended September 30, 2025 and 2024
The following table sets forth our condensed consolidated statements of operations data for the nine months ended September 30, 2025 and 2024 (in thousands, except percentages):
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
Revenue |
|
$ |
80,109 |
|
|
$ |
91,376 |
|
|
$ |
(11,267 |
) |
|
|
(12 |
)% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue, exclusive of depreciation and amortization |
|
|
76,696 |
|
|
|
83,714 |
|
|
|
(7,018 |
) |
|
|
(8 |
)% |
Technology and development |
|
|
8,012 |
|
|
|
18,377 |
|
|
|
(10,365 |
) |
|
|
(56 |
)% |
Sales and marketing |
|
|
5,214 |
|
|
|
6,869 |
|
|
|
(1,655 |
) |
|
|
(24 |
)% |
General and administrative |
|
|
34,173 |
|
|
|
44,620 |
|
|
|
(10,447 |
) |
|
|
(23 |
)% |
Depreciation and amortization |
|
|
7,012 |
|
|
|
6,161 |
|
|
|
851 |
|
|
|
14 |
% |
Total operating expenses |
|
|
131,107 |
|
|
|
159,741 |
|
|
|
(28,634 |
) |
|
|
(18 |
)% |
Operating loss |
|
|
(50,998 |
) |
|
|
(68,365 |
) |
|
|
17,367 |
|
|
|
(25 |
)% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Changes in fair value of financial instruments carried at fair value, net |
|
|
(9,772 |
) |
|
|
(1,918 |
) |
|
|
(7,854 |
) |
|
|
409 |
% |
Interest expense |
|
|
(10,916 |
) |
|
|
(5,669 |
) |
|
|
(5,247 |
) |
|
|
93 |
% |
Gain on extinguishment of debt |
|
|
39 |
|
|
|
— |
|
|
|
39 |
|
|
|
— |
% |
Other expense |
|
|
(2,209 |
) |
|
|
(316 |
) |
|
|
(1,893 |
) |
|
|
599 |
% |
Total other income (expense), net |
|
|
(22,858 |
) |
|
|
(7,903 |
) |
|
|
(14,955 |
) |
|
|
189 |
% |
Loss before income taxes |
|
|
(73,856 |
) |
|
|
(76,268 |
) |
|
|
2,412 |
|
|
|
(3 |
)% |
Income tax benefit |
|
|
179 |
|
|
|
(95 |
) |
|
|
274 |
|
|
|
(288 |
)% |
Net loss |
|
$ |
(73,677 |
) |
|
$ |
(76,363 |
) |
|
$ |
2,686 |
|
|
|
(4 |
)% |
Revenue
Revenue decreased by $11.3 million, or 12%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The decrease in revenue was attributable to the following changes in scheduled and on-demand revenues (in thousands, except percentages):
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
Scheduled |
|
$ |
59,777 |
|
|
$ |
69,461 |
|
|
$ |
(9,684 |
) |
|
|
(14 |
)% |
On-Demand |
|
|
20,332 |
|
|
|
21,915 |
|
|
|
(1,583 |
) |
|
|
(7 |
)% |
Total revenue |
|
$ |
80,109 |
|
|
$ |
91,376 |
|
|
$ |
(11,267 |
) |
|
|
(12 |
)% |
Scheduled revenue decreased $9.7 million, or 14%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The decrease in scheduled revenue was primarily related to the exiting of unprofitable routes, partially offset by higher completion factors.
On-Demand revenue decreased $1.6 million, or 7%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The decrease in on-demand revenue was related to the exiting of several on-demand products to focus on profitability rather than near-term market penetration, partially offset by a focus on larger jet charter sales.
Operating Expenses
Cost of Revenue, exclusive of depreciation and amortization
Cost of revenue decreased by $7.0 million, or 8%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The decrease of $4.4 million in scheduled cost of revenue was primarily attributable to lower revenue due to the exiting of unprofitable routes, partially offset by higher completion factors, and higher unit cost as a result of investments in operational improvements.
36
The decrease of $2.6 million in on-demand cost of revenue was primarily attributable to exiting several on-demand products to focus on profitability.
Technology and Development
Technology and development expenses decreased by $10.4 million, or 56%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The decrease was driven primarily by a decrease in accruals pertaining to the Textron data license of $9.4 million following the completion of the initial license stage, and additional decreases in labor and labor related expenses for the technology team of $1.0 million due to a decrease in headcount.
Sales and Marketing
Sales and marketing expenses decreased by $1.7 million, or 24%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily due to a decrease of $2.4 million in employee compensation and commission expenses, driven by a reduced headcount. This was partially offset by an increase of $0.8 million in external marketing initiatives.
General and Administrative
General and administrative expenses decreased by $10.4 million, or 23%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The decrease in general and administrative expense was primarily driven by a $6.7 million reduction in stock-based compensation expense, primarily due to a $6.2 million reduction in expenses related to a management incentive plan associated with the Company’s acquisition of Southern. Additional reductions of $1.6 million in professional service fees and $2.1 million in salary and compensation expense were the result of reductions in transaction-related expenses and headcount reductions.
Depreciation and Amortization
Depreciation and amortization expenses increased by $0.9 million, or 14%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. This increase was primarily due to overall increases in aircraft depreciation due to capital expenditures subsequent to March 31, 2024.
Other Income/(Expense)
Other expense, net increased by $14.9 million, or 189%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. This was primarily attributable to a $7.9million increase in losses from changes in fair value of financial instruments, primarily due to the impact of changes in price of the Company’s common stock on valuations of convertible notes and the GEM MCS, a $5.2 million increase in interest expense due to overall higher borrowings under the Comvest Credit Agreement and LamVen Note, and a $1.9 million increase in other loss. Elements of other expense, net are are typically non-cash and do not affect the core operations of our business or liquidity.
Net Loss
The decrease in net loss of $2.7 million, or 4%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, was primarily attributable to a decrease in operating expenses of $28.6 million. This was mostly offset by decreases in revenue of $11.2 million and increases in other expense, net of $14.9 million.
37
Cash Flow Analysis
The following table presents a summary of our cash flows (in thousands):
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating activities |
|
$ |
(45,788 |
) |
|
$ |
(30,742 |
) |
|
$ |
(15,046 |
) |
|
|
49 |
% |
Investing activities |
|
|
(3,301 |
) |
|
|
(4,465 |
) |
|
|
1,164 |
|
|
|
(26 |
)% |
Financing activities |
|
|
34,531 |
|
|
|
33,898 |
|
|
|
633 |
|
|
|
2 |
% |
Net change in cash and cash equivalents |
|
$ |
(14,558 |
) |
|
$ |
(1,309 |
) |
|
$ |
(13,249 |
) |
|
|
1,012 |
% |
Cash Flow from Operating Activities
For the nine months ended September 30, 2025, net cash used in operating activities was $45.8 million, primarily driven by a net loss of $73.7 million. Operating outflows were partially offset by depreciation and amortization expense of $7.0 million, stock-based compensation expense of $8.0 million, changes in fair value of financial instruments of $9.8 million and an $4.6 million increase in accounts payable and accrued liabilities.
For the nine months ended September 30, 2024, net cash used in operating activities was $30.7 million, primarily driven by a net loss of $76.2 million. Operating outflows were partially offset by non-cash stock-based compensation expenses of $14.6 million, increases in accounts payable, amounts due to related parties and accrued expenses of $24.6 million, and increases in depreciation and amortization expense of $6.2 million.
Net cash used in operating activities increased period over period by $15.0 million, primarily driven by decreases in accounts payable, amounts due to related parties and accrued expenses of $20.0 million, offset by a $2.7 million reduction in net loss and a $2.8 million reduction attributable to deferred revenue.
Cash Flow from Investing Activities
For the nine months ended September 30, 2025, net cash used in investing activities was $3.3 million, a decrease of $1.2 million compared to the nine months ended September 30, 2024. The decrease was driven by an increase of $2.7 million in proceeds from the sale of fixed assets during the nine months ended September 30, 2025, partially offset by increases in purchases of property and equipment of $1.5 million.
Cash Flow from Financing Activities
For the nine months ended September 30, 2025, net cash provided by financing activities was $34.5 million, primarily from $31.4 million in proceeds from the issuance of common stock and $2.8 million in borrowings on long-term debt.
For the nine months ended September 30, 2024, net cash provided by financing activities was $33.9 million primarily due to proceeds from borrowings from related parties of $29.7 million, net proceeds of $2.8 million from collateralized borrowings, and proceeds from the GEM stock purchase agreement of $3.9 million, partially offset by $2.3 million in principal payments on long-term debt.
Net cash provided by financing activities increased period over period by $0.6 million, primarily driven by increased issuances of common stock of $31.4 million and $2.8 million in borrowings on long-term debt, partially offset by a decrease of $29.7 million in borrowings from related parties and a $2.7 million decrease in net proceeds from collateralized borrowings.
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 September 30, 2025 and December 31, 2024. 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
38
Company is currently in default on these obligations with a total outstanding federal excise tax liability including accrued penalties and interest of $8.9 million included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheet as of September 30, 2025. The Company is currently considering available options regarding settlement of its federal excise tax liability. 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 $0.8 million as of September 30, 2025. 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 quarter ended September 30, 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 subject to the prior aircraft liens. As of September 30, 2025, 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 the Company’s Convertible Note Purchase Agreement (see Note 7, Financing Arrangements); therefore, the Company cannot pay the outstanding balance prior to paying amounts due under the Convertible Note Purchase Agreement. The SAFE-T note had an outstanding principal amount of $0.5 million as of September 30, 2025 and December 31, 2024.
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 second amended and restated Share Purchase Agreement (the “Share Purchase Agreement”) 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 nine months ended September 30, 2025, the Company received net proceeds of $31.4 million through the issuance and sale of 13,616,328 shares of its common stock (or pre-funded warrants in lieu thereof). Additionally, during the year ended December 31, 2024, the Company entered into a 4-year credit agreement with certain affiliates of Comvest Partners, as lenders (the “Comvest Credit Agreement”), pursuant to which the Company borrowed $44.5 million under a four-year term loan, and $5.5 million of delayed draw commitments. As of September 30, 2025, $3.2 million has been drawn under the delayed draw commitments. Additionally, during the nine months ended September 30, 2025, the Company received an additional $19.0 million from draws under the Share Purchase Agreement with GEM. The Company had previously filed a Form S-1 registration statement (File No. 333-275434) with the SEC, registering up to 42,857,143 shares of the Company’s common stock, which represents the balance of the full amount of shares of common stock that the Company estimated could be issued and sold to GEM for advances under the Share Purchase Agreement, plus the amount of shares the Company estimated could be sold to GEM for $50.0 million under the Share Purchase Agreement, (the “Prior Registration Statement”). In connection with the GEM Mandatory Convertible Security (see Note 8, Share Purchase Agreement and GEM Mandatory Convertible Security), the Company deregistered all of the shares registered but unsold under the Prior Registration Statement on June 4, 2024. The combined 46,428,571 shares contemplated under the Prior Registration Statement have been included in a Form S-1 Registration Statement (File No. 333-279929), which was declared effective by the SEC on August 7, 2024. As of September 30, 2025, the contractual terms allow the Company to make further advances of up to $97.5 million under the Share Purchase Agreement. Additionally, the Company has the ability to draw an additional $279.6 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 September 30, 2025, GEM held 0% of the then fully-diluted shares of the Company. At September 30, 2025, the daily volume limitations under the Share Purchase Agreement restricted our ability to take additional draws under the Share Purchase Agreement to approximately 780 thousand shares per draw. These restrictions do not impact the Company’s ability to execute advances under the Share Purchase Agreement. Additionally, the Company’s ability to draw upon the Share Purchase Agreement is contingent on the
39
Company’s common stock being listed on a national exchange. The Company is currently subject to one listing requirement violation, pertaining to its market capitalization, with the New York Stock Exchange. Absent an extension granted by the New York Stock Exchange, the Company would need to regain compliance by the end of November 2025. While the Company expects to meet the applicable market capitalization requirement by the deadline, and is not currently subject to de-listing, it has not yet met the threshold for the time period required to cure the deficiency. An inability to cure this listing requirement violation would impact the Company’s ability to raise capital through existing sources.
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 Caravan 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 equip 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 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 nine months ended September 30, 2025 as compared to those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
40
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, 2024.
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 September 30, 2025. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2025, due to material weaknesses in our internal control over financial reporting described below.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect transactions and the dispositions of assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures are being made only in accordance with appropriate authorizations of management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on its financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2025 based on the criteria described in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our internal control over financial reporting was not effective as of December 31, 2024 due to the material weaknesses described below.
As of September 30, 2025, 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:
41
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.
This Quarterly Report on Form 10-Q does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting as we are an “emerging growth company” as defined in the JOBS Act. For as long as we remain an “emerging growth company,” we are exempt from the auditor attestation requirement in the assessment of the effectiveness of our internal control over financial reporting.
Remediation Plans to Address Material Weaknesses
As of the date of this Quarterly Report, we have executed on the following remediation actions:
Our remediation plan includes the following actions that are ongoing:
42
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 September 30, 2025 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.
43
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 factor 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, 2024.
Essential Air Service Program and Federal Funding Developments
The Company has multi-year contracts with the United States Department of Transportation’s (“DOT”) to operate Essential Air Service (“EAS”) routes, which helps small communities in the United States maintain a minimum level of scheduled air services. During October 2025, the U.S. Department of Transportation (“DOT”) issued public notices regarding a potential lapse in appropriated funding for the Essential Air Service (“EAS”) program as a result of the federal government shutdown, followed by an amended notice extending temporary funding authority through November 18, 2025.
There can be no assurance that funding will continue without interruption after November 18, 2025 or that appropriations will be made on a timely basis. While the DOT has historically restored and funded EAS obligations retroactively following prior government shutdowns, no commitment to do so has been made in connection with this shutdown and there can be no assurance that Congress will authorize retroactive reimbursement for service provided during a lapse. The Company and its operating subsidiaries will continue to provide full scheduled EAS service during the current funding uncertainty and intend to evaluate operations in coordination with the DOT as circumstances evolve.
Interruptions, reductions, or delays in federal appropriations for the EAS program—or changes in related legislation, regulations, or administrative practices—could affect the timing and amount of subsidy payments and increase the Company’s working capital requirements to the extent it elects to continue operating EAS routes during a funding lapse.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In July 2025, we issued an aggregate of 74,907 shares of Common Stock to one accredited investor for in-kind services worth $0.2 million in a transaction exempt from registration under Section 4(a)(2) of the Securities Act (or Rule 506(b) of Regulation D promulgated thereunder) as a transaction by an issuer not involving a public offering.
In August 2025, we issued an aggregate of 125,000 shares of Common Stock to one accredited investor for in-kind services worth $0.5 million in a transaction exempt from registration under Section 4(a)(2) of the Securities Act (or Rule 506(b) of Regulation D promulgated thereunder) as a transaction by an issuer not involving a public offering.
In September 2025, we issued an aggregate of 723,238 shares of Common Stock to two accredited investors for in-kind services worth $3.2 million in a transaction exempt from registration under Section 4(a)(2) of the Securities Act (or Rule 506(b) of Regulation D promulgated thereunder) as a transaction by an issuer not involving a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
44
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 September 30, 2025, none of our directors or officers (as defined in Section 16 of the Exchange Act),
45
Item 6 – Exhibits
The following documents are filed or furnished as exhibits to this Quarterly Report:
Exhibit Number |
|
Description of Document |
|
|
|
10.1 |
|
Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 12, 2025 |
10.2 |
|
Form of Warrant (Registered) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on November 12, 2025). |
10.3 |
|
Form of Warrant (Private Placement) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on November 12, 2025). |
10.4 |
|
Senior Secured Convertible Note due 2028 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on November 12, 2025). |
10.5 |
|
First Amendment to Reimbursement Agreement (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed on November 12, 2025). |
31.1* |
|
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. |
|
|
|
31.2* |
|
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. |
|
|
|
32.1§ |
|
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. |
|
|
|
101.INS* |
|
Inline XBRL Instance Document |
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
|
104* |
|
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.
46
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.
|
Surf Air Mobility Inc. (Registrant) |
|
|
Date: November 12, 2025 |
/s/ Deanna White |
|
Deanna White Chief Executive Officer (Principal Executive Officer) |
Date: November 12, 2025 |
/s/ Oliver Reeves |
|
Oliver Reeves Chief Financial Officer (Principal Financial and Accounting Officer) |
47
FAQ
What were Surf Air Mobility (SRFM) Q3 2025 revenue and net loss?
How much cash did SRFM have as of September 30, 2025?
What liabilities and equity position did SRFM report?
Did SRFM disclose a going concern issue?
What tax obligations are outstanding for SRFM?
How did SRFM fund operations year-to-date?
What are SRFM’s key debt obligations?
