Surf Air Mobility Inc 10-Q for FY2025 Q1
Surf Air Mobility Inc. (SRFM)
About this 10-Q
Surf Air Mobility Inc filed this 10-Q on May 13, 2025, covering the quarter ended March 31, 2025 (FY2025 Q1).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $23.51M
- down 23.2% from $30.62M a year earlier
- Net loss
- $18.47M
- compared with a net loss of $36.97M a year earlier
- Diluted EPS
- -$1.09
- compared with -$3.35 a year earlier
+
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
[Mark One]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter)
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4522 |
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(State or other jurisdiction of |
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(Primary Standard Industrial |
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(I.R.S. Employer |
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(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of May 9, 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, and the potential success of the Company’s marketing and expansion strategies. These statements are based on various assumptions, whether or not identified in this Quarterly Report on Form 10-Q, and on the current expectations of the Company’s management, and are not predictions of actual results and outcomes. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied upon, by any investor as a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. These forward-looking statements are subject to a number of risks and uncertainties, including:
All forward-looking statements included herein attributable to the Company or any person acting on any party’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, the Company undertakes no obligations to update these forward-looking statements for any reason, including to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.
TABLE OF CONTENTS
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Page |
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PART I. |
1 |
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Item 1. |
1 |
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1 |
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2 |
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Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Deficit |
3 |
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4 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
5 |
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
27 |
Item 3. |
33 |
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Item 4. |
34 |
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PART II. |
37 |
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Item 1. |
37 |
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Item 1A. |
37 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 3. |
37 |
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Item 4. |
37 |
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Item 5. |
37 |
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Item 6. |
39 |
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40 |
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i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Surf Air Mobility Inc.
Unaudited Condensed Consolidated Balance Sheets
March 31, 2025 and December 31, 2024
(in thousands, except share and per share data)
(Unaudited)
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March 31, |
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December 31, |
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Assets: |
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Current assets: |
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Cash |
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$ |
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$ |
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Accounts receivable, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Restricted cash |
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Property and equipment, net |
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Intangible assets, net |
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Operating lease right-of-use assets |
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Finance lease right-of-use assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Shareholders’ Deficit: |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Deferred revenue |
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Current maturities of long-term debt |
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Operating lease liabilities, current |
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Finance lease liabilities, current |
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SAFE notes at fair value, current |
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Due to related parties, current |
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Total current liabilities |
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Long-term debt, net of current maturities |
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Convertible notes at fair value, non-current |
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Operating lease liabilities, long term |
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Finance lease liabilities, long term |
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Due to related parties, long term |
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Other long-term liabilities |
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Total liabilities |
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$ |
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$ |
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Shareholders’ deficit: |
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Common stock, $ |
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$ |
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$ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total shareholders’ deficit |
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$ |
( |
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$ |
( |
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Total liabilities and shareholders’ deficit |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
Surf Air Mobility Inc.
Unaudited Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2025 and 2024
(in thousands, except share and per share data)
(Unaudited)
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Three Months Ended |
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2025 |
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2024 |
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Revenue |
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$ |
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$ |
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Operating expenses: |
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Cost of revenue, exclusive of depreciation and amortization |
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Technology and development |
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Sales and marketing |
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General and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Operating loss |
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$ |
( |
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$ |
( |
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Other income (expense): |
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Changes in fair value of financial instruments carried at fair value, net |
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$ |
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$ |
( |
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Interest expense |
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( |
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( |
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Gain on extinguishment of debt |
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— |
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Other expense |
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( |
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( |
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Total other income (expense), net |
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$ |
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$ |
( |
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Loss before income taxes |
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( |
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( |
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Income tax benefit |
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Net loss |
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$ |
( |
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$ |
( |
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Net loss per share applicable to common shareholders, basic and diluted |
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$ |
( |
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$ |
( |
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Weighted-average number of common shares used in net loss per share applicable to common shareholders, basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Surf Air Mobility Inc.
Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Deficit
Three Months Ended March 31, 2025 and 2024
(in thousands, except share data)
(Unaudited)
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Stockholders’ Equity (Deficit) |
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Common Stock |
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Number of |
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Amount |
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Additional Paid-In Capital |
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Accumulated |
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Total Shareholders' Deficit |
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Balance at December 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Issuance of common stock related to restricted shares |
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— |
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— |
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— |
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— |
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Issuance of common stock under software license agreement |
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— |
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— |
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Issuance of common stock under marketing agreement |
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— |
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— |
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Issuance of common shares under Share Purchase Agreement |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance at March 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Stockholders’ Equity (Deficit) |
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Common Stock |
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Number of |
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Amount |
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Additional Paid-In Capital |
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Accumulated |
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Total Shareholders' Deficit |
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Balance at December 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Issuance of common stock related to restricted shares |
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— |
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— |
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— |
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— |
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Issuance of common shares under software license agreement |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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Balance at March 31, 2025 |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Surf Air Mobility Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2025 and 2024
(in thousands)
(Unaudited)
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Three Months Ended March 31, |
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2025 |
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2024 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Loss on sale of fixed asset |
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— |
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Non-cash operating lease expense |
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Gain on extinguishment of debt |
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( |
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— |
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Stock-based compensation expense |
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Changes in fair value of financial instruments carried at fair value, net |
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( |
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Amortization of debt discounts and debt issuance costs |
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Deferred income taxes |
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( |
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( |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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( |
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Prepaid expenses and other current assets |
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( |
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Other assets |
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Accounts payable |
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Due to a related party |
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( |
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Accrued expenses and other current liabilities |
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Deferred revenue |
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( |
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( |
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Operating lease liabilities |
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( |
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( |
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Other liabilities |
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( |
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( |
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Cash flows used in operating activities |
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$ |
( |
) |
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$ |
( |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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( |
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( |
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Proceeds from the sale of assets |
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— |
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Internal-use software development costs |
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( |
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( |
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Net cash provided by (used in) investing activities |
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$ |
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$ |
( |
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Cash flows from financing activities: |
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Borrowings on long-term debt |
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— |
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Principal payments on long-term debt |
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( |
) |
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( |
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Proceeds from advances under Share Purchase Agreement |
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— |
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Proceeds from collateralized borrowings, net of repayment |
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Proceeds from borrowings from related parties |
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— |
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Payment of finance lease obligations |
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( |
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( |
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Net cash provided by financing activities |
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$ |
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$ |
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Increase (decrease) in cash, cash equivalents and restricted cash |
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( |
) |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Surf Air Mobility Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Description of Business
Organization
Surf Air Mobility Inc. (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 daily scheduled flights and 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”). For 2024, the Company’s combined network served over 370,000 passengers with approximately 72,000 scheduled departures. We expect the combination of our legacy networks will continue to provide the basis for our expanded, nationwide regional air mobility platform.
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 as of all periods presented herein.
Liquidity and Going Concern
The Company has incurred losses from operations, negative cash flows from operating activities and has a working capital deficit. In addition, the Company is currently in default of certain excise and property taxes as well as certain debt obligations. These tax and debt obligations are classified as current liabilities on the Company’s Condensed Consolidated Balance Sheets as of March 31, 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 $
5
The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The airline industry and the Company’s operations are cyclical and highly competitive. The Company’s success is largely dependent on the ability to raise debt and equity capital, achieve a high level of aircraft and crew utilization, increase flight services and the number of passengers flown, and continue to expand into regions profitably throughout the United States.
The Company’s prospects and ongoing business activities are subject to the risks and uncertainties frequently encountered by companies in new and rapidly evolving markets. Risks and uncertainties that could materially and adversely affect the Company’s business, results of operations or financial condition include, but are not limited to, the ability to: (i) raise additional capital (or financing) to fund operating losses, (ii) refinance its current outstanding debt, (iii) maintain efficient aircraft utilization, primarily through the proper utilization of pilots and managing market shortages of maintenance personnel and critical aircraft components, (iv) sustain ongoing operations, (v) attract and maintain customers, (vi) integrate, manage and grow recent acquisitions and new business initiatives, (vii) obtain and maintain relevant regulatory approvals, and (viii) measure and manage risks inherent to the business model.
The Company historically has funded its operations and capital needs primarily through the net proceeds received from the issuance of various debt instruments, convertible securities, related party funding, and preferred and common stock financing arrangements. During the year ended December 31, 2024, the Company entered into a
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.
6
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 three months ended March 31, 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 three months ended March 31, 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.
Accounts Receivable, Net
Accounts receivable primarily consist of amounts due from the U.S. DOT in relation to certain air routes served by the Company under the 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 March 31, 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. 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 March 31, 2025 (see Note 8, Share Purchase Agreement, GEM Purchase, and 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.
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
7
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.
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.
8
Note 3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
Prepaid insurance |
|
$ |
|
|
$ |
|
||
Prepaid software |
|
|
|
|
|
|
||
Prepaid marketing |
|
|
|
|
|
|
||
Engine reserves |
|
|
|
|
|
|
||
Vendor operator prepayments |
|
|
|
|
|
|
||
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):
|
|
March 31, |
|
|
December 31, |
|
||
Aircraft, equipment and rotable spares |
|
$ |
|
|
$ |
|
||
Equipment purchase deposits |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Office, vehicles and ground equipment |
|
|
|
|
|
|
||
Internal-use software |
|
|
|
|
|
|
||
Property and equipment, gross |
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
The Company recorded depreciation expense of $
For the three months ended March 31, 2025 the Company recorded a $
Note 5. Intangible Assets, Net
Intangibles assets, net, consists of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
EAS contracts |
|
$ |
|
|
$ |
|
||
Tradenames and trademarks |
|
|
|
|
|
|
||
Software |
|
|
|
|
|
|
||
Other intangibles |
|
|
|
|
|
|
||
Intangible assets, gross |
|
|
|
|
|
|
||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Intangible assets, net |
|
$ |
|
|
$ |
|
||
The Company recorded amortization expense of $
9
Expected future amortization as of March 31, 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):
|
|
March 31, |
|
|
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 March 31, 2025, the Company borrowed a total of $
As of March 31, 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 $
10
Note 7. Financing Arrangements
The Company’s total debt due to unrelated parties consist of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
Note payable to bank, fixed interest rate of |
|
$ |
|
|
$ |
|
||
Note payable to a financing company, fixed interest rate of |
|
|
|
|
|
|
||
Notes payable to Clarus Capital, fixed interest rate of |
|
|
|
|
|
|
||
Note payable to Skywest, fixed interest rates of |
|
|
|
|
|
|
||
Note payable to Tecnam, fixed interest rate of |
|
|
|
|
|
|
||
Credit Agreement to ComVest Partners, 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 March 31, 2025 are as follows (in thousands):
|
|
March 31, |
|
|
Remainder of 2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
The Company is subject to customary affirmative covenants and negative covenants on all of the above notes payable. As of March 31, 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 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
11
PFG has the right to convert, at its option, the amounts outstanding under the Convertible Note Purchase Agreement into common stock of 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 March 31, 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 |
|
|||||
|
|
March 31, 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 March 31, 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 $
Fair value of SAFE-T note (in thousands):
|
|
Fair Value at |
|
|||||
|
|
March 31, 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, GEM Purchase, and Mandatory Convertible Security
Share Purchase Agreement
During 2020, the Company entered into a Share Purchase Agreement (“SPA”) with GEM Global Yield LLC SCS (“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 $
12
the SPA provide that in no event may GEM receive a share issuance, from a draw under the SPA, that would raise their share ownership percentage above
On June 15, 2023, July 21, 2023, and July 24, 2023, the SPA was further amended to modify the number of shares of the Company’s common stock to be issued to GEM at the time of a public listing transaction of the Company from an amount equal to
The Company has accounted for the shares issuance contracts under the SPA, as amended, as derivative financial instruments which are recorded at fair value within Other long-term liabilities on the Consolidated Balance Sheets. During the year ended December 31, 2024, the Company settled $
As a result of this activity, the fair value of the GEM liability was $
GEM Purchase
On June 15, 2023, and amended on July 21, 2023, and July 24, 2023, the Company and GEM entered into the SPA whereby GEM would purchase
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 “Closing Date”). The Mandatory Convertible Security will mature on
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
13
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
The Company may, at its option, redeem the Mandatory Convertible Security, in whole or in part, in cash at a price equal to
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 months ended March 31, 2025, the Company recorded a change in fair value of $
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Par amount |
|
|
|
|
|
|
||
Probability of default |
|
|
— |
% |
|
|
— |
% |
Expected volatility |
|
|
% |
|
|
% |
||
Discount rate |
|
|
% |
|
|
% |
||
Share price |
|
$ |
|
|
$ |
|
||
Note 9. Fair Value Measurements
The fair values of the convertible notes, SAFE instruments, preferred stock warrant liabilities, and derivative liability were based on the estimated values of the notes, SAFE instruments, warrants, and derivatives upon conversion including adjustments to the conversion rates, which were probability weighted associated with certain events, such as a sale of the Company or the Company becoming a public company. The estimated fair values of these financial liabilities were determined utilizing the Probability-Weighted Expected Return Method and is 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.
14
The following tables summarize the Company’s financial liabilities that are measured at fair value on a recurring basis in the condensed consolidated financial statements (in thousands):
|
|
Fair Value Measurements at March 31, 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 |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Mandatorily 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 |
|
|
Mandatorily Convertible Security |
|
||||
Balance at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Change in fair value |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Discount Amortization |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Balance at March 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Long-Term Debt
The carrying amounts and fair values of the Company’s long-term debt obligations were as follows:
|
|
As of March 31, 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.
Note 10. Commitments and Contingencies
Software License Agreements
On May 18, 2021, the Company executed
15
the issuance of
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
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 $
16
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 expects to establish Surf Air Technologies LLC (“Surf Air Technologies”), a subsidiary of the Company, in order to help develop, market, sell, maintain, and support an artificial intelligence-powered software platform for the advanced air mobility industry, which is expected to be powered by Palantir, 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”).
The JV Agreement provides that the Company will assign certain agreements regarding subscription access to certain of Palantir’s proprietary commercial software platforms (the “Palantir Platforms”) to Surf Air Technologies. The Company has agreed to contribute the software and intellectual property the Company has developed relating to the Software Platform; the data and know-how from its operations on an ongoing basis to support the development, maintenance, support, and operation of the Software Platform; and the employees and contractors directly involved in developing the Software Platform. Palantir has agreed to contribute a service contract to provide implementation engineering services in support of Surf Air Technologies’ use of the Palantir Platforms, which may include its interface to Software Platform. Surf Air Technologies is also expected to be capitalized by outside third-party investors sourced by the Company and Palantir, with an initial target raise of not less than $
The closing of the JV Agreement is anticipated to occur no later than May 31, 2025 and is subject to certain customary conditions, including the following: establishment of Surf Air Technologies as a Delaware limited liability company, signing of an operating agreement, contributions by each party to Surf Air Technologies, the securing and funding of outside capital, and receipt of internal approvals by the Company and Palantir.
Under the JV Agreement, the Company is entitled to designate four of the five members of the board of directors of Surf Air Technologies and Palantir is entitled to designate one board member. The JV Agreement also provides that the Company will be primarily responsible for oversight of Surf Air Technologies and shall designate the Chair of the board of directors, the legal representative, and the General Manager of Surf Air Technologies.
The JV Agreement also provides that the Company and Palantir have certain rights in connection with Surf Air Technologies, including pre-emptive rights if Surf Air Technologies proposes to increase its registered capital, a right of first refusal to purchase equity in Surf Air Technologies that the other party may propose to transfer to a third party, the Company’s right to buy out Palantir’s stake in Surf Air Technologies, Palantir’s right to exchange shares in the Company for equity in Surf Air Technologies, and the right to purchase all of the other party’s equity in the event of bankruptcy of the other party.
Guarantees
The Company indemnifies its officers and directors for certain events or occurrences arising as a result of the officer or director serving in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential future amount the Company could be required to pay under these indemnification agreements is unlimited. The Company believes its insurance would cover any liability that may arise from the acts of its officers and directors and as of March 31, 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 $
17
$
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 March 31, 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. The Company’s total outstanding property tax liability including penalties and interest is $
18
Note 11. Disaggregated Revenue
The disaggregated revenue for the three months ended March 31, 2025 and 2024 were as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Scheduled |
|
$ |
|
|
$ |
|
||
On-Demand |
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
||
The revenue deferred and recognized for the three months ended March 31, 2025 and 2024 were as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
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 to
Note 12. Stock-Based Compensation
Stock Options
A summary of stock option activity for the three months ended March 31, 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 March 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercisable at March 31, 2025 |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
As of March 31, 2025, unrecognized compensation expense related to the unvested portion of the Company’s share options was approximately $
19
Warrants
A summary of warrant activity for the three months ended March 31, 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 March 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercisable at March 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of March 31, 2025, unrecognized compensation expense related to the unvested portion of the Company’s common stock warrants was approximately $
Restricted Stock Units
A summary of RSU activity for the three months ended March 31, 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 March 31, 2025 |
|
|
|
|
$ |
|
||
Restricted Share Purchase Agreement (“RSPA”)
A summary of RSPA activity for the three months ended March 31, 2025 is set forth below:
|
|
Number of RSPAs |
|
|
Weighted |
|
||
Unvested RSPAs at December 31, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
— |
|
|
|
— |
|
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
— |
|
|
|
— |
|
Unvested RSPAs at March 31, 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 March 31, 2025, the unrecognized compensation expense related to the unvested portion of the Company’s RSPAs was $
20
Performance-Based Restricted Stock Units
A summary of performance-based restricted stock units (“PRSU”) activity for the three months ended March 31, 2025 is set forth below:
|
|
Number of PRSUs |
|
|
Weighted |
|
||
PRSUs at December 31, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
— |
|
|
|
— |
|
Shares issued |
|
|
— |
|
|
|
— |
|
Forfeited, cancelled, or expired |
|
|
— |
|
|
|
— |
|
PRSUs at March 31, 2025 |
|
|
|
|
$ |
|
||
A summary of stock-based compensation expense recognized for the three months ended March 31, 2025 and 2024 is as follows (in thousands):
|
|
Three months ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Stock Options |
|
$ |
|
|
$ |
|
||
RSUs |
|
|
|
|
|
|
||
RSPAs |
|
|
|
|
|
|
||
PRSUs |
|
|
|
|
|
|
||
Warrants |
|
|
|
|
|
— |
|
|
Management Incentive Bonus Plan |
|
|
— |
|
|
|
|
|
Total Stock Based Compensation |
|
$ |
|
|
$ |
|
||
21
Note 13. Segment Reporting
The Company and its chief operating decision maker (“CODM”), which is the Company’s , organize and manage the Company on a consolidated basis, and, accordingly, the Company operates as a 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 March 31, |
|
|||||
|
|
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 (loss) 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. |
|
|||||||
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.
22
Note 14. Income Taxes
The Company’s provision for income taxes for the three months ended March 31, 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 March 31, 2025. In general, tax years 2011 and forward remain open to audit for U.S. federal and state income tax purposes.
Note 15. Related Party Balances and Transactions
Term Notes
The Company entered into term note agreements with LamVen, a related party, 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 $
On June 15, 2023, the LamVen term note dated April 1, 2023 for $
On June 15, 2023, the term notes with LamJam, an entity affiliated with a co-founder of the Company, in the amount of $
23
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 will accrue interest at the greater of (x) (subject to a
At the election of LamVen from time to time, on one or more occasions, the outstanding principal amount of the LamVen Note (or any portion thereof), together with all accrued but unpaid interest thereon, can be converted into a number of shares of common stock, using a conversion price per share equal to the Minimum Price, as defined in New York Stock Exchange Listed Company Manual Section 312.04(h) (the “Minimum Price”); provided, however, that LamVen shall not be able to convert the LamVen Note if so doing would increase LamVen’s beneficial ownership interest in the Company to 10% or more of the Company’s then outstanding common stock.
In addition, on November 14, 2024, the outstanding principal and the interest of existing LamVen notes of $
The obligations under the LamVen Note are guaranteed by certain of the Company’s subsidiaries, and subject to a security interest on assets of the Company and the subsidiary guarantors, subject to certain exceptions.
The conversion feature embedded in the LamVen Note failed to satisfy the requirements for the derivative scope exception for contracts indexed in the Company’s own stock. The conversion feature of the LamVen Note required bifurcation from the host contract. The embedded derivative was initially measured at fair value of $
Park Lane Reimbursement Agreement
On November 14, 2024, in connection with the letter of credit backstopping the Credit Agreement, the Company entered into a Reimbursement Agreement with 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 March 31, 2025, the Company continues to lease
24
JA Flight Services and BAJ Flight Services
As of March 31, 2025, the Company leased a total of
The Company recorded approximately $
Schuman Aviation
As of March 31, 2025, the Company leased six aircraft from Schuman Aviation Ltd. (“Schuman”), an entity which is owned by Richard Schuman, an employee and shareholder of the Company. All leases consist of
The Company recorded 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 Island 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 16. Supplemental Cash Flows
Supplemental cash flow information for the three months ended March 31, 2025 and 2024 (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
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 |
|
$ |
|
|
$ |
|
||
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 |
|
$ |
— |
|
|
$ |
|
|
Overhaul accrual in accrued expenses and other current liabilities |
|
$ |
— |
|
|
$ |
|
|
Purchases of property and equipment included in accounts payable |
|
$ |
|
|
$ |
|
||
Note 17. Net Loss per Share Applicable to Common Shareholders, Basic and Diluted
The Company calculates basic and diluted net loss per share attributable to common shareholders 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 common shares. 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.
25
The following table sets forth the computation of net loss per common share (in thousands, except share data and per share amounts):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average number of common shares used in net loss per share applicable to common shareholders, basic and diluted |
|
|
|
|
|
|
||
Net loss per share applicable to common shareholders, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Excluded securities: |
|
|
|
|
|
|
||
Options to purchase common shares |
|
|
|
|
|
|
||
Warrants to purchase common shares |
|
|
|
|
|
— |
|
|
Restricted stock units |
|
|
|
|
|
|
||
Unvested RSPAs |
|
|
|
|
|
|
||
Convertible notes (as converted to common shares) |
|
|
|
|
|
|
||
Mandatory Convertible Security |
|
|
|
|
|
— |
|
|
Total common shares equivalents |
|
|
|
|
|
|
||
Note 18. Subsequent Events
Registered Direct Offering
On March 31, 2025, the Company entered into a securities purchase agreement with an investor (the “Purchase Agreement”) relating to the offering and sale in a registered direct offering (the “Offering”) of an aggregate of
We also issued warrants (the “Placement Agent Warrants”) to purchase up to
The common stock, Pre-Funded Warrants and Placement Agent Warrants were offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-284845) initially filed with the Securities and Exchange Commission (the “Commission”) on February 11, 2025 and declared effective on March 26, 2025. A prospectus supplement relating to the Offering and the Placement Agent Warrants was filed with the Commission on April 1, 2025.
Pursuant to an engagement letter dated as of March 18, 2025, between the Company and the Placement Agent, the Company agreed to pay the Placement Agent a total cash fee equal to
26
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis is intended to help the reader understand the Company’s results of operations and financial condition. This discussion and analysis is provided as a supplement to, and should be read in conjunction with, the information included in Item 1. Financial Statements in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to the Company’s plans and strategy for its business, includes forward-looking statements that involve risks and uncertainties. The Company’s actual results and outcomes, and the timing of its results and outcomes, may differ materially from management’s expectations as a result of various factors, including but not limited to those discussed in the section entitled “Special Note Regarding Forward-Looking Statements” included in this Quarterly Report on Form 10-Q and the sections entitled “Risk Factors” included within this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the U.S. Securities and Exchange Commission (“SEC”) on March 21, 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”). For 2024, the Company’s combined network served over 370,000 passengers with approximately 72,000 scheduled departures. We expect the combination of our legacy networks will continue to provide the basis for our expanded, nationwide regional air mobility platform.
Our predecessor company, Surf Air, was formed in 2016 and prior to its reorganization into Surf Air Mobility, aimed to expand the category of regional air travel, connecting underutilized regional airports and private terminals to create a “shared private” customer experience and a high frequency “commercial-like” air service, using small turboprop aircraft. Surf Air provided both scheduled routes and on-demand charter flights operated by third parties that operate under Part 135 of Title 14 of the U.S. Code of Federal Regulations (“Part 135”). Surf Air drove the early stages of development of our current efforts to develop electrified powertrain technology, including the establishment of relationships with key commercial partners who, as a group, we believe can deliver novel hardware and software solutions that can make electrified flight possible for operators across the Part 135 industry, starting with our owned and operated fleet.
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 as of all periods presented herein.
Operating Environment
Since 2020, the Company has been incurring expenses to support the development of the technology of its digital platform with the aim of enabling the regional air mobility market to operate at scale and to enhance the user’s ability to make informed decisions based on multiple first and third party data sources as well as connected aircraft, and the Company expects these development expenses to continue to be incurred. Additionally, the Company is developing fully-electric and hybrid-electric powertrain technologies with its commercial partners to electrify existing fleets and as well as new aircraft of the same type. As a result, the Company expects to incur
27
significant costs in the future to support the development of this technology.
In addition to incremental costs incurred in the execution of the Company’s near and long-term business strategy, the Company has experienced inflationary pressures, which have materially increased the Company’s costs for aircraft fuel, wages and benefits and other goods and services critical to its operations during 2024 and 2025 and believes perceived recessionary risks have impacted the operating results for 2024 and the first quarter 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. In addition, the Company incurred greater than expected losses and negative cash flows from operating activities during 2024 and through the first quarter of 2025 due to inefficient aircraft utilization, primarily caused by an underutilization of pilots and a shortage of maintenance personnel and critical aircraft components, which, in aggregate, have challenged the Company’s ability to serve its customers as desired and, in turn, cover expenses, specifically related to its scheduled service offerings.
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.
Key Operating Measures
In addition to the data presented in our condensed consolidated financial statements, we use the following key operating measures commonly used throughout the air transport industry to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions. The following table summarizes key operating measures for each period presented below, which are unaudited.
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
Increase/ |
|
|
% |
|
||||
Scheduled Flight Hours(1) |
|
|
13,090 |
|
|
|
16,817 |
|
|
|
(3,727 |
) |
|
|
(22 |
)% |
On-Demand Flights(2) |
|
|
620 |
|
|
|
906 |
|
|
|
(286 |
) |
|
|
(32 |
)% |
Scheduled Passengers(3) |
|
|
66,638 |
|
|
|
87,723 |
|
|
|
(21,085 |
) |
|
|
(24 |
)% |
Headcount(4) |
|
|
654 |
|
|
|
815 |
|
|
|
(161 |
) |
|
|
(20 |
)% |
Scheduled Departures(5) |
|
|
13,717 |
|
|
|
16,529 |
|
|
|
(2,812 |
) |
|
|
(17 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(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. |
|
|||||||||||||||
28
Results of Operations
Results of the Company’s Operations for the Three Months Ended March 31, 2025 and 2024
The following table sets forth our condensed consolidated statements of operations data for the three months ended March 31, 2025 and 2024 (in thousands, except percentages):
|
|
Three months ended March 31, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
Revenue |
|
$ |
23,506 |
|
|
$ |
30,624 |
|
|
$ |
(7,118 |
) |
|
|
(23 |
)% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue, exclusive of depreciation and amortization |
|
|
24,706 |
|
|
|
28,489 |
|
|
|
(3,783 |
) |
|
|
(13 |
)% |
Technology and development |
|
|
2,680 |
|
|
|
7,009 |
|
|
|
(4,329 |
) |
|
|
(62 |
)% |
Sales and marketing |
|
|
1,653 |
|
|
|
3,009 |
|
|
|
(1,356 |
) |
|
|
(45 |
)% |
General and administrative |
|
|
10,886 |
|
|
|
24,609 |
|
|
|
(13,723 |
) |
|
|
(56 |
)% |
Depreciation and amortization |
|
|
2,148 |
|
|
|
1,978 |
|
|
|
170 |
|
|
|
9 |
% |
Total operating expenses |
|
|
42,073 |
|
|
|
65,094 |
|
|
|
(23,021 |
) |
|
|
(35 |
)% |
Operating loss |
|
|
(18,567 |
) |
|
|
(34,470 |
) |
|
|
15,903 |
|
|
|
(46 |
)% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Changes in fair value of financial instruments carried at fair value, net |
|
|
5,396 |
|
|
|
(515 |
) |
|
|
5,911 |
|
|
|
(1,148 |
)% |
Interest expense |
|
|
(3,895 |
) |
|
|
(1,671 |
) |
|
|
(2,224 |
) |
|
|
(133 |
)% |
Gain on extinguishment of debt |
|
|
39 |
|
|
|
— |
|
|
|
39 |
|
|
|
— |
% |
Other expense |
|
|
(1,492 |
) |
|
|
(355 |
) |
|
|
(1,137 |
) |
|
|
(320 |
)% |
Total other income (expense), net |
|
|
48 |
|
|
|
(2,541 |
) |
|
|
2,589 |
|
|
|
(102 |
)% |
Loss before income taxes |
|
|
(18,519 |
) |
|
|
(37,011 |
) |
|
|
18,492 |
|
|
|
(50 |
)% |
Income tax benefit |
|
|
53 |
|
|
|
46 |
|
|
|
7 |
|
|
|
15 |
% |
Net loss |
|
$ |
(18,466 |
) |
|
$ |
(36,965 |
) |
|
$ |
18,499 |
|
|
|
(50 |
)% |
Revenue
Revenue decreased by $7.1 million, or 23%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The decrease in revenue was attributable to the following changes in scheduled and on-demand revenues (in thousands, except percentages):
|
|
For The Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
Scheduled |
|
$ |
17,783 |
|
|
$ |
22,979 |
|
|
$ |
(5,196 |
) |
|
|
(23 |
)% |
On-Demand |
|
|
5,723 |
|
|
|
7,645 |
|
|
|
(1,922 |
) |
|
|
(25 |
)% |
Total revenue |
|
$ |
23,506 |
|
|
$ |
30,624 |
|
|
$ |
(7,118 |
) |
|
|
(23 |
)% |
Scheduled revenue decreased $5.2 million, or 23%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The decrease in scheduled revenue was primarily related to the exiting of unprofitable routes, addressing deferred interior and exterior maintenance items that impacted aircraft availability, and a full decrease in membership subscription revenue due to termination of scheduled membership routes.
On-Demand revenue decreased $1.9 million, or 25%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The decrease in on-demand revenue was related to exiting several on-demand products to focus on profitability rather than near-term market penetration.
Operating Expenses
Cost of Revenue, exclusive of depreciation and amortization
Cost of revenue decreased by $3.8 million, or 13%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The decrease of $2.6 million for the scheduled cost of revenue was primarily attributable to lower revenue due to the exiting of unprofitable routes and addressing deferred interior and exterior maintenance items that impacted aircraft availability.
29
The decrease of $1.2 million for the 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 $4.3 million, or 62%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The decrease was driven primarily by a decrease in accruals pertaining to the Textron data license of $3.1 million following the completion of the initial license stage, and additional decreases in labor and labor related expenses for the technology team of $1.3 million due to a decrease in headcount.
Sales and Marketing
Sales and marketing expenses decreased by $1.4 million, or 45%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to a decrease of $1.2 million in employee compensation and commission expenses, due to a reduced headcount.
General and Administrative
General and administrative expenses decreased by $13.7 million, or 56%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The decrease in general and administrative expense was driven primarily by a $10.8 million reduction in stock-based compensation expense, primarily due to a $10.0 million reduction in expenses related to the Management Incentive Plan. Additional reductions of $2.2 million in professional service fees and $0.4 million in salary and compensation expense was the result of transaction and headcount reductions.
Depreciation and Amortization
Depreciation and amortization expenses increased by $0.2 million, or 9%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. This was primarily due overall increases in aircraft depreciation due to capital expenditures subsequent to March 31, 2024.
Other Income/(Expense)
Other expense, net decreased by $2.6 million, or 102%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This was primarily attributable to a $5.5 million decrease in losses from changes in fair value of financial instruments, primarily due to changes in price of the Company’s common stock, off set by a $1.8 million increase in interest expense due overall higher borrowings under the Comvest Credit Agreement and LamVen Note, and a $1.1 million increase in other loss, primarily due to $0.7 million in losses on disposal of fixed assets.
Net Loss
The decrease in net loss of $18.5 million, or 50%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, was primarily attributable to a decrease in operating expenses of $23.0 million and a decrease in other expense of $2.6 million. These decreases in expenses were offset by a decrease in revenue of $7.1 million.
Cash Flow Analysis
The following table presents a summary of our cash flows (in thousands):
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating activities |
|
$ |
(15,804 |
) |
|
$ |
(12,810 |
) |
|
$ |
(2,994 |
) |
|
|
(23 |
)% |
Investing activities |
|
|
782 |
|
|
|
(743 |
) |
|
|
1,525 |
|
|
|
(205 |
)% |
Financing activities |
|
|
542 |
|
|
|
13,113 |
|
|
|
(12,571 |
) |
|
|
(96 |
)% |
Net change in cash and cash equivalents |
|
$ |
(14,480 |
) |
|
$ |
(440 |
) |
|
$ |
(14,040 |
) |
|
|
(3,191 |
)% |
30
Cash Flow from Operating Activities
For the three months ended March 31, 2025, net cash used in operating activities was $15.8 million, driven by a net loss of $18.5 million. These operating outflows were partially offset by depreciation and amortization expense of $2.1 million and losses on disposals of fixed assets of $0.7 million.
For the three months ended March 31, 2024, net cash used in operating activities was $12.8 million, driven by a net loss of $36.9 million. These operating outflows were partially offset by non-cash stock-based compensation expenses of $12.6 million, increases in accounts payable and accrued expenses of $8.3 million, and depreciation and amortization expense of $2.0 million.
Net cash used in operating activities increased period over period by $3.0 million, driven by decreases in stock based compensation expenses of $10.8 million, decreases in losses of changes in fair value of $5.9 million decrease in change in fair value of financial instruments and a $1.1 million decrease in operating cash flows from related parties. These were offset by a $18.5 million reduction in net loss.
Cash Flow from Investing Activities
For the three months ended March 31, 2025, net cash provided by investing activities was $0.8 million, an increase of $1.5 million compared to the three months ended March 31, 2024, driven by an increase in proceeds from the sale of fixed assets of $2.7 million, which was offset by a $1.2 million increase in purchases of property and equipment and software development costs during the three months ended March 31, 2025.
Cash Flow from Financing Activities
For the three months ended March 31, 2025, net cash provided by financing activities was $0.5 million due to proceeds from borrowings on long-term debt of $0.9 million and $0.3 million in collateralized financings, partially offset by $0.6 million in principal payments on long-term debt.
For the three months ended March 31, 2024, net cash provided by financing activities was $13.1 million from proceeds from borrowings due to related parties of $10.0 million, and proceeds from the GEM stock purchase agreement of $3.8 million, offset by $0.8 million due to payments on long-term debt.
Net cash provided by financing activities decreased period over period by $12.6 million, primarily driven by reductions in borrowings from related parties of $10.0 million and reductions in proceeds from the Share Purchase Agreement of $3.8 million. This was offset by a net increase of $1.2 million in borrowings and repayments on long-term debt and collateralized financings.
Liquidity and Capital Resources
The Company has incurred losses from operations, negative cash flows from operating activities and has a working capital deficit. In addition, the Company is currently in default of certain excise and property taxes as well as certain debt obligations. These tax and debt obligations are classified as current liabilities on the Company’s Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024. 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 beginning October 2016 through September 2017 in the amount of $1.9 million, including penalties and interest as of the date of the notice. The Company agreed to a payment plan (the “Installment Plan”) whereby the IRS would take no further action and remove such liens at the time such amounts have been paid. In 2019, the Company defaulted on the Installment Plan. Defaulting on the Installment Plan can result in the IRS nullifying such plan, placing the Company in default and taking collection action against the Company for any unpaid balance. The Company’s total outstanding federal excise tax liability including accrued penalties and interest of $8.1 million is included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheet as of March 31, 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 $1.7 million as of March 31, 2025. The Company received a net credit of $0.3 million as a result of the property tax audit, which concluded in June 2024. Additionally, Los Angeles County has imposed a tax lien on four of the Company’s leased aircraft due to the late filing of the Company’s 2022 property tax return. As of March 31, 2025, the amount of property tax, interest and penalties accrued related to the Los Angeles County tax lien for all unpaid tax years was approximately $1.1 million. The Company is in the process of remediating the late filing, inclusive of the completion of county audits, and payment of the property taxes due to Los Angeles County. As of March 31, 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. 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
31
Purchase Agreement (as defined below). The SAFE-T note had an outstanding principal amount of $0.5 million as of March 31, 2025 (see Note 7, Financing Arrangements).
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 profitably expand into regions 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 optimized 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 has historically 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 share financing arrangements. During the year ended December 31, 2024, the Company entered into a 4-year credit agreement with certain affiliates of Comvest Partners, as lenders, 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 March 31, 2025, $1.4 million has been drawn under the delayed draw commitments. Additionally, during the year ended December 31, 2024, the Company received an additional $2.5 million in advances and $1.4 million in draws under the second amended and restated 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, GEM Purchase, and 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 March 31, 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 $298.6 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 March 31, 2025, GEM held 0% of the then fully-diluted shares of the Company. At March 31, 2025, the daily volume limitations under the Share Purchase Agreement significantly restricted our ability to take additional draws under the Share Purchase Agreement to approximately 104 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 Company’s common stock being listed on a national exchange. The Company is currently attempting to resolve 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 November 2025. While not currently subject to de-listing, the Company’s inability to cure this listing requirement violation would impact its 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 of 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 or, the Company will be required to take additional measures to conserve liquidity, which could include, but 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 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.
32
The Company’s capital expenditures during the three months ended March 31, 2025 were limited to payments made for aircraft parts, engines, immaterial purchases and internally developed software. The Company intends to to utilize the SPA or obtain alternative funding, the Company intends to invest significantly in expansion of its network footprint and in development of electrified powertrain technology and its commercial platform. Expansion of the network will require acquisition of aircraft over the next five years with an expected cost of approximately $0.3 billion. The Company has placed an order with TAI for 90 Cessna Grand Caravan aircraft with an option for an additional 26 Cessna Grand Caravan aircraft, with expected delivery taken over the next five years. As of March 31, 2025, the Company has made deposits of $2.0 million for aircraft that are scheduled to be delivered under this order with TAI. The Company may finance these aircraft through Jetstream Aviation Capital, with which the Company currently has a sale-leaseback financing arrangement of up to $450 million, and additional debt and/or leasing facilities that it intends to obtain in the event sale-leaseback financing is not available through Jetstream Aviation Capital. See the section entitled “Risk Factors — Risks Related to SAM’s Financial Position and Capital Requirements — SAM has no operating history. Surf Air and Southern’s past financial results may not be a reliable indicator of SAM’s future success” included within the Company’s Form 10-K filed on March 21, 2025. The Company has engaged AeroTEC to develop hybrid-electric and fully electric STCs for the Cessna Grand Caravan in partnership with TAI.
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. We had no significant changes to our critical accounting estimates as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
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.
33
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure. It should be noted that, because of inherent limitations, our disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the disclosure controls and procedures are met.
As required by Rule 13a-15(b) under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 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 March 31, 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 March 31, 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 March 31, 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:
These material weaknesses contributed to the following additional material weaknesses:
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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:
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.
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Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 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.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. Except as set out in Item 1 “Financial Statements - Note 10 - Commitments and Contingencies - Legal Contingencies,” we are not currently party to any legal proceedings, the outcome of which, if determined adversely, we believe would individually or in the aggregate, have a material adverse effect on our business, financial condition or results of operations.
ITEM 1A. RISK FACTORS
Except for the risk 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.
Changes in U.S. or foreign trade policies, including the imposition of tariffs and other protectionist trade measures, and other factors beyond our control may adversely impact our business, financial condition, and results of operations.
Since January 2025, the United States has announced significant new tariffs on imports from a wide range of countries, including China, which was followed by retaliatory tariffs by China and a number of countries and a cycle of further retaliatory tariff announcements and trade actions. Certain of the tariffs have been and may be delayed, but others have taken or may take effect. Further, tariffs announced or imposed by the United States could be altered or delayed through presidential action, bilateral negotiations, judicial orders or congressional action, and tariffs announced or imposed by other countries can be affected by similar developments. These and future changes in tariffs and trade policies by the United States or China, or trade actions by or directed toward other countries, such as Mexico or Canada, or retaliatory trade measures in response, may continue to result in additional costs and pricing pressures, supply chain disruptions, volatile or unpredictable customer spending patterns, and increased economic or geopolitical risks, any or all of which could adversely impact our business, financial condition, and results of operations, perhaps materially or in ways that we cannot predict. For example, we plan to outsource the majority of the production, assembly and installation of our fully-electric and hybrid-electric solutions, and international trade disputes and tariffs may increase costs of production and/or otherwise disrupt production, supply, or transit of products to their final destination. In addition, macroeconomic uncertainty tends to make consumers and businesses hesitant about discretionary purchases, which could result in reduced customer demand for air transportation, including our air mobility services, or could shift demand from our air mobility services to other methods of air or ground transportation for which we do not offer a competing service.
We are actively monitoring and evaluating these developments and the potential impacts of trade policy and tariffs on our business and results of operations. If tariffs continue to be maintained at current levels, and/or the U.S. government or foreign governments impose further retaliatory tariffs or other trade restrictive measures in response, we expect that such actions could negatively impact our revenue growth and margins in future periods through increased costs, decreased demand and other adverse economic impacts. The net effect of these actions on our business will depend on our ability to successfully mitigate and offset their impact, which efforts may not be effective. If we are unable to mitigate these risks through supply chain adjustments or other measures, our business could be negatively affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Except as previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on March 28, 2025, there have been no unregistered sales of equity securities during the three months ended March 31, 2025.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
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(a) None.
(b) Not applicable.
(c) Rule 10b5-1 Trading Plans or Other Preplanned Trading Arrangements
During the three months ended March 31, 2025, none of our directors or officers (as defined in Section 16 of the Exchange Act),
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Item 6 – Exhibits
The following documents are filed as exhibits to this Report:
Exhibit Number |
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Description of Document |
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3.1 |
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3.2 |
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3.3 |
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10.1 |
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10.2 |
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10.3* |
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31.1* |
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31.2* |
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32.1*§ |
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101.INS* |
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Inline XBRL Instance Document |
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101.SCH* |
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Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
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104* |
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Cover Page Interactive Data File (embedded within the Inline XBRL document). |
* Filed herewith.
§ Furnished herewith. This certification is not deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act whether made before or after the date hereof, regardless of any general incorporation language in such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Surf Air Mobility Inc. (Registrant) |
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Date: May 13, 2025 |
/s/ Deanna White |
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Deanna White Chief Executive Officer and Chief Operating Officer (Principal Executive Officer) |
Date: May 13, 2025 |
/s/ Oliver Reeves |
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Oliver Reeves Chief Financial Officer (Principal Financial and Accounting Officer) |
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Exhibit 31.1
CERTIFICATIONS
I, Deanna White, certify that:
Date: May 13, 2025 |
/s/ Deanna White |
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Deanna White |
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Chief Executive Officer and Chief Operating Officer |
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(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, Oliver Reeves, certify that:
Date: May 13, 2025 |
/s/ Oliver Reeves |
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Oliver Reeves |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATIONS
PURSUANT TO 18 U.S.C. 1350
Solely for the purposes of complying with 18 U.S.C. 1350, I, the undersigned Principal Executive Officer and Principal Financial and Accounting Officer of Surf Air Mobility Inc. (the “Company”) hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2025 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Deanna White |
Deanna White, Chief Executive Officer and Chief Operating Officer (Principal Executive Officer) |
May 13, 2025 |
/s/ Oliver Reeves |
Oliver Reeves, Chief Financial Officer (Principal Financial and Accounting Officer) |
May 13, 2025 |