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What changed in SURF AIR MOBILITY INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SURF AIR MOBILITY INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+357 added−430 removedSource: 10-K (2025-03-21) vs 10-K (2024-03-29)

Top changes in SURF AIR MOBILITY INC.'s 2024 10-K

357 paragraphs added · 430 removed · 261 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

39 edited+18 added−92 removed33 unchanged
Biggest changeWe believe that our current and future experience and knowledge, generated by operating our own large scheduled fleet and charter operation, combined with our partnerships and interactions with operators, brokers, lessors and OEMs puts us in a strong position to identify, create and commercialize the best electrification products and services for our evolving industry. 15 Access to Sustainable Aviation Fuel.
Biggest changeThrough our combined leverage as suppliers of new electrified aircraft and facilitators of a pilot training pipeline, we believe we can create a program that helps to ensure an adequate supply of pilots for the introduction of electrified flight. 10 We believe that our current and future experience and knowledge, generated by operating our own large scheduled fleet and charter operation, combined with our partnerships and interactions with operators, brokers, lessors and OEMs puts us in a strong position to identify, create and commercialize the best electrification products and services for our evolving industry.
The FAA’s regulations touch on many aspects of civil aviation, such as the design and manufacture of aircraft, engines, propellers, avionics and other components, including applicability of engine noise and other environmental standards; the inspection, maintenance, repair and registration of aircraft; the training, licensing or authorizing and performance of duties by pilots, flight attendants and maintenance technicians; the testing of safety-sensitive personnel for prohibited drug use or alcohol consumption; the design, construction and maintenance of runways and other airport facilities; the operation of air traffic control systems, including the management of complex air traffic at busy airport facilities; the safety certification and oversight of air carriers including their operations and maintenance; the establishment and use of safety management systems by air carriers; the promotion of voluntary systems to encourage the disclosure of data that may aid in enhancing safety; and the oversight and operational control of air carriers by their accountable managers, directors of operations, directors of maintenance and other key personnel.
The FAA’s regulations touch on many aspects of civil aviation, such as the design and manufacture of aircraft, engines, propellers, avionics and other components, including applicability of engine noise and other environmental standards; the inspection, maintenance, repair and registration of aircraft; the training, licensing or authorizing and performance of duties by pilots, flight attendants and maintenance technicians; the testing of safety-sensitive personnel for prohibited drug use or alcohol consumption; the design, construction and maintenance of runways and other airport facilities; the operation of air traffic control systems, including the management of complex air traffic at busy airport facilities; the safety certification and oversight of air carriers including their operations and maintenance; the establishment and use of safety management systems by air carriers; the promotion of voluntary systems to encourage the disclosure of data that may aid in enhancing safety; and 11 the oversight and operational control of air carriers by their accountable managers, directors of operations, directors of maintenance and other key personnel.
The DOT also oversees the marketing, sale and 16 performance of public charter flights (charter flights which are sold by the seat) that may be arranged by an indirect air carrier (i.e., an entity that does not operate aircraft but contracts as a principal with a direct air carrier to do so on its behalf), for the purpose of offering its chartered flights to the public that will be performed by an identified direct air carrier at a predetermined date and time (in contrast to the on-demand, or as-needed/where-needed, character of certain of our services).
The DOT also oversees the marketing, sale and performance of public charter flights (charter flights which are sold by the seat) that may be arranged by an indirect air carrier (i.e., an entity that does not operate aircraft but contracts as a principal with a direct air carrier to do so on its behalf), for the purpose of offering its chartered flights to the public that will be performed by an identified direct air carrier at a predetermined date and time (in contrast to the on-demand, or as-needed/where-needed, character of certain of our services).
Surf Air Global 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 the our owned and operated fleet.
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.
Our predecessor company, Surf Air Global, 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.
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.
Available Information Our Annual Report on Form 10-K, along with all other reports and amendments filed with or furnished to the SEC, are publicly available free of charge on the Investor Relations section of our website at investor.surfair.com or at www.sec.gov as soon as reasonably practicable after these materials are filed with or furnished to the SEC.
Available Information Our Annual Report on Form 10-K, along with all other reports and amendments filed with or furnished to the SEC, are publicly available free of charge on the Investor Relations section of our website at investor.surfair.com or at 13 www.sec.gov as soon as reasonably practicable after these materials are filed with or furnished to the SEC.
We are working to build a dedicated, diverse and inclusive workforce to achieve this goal while striving to adhere to best practices in risk assessment, mitigation and corporate governance. Our ESG efforts consist of focusing on the following: • Environmental.
We are working to build a dedicated, and inclusive workforce to achieve this goal while striving to adhere to best practices in risk assessment, mitigation and corporate governance. Our ESG efforts consist of focusing on the following: • Environmental.
Our acquisition of Southern in July 2023 has resulted in a combined regional airline network servicing U.S. cities across the Mid-Atlantic, Gulf South, Midwest, Rocky Mountains, West Coast, New England and Hawaii.
Our acquisition of Southern Airways in July 2023 has resulted in a combined regional airline network servicing U.S. cities across the Mid-Atlantic, Gulf South, Midwest, Rocky Mountains, West Coast, New England and Hawaii.
Surf Air Global 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 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”).
We have developed a regional air mobility network growth plan based on mobile device and various demographic data layers, which resulted in a network growth plan across approximately 30 U.S. regional networks with approximately 200 “tier 1” routes. We intend to pursue this plan using our own air operation and by leveraging third-party air operators.
We have developed a regional air mobility network growth plan based on mobile device and various demographic data layers, which resulted in a network growth plan across approximately 30 U.S. regional networks with approximately 200 “tier 1” routes. We intend to pursue this plan using our own air operations and by leveraging third-party air operators.
Being a good steward of the natural environment through the production and development of innovative designs that reduce resource use and energy consumption. • Social. Promoting diversity, equity and inclusion, while underpinning all of our activities with a core focus on health and safety. • Governance.
Being a good steward of the natural environment through the production and development of innovative designs that reduce resource use and energy consumption. • Social. Promoting inclusion, while underpinning all of our activities with a core focus on health and safety. • Governance.
None of our employees are subject to a collective bargaining agreement or represented by a labor union. 17 Commitment to Environmental, Social and Governance Leadership We are seeking to build a regional air mobility ecosystem that will sustainably connect communities.
None of our employees are subject to a collective bargaining agreement or represented by a labor union. Commitment to Environmental, Social and Governance (“ESG”) Leadership We are seeking to build a regional air mobility ecosystem that will sustainably connect communities.
Southern has multi-year contracts with the U.S. federal government to operate Essential Air Service (“EAS”) routes, which ensures small communities in the United States can maintain a minimum level of scheduled air services. At the heart of our strategy is our aim of commercializing green regional aviation at scale.
Southern has multi-year contracts with the U.S. federal government to operate Essential Air Service (“EAS”) routes, which helps small communities in the United States maintain a minimum level of scheduled air services. At the heart of our strategy is our aim of commercializing green regional aviation at scale.
The information on our website (or any webpages referenced in this Annual Report on Form 10-K) is not part of this or any other report we file with, or furnish to, the SEC. 19
The information on our website (or any webpages referenced in this Annual Report on Form 10-K) is not part of this or any other report we file with, or furnish to, the SEC. 14
The Company will be subject to U.S. laws regarding privacy of passenger and employee data, including as enforced by the DOT, that are not consistent in all jurisdictions where we operate and which are continually evolving, requiring ongoing monitoring and updates to our privacy and information security programs.
The Company is subject to U.S. laws regarding privacy of passenger and employee data, including as enforced by the DOT, that are not consistent in all jurisdictions where we operate and which are continually evolving, requiring ongoing monitoring and updates to our privacy and information security programs.
We believe we are the largest commuter air carrier by both size of Cessna Caravan fleet and number of scheduled departures of Cessna Caravans in the United States and we believe that in the future our scale could result in an increase in the number of average daily departures, fares and load factor compared to today.
We believe we are one of the largest commuter air carriers by both size of Cessna Caravan fleet and number of scheduled departures of Cessna Caravans in the United States and we believe that in the future our scale could result in an increase in the number of average daily departures, fares and load factor compared to today.
FAA The FAA is an operating administration of the DOT and the principal regulator of safety matters in the U.S. aviation industry.
FAA The Federal Aviation Administration (“FAA”) is an operating administration of the DOT and the principal regulator of safety matters in the U.S. aviation industry.
The EAS program subsidizes scheduled flights to connect underserved communities with larger airline hubs. These contracts help add predictable stability to Southern’s operations from both a route and revenue planning perspective. As of May 1, 2023, the EAS market size for annual contract subsidy rates was approximately $400 million.
The EAS program subsidizes scheduled flights to connect underserved communities with larger airline hubs. These contracts help add predictable stability to Southern’s operations from both a route and revenue planning perspective. As of October, 1 2024, the EAS market size for annual contract subsidy rates was approximately $550 million.
Upholding our commitment to ethical business conduct, integrity and corporate responsibility, and integrating strong governance and enterprise risk management oversight across all aspects of our business. Diversity, Equity and Inclusion We work diligently to create a diverse, equitable and inclusive work environment.
Upholding our commitment to ethical business conduct, integrity and corporate responsibility, and integrating strong governance and enterprise risk management oversight across all aspects of our business. Inclusion We work diligently to create an inclusive work environment.
Founded in 2013 as a Delaware corporation, Southern is the largest commuter airline in the United States and the largest passenger operator of Cessna Grand Caravan EXs (“Cessna Caravans”) in the United States by scheduled departures.
Founded in 2013, Southern is one of the largest commuter airlines in the United States and the largest passenger operator of Cessna Grand Caravan EXs (“Cessna Caravans”) in the United States by scheduled departures.
Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may not be able to acquire or maintain all domain names that use the name “Surf Air” or “Southern” or are otherwise relevant to or descriptive of our business.
As a result, we may not be able to acquire or maintain all domain names that use the name “Surf Air” or “Southern” or are otherwise relevant to or descriptive of our business.
The scope of these regulations is exceedingly broad, covering a wide range of subjects that includes, but is not limited to, those summarized below.
Government Regulation The Company is subject to government regulation at local, state, national and international levels. The scope of these regulations is exceedingly broad, covering a wide range of subjects that includes, but is not limited to, those summarized below.
We have not experienced any work stoppages and consider our relationship with our employees to be good. Our employees are divided across various core business functions, including operations, sales and marketing, research and development, customer service and finance and administration.
Human Capital/Team As of December 31, 2024, we had 703 employees, of which 556 were full-time and 147 were part-time. We have not experienced any work stoppages and consider our relationship with our employees to be good. Our employees are divided across various core business functions, including operations, sales and marketing, research and development, customer service and finance and administration.
We intend to give our customers a stress-free and time-saving airport and travel experience. Seamless Booking. Our customer journey begins digitally through both our booking app and website, creating a personalized air travel experience. Using the mobile app and website, customers have access to a real-time digital marketplace, which we believe enhances and simplifies the user experience.
Our customer journey begins digitally through both our booking app and website, creating a personalized air travel experience. Using the mobile app and website, customers have access to a real-time digital marketplace, which we believe enhances and simplifies the user experience. Customers can conveniently purchase tickets on existing scheduled flights or create private charters.
We own certain trademarks important to our business, such as the “Surf Air” and “Mokulele Airlines” trademarks in the United States. We currently own the “surfair.com” Internet domain-name registration and the “iflysouthern.com” and “mokuleleairlines.com” domain-name registrations. The regulation of domain names in the United States is subject to change.
We regularly review our technology development efforts and branding strategy to identify and assess the protection of new intellectual property. We own certain trademarks important to our business, such as the “Surf Air” and “Mokulele Airlines” trademarks in the United States. We currently own the “surfair.com” Internet domain-name registration and the “iflysouthern.com” and “mokuleleairlines.com” domain-name registrations.
Aircraft-as-a-Service encapsulates bundling certain aircraft ownership related costs, potentially including leasing, insurance, powertrain maintenance and operating software purchase or rental for both conventional internal combustion and/or electrified aircraft to operators with the goal of creating a recurring revenue stream. Government Regulation The Company will be subject to government regulation at local, state, national and international levels.
Aircraft-as-a-Service encapsulates bundling certain aircraft ownership related costs, potentially including leasing, insurance, powertrain maintenance and operating software purchase or rental for both conventional internal combustion and/or electrified aircraft to operators with the goal of creating a recurring revenue stream. 9 Customer Experience We believe that the customer experience that we have developed is a meaningful differentiating advantage.
We strive to provide equal opportunities for growth, success, promotion, learning and development, and aim to achieve parity in the way we organize, assign and manage projects. We are focused on building support across all teams and individuals, with the aim that everyone has a voice, and treats each other with respect.
We strive to provide equal opportunities for growth, success, promotion, learning and development, and aim to achieve parity in the way we organize, assign and manage projects in a way that provides equal opportunities for all.
A small number of the on-demand flights are operated on our fleet; the majority are arranged on third-party turboprops or small jets. For the year ended December 31, 2023, we generated revenue of $21 million from on-demand operations. Today, we offer on-demand flight booking capabilities on our consumer platform enabled by our Surf Air mobile app.
A small number of the on-demand flights are operated on our fleet; the majority are delivered on third-party turboprops or small jets. For the year ended December 31, 2024, we generated revenue of $28.7 million from on-demand operations.
Sources of Air Mobility Revenue We generate revenue from two categories of air mobility services: Scheduled Air Service - We generate revenue from operating scheduled commercial air service flights which are sold to the public primarily on a per seat basis, as well through membership subscriptions, principally relating to two main categories of membership: All-You-Can-Fly (“AYCF”) and Pay-As-You-Fly (“PAYF”).
Sources of Air Mobility Revenue We generate revenue from two categories of air mobility services: Scheduled Air Service - We generate revenue from operating scheduled commercial air service flights which are sold to the public primarily on a per seat basis, as well as through membership subscriptions. 8 Of our combined fleet of 57 aircraft, 46 are Cessna Caravans as of December 31, 2024.
The Company was incorporated in 2021 and became the ultimate parent of both Surf Air Global Limited (“Surf Air Global”) and Southern Airways Corporation (“Southern”) in July of 2023 following the Company’s public listing on the New York Stock Exchange (“NYSE”).
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 NYSE. For 2024, the Company served over 370,000 passengers with approximately 72,000 scheduled departures.
Intellectual Property Our ability to protect our material intellectual property is important to our business. We seek to protect our intellectual property (including our technology and confidential information) through a combination of trademarks and trade secret protections, as well as contractual commitments and security procedures.
We seek to protect our intellectual property (including our technology and confidential information) through a combination of trademarks and trade secret protections, as well as contractual commitments and security procedures. We generally require employees and consultants to enter into confidentiality and assignment of inventions agreements and certain third parties to enter into nondisclosure agreements.
We regularly review our development efforts to assess the existence and patentability of new inventions, and we are prepared to file patent applications when we determine it would benefit our business to do so. 18 Privacy and Data Protection There are many requirements regarding the collection, use, transfer, security, storage, destruction and other processing of personally identifiable information and other data relating to individuals.
We regularly review our development efforts to assess the existence and patentability of new inventions, and we are prepared to file patent applications when we determine it would benefit our business to do so.
Customers can conveniently purchase tickets on existing scheduled flights or create private charters. Customers have access to an array of available aircraft to meet various travel needs. Local Airports & Private Terminals. We operate scheduled and on-demand flights in and out of small airports and private terminals.
Customers have access to an array of available aircraft to meet various travel needs. Local Airports & Private Terminals. We operate scheduled and on-demand flights in and out of small airports and private terminals. This provides our customers with the convenience of an accessible airport closer to their origin and/or destination and the convenience of a private terminal experience.
This business represents a capital light source of revenue. 14 Customer Experience We believe that the customer experience that we have developed is a meaningful differentiating advantage. We have strived to create an exceptional flying experience solving the greatest pain points of regional commercial flying. Through our large scale, we have a substantial customer service operation to support our travelers.
We have strived to create an exceptional flying experience solving the greatest pain points of regional commercial flying. Through our large scale, we have a substantial customer service operation to support our travelers. We intend to give our customers a stress-free and time-saving airport and travel experience. Seamless Booking.
Of our combined fleet of 55 aircraft, 40 are Cessna Caravans as of December 31, 2023. For the year ended December 31, 2023, our total fleet averaged approximately 193 daily departures.
For the year ended December 31, 2024, our total fleet averaged approximately 190 daily departures.
ITEM 1: BUSINESS Overview Surf Air Mobility Inc. (the “Company”, “us”, “we” or “our”) is a regional air mobility platform that aims to sustainably connect communities.
ITEM 1: BUSINESS Overview 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, and has a goal of further developing and enhancing its service and technology offerings through its Air Technology business.
The lease of this facility expires in August 2026. Southern’s headquarters is located in a leased workspace in Palm Beach, Florida. The lease of this facility expires in April 2025. Human Capital/Team As of December 31, 2023, we had 833 employees, of which 625 were full-time and 208 were part-time.
The lease of this facility expires in August 2026. Southern’s headquarters is located in a leased workspace in Palm Beach, Florida. The lease of this facility expires in April 2025. In February 2025, the Company relocated its air operations center to Addison, Texas. The lease of this facility expires in January 2028.
We believe operating at the center and providing valuable services across the value chain of the regional air mobility ecosystem as well as coordinating the various parties can lead to additional earning opportunities for us. We believe there is significant value to be created by leveraging our ability to serve both customers and operators within the regional flying ecosystem.
Today, we offer on-demand flight booking capabilities on our consumer platform enabled by our Surf Air mobile app, which is a capital light source of revenue. We believe there is significant value to be created by leveraging our ability to serve both customers and operators within the regional flying ecosystem.
We believe that electrified aircraft, which would boast lower operating costs and emissions could be the key to unlock this electrified air-mobility market. We are today an established regional air-mobility platform providing scheduled and on-demand regional flights to passengers across the U.S. We both operate our own flights and use ‘off fleet’ third-party aircraft to serve our customers.
We believe that electrified aircraft, which could boast lower operating costs and emissions could be the key to unlock this electrified air-mobility market. Surf Air Mobility (through its subsidiary airlines Southern Airways and Mokulele Airlines) is one of the largest commuter airlines in the United States by scheduled departures, serving numerous communities across the U.S. mainland and Hawaii.
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We intend to accelerate the adoption of green flying by developing, together with our commercial partners, fully-electric and hybrid-electric powertrain technology to upgrade existing fleets, and by creating a financing and services infrastructure to enable this transition on an industry-wide level.
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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 develop proprietary aviation software, aircraft electrification powertrain technology and services to enable electrification across the regional air mobility sector.
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We believe bringing electrified aircraft to market at scale will substantially reduce the cost and environmental impact of regional flying, and that such reductions are achievable by the end of the decade. Additionally, we believe operating as a publicly traded company and having efficient access to growth capital will allow us to accelerate the implementation of our strategic plan.
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We expect the combination of our legacy networks will continue to provide the basis for our expanded, nationwide regional Air Mobility business.
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For 2023, which includes the full year of operations of Surf and the operations of Southern from the July 27, 2023 acquisition date, the Company’s combined network served approximately 176,131 passengers across 41 cities with approximately 31,476 departures. We expect the combination of our legacy networks will provide the basis for our expanded, nationwide regional air mobility platform.
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In addition, we have commercial relationships with over 400 air operators that provide on-demand charter services to our customers.
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Together with our partners: Textron Aviation, AeroTEC, Jetstream Aviation Capital and Palantir Technologies Inc., we believe that we can catalyze the development of this regional air-mobility market by creating the technology (both hardware and software) and services required to enable this ecosystem and placing ourselves at the center of it.
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In the future, these charter operators will be ideal customers for our AI-enhanced software operating system, SurfOS, and for hybrid and electric aircraft, all of which we expect to launch, commercialize and/or scale through our relationships with Textron Aviation, Electra, REGENT and others.
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We envision a world where our consumer facing distribution technology is coupled with a full suite of technologies and services, which enable the development of the supply side of our industry – the operator. We call this operator facing product Aircraft-as-a-Service, which includes three elements: electrification technology, operator software suite, and aircraft financing.
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Our Strategy We have several strategic differentiators which form our competitive advantage in the regional air mobility market. • Scale: we are one of the largest commuter airlines in the U.S. by scheduled departures. • Experience: we have over a decade of experience operating in the highly regulated aviation industry and we have flown millions of passengers millions of miles. 7 • Depth: we have deep – and unique – ties across the industry with exclusive relationships with Textron Aviation – manufacturer of the Cessna Caravan aircraft that we operate, and with Palantir Technologies a global leader in AI, enterprise data analytics, and business intelligence that we have partnered with to power the SurfOS operating system. • Reach: we have expansive reach and relationships with over 400 regional air operators who have operated charter flights via our marketplace and are expected to form the initial customer base of our SurfOS software.
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Our electrification technology program aims to address the projected demand for thousands of electrified Conventional Take-Off and Landing (eCTOL) aircraft, which will be needed over the next decade to enable a new mass air-mobility market.
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In addition, we have interline agreements with United, American, Alaska and Hawaiian Airlines that extend our reach to their combined 430 million annual passengers. • Technology: we are developing AI-enhanced software, in partnership with Palantir, to drive our growth and profitability and, in the future, we plan to offer this technology to other charter brokers, air operators, and aircraft owners. • Execution: we have brought together leaders and experts in aviation, software and electrification to help us synergistically execute our vision, drive profitable growth over time, and create shareholder value.
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As estimated by McKinsey & Company in 2023, the electrified regional air-mobility market could reach $75-115B by 2035 and require 18,000-36,000 new and retrofitted aircraft. 8 Our electrification strategy is to upgrade existing, prolific, regional aircraft by pursuing Supplemental Type Certificates (“STCs”) to install them with fully-electric or hybrid-electric powertrain technology, once these powertrains are fully designed and developed by us, and certified by the Federal Aviation Administration (“FAA”).
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Given our leadership position in the regional air mobility sector, we believe we are uniquely qualified to understand the needs of industry participants and to develop software and hardware solutions to enhance efficiency, productivity, and profitability. Today, through our exclusive partnership with Palantir, we are developing an AI-enhanced software operating system, SurfOS.
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Due to readiness level of key components intended for use in our powertrain, we are expecting FAA certification of our first product, a fully-electric powertrain STC for the Cessna Caravan to occur in early 2027, and our hybrid-electric Cessna Caravan STC to occur thereafter. The Cessna Caravan is the initial cornerstone of our electrification program.
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SurfOS is currently in the implementation phase across our Company, and we are already seeing improved productivity and efficiency through these tools. SurfOS aims to apply leverage to our commercial initiatives by streamlining our sales, sourcing, and distribution. Additionally, the software impacts critical functions of the airline operation such as crew scheduling, maintenance, and resource planning.
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The Caravan provides a large target market given its position as one of the most prolific family of aircraft in the single engine turboprop category, with approximately 3,000 aircraft in use worldwide.
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We believe revenue management features such as dynamic pricing and flight distribution are key to maximizing revenue. Moreover, SurfOS is designed to empower a “connected aircraft,” which is expected to allow for near real-time insight into airplane health, maintenance needs, pilot performance, and flight tracking.
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Our electrification program will initially focus on the creation of fully-electric and hybrid-electric powertrains for the Cessna Caravan EX and is expected to be expanded to other variants of the Caravan family in the future. The electrified Caravans are projected to have significantly reduced operating costs and emissions.
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We currently anticipate that we will begin rolling out SurfOS to launch customers in 2025, before widening distribution to other third-party operators, charter brokers, and owners over time. The regional air mobility industry is expected to grow into a $75 billion to $115 billion global market by 2035.
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Our Caravan fleet, operated by our subsidiary Southern Airways, will act as the initial “install base” for our electrified powertrain technology, followed by our operator-customer fleets around the world. We have relationships with industry leaders across the value chain, which we believe provide significant competitive advantages as we pursue the implementation of our electrification program.
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This market is expected to undergo massive transformation due to the emergence of new technologies such as electrification that seek to greatly reduce the cost of air travel, particularly for smaller regional planes that serve point-to-point routes from more convenient regional airports. In addition, electric and hybrid aircraft are expected to substantially reduce the carbon emissions of flying.
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We intend to be the exclusive supplier of fully-electric and hybrid-electric propulsion systems for the Cessna Caravan to Textron Aviation Inc. (“TAI”), one of the largest general aviation original equipment manufacturers (“OEMs”) in the world by units sold.
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We believe Surf Air Mobility is uniquely positioned to lead the transformation of the regional air mobility industry. We intend to deploy electrified aircraft, when available, across our scheduled service routes. The Company is also pursuing Supplemental Type Certificates (“STCs”) for proprietary powertrain technology for the Cessna Grand Caravan aircraft.
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We have also entered into a definitive agreement with our electrification and certification partner, AeroTEC, a leading aerospace engineering firm with deep experience in electronification of aircraft, to work exclusively with us to develop and obtain STCs for a series of fully-electric and hybrid-electric Cessna Caravans.
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The Company has an exclusive sales and marketing relationship with the aircraft manufacturer, Textron Aviation, for distribution of electrified and hybrid powered aircraft, and we have MOU agreements with 7 operators globally with approximately 100 aircraft under management to potentially upgrade to our proprietary powertrains, once certified.
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Our operator software suite is being developed in partnership with Palantir Technologies Inc. to enable the regional air-mobility market to operate at scale. We intend to provide Part 135 operators with the software tools they need to operate and grow their business successfully, an ‘operating system’ for regional aviation.
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In addition, Surf Air Mobility’s platform will also help other electrification technologies go to market with access to the Company’s network and distribution potential.
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Our software platform strives to provide operators with distribution, operations, maintenance, and other business applications. This is expected to include functionality such as revenue management, crew scheduling, maintenance planning, and customer analytics, to name a few.
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The Company is exploring relationships with other industry participants to bring innovative solutions to the regional air mobility market and accelerate the adoption of electrified aircraft potentially through the formation of joint ventures which may be separately capitalized.
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Our software suite is expected to leverage Palantir’s large data models and AI driven systems to enhance the user’s ability to make informed decisions based on multiple first and third party data sources as well as connected aircraft.
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We are focused on building support across all teams and individuals, with the aim that everyone has a voice, and treats each other with respect. 12 Intellectual Property Our ability to protect our material intellectual property is important to our business.
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In the future, we expect that EP1 Caravan aircraft will be connected to this software suite, continuously sharing data from multiple onboard sensors, adding to the cumulative fleet data and enabling us to provide operators with trend monitoring and predictive maintenance functionalities.
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The regulation of domain names in the United States is subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names.
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These are expected to reduce the cost of operations as well as improve the uptime of the EP1 system. The third part of our Aircraft-as-a-Service product is planned to be aircraft and powertrain financing.
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Privacy and Data Protection There are many requirements regarding the collection, use, transfer, security, storage, destruction and other processing of personally identifiable information and other data relating to individuals.
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We and Jetstream Aviation Capital, LLC (“Jetstream”) have entered into a master agreement (“Master Agreement”) to finance up to $450 million to fund the planned growth of our fleet of turboprop aircraft.
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We expect to deploy this capital to finance our current TAI fleet order and, once the EP1 powertrains are certified, to allow us to help operator-customers finance their EP1 upgrades and new aircraft purchases from TAI. In addition, we, through our subsidiary Southern Airways Express, and SkyWest Airlines, Inc. (“SkyWest”) are partnered to provide a pilot hiring and training pathway.
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We believe this is a key relationship, which allows us to ensure a steady and predictable pilot pipeline. Lastly, we have entered into a memorandum of understanding (“MOU”) with Signature Flight Support LLC (“Signature”) for fixed base operator (“FBO”) services (e.g. fueling, hangaring, parking and aircraft rental) at airports and the support of our existing and future network.
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Our Strategy Our future business strategy is built on six key premises: 1. Large Addressable Market Our strategic plan is focused on capturing a meaningful portion of the point-to-point regional air mobility market currently served by automobiles and inefficient hub-and-spoke airline business models.
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Based on a study published by 9 McKinsey & Company in 2023, we believe the total global market opportunity for point-to-point regional air mobility of approximately 100 - 500 miles will be approximately $75 billion to $115 billion worldwide and, based on management’s estimates, approximately $15 billion to $22 billion in the United States by 2035.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks and uncertainties that could materially and adversely affect our business, results of operations or financial condition include, but are not limited to the ability to raise additional capital (or financing) to fund operating losses, refinance our current outstanding debt, sustain ongoing operations, the ability to attract and maintain members, the ability to integrate, manage and grow recent acquisitions and new business initiatives, obtain and maintain relevant regulatory approvals, and the ability to measure and manage risks inherent to our business model.
Biggest changeRisks and uncertainties that could materially and adversely affect our 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 our 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, 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 our business model. 15 Moreover, some of our vendors and suppliers likewise rely on capital raising activities to fund their operations and capital expenditures, which may be more difficult or expensive in the event of downturns in the economy or disruptions in the financial and credit markets (including as a result of the aforementioned factors that have impacted our operations).
These material weaknesses could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
These material weaknesses could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Among other things, the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws include provisions: • establishing a classified board of directors with staggered, three-year terms; • authorizing our Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • prohibiting cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • limiting the liability of, and providing for the indemnification of, our directors and officers; • authorizing our Board to amend the bylaws, which may allow our Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and • establishing advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
Among other things, the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws include provisions: • establishing a classified board of directors with staggered, three-year terms; • authorizing our Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • prohibiting cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • limiting the liability of, and providing for the indemnification of, our directors and officers; 46 • authorizing our Board to amend the bylaws, which may allow our Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and • establishing advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
As a new entrant into the nascent market of hybrid-electric and battery electric aircraft, we anticipate that we will face risks and significant challenges that would impact our ability to, among other things: • design and produce safe, reliable and quality fully-electric and hybrid-electric powertrains on an ongoing basis; • obtain necessary regulatory approvals in a timely manner, or at all; • build a well-recognized and respected brand; 30 • attract and maintain core commercial partnerships; • establish and expand our customer base; • successfully service our aircraft after sales and maintain a good flow of spare parts and customer goodwill; • improve and maintain our operational efficiency; • predict our future revenues and appropriately budget for our expenses; • attract, retain and motivate talented employees; • anticipate trends that may emerge and affect our business; • anticipate and adapt to changing market conditions, including technological developments and changes in our competitive landscape; and • navigate an evolving and complex regulatory environment.
As a new entrant into the nascent market of hybrid-electric and battery electric aircraft, we anticipate that we will face risks and significant challenges that would impact our ability to, among other things: • design and produce safe, reliable and quality fully-electric and hybrid-electric powertrains on an ongoing basis; • obtain necessary regulatory approvals in a timely manner, or at all; • build a well-recognized and respected brand; • attract and maintain core commercial partnerships; • establish and expand our customer base; • successfully service our aircraft after sales and maintain a good flow of spare parts and customer goodwill; • improve and maintain our operational efficiency; • predict our future revenues and appropriately budget for our expenses; • attract, retain and motivate talented employees; • anticipate trends that may emerge and affect our business; • anticipate and adapt to changing market conditions, including technological developments and changes in our competitive landscape; and • navigate an evolving and complex regulatory environment.
Negative perception of our business or platform may have a material adverse effect on our reputation and brands, including as a result of: • complaints or negative publicity or reviews about us, our third-party aircraft operators or customers, our air mobility services, certain other brands or events we associate with or our flight operations policies ( e.g. , cancellation or baggage fee policies), even if factually incorrect or based on isolated incidents; • general safety concerns or specific perceptions of the safety and performance of certain types of aircraft, such as single-engine versus twin-engine aircraft or propeller-powered aircraft versus jet-powered aircraft, or if companies have policies that prevent them from utilizing our services due to the aircraft we operate; • changes to our flight operations, safety and security, data privacy or other policies that users or others perceive as overly restrictive, unclear or inconsistent with our values; • a failure to enforce our flight operations policies in a manner that users perceive as effective, fair and transparent; • illegal, negligent, reckless or otherwise inappropriate behavior by our customers, our third-party aircraft operators or other third parties involved in the operation of our business or by our management team or other employees; • flight delays or a failure to provide routes and flight schedules sought by customers; • actual or perceived disruptions or defects in our platform or other technology development, such as data privacy or security incidents, platform outages, payment processing disruptions or other incidents that impact the availability, reliability or security of our offerings; • litigation over, or investigations by regulators into, our operations or those of our third-party aircraft operators; • inadequate or unsatisfactory customer support service experiences; • negative responses by third-party aircraft operators or customers to new mobility offerings on our platform; • perception of our treatment of employees, contractors or third-party aircraft operators and our response to their sentiment related to political or social causes or actions of management; • disputes with any of our strategic partners; 26 • problems in engagement with aircraft certification bodies or other regulators, communities, target demographics or other positioning in the market; or • any of the foregoing with respect to our competitors, to the extent such resulting negative perception affects the public’s perception of us or the aviation industry as a whole, and particularly if we are unable to adequately differentiate our brand, services and aircraft from others in the market.
Negative perception of our business or platform may have a material adverse effect on our reputation and brands, including as a result of: • complaints or negative publicity or reviews about us, our third-party aircraft operators or customers, our air mobility services, certain other brands or events we associate with or our flight operations policies ( e.g. , cancellation or baggage fee policies), even if factually incorrect or based on isolated incidents; • general safety concerns or specific perceptions of the safety and performance of certain types of aircraft, such as single-engine versus twin-engine aircraft or propeller-powered aircraft versus jet-powered aircraft, or if companies have policies that prevent them from utilizing our services due to the aircraft we operate; • changes to our flight operations, safety and security, data privacy or other policies that users or others perceive as overly restrictive, unclear or inconsistent with our values; • a failure to enforce our flight operations policies in a manner that users perceive as effective, fair and transparent; • illegal, negligent, reckless or otherwise inappropriate behavior by our customers, our third-party aircraft operators or other third parties involved in the operation of our business or by our management team or other employees; • flight delays or a failure to provide routes and flight schedules sought by customers; • actual or perceived disruptions or defects in our platform or other technology development, such as data privacy or security incidents, platform outages, payment processing disruptions or other incidents that impact the availability, reliability or security of our offerings; • litigation over, or investigations by regulators into, our operations or those of our third-party aircraft operators; • inadequate or unsatisfactory customer support service experiences; • negative responses by third-party aircraft operators or customers to new mobility offerings on our platform; • perception of our treatment of employees, contractors or third-party aircraft operators and our response to their sentiment related to political or social causes or actions of management; • disputes with any of our strategic partners; • problems in engagement with aircraft certification bodies or other regulators, communities, target demographics or other positioning in the market; or 22 • any of the foregoing with respect to our competitors, to the extent such resulting negative perception affects the public’s perception of us or the aviation industry as a whole, and particularly if we are unable to adequately differentiate our brand, services and aircraft from others in the market.
Our Amended and Restated Certificate of Incorporation provides that, to the fullest extent permitted by law, and unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, 50 in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of ours to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Amended and Restated Certificate of Incorporation or the Amended and Restated Bylaws (as either may be amended or restated) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware.
Our Amended and Restated Certificate of Incorporation provides that, to the fullest extent permitted by law, and unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of ours to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Amended and Restated Certificate of Incorporation or the Amended and Restated Bylaws (as either may be amended or restated) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware.
The supply and demand for aircraft is affected by various cyclical and non-cyclical factors that are outside of our control, including: • passenger and air cargo demand; • fuel costs and general economic conditions; • geopolitical events, including war, prolonged armed conflict and acts of terrorism; • outbreaks of communicable diseases and natural disasters; • governmental regulation; • interest rates; • the availability of credit; • airline restructurings and bankruptcies; • manufacturer production levels and technological innovation; • manufacturers merging or exiting the industry or ceasing to produce aircraft types; • retirement and obsolescence of aircraft models; • reintroduction into service of aircraft previously in storage; and • airport and air traffic control infrastructure constraints.
The supply and demand for aircraft is affected by various cyclical and non-cyclical factors that are outside of our control, including: • passenger and air cargo demand; • fuel costs and general economic conditions; • geopolitical events, including war, prolonged armed conflict and acts of terrorism; • outbreaks of communicable diseases and natural disasters; • governmental regulation; • interest rates; • the availability of credit; • airline restructurings and bankruptcies; • manufacturer production levels and technological innovation; • manufacturers merging or exiting the industry or ceasing to produce aircraft types; • retirement and obsolescence of aircraft models; • reintroduction into service of aircraft previously in storage; and 23 • airport and air traffic control infrastructure constraints.
Our business depends on consumer demand for our services and, consequently, is sensitive to a number of factors that influence consumer confidence and spending, such as general economic conditions, consumer disposable income, energy and fuel prices, recession and fears of recession, unemployment, legislative and regulatory changes, minimum wages, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, tax rates and policies, inflation, consumer confidence in future economic conditions and political conditions, war and fears of war, inclement weather and climate change, natural disasters, terrorism, uncertainty in the banking system, outbreak of viruses or widespread illness, and consumer perceptions of personal well-being and security.
Our business depends on consumer demand for our services and, consequently, is sensitive to a number of factors that influence consumer confidence and spending, such as general economic conditions, consumer disposable income, energy and fuel prices, recession and fears of recession, 50 unemployment, legislative and regulatory changes, minimum wages, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, tax rates and policies, inflation, consumer confidence in future economic conditions and political conditions, war and fears of war, inclement weather and climate change, natural disasters, terrorism, uncertainty in the banking system, outbreak of viruses or widespread illness, and consumer perceptions of personal well-being and security.
Although we believe our ability to develop and integrate hybrid-electric and electric technology with our commercial partners to present a cost-effective solution to address the needs of consumers in this market will also be a key factor to the success of our future growth, if the market that we seek to address does not perceive electrification as beneficial, or chooses not to adopt electrification as a result of concerns regarding safety, affordability, value proposition or for other reasons, then the market for our offerings may not develop, may develop more slowly than we expect or may not achieve the growth potential we expect.
In addition, although we believe our ability to develop and integrate hybrid-electric and electric technology with our commercial partners to present a cost-effective solution to address the needs of consumers in this market will also be a key factor to the success of our future growth, if the market that we seek to address does not perceive electrification as beneficial, or chooses not to adopt electrification as a result of concerns regarding safety, affordability, value proposition or for other reasons, then the market for our offerings may not develop, may develop more slowly than we expect or may not achieve the growth potential we expect.
In response to a determination that we have infringed upon or misappropriated a third-party’s intellectual property rights, we may be required to do one or more of the following: • cease development, sales or use of its or our products or services; • trade under a different name or rebrand our services; • pay substantial damages; • obtain a license from the owner of the asserted intellectual property right, which license may not be available on reasonable terms or available at all; or • re-design one or more aspects or systems of its or our aircraft or other offerings.
In response to a determination that we have infringed upon or misappropriated a third-party’s intellectual property rights, we may be required to do one or more of the following: • cease development, sales or use of its or our products or services; • trade under a different name or rebrand our services; • pay substantial damages; 37 • obtain a license from the owner of the asserted intellectual property right, which license may not be available on reasonable terms or available at all; or • re-design one or more aspects or systems of its or our aircraft or other offerings.
We could be an emerging growth company until December 31, 2028, although circumstances could cause us to lose that status earlier, including if 48 the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of any second quarter of a fiscal year, in which case we would no longer be an emerging growth company as of the end of such fiscal year and would become an accelerated filer.
We could be an emerging growth company until December 31, 2028, although circumstances could cause us to lose that status earlier, including if the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of any second quarter of a fiscal year, in which case we would no longer be an emerging growth company as of the end of such fiscal year and would become an accelerated filer.
The failure to obtain any of the required authorizations or certificates, or do so in a timely manner, or if any of these authorizations or certificates are modified, suspended or revoked after we obtain them, may render us unable to develop our powertrains and implement our plans to install them in aircraft on the timelines we project, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.
The failure to obtain any of the required authorizations or certificates, or do so in a timely manner, or if any of these authorizations or certificates are modified, suspended or revoked after we obtain them, may render us unable to develop our powertrains 41 and implement our plans to install them in aircraft on the timelines we project, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.
We will remain a smaller reporting company until the last day of the fiscal year in which (a) (1) the market value of our ordinary shares held by non-affiliates equals or exceeds $250 million as of the end of that year’s second fiscal quarter, and (2) our annual revenues equal or exceeded $100 million during such completed fiscal year or (b) the market value of our ordinary shares held by non-affiliates equals or exceeds $700 million as of the end of that year’s second fiscal quarter.
We will remain a smaller reporting company until the last day of the fiscal year in which (a) (1) the market value of our ordinary shares held by non-affiliates equals or exceeds $250 million as of the end of that year’s second fiscal quarter, and (2) our annual revenues equal or exceeded $100 million during such completed fiscal year or (b) the market value of our ordinary shares held by non-affiliates equals or exceeds 45 $700 million as of the end of that year’s second fiscal quarter.
We may be required to recognize losses in the future due to, among other factors, extreme fuel price volatility, tight credit markets, government regulatory changes, decline in the fair values of certain tangible or intangible assets. Our contractual obligations could impair our liquidity and materially adversely affect our business, results of operations and financial condition.
We may be required to recognize losses in 18 the future due to, among other factors, extreme fuel price volatility, tight credit markets, government regulatory changes, decline in the fair values of certain tangible or intangible assets. Our contractual obligations could impair our liquidity and materially adversely affect our business, results of operations and financial condition.
We may be required to cease operations which could result in our stockholders losing all or most of their investment. Agreements governing our debt obligations include financial and other covenants that provide limitations on our business and operations under certain circumstances, and failure to comply with any of the covenants in such agreements could adversely impact us.
We may be required to cease operations which could result in our stockholders losing all or most of their investment. 19 Agreements governing our debt obligations include financial and other covenants that provide limitations on our business and operations under certain circumstances, and failure to comply with any of the covenants in such agreements could adversely impact us.
In the future, these mobile operating systems or application marketplaces could limit or prohibit us from making our current and future apps available to customers, make changes that degrade their functionality, increase the difficulty 42 of using them, impose terms of use unsatisfactory to us or users, or modify search or ratings algorithms in ways that are detrimental to us.
In the future, these mobile operating systems or application marketplaces could limit or prohibit us from making our current and future apps available to customers, make changes that degrade their functionality, increase the difficulty of using them, impose terms of use unsatisfactory to us or users, or modify search or ratings algorithms in ways that are detrimental to us.
As a result, the training of our pilots may not be accomplished in a cost-efficient manner or in a manner timely enough to support our operational needs. We are subject to legal, regulatory and physical risks associated with climate change, including the potential increased impacts of severe weather events on our operations and infrastructure.
As a result, the training of our pilots may not be accomplished in a cost-efficient manner or in a manner timely enough to support our operational needs. 29 We are subject to legal, regulatory and physical risks associated with climate change, including the potential increased impacts of severe weather events on our operations and infrastructure.
Due to our reliance on third parties to provide these services going 38 forward, we are subject to the risk of disruptions to their operations, such as the impact of adverse economic conditions and the inability of third parties to hire or retain skilled personnel, including pilots and mechanics, as well as any failure to deliver services at the level expected of them.
Due to our reliance on third parties to provide these services going forward, we are subject to the risk of disruptions to their operations, such as the impact of adverse economic conditions and the inability of third parties to hire or retain skilled personnel, including pilots and mechanics, as well as any failure to deliver services at the level expected of them.
Significant new initiatives have in the past resulted in similar operational challenges, and our growth strategy contemplates scaling our business rapidly, 25 such as through acquisitions. In addition, developing and launching new routes and enhancements to our existing routes may involve significant upfront investment, such as additional marketing and terminal build-out, and such investments may not generate a return.
Significant new initiatives have in the past resulted in similar operational challenges, and our growth strategy contemplates scaling our business rapidly, such as through acquisitions. In addition, developing and launching new routes and enhancements to our existing routes may involve significant upfront investment, such as additional marketing and terminal build-out, and such investments may not generate a return.
The impact of such events may limit our third-party aircraft operators’ ability to perform our flights, which could result in loss of revenue and adversely affect our ability to provide our services. Additionally, high fuel prices or significant disruptions in the supply of aircraft fuel could have an adverse effect on our financial condition and results of operations.
The impact of such events may limit our third-party aircraft 31 operators’ ability to perform our flights, which could result in loss of revenue and adversely affect our ability to provide our services. Additionally, high fuel prices or significant disruptions in the supply of aircraft fuel could have an adverse effect on our financial condition and results of operations.
The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in the proposed certificate of incorporation to be inapplicable or unenforceable in such action.
The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in the proposed certificate of incorporation to be inapplicable or unenforceable in 47 such action.
If our future fully-electric and hybrid-electric aircraft and related equipment require maintenance 31 more frequently than we plan for or at costs that exceed our estimates, that would disrupt the operation of our service and could have a material adverse effect on our business, financial condition and results of operations.
If our future fully-electric and hybrid-electric aircraft and related equipment require maintenance more frequently than we plan for or at costs that exceed our estimates, that would disrupt the operation of our service and could have a material adverse effect on our business, financial condition and results of operations.
If we experience harm to our reputation and brands, our business, financial condition and results of operations could be adversely affected. We must continue to increase the strength of our reputation and brands as reliable, experience-driven and cost-effective air mobility in order to attract and retain qualified third-party aircraft operators and customers.
If we experience harm to our reputation and brands, our business, financial condition and results of operations could be adversely affected. We must continue to increase the strength of our reputation and brands as reliable, experience-driven and cost-effective air mobility providers in order to attract and retain qualified third-party aircraft operators and customers.
In addition, certain of our terminals are in locations susceptible to the impacts of storm-related flooding and 33 sea-level rise, which could result in costs and loss of revenue. We could incur significant costs to improve the climate resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change.
In addition, certain of our terminals are in locations susceptible to the impacts of storm-related flooding and sea-level rise, which could result in costs and loss of revenue. We could incur significant costs to improve the climate resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change.
In addition, we will also need to do extensive testing to ensure that the 44 propulsion system is in compliance with applicable FAA safety regulations and other relevant regulations prior to our suppliers beginning mass production. Production approval involves initial FAA manufacturing approval and extensive ongoing oversight of mass produced aircraft components.
In addition, we will also need to do extensive testing to ensure that the propulsion system is in compliance with applicable FAA safety regulations and other relevant regulations prior to our suppliers beginning mass production. Production approval involves initial FAA manufacturing approval and extensive ongoing oversight of mass produced aircraft components.
Any acquisition, partnership or joint venture may not result in anticipated synergies or cost savings 29 over time, may reduce our cash reserves, may negatively affect our earnings and financial performance, to the extent financed with the proceeds of debt, may increase our indebtedness and to the extent financed with the proceeds of equity, and may result in dilution to our existing equity holders.
Any acquisition, partnership or joint venture may not result in anticipated synergies or cost savings over time, may reduce our cash reserves, may negatively affect our earnings and financial performance, to the extent financed with the proceeds of debt, may increase our indebtedness and to the extent financed with the proceeds of equity, and may result in dilution to our existing equity holders.
Stock prices of many companies, including mobility and technology companies, have fluctuated in a manner often unrelated to the operating performance of those companies. These fluctuations may be 51 even more pronounced in the trading market for our Common Stock given that we are a newly public company.
Stock prices of many companies, including mobility and technology companies, have fluctuated in a manner often unrelated to the operating performance of those companies. These fluctuations may be even more pronounced in the trading market for our common stock given that we are a newly public company.
If such vendors or suppliers are unable to raise adequate capital to fund their business plans, they may not be able to 20 comply with their obligations to us, which could have a material adverse effect on our business, financial condition and results of operations.
If such vendors or suppliers are unable to raise adequate capital to fund their business plans, they may not be able to comply with their obligations to us, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, our ability to use NOL carryforwards and certain other tax attributes to offset future taxable income may be limited if we experience 22 an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”).
In addition, our ability to use NOL carryforwards and certain other tax attributes to offset future taxable income may be limited if we experience an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”).
We plan to outsource the majority of the production, assembly and installation of our fully-electric and hybrid-electric powertrain solutions. As such, our suppliers, including single source suppliers for certain components, are a key part of our business model in order to manufacture our planned fully-electric and hybrid-electric powertrains for the Cessna Caravan.
We plan to outsource the majority of the production, assembly and installation of our fully-electric and hybrid-electric powertrain solutions. As such, our suppliers, including single source suppliers for certain components, are a key 33 part of our business model in order to manufacture our planned fully-electric and hybrid-electric powertrains for the Cessna Caravan.
Any reference to “our proprietary powertrain technology” or similar phrases herein refer to our anticipated rights in one or more STCs relating to such technology, and not to any intellectual property rights in such technology. We expect that in the future we will rely on patents and trade secrets to protect any proprietary technology we develop.
Any reference to “our proprietary powertrain technology” or similar phrases herein refer to our anticipated rights in one or more STCs relating to such technology, and not to any intellectual property rights in such technology. 36 We expect that in the future we will rely on patents and trade secrets to protect any proprietary technology we develop.
Our ability to use Net Operating Loss (“ NOL ”) carryforwards and certain other tax attributes will depend on the amount of taxable income we generates in future periods and, as a result, certain of our NOL carryforwards and other tax attributes may expire before we can generate sufficient taxable income to use them in full.
Our ability to use Net Operating Loss (“ NOL ”) carryforwards and certain other tax attributes will depend on the amount of taxable income we generate in future periods and, as a result, certain of our NOL carryforwards and other tax attributes may expire before we can generate sufficient taxable income to use them in full.
Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. 24 Our prospects and operations may be adversely affected by changes in consumer preferences, discretionary spending and other economic conditions that affect demand for our services.
Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. Our prospects and operations may be adversely affected by changes in consumer preferences, discretionary spending and other economic conditions that affect demand for our services.
In addition, our aircraft may be grounded by regulatory authorities due to safety concerns that could have a material adverse effect on our business, financial condition, results of operations and prospects. 35 Crashes, accidents or incidents of aircraft involving us or our competitors could have a material adverse effect on our business, financial condition and results of operations.
In addition, our aircraft may be grounded by regulatory authorities due to safety concerns that could have a material adverse effect on our business, financial condition, results of operations and prospects. Crashes, accidents or incidents of aircraft involving us or our competitors could have a material adverse effect on our business, financial condition and results of operations.
Any of the foregoing risks and challenges could have a material adverse effect on our business, financial condition and results of operations. Our long-term growth strategy includes the establishment of a regional air travel ecosystem, including the implementation of our Aircraft-as-a-Service initiative.
Any of the foregoing risks and challenges could have a material adverse effect on our business, financial condition and results of operations. 21 Our long-term growth strategy includes the establishment of a regional air travel ecosystem, including the implementation of our Aircraft-as-a-Service initiative.
The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business.
The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including 30 premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business.
Any disruptions in the supply of components from 37 our suppliers could lead to delays in both prototype and commercial powertrain production and subsequent modification of aircraft, which could have a material adverse effect on our business, financial condition and results of operations.
Any disruptions in the supply of components from our suppliers could lead to delays in both prototype and commercial powertrain production and subsequent modification of aircraft, which could have a material adverse effect on our business, financial condition and results of operations.
A reduction of EAS revenue, a loss of EAS revenue awards either due to termination or failure to renew at the end of the two-year term or a change to or termination of the EAS program could have a material adverse effect on our business, financial condition and results of operation.
A reduction of EAS revenue, a loss of EAS 42 revenue awards either due to termination or failure to renew at the end of the two-year term or a change to or termination of the EAS program could have a material adverse effect on our business, financial condition and results of operation.
Errors, defects and vulnerabilities could also prevent customers from booking flights, which would adversely affect our flyer utilization rates, or disrupt communications within the company ( e.g. , flight schedules or passenger manifests), which could affect our on-time performance.
Errors, defects and vulnerabilities could also prevent customers from booking flights, which would adversely affect our flyer utilization rates, or disrupt communications within the company ( e.g. , flight schedules or passenger manifests), which could affect our on-time 38 performance.
In addition to state and federal regulation, airports and municipalities enact rules and regulations that affect our operations. From time to time, various airports throughout the country have considered limiting the use of smaller aircraft, such as the aircraft used in our operations, at such airports.
In addition to state and federal regulation, airports and municipalities enact rules and regulations that affect our operations. From time to time, various airports throughout the country have considered limiting the use of smaller aircraft, 40 such as the aircraft used in our operations, at such airports.
We may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies in the United States.
We may not have adequate personnel with the appropriate level of knowledge, experience 43 and training in the accounting policies, practices or internal control over financial reporting required of public companies in the United States.
In the event that we fail to pay these fees when due, the Data License Agreement may be terminated by TAI, which could, in turn result in the termination of the other TAI Agreements.
In the event that we fail to pay these fees when due, the Data License Agreement 34 may be terminated by TAI, which could, in turn result in the termination of the other TAI Agreements.
The trading price of our Common Stock, may fluctuate due to a variety of factors, including: • changes in the industries in which we and our customers operate; • developments involving our competitors; • changes in laws and regulations affecting our business; • variations in our operating performance and the performance of our competitors in general; • actual or anticipated fluctuations in our quarterly or annual results of operations; • publication of research reports by securities analysts about us or our competitors or our industry; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; • actions by stockholders, including the sale by the third-party investors of any of their shares of Common Stock; • additions and departures of key personnel; • commencement of, or involvement in, litigation involving the combined company; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of Common Stock available for public sale; and • general economic and political conditions, such as the effects of the COVID-19 pandemic or similar public health threats, recessions, interest rates, local and national elections, fuel prices, international currency fluctuations, corruption, political instability and acts of war or terrorism.
The trading price of our common stock, may fluctuate due to a variety of factors, including: • changes in the industries in which we and our customers operate; • developments involving our competitors; • changes in laws and regulations affecting our business; • variations in our operating performance and the performance of our competitors in general; • actual or anticipated fluctuations in our quarterly or annual results of operations; • publication of research reports by securities analysts about us or our competitors or our industry; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; • actions by stockholders, including the sale by the third-party investors of any of their shares of common stock; • additions and departures of key personnel; • commencement of, or involvement in, litigation involving the combined company; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of common stock available for public sale; and • general economic and political conditions, such as the effects of public health threats, recessions, interest rates, local and national elections, fuel prices, international currency fluctuations, corruption, political instability and acts of war or terrorism.
If any of these service providers cease operations, there is no guarantee that we could replace these providers on a timely basis with comparably priced providers, or at all.
If any of these service providers cease operations, there is no guarantee that we could replace these providers on 35 a timely basis with comparably priced providers, or at all.
The EAS program may continue to be modified or changed or may be canceled in the future, or we may be unable to continue to participate successfully in the EAS 45 program. Any such developments could materially adversely affect our business.
The EAS program may continue to be modified or changed or may be canceled in the future, or we may be unable to continue to participate successfully in the EAS program. Any such developments could materially adversely affect our business.
In addition, GEM will not be obligated to (but may, at its option, choose to) purchase shares of our Common Stock to the extent such purchase would result in beneficial ownership (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by GEM, together with its affiliates, of more than 9.99% of our issued and outstanding Common Stock.
GEM will not be obligated to (but may, at its option, choose to) purchase shares of our common stock to the extent such purchase would result in 16 beneficial ownership (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by GEM, together with its affiliates, of more than 9.99% of our issued and outstanding common stock.
These rules and regulations can also make it more difficult for us to attract and retain qualified independent members of our Board. As a public company, we expect to increase the coverage limits of our director and officer liability insurance from $2.5 million to in excess of $20 million, which will likely result in materially higher insurance premiums.
These rules and regulations can also make it more difficult for us to attract and retain qualified independent members of our Board. As a public company, we expect to increase the coverage limits of our director and officer liability insurance from $2.5 million to in excess of $50 million, which will likely result in materially higher insurance premiums.
As part of our agreement with TAI, we have committed to the purchase of 90 Cessna Caravans over a five-year period beginning in 2024, with an option for up to 38 additional Cessna Caravans, which we believe are currently competitively priced, but which may increase in price pursuant to price escalation clauses by the time we execute the purchase.
As part of our agreement with TAI, we have committed to the purchase of 90 Cessna Caravans over a five-year period beginning in 2024, with an option for up to 25 additional Cessna Caravans, which we believe are currently competitively priced, but which may increase in price pursuant to price escalation clauses by the time we execute the purchase.
Our management has limited prior experience in operating a public company. Our executive officers have limited prior experience in the management of a publicly traded company. Our management team may not be able to effectively manage our responsibilities as a public company subject to significant regulatory oversight and reporting obligations under federal securities laws.
Our executive officers have limited prior experience in the management of a publicly traded company. Our management team may not be able to effectively manage our responsibilities as a public company subject to significant regulatory oversight and reporting obligations under federal securities laws.
Accordingly, as of December 31, 2023 and December 31, 2022, we did not have any fuel hedging contracts outstanding to hedge our fuel costs. Additionally, we do not typically enter long-term labor agreements with our pilots or ground service personnel to fix our employee-related costs.
Accordingly, as of December 31, 2024 and December 31, 2023, we did not have any fuel hedging contracts outstanding to hedge our fuel costs. Additionally, we do not typically enter long-term labor agreements with our pilots or ground service personnel to fix our employee-related costs.
We have entered into agreements with TAI for, among other things, the purchase of 90 new Cessna Caravans, with an option for up to 38 additional Cessna Caravans, as well as the provision of certain services, in anticipation of the development of fully-electric and hybrid-electric powertrains.
We have entered into agreements with TAI for, among other things, the purchase of 90 new Cessna Caravans, with an option for up to 25 additional Cessna Caravans, as well as the provision of certain services, in anticipation of the development of fully-electric and hybrid-electric powertrains.
Unfavorable economic conditions can lead consumers to forgo our services and consumer demand for our services may not grow as we expect. We believe perceived recessionary risks will continue to impact our results of operation in 2024.
Unfavorable economic conditions can lead consumers to forgo our services and consumer demand for our services may not grow as we expect. We believe perceived recessionary risks will continue to impact our results of operation in 2025.
Our Board currently intends to retain any future earnings to support operations and to finance the growth and development of our business and does not intend to pay cash dividends on our Common Stock for the foreseeable future.
We do not intend to pay cash dividends for the foreseeable future. Our Board currently intends to retain any future earnings to support operations and to finance the growth and development of our business and does not intend to pay cash dividends on our common stock for the foreseeable future.
The continued growth of our business will require significant investments in the development of fully-electric and hybrid-electric powertrains, our aircraft fleet, ground-based infrastructure, information technology and marketing and sales efforts. Our current cash flow has not been sufficient to support these needs to date.
The continued growth of our business will require significant investments in the development of our SurfOS software platform, fully-electric and hybrid-electric powertrains, our aircraft fleet, ground-based infrastructure, information technology and marketing and sales efforts. Our current cash flow has not been sufficient to support these needs to date.
Fayed and Mr. Shahani, and (ii) Non-Citizens beneficially own 32.7% of the total voting power of our Common Stock and the total number of our outstanding equity securities.
Fayed and Mr. Shahani, and (ii) Non-Citizens beneficially own 17.7% of the total voting power of our common stock and the total number of our outstanding equity securities.
We may not have access to the full amount available under the Share Subscription Facility, or may not be able to draw down under the Share Subscription Facility in a timely manner (or at all) in order to meet our existing obligations.
Further, we may not have access to the full amount available under the Share Subscription Facility, or may not be able to draw down under the Share Subscription Facility in a timely manner (or at all) in order to meet its existing obligations.
Investors’ expectations of our performance relating to environmental, social and governance (“ESG”) factors may impose additional costs and expose us to new risks. There is an increasing focus from investors, employees, customers and other stakeholders concerning corporate responsibility, specifically related to ESG matters.
Investors’ expectations of our performance relating to ESG factors may impose additional costs and expose us to new risks. There is an increasing focus from investors, employees, customers and other stakeholders concerning corporate responsibility, specifically related to ESG matters.
During the years ended December 31, 2023 and 2022, our fuel expense was $7.2 million and $1.2 million, respectively. The timely and adequate supply of fuel to meet operational demand depends on the continued availability of reliable fuel supply sources as well as related service and delivery infrastructure.
During the years ended December 31, 2024 and 2023, our fuel expense was $14.0 million and $7.2 million, respectively. The timely and adequate supply of fuel to meet operational demand depends on the continued availability of reliable fuel supply sources as well as related service and delivery infrastructure.
While historically we have maintained daily aircraft and customer utilization rates sufficient to offset the costs we pay to operators, we may be unable to resume our pre-COVID utilization rates or maintain and increase utilization rates as our business grows and expands.
While historically we have maintained daily aircraft and customer utilization rates sufficient to offset the costs we pay to operators, we may be unable maintain and increase utilization rates as our business grows and expands.
Our failure to satisfy any conditions under the Share Subscription Facility may result in our inability to request future GEM Advances or other draw downs pursuant to the Share Subscription Facility.
The failure to satisfy the specified conditions under the Share Subscription Facility may result in our inability to request any or all of the GEM Advances or other draw downs pursuant to the Share Subscription Facility.
In addition, we have filed a registration statement on Form S-8 under the Securities Act to register all shares subject to outstanding stock options or reserved for future issuance under our equity compensation plans. As of December 31, 2023, we had 1,606,159 options outstanding that, if fully exercised, would result in the issuance of 1,606,159 shares of Common Stock.
In addition, we have filed a registration statement on Form S-8 under the Securities Act to register all shares subject to outstanding stock options or reserved for future issuance under our equity compensation plans. As of December 31, 2024, we had 2,689,131 options outstanding that, if fully exercised, would result in the issuance of 2,689,131 shares of common stock.
Disruptions to capital markets, shortages of skilled personnel and adverse economic conditions in general, such as conditions resulting from the COVID-19 pandemic, have subjected certain of these third-party regional operators to significant financial and operational pressures, which have in the past and could in the future result in the temporary or permanent cessation of their operations.
Disruptions to capital markets, shortages of skilled personnel and adverse economic conditions in general, have subjected certain of these third-party regional operators to significant financial and operational pressures, which have in the past and could in the future result in the temporary or permanent cessation of their operations.
Our shareholders may experience dilution from several different sources after our initial listing. Our shareholders may experience dilution from several sources to varying degrees, including as lock-ups from our initial listing are released and as shares of our Common Stock are issued and sold in subsequent offerings.
Our shareholders may experience dilution from several different sources after our initial listing. Our shareholders may experience dilution from several sources to varying degrees, namely as shares of our common stock are issued and sold in subsequent offerings.
The purchase price per share to be paid by GEM for the shares of our Common Stock that we may elect to sell to GEM under the Share Subscription Facility pursuant to the GEM Advances or draw downs will fluctuate based on the volume weighted average trading price of our Common Stock.
The purchase price per share to be paid by GEM for the shares of our common stock that we may elect to sell to GEM under the Share Subscription Facility pursuant to the GEM Advances or draw downs, if any, will fluctuate based on the volume weighted average trading price of our common stock during the applicable period for each purchase made pursuant to the Share Subscription Facility.
Sales of shares of our Common Stock, if any, to GEM under the Share Subscription Facility will be determined by us from time to time in our sole discretion and will depend on a variety of factors, many of which are outside of our control, including, among other things, market conditions and the terms, conditions and limitations set forth in the Share Subscription Facility.
Sales of shares of our common stock, if any, to GEM under the Share Subscription Facility will be determined by us from time to time in our sole discretion and will depend on a variety of factors, many of which are outside of our control, including, among other things, market conditions and the terms, conditions and limitations set forth in the Share Subscription Facility (subject to certain limitations on the obligation of GEM to purchase shares including, among other things, beneficial ownership limitations (other than in respect of the GEM Advances)).
For the year ended December 31, 2023, EAS revenue was $19.2 million, or approximately 32% of the Company’s total revenue. The total amount of EAS revenue ultimately received by us will be determined by, among other things, the number of subsidized flights flown by Southern, overall funding levels of the EAS program by the U.S.
For the year ended December 31, 2024, EAS revenue was $49.5 million, or approximately 41% of the Company’s total revenue. The total amount of EAS revenue ultimately received by us will be determined by, among other things, the number of subsidized flights flown by Southern, overall funding levels of the EAS program by the U.S.
The incurrence of existing or future indebtedness could have important consequences on our business, including, but not limited to: • increasing our vulnerability to general adverse economic and industry conditions; • requiring us to dedicate a substantial portion of our cash flow from operations to servicing our debt, thereby reducing the availability of cash to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes; • limiting our flexibility in planning for, or reacting to, challenges and opportunities, and changes in our businesses and the markets in which we operate; and • leading to the possibility of default on future debt obligations.
The incurrence of existing or future indebtedness could have important consequences on our business, including, but not limited to: • increasing our vulnerability to general adverse economic and industry conditions; • requiring us to dedicate a substantial portion of our cash flow from operations to servicing our debt, thereby reducing the availability of cash to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes; • limiting our flexibility in planning for, or reacting to, challenges and opportunities, and changes in our businesses and the markets in which we operate; and • leading to the possibility of default on future debt obligations. 17 Our ability to service our debt will depend on our future operating performance and financial results, which may be subject to factors beyond our control, including general economic, financial and business conditions.
Future policy, legal, and regulatory developments relating to the protection of the environment could increase our costs and have a material adverse effect on our operations.
Future policy, legal, and regulatory developments relating to the protection of the environment, including modifications to or reversals of such developments, could increase our costs and have a material adverse effect on our operations.
Disruption of operations at airports, whether caused by natural disasters including tornados, hurricanes, floods, volcanic eruptions and earthquakes, and severe weather conditions, such as heavy rains, strong winds, dense fog, blizzards or snowstorms, or labor relations, utility or communications issues, power outages, or changes in federal, state and local regulatory requirements could have a material adverse effect on our business.
Disruption of operations at airports, whether caused by natural disasters including tornados, hurricanes, floods, volcanic eruptions and earthquakes, and severe weather conditions, such as heavy rains, strong winds, dense fog, blizzards or snowstorms, or labor relations, utility or communications issues, power outages, or changes in federal, state and local regulatory requirements could have a material adverse effect on our business. 28 Our aircraft utilization may be lower than expected and our aircraft may be limited in performance during certain weather conditions.
We incurred net losses of $250.7 million and $74.4 million for the years ended December 31, 2023 and 2022, respectively.
We incurred net losses of $74.9 million and $250.7 million for the years ended December 31, 2024 and 2023, respectively.
As of December 31, 2023, we had 3,773,063 RSU awards granted prior to December 31, 2023 for which the time-based and/or performance-based vesting condition had not been satisfied as of such date that, upon vesting, would result in the issuance of 3,773,063 shares of Common Stock.
As of December 31, 2024, we had 745,234 RSU and PRSU awards granted prior to December 31, 2024 for which the time-based and/or performance-based vesting condition had not been satisfied as of such date that, upon vesting, would result in the issuance of 745,234 shares of common stock.
The Consumer Price Index for All Urban Consumers, a widely followed inflation gauge published by the U.S. Bureau of Labor Statistics, increased by 4.9% from April 2022 to April 2023. The general effects of inflation on the global economy can be wide-ranging, evidenced by rising wages and rising costs of consumer goods and necessities.
The Consumer Price Index for All Urban Consumers, a widely followed inflation gauge published by the U.S. Bureau of Labor Statistics, increased by 2.8% from February 2024 to February 2025. The general effects of inflation on the global economy can be wide-ranging, evidenced by rising wages and rising costs of consumer goods and necessities.
Historically, we have financed our operations and capital expenditures primarily through private financing rounds and the issuance of debt and equity. A significant amount of our funding to date has been provided by entities affiliated with an officer and co-founder of the Company. We intend to draw upon the GEM Advances in 2024 to address our capital needs.
Historically, we have financed our operations and capital expenditures primarily through private financing rounds and the issuance of debt and equity. A significant amount of our funding to date has been provided by entities affiliated with a co-founder of the Company. We may utilize the GEM Advances, as necessary, in 2025 to address our capital needs.
Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, and could impair our operational flexibility, including restricting our ability to pursue our business strategy, increase our expenses, require that our assets secure such debt, or provide for high interest rates, discounted conversion prices, or other unfavorable terms.
Our current and any future financing arrangements, that we may enter into from time to time, involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, and currently, and in the future, could impair our operational flexibility, including restricting our ability to pursue our business strategy, increase our expenses, require that our assets secure such debt, or provide for high interest rates, discounted conversion prices, or other unfavorable terms.
Further, as we develop and manufacture fully-electric and hybrid-electric powertrains and as these powertrains are implemented in aircraft that we sell to other operators, we may be exposed to additional risks and demand for our newly developed products will be negatively impacted by accidents or incidents involving the powertrains, including during test flights of prototypes.
In the event that our insurance is inapplicable or inadequate, we may be forced to bear substantial losses from an incident or accident. 32 Further, as we develop and manufacture fully-electric and hybrid-electric powertrains and as these powertrains are implemented in aircraft that we sell to other operators, we may be exposed to additional risks and demand for our newly developed products will be negatively impacted by accidents or incidents involving the powertrains, including during test flights of prototypes.
Pursuant to the Share Subscription Facility, upon the terms of and subject to the satisfaction of certain conditions, we will have the right from time to time at our option to direct GEM to purchase up to a specified maximum amount of shares of our Common Stock, up to a maximum aggregate purchase price equal to $400 million over the duration of the Share Subscription Facility.
Pursuant to the Share Purchase Agreement with GEM Global Yield LLC SCS, as amended, (the “Share Subscription Facility”), upon the terms of and subject to the satisfaction of certain conditions, we have the right from time to time at our option to direct GEM to purchase up to a specified maximum amount of shares of our common stock, up to a maximum aggregate purchase price equal to $400 million over the term of the Share Subscription Facility.
As of December 31, 2023, (i) the Permitted Holders beneficially own 19.4% of the total voting power of our Common Stock and the total number of our outstanding equity securities, or 22.0% of the total voting power and the total number of our outstanding equity securities assuming the vesting in full of 1,260,000 PRSUs to each of Mr.
As of December 31, 2024, (i) the Permitted Holders beneficially own 16.1% of the total voting power of our common stock and the total number of our outstanding equity securities, or 17.8% of the total voting power and the total number of our outstanding equity securities assuming the vesting in full of 180,000 PRSUs to each of Mr.
Our growth is highly dependent upon the adoption by consumers of an enhanced form of mobility offered by our fully-electric and hybrid-electric aircraft, once developed, and the growth of the regional air mobility industry.
Our growth is highly dependent upon the adoption by charter brokers, air operators and aircraft owners of our SurfOS software solutions, the adoption by consumers of an enhanced form of mobility offered by our fully-electric and hybrid-electric aircraft, and those of others, once developed, and the growth of the regional air mobility industry.
We have significant long-term lease obligations primarily relating to our aircraft fleet. As of December 31, 2023, we had 27 aircraft under operating leases, with an average remaining lease term of approximately 2.24 years. As of December 31, 2023, future minimum lease payments due under all long-term operating leases were approximately $13.0 million.
We have significant long-term lease obligations primarily relating to our aircraft fleet. As of December 31, 2024, we had 40 aircraft under operating leases, with an average remaining lease term of approximately 4.29 years. As of December 31, 2024, future minimum lease payments due under all long-term operating leases were approximately $17.3 million.
The oversupply of a specific type of aircraft is likely to depress the lease rates for and the value of that type of aircraft.
Historically, the aircraft leasing business has experienced periods of aircraft oversupply. The oversupply of a specific type of aircraft is likely to depress the lease rates for and the value of that type of aircraft.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs part of our overall approach to managing risks, we have implemented the following: • Cybersecurity incident response plan and procedures • Change management and software development life cycle (“SDLC”) workflow across the Engineering release team • Role-based access controls across enterprise systems • Work with partners that have SOC1/SOC2 compliance standards around the management and processing of payment card industry (“PCI”) and personally identifiable information (“PII”) data • Use of multi-factor authentication for accessing digital content across important roles in the enterprise • Implementation of security frameworks to guard against business email compromise and device security to protect against malware, ransomware, and other risks across employees’ devices • Device management tools to centrally manage and update company-owned hardware assets 54 • Implementation of vulnerability scanning frameworks across digital and hardware assets across the enterprise Also on our planned roadmap are the below-listed activities: • Undertake regular reviews of our consumer-facing policies and statements related to cybersecurity • Implement cybersecurity management and incident training for employees • Conduct regular phishing email simulations for all employees and contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats • Iterate our internal processes and response plans to calibrate with emerging threats/trends As part of our overall approach to enhance our cybersecurity posture, we plan to regularly engage with assessors, consultants, and other third parties to assess and review our program to help identify areas for continued focus, improvement, and/or compliance.
Biggest changeWe have implemented and planned several cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage such material risks. 51 As part of our overall approach to managing risks, we have implemented the following: • Cybersecurity incident response plan and procedures • Change management and software development life cycle (“SDLC”) workflow across the Engineering release team • Role-based access controls across enterprise systems • Work with partners that have SOC1/SOC2 compliance standards around the management and processing of payment card industry (“PCI”) and personally identifiable information (“PII”) data • Use of multi-factor authentication for accessing digital content across important roles in the enterprise • Implementation of security frameworks to guard against business email compromise and device security to protect against malware, ransomware, and other risks across employees’ devices • Device management tools to centrally manage and update company-owned hardware assets • Implementation of vulnerability scanning frameworks across digital and hardware assets across the enterprise Also on our planned roadmap are the below-listed activities: • Undertake regular reviews of our consumer-facing policies and statements related to cybersecurity • Implement cybersecurity management and incident training for employees • Conduct regular phishing email simulations for all employees and contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats • Iterate our internal processes and response plans to calibrate with emerging threats/trends As part of our overall approach to enhance our cybersecurity posture, we plan to regularly engage with assessors, consultants, and other third parties to assess and review our program to help identify areas for continued focus, improvement, and/or compliance.
We have instituted a quarterly update to our Board members with an overview of the management of our cybersecurity threat risk and strategy processes covering topics such as security posture, progress towards risk-mitigation-related goals, and emerging threat risks or incidents and developments, as well as the steps management has taken to respond to such risks, if any.
We have instituted a quarterly update to our Board members with an overview of the management of our cybersecurity threat risk and strategy processes covering topics such as security posture, progress towards risk-mitigation-related goals, 52 and emerging threat risks or incidents and developments, as well as the steps management has taken to respond to such risks, if any .
We have a regular cadence between IT and Tech teams to collaborate on cybersecurity topics. In addition, we encourage communication and participation across the enterprise on cybersecurity-related topics and 55 observations/recommendations. The cybersecurity incident response framework is updated as needed for alignment with current processes and communications.
We have a regular cadence between IT and Tech teams to collaborate on cybersecurity topics. In addition, we encourage communication and participation across the enterprise on cybersecurity-related topics and observations/recommendations. The cybersecurity incident response framework is updated as needed for alignment with current processes and communications. 53
In the last two fiscal years, we have not experienced any material cybersecurity incidents and risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected the Company, including its business strategy, results of operations or financial condition.
As of December 31, 2024, we have not experienced any material cybersecurity incidents and risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have no t materially affected the Company, including its business strategy, results of operations or financial condition.
ITEM 1C: CYBERSECURITY We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. We have implemented and planned several cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage such material risks.
ITEM 1C: CYBERSECURITY We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCrenshaw Blvd, Hawthorne, CA 90250. The lease of this facility expires in August 2026. Southern’s headquarters is located in a leased workspace in Palm Beach, Florida. The lease of this facility expires in April 2025.
Biggest changeCrenshaw Blvd, Hawthorne, CA 90250. The lease of this facility expires in August 2026. Southern’s headquarters is located in a leased workspace in Palm Beach, Florida. The lease of this facility expires in April 2025. In February 2025, the Company relocated its air operations center to Addison, Texas. The lease of this facility expires in January 2028.
ITEM 2: PROPERTIES As of December 31, 2023, we leased aircraft, airport passenger terminal space, portions of and full aircraft hangars and other airport facilities in 45 U.S. airports. We lease our main office and all of the properties on which we operate air mobility services. Our main office is located in a 5,500 square foot facility at 12111 S.
ITEM 2: PROPERTIES As of December 31, 2024, we leased aircraft, airport passenger terminal space, portions of and full aircraft hangars and other airport facilities in 45 U.S. airports. We lease our main office and all of the properties on which we operate air mobility services. Our main office is located in a 5,500 square foot facility at 12111 S.
Removed
For additional information regarding the lease terms and provisions, see Note 8 in our audited consolidated financial statements contained elsewhere in this Annual Report on Form 10-K.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 4. MINE SAFETY DISCLOSURES Not applicable. 56 PART II
Biggest changeITEM 4. MINE SAFETY DISCLOSURES Not applicable. 54 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Common Stock is listed on the New York Stock Exchange under the symbol “SRFM.” Holders of Record As of March 22, 2024, there were approximately 329 stockholders of record of our Common Stock.
Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange under the symbol “SRFM.” Holders of Record As of March 14, 2025, there were approximately 228 stockholders of record of our common stock.
Stock Performance Graph The following performance graph shows a comparison from July 27, 2023 (the date our Common Stock commenced trading on the New York Stock Exchange) through December 31, 2023, of the cumulative total return for our Common Stock, the NYSE Composite Index and the S&P 500 Airlines Industry Index. ITEM 6. [RESERVED] 52
Stock Performance Graph The following performance graph shows a comparison from July 27, 2023 (the date our common stock commenced trading on the New York Stock Exchange) through December 31, 2024, of the cumulative total return for our common stock, the NYSE Composite Index and the S&P 500 Airlines Industry Index. ITEM 6. [RESERVED] 55

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Results of the Company’s Operations for the Years Ended December 31, 2023 and 2022 The following table sets forth our consolidated statements of operations data for the years ended December 31, 2023 and 2022 ( in thousands, except percentages ): Year Ended December 31, Change 2023 2022 $ % Revenue $ 60,505 $ 20,274 $ 40,231 198 % Operating expenses: Cost of revenue, exclusive of depreciation and amortization 61,918 24,824 37,094 149 % Technology and development 20,850 3,289 17,561 534 % Sales and marketing 10,028 5,214 4,814 92 % General and administrative 100,669 36,824 63,845 173 % Depreciation and amortization 3,762 1,027 2,735 266 % Impairment of goodwill 60,045 — 60,045 — % Total operating expenses 257,272 71,178 186,094 261 % Operating loss (196,767 ) (50,904 ) (145,863 ) (287 )% Other income (expense): Changes in fair value of financial instruments carried at fair value, net (50,230 ) (27,711 ) (22,519 ) (81 )% Interest expense (2,969 ) (596 ) (2,373 ) (398 )% Gain (loss) on extinguishment of debt (326 ) 5,951 (6,277 ) (105 )% Other expense (3,708 ) (1,102 ) (2,606 ) (236 )% Total other income (expense), net (57,233 ) (23,458 ) (33,775 ) (144 )% Loss before income taxes (254,000 ) (74,362 ) (179,638 ) (242 )% Income tax expense (benefit) 3,304 — 3,304 — % Net loss $ (250,696 ) $ (74,362 ) $ (176,334 ) (237 )% 55 Revenue Revenue increased by $40.2 million, 198%, for the year ended December 31, 2023, compared to the year ended December 31, 2022.
Biggest changeResults of Operations Results of the Company’s Operations for the Years Ended December 31, 2024 and 2023 The following table sets forth our consolidated statements of operations data for the years ended December 31, 2024 and 2023 ( in thousands, except percentages ): Year Ended December 31, Change 2024 2023 $ % Revenue $ 119,425 $ 60,505 $ 58,920 97 % Operating expenses: Cost of revenue, exclusive of depreciation and amortization 109,934 61,918 48,016 78 % Technology and development 24,041 20,850 3,191 15 % Sales and marketing 7,514 10,028 (2,514 ) (25 )% General and administrative 29,851 100,669 (70,818 ) (70 )% Depreciation and amortization 8,341 3,762 4,579 122 % Impairment of goodwill — 60,045 (60,045 ) (100 )% Total operating expenses 179,681 257,272 (77,591 ) (30 )% Operating loss (60,256 ) (196,767 ) 136,511 (69 )% Other income (expense): Changes in fair value of financial instruments carried at fair value, net (11,732 ) (50,230 ) 38,498 (77 )% Interest expense (8,617 ) (2,969 ) (5,648 ) (190 )% Gain (loss) on extinguishment of debt 5,398 (326 ) 5,724 (1,756 )% Other income (expense) 12 (3,708 ) 3,720 (100 )% Total other income (expense), net (14,939 ) (57,233 ) 42,294 (74 )% Loss before income taxes (75,195 ) (254,000 ) 178,805 (70 )% Income tax benefit 287 3,304 (3,017 ) (91 )% Net loss $ (74,908 ) $ (250,696 ) $ 175,788 (70 )% 58 Revenue Revenue increased by $58.9 million, 97%, for the year ended December 31, 2024, compared to the year ended December 31, 2023.
Pursuant to the Internal Reorganization, all ordinary shares of Surf Air outstanding as of immediately prior to the closing were canceled in exchange for the right to receive shares of the Company’s Common Stock and all rights to receive ordinary shares of Surf Air (after giving effect to the conversions) were exchanged for shares of the Company’s Common Stock (or warrants, options or RSUs to acquire the Company’s Common Stock, as applicable) at a ratio of 22.4 Surf Air ordinary shares to 1 share of the Company’s Common Stock.
Pursuant to the Internal Reorganization, all ordinary shares of Surf Air outstanding as of immediately prior to the closing, were canceled in exchange for the right to receive shares of the Company’s common stock and all rights to receive ordinary shares of Surf Air (after giving effect to the conversions) were exchanged for shares of the Company’s common stock (or warrants, options or RSUs to acquire the Company’s common stock, as applicable) at a ratio of 22.4 Surf Air shares to 1 share of the Company’s common stock.
The Company agreed to a payment plan (“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.
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.
Common Stock Valuations Prior to our direct listing, given the absence of a public trading market for our Common Stock, and in accordance with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held Company Equity 63 Securities Issued as Compensation (the “Practice Aid”), our board of directors exercised its reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of fair value of our Common Stock, including: • independent third-party valuations of our Common Stock; • the prices at which we sold shares of our preferred stock; • the rights, preferences and privileges of our preferred stock relative to those of our Common Stock; • our capital resources and financial condition; • the likelihood and timing of achieving a liquidity event, such as an initial public offering or sale of the company, given prevailing market conditions; • our historical operating and financial performance as well as our estimates of future financial performance; • valuations of comparable companies; • the hiring of key personnel; • the relative lack of marketability of our Common Stock; • industry information such as market growth and volume and macro-economic events; and • additional objective and subjective factors relating to our business.
Common Stock Valuations Prior to our direct listing, given the absence of a public trading market for our common stock, and in accordance with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held Company Equity Securities Issued as Compensation (the “Practice Aid”), our board of directors exercised its reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of fair value of our common stock, including: • independent third-party valuations of our common stock; • the prices at which we sold shares of our preferred stock; • the rights, preferences and privileges of our preferred stock relative to those of our common stock; • our capital resources and financial condition; • the likelihood and timing of achieving a liquidity event, such as an initial public offering or sale of the company, given prevailing market conditions; • our historical operating and financial performance as well as our estimates of future financial performance; • valuations of comparable companies; • the hiring of key personnel; • the relative lack of marketability of our common stock; • industry information such as market growth and volume and macro-economic events; and • additional objective and subjective factors relating to our business.
Examples of such events and circumstances that we would consider include the following: • macroeconomic conditions such as deterioration in general economic conditions, limitations on accessing capital, or other developments in equity and credit markets; • industry and market considerations such as a deterioration in the environment in which we operate, an increased competitive environment, a decline in market-dependent multiples or metrics (considered in both absolute terms and relative to peers), a change in the market for our products or services, or a regulatory or political development; • cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows; 61 • overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods; and • other relevant entity-specific events such as changes in management, key personnel, strategy, or customers.
Examples of such events and circumstances that we would consider include the following: • macroeconomic conditions such as deterioration in general economic conditions, limitations on accessing capital, or other developments in equity and credit markets; • industry and market considerations such as a deterioration in the environment in which we operate, an increased competitive environment, a decline in market-dependent multiples or metrics (considered in both absolute terms and relative to peers), a change in the market for our products or services, or a regulatory or political development; • cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows; • overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods; and • other relevant entity-specific events such as changes in management, key personnel, strategy, or customers.
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 not necessarily be 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 would have a material adverse effect on the Company’s financial position, results of operations, cash flows, and ability to achieve its intended business objectives.
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.
Cash Flow from Financing Activities For the year ended December 31, 2023, net cash provided by financing activities was $73.0 million from proceeds from the issuance of preferred shares, Common Stock, and exercise of share options of $30.2 million, proceeds from borrowings of SAFE and convertible notes of $11.7 million, proceeds from borrowings due to related parties of $22.4 million, and proceeds from the GEM stock purchase agreement of $10.2 million.
For the year ended December 31, 2023, net cash provided by financing activities was $73.0 million from proceeds from the issuance of preferred shares, common stock, and exercise of share options of $30.2 million, proceeds from borrowings of SAFE and convertible notes of $11.7 million, proceeds from borrowings due to related parties of $22.4 million, and proceeds from the GEM share purchase agreement of $10.2 million.
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 of these factors, the Company cannot reasonably estimate their impact on its future results of operations, cash flows or financial condition.
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.
A Monte Carlo simulation model requires the use of various assumptions, including the underlying stock price, volatility, expiration term, and the risk-free interest rate as of the valuation date, corresponding to the length of time remaining in the performance period, and expected dividend yield.
A Monte Carlo simulation model requires the use of various assumptions, including the 65 underlying stock price, volatility, expiration term, and the risk-free interest rate as of the valuation date, corresponding to the length of time remaining in the performance period, and expected dividend yield.
Subsequent to the direct listing, the fair market value of our Common Stock is based on its closing price as reported on the date of grant on the NYSE. Fair Value Measurements The Company has a significant number of debt and equity transactions that are recorded at fair value.
Subsequent to the direct listing, the fair market value of our common stock is based on its closing price as reported on the date of grant on the NYSE. 66 Fair Value Measurements The Company has a significant number of debt and equity transactions that are recorded at fair value.
The Company concluded that the carrying value of the Southern reporting unit exceeded its fair value and, as such, recorded a $60.0 million impairment of goodwill in its Southern reporting unit during the fourth quarter of 2023. As of December 31, 2023, we had no remaining goodwill balance.
The Company concluded that the carrying value of the Southern reporting unit exceeded its fair value and, as such, recorded a $60.0 million impairment of goodwill in its Southern reporting unit during the fourth quarter of 2023. As of December 31, 2024, we had no remaining goodwill balance.
Treasury notes with the same maturity as the expected term of the underlying options was used as the average risk-free interest rate. 62 • Expected Term —The expected term of options granted to employees was determined based on management’s expectations of the options granted, which are expected to remain outstanding.
Treasury notes with the same maturity as the expected term of the underlying options was used as the average risk-free interest rate. • Expected Term —The expected term of options granted to employees was determined based on management’s expectations of the options granted, which are expected to remain outstanding.
These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
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 62 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.
Prior to the Internal Reorganization (as defined below) on July 21, 2023, these results were comprised of the operations of Surf Air Global, the predecessor to Surf Air Mobility Inc. References in this section to the “Company”, “we” or “our” refer to Surf Air Mobility Inc. and its consolidated subsidiaries, including Southern Airways Corporation.
Prior to the Internal Reorganization (as defined below) on July 21, 2023, these results comprised the operations of Surf Air Global Limited, the predecessor to Surf Air Mobility Inc. References in this section to the “Company”, “we” or “our” refer to Surf Air Mobility Inc. and its consolidated subsidiaries, including Southern Airways Corporation.
Under the market approach, the principal assumption included an estimate of a control premium. Stock-Based Compensation We grant stock options, restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”) to certain employees, as well as non-employees (including directors and others who provide services to us) under our stock plans.
Under the market approach, the principal assumption included an estimate of a control premium. 64 Stock-Based Compensation We grant stock options, warrants, restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”) to certain employees, as well as non-employees (including directors and others who provide services to us) under our stock plans.
Southern provides both seasonal and full-year scheduled passenger air transportation service in the Mid-Atlantic and Gulf regions, Rockies and West Coast, Far Pacific, and Hawaii, with select routes subsidized by the United States Department of Transportation (“U.S. DOT”) under the Essential Air Service (“EAS”) program.
Southern provides both seasonal and full-year scheduled passenger air transportation service in the Mid-Atlantic and Gulf regions, Rockies and West Coast, and Hawaii, with select routes subsidized by the United States Department of Transportation (“U.S. DOT”) under the Essential Air Service (“EAS”) program.
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. 65
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. 68
This was based on operational challenges that were expected to be remediated in the fourth quarter, such as: additional delays of aircraft maintenance due to the unavailability of parts, which resulted in a higher cancellation rate of scheduled flights. These delays are expected to continue into 2024.
This was based on operational challenges that were expected to be remediated in the fourth quarter, such as: additional delays of aircraft maintenance due to the unavailability of parts, which resulted in a higher cancellation rate of scheduled flights. These delays were expected to, and did, continue into 2024.
The increase in on-demand charter flights, absent the impact of the acquisition of Southern, was driven by increases in marketing efforts for our on-demand products and other service offerings, and was the primary driver accounting for roughly $3.7 million of the total on-demand revenue increase period over period.
The increase in on-demand charter flights, absent the impact of the acquisition of Southern, was driven by increases in marketing efforts for our on-demand products and other service offerings, and was the primary driver accounting for roughly $5.5 million of the total on-demand revenue increase period over period.
The impact of the Southern Acquisition was to contribute an increase of $1.5 million to on-demand revenue during the year ended December 31, 2023 for trips in the Hawaii-based operations focusing on providing route services for construction crews, school events and leisure travel.
The impact of the Southern Acquisition was to contribute an increase of $1.6 million to on-demand revenue during the year ended December 31, 2024 for trips in the Hawaii-based operations focusing on providing route services for construction crews, school events and leisure travel.
The Southern Acquisition resulted in a combined regional airline network servicing U.S. cities across the Mid-Atlantic, Gulf South, Midwest, Rocky Mountains, West Coast, New England and Hawaii. The results of operations of Southern are included in the Company’s consolidated financial statements from the date of acquisition, July 27, 2023, through December 31, 2023.
Following the Southern Acquisition, the Company operates a combined regional airline network servicing U.S. cities across the Mid-Atlantic, Gulf South, Midwest, Rocky Mountains, West Coast, New England and Hawaii. The results of operations of Southern are included in the Company’s consolidated financial statements from the date of acquisition, July 27, 2023, through 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.
As discussed in Note 15, Commitments and Contingencies , on May 15, 2018, the Company received a notice of a tax lien filing from the Internal Revenue Service (“IRS”) for unpaid federal excise taxes for the quarterly periods from October 2016 through September 2017 in the amount of $1.9 million, including penalties and interest as of the date of the notice.
The average grant date fair value of the Founder PRSUs were estimated to be $2.26 per share, and we will recognize total stock-based compensation expense of approximately $6.3 million over the derived service period.
The average grant date fair value of the Founder PRSUs were estimated to be $15.82 per share, and we will recognize total stock-based compensation expense of approximately $6.3 million over the derived service period.
Performance-Based Restricted Stock Units In July 2023, we granted PRSUs to each of our three founders (“Founder PRSUs”). In October 2023, we granted 200,000 additional PRSUs as part of a hiring grant to an executive under the 2023 Plan.
Performance-Based Restricted Stock Units In July 2023, we granted PRSUs to each of our three founders (“Founder PRSUs”). In October 2023, we granted 28,571 additional PRSUs as part of a hiring grant to an executive under the 2023 Plan.
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 raise additional capital (or financing) to fund operating losses, refinance its current outstanding debt, maintain efficient aircraft utilization, primarily through the proper utilization of pilots and a managing market shortages of maintenance personnel and critical aircraft components, ,sustain ongoing operations, to attract and maintain customers, integrate, manage and grow recent acquisitions and new business initiatives, obtain and maintain relevant regulatory approvals, and measure and manage risks inherent to the business model.
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.
For RSUs granted prior June 30, 2023, all awards were deemed to have vested upon the satisfaction of both a service-based vesting condition and a liquidity event-related performance vesting condition tied to the direct listing.
For RSUs granted prior to the Company’s direct listing, all awards were deemed to have vested upon the satisfaction of both a service-based vesting condition and a liquidity event-related performance vesting condition tied to the direct listing.
These strategies may include, but are not limited to, obtaining additional equity financing, issuing additional debt or entering into other financing arrangements, or restructuring of operations to grow revenues and decrease expenses.
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.
See the subsection titled “Common Stock Valuations” below. For valuations completed subsequent to the direct listing, the fair value of each share of underlying Common Stock is based on the closing price of our Common Stock as reported on the date immediately preceding the date of grant. • Risk-Free Interest Rate —The yield on actively traded non-inflation indexed U.S.
For valuations completed subsequent to the direct listing, the fair value of each share of underlying common stock is based on the closing price of our common stock as reported on the date immediately preceding the date of grant. • Risk-Free Interest Rate —The yield on actively traded non-inflation indexed U.S.
Such conversions, as they relate to the ordinary shares of Surf Air, and all rights to receive ordinary shares, have been reflected as of all periods presented herein. On July 27, 2023, the Company’s Common Stock was listed for trading on the New York Stock Exchange (“NYSE”).
Such conversions, as they relate to the ordinary shares of Surf Air, and all rights to receive ordinary shares, have been reflected as of all periods presented herein. On July 27, 2023, the Company’s common stock was listed for trading on the NYSE.
Absent the impact of the acquisition of Southern, the total scheduled revenue decreased by $0.5 million, or -12%, which was primarily attributable to a decline in our membership subscription base.
Absent the impact of the Southern Acquisition, the total scheduled revenue decreased by $0.6 million, or -17%, which was primarily attributable to a decline in our membership subscription base.
In addition, the Company incurred greater than expected losses and negative cash flows from operating activities during the second half of 2023 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.
In addition, the Company incurred greater than expected losses and negative cash flows from operating activities during 2024 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.
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 profitably into regions throughout the United States.
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.
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill is not amortized but is subject to an annual (or under certain circumstances more frequent) impairment test in the fourth quarter based on its estimated fair value.
Goodwill We have made acquisitions in the past that included goodwill. Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill is not amortized but is subject to an annual (or under certain circumstances more frequent) impairment test in the fourth quarter based on its estimated fair value.
The Company’s actual results may differ materially from management’s expectations as a result of various factors, including but not limited to those discussed in the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” included within this Annual Report on Form 10-K. Overview of the Business Surf Air Mobility Inc.
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 sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” included within this Annual Report on Form 10-K.
These operating outflows were partially offset by non-cash changes in fair value of financial instruments of $50.2 million, non-cash impairment of goodwill of $60.0 million, non-cash stock-based compensation expenses of $48.3 million, increases in accounts payable and other liabilities of $28.6 million, increases in depreciation and amortization of $1.1 million, and increases in prepaid expenses and other current assets of $0.7 million.
These operating outflows were partially offset by non-cash changes in fair value of financial instruments of $50.2 million, non-cash impairment of goodwill of $60.0 million, non-cash stock-based compensation expenses of $48.3 million, increases in accounts payable and other liabilities of $28.6 million, increases in depreciation and amortization of $1.1 million, and increases in prepaid expenses and other current assets of $0.7 million. 60 In 2023, the Southern Acquisition resulted in net cash outflows from operating activities of $3.9 million.
The acquisition of Southern resulted in net cash outflows from operating activities of $3.9 million. This was primarily driven by a $3.3 million reduction in deferred income taxes and a net loss of $4.6 million These were mostly offset by increases in depreciation and amortization of $2.7 million, and non-cash operating leases of $1.5 million.
This was primarily driven by a $3.3 million reduction in deferred income taxes and a net loss of $4.6 million. These were mostly offset by increases in depreciation and amortization of $2.7 million, and non-cash operating leases of $1.5 million.
Of the total 2,831 on-demand charter flights, absent the impact of the acquisition of Southern, the Company conducted 2,282 on-demand charter flights in the year ended December 31, 2023 an increase from 1,696 for the year ended December 31, 2022, which resulted in a $3.1 million increase in cost of revenue associated with Company on-demand charter flights.
Of the total 3,515 on-demand charter flights, absent the impact of the acquisition of Southern, the Company conducted 2,478 on-demand charter flights in the year ended December 31, 2024 an increase from 2,282 for the year ended December 31, 2023, which resulted in a $5.8 million increase in cost of revenue associated with Company on-demand charter flights.
We recognize compensation expense resulting from stock-based payments over the period for which the requisite services are provided. Stock Options We use the Black-Scholes option pricing model to estimate the fair value of the stock options at the measurement date. The grant date is deemed to be the appropriate measurement date for stock options issued to employees and non-employees.
We recognize compensation expense resulting from stock-based payments over the period for which the requisite services are provided. Stock Options and Warrants We use the Black-Scholes option pricing model to estimate the fair value of the stock options and warrants at the measurement date.
Impairment of Goodwill The Company recorded impairment charges to previously recorded goodwill of its Southern business unit of $60.0 million during the year ended December 31, 2023 as a result of the identification of impairment indicators during the fourth quarter of 2023. The Company did not have goodwill during the year ended December 31, 2022.
Impairment of Goodwill The Company recorded impairment charges to previously recorded goodwill of its Southern business unit of $60.0 million during the year ended December 31, 2023 as a result of the identification of impairment indicators during the fourth quarter of 2023. No such charges were recorded during the year ended December 31, 2024.
The Southern Acquisition contributed to an increase in cost of revenue of $33.9 million, or 137%, during the year ended December 31, 2023 primarily due to aircraft expenses of $19.4 million, pilot expenses of $7.5 million, customer care expenses of $4.4 million, station expenses of $1.2 million, reservation systems of $0.7 million, and passenger re-accommodation expenses of $0.3 million.
The Southern Acquisition contributed to an increase in cost of revenue of $43.9 million, or 129%, during the year ended December 31, 2024 primarily due to aircraft expenses of $25.2 million, pilot expenses of $10.9 million, customer care expenses of $5.4 million, station expenses of $1.9 million, reservation systems of $0.9 million, and passenger re-accommodation expenses of $0.5 million.
Operating Expenses Cost of Revenue, exclusive of depreciation and amortization Cost of revenue increased by $37.1 million, or 149%, for the year ended December 31, 2023, compared to the year ended December 31, 2022.
Operating Expenses Cost of Revenue, exclusive of depreciation and amortization Cost of revenue increased by $48 million, or 78%, for the year ended December 31, 2024, compared to the year ended December 31, 2023.
Of the total 2,831 on-demand charter flights, absent the impact of the acquisition of Southern, the Company conducted 2,282 on-demand charter flights during the year ended December 31, 2023 compared to 1,696 on-demand charter flights during the year ended December 31, 2022.
Of the total 3,515 on-demand charter flights, absent the impact of the Southern Acquisition, the Company conducted 2,478 on-demand charter flights during the year ended December 31, 2024 compared to 2,282 on-demand charter flights during the year ended December 31, 2023.
Level 2 Inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, such as quoted market prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. 64 Level 3 Inputs are unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
Level 2 Inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, such as quoted market prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
Assets and liabilities are classified in the hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.
The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.
The 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 2022 and 2023 and believes perceived recessionary risks have impacted the 2023 results.
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 2023 and 2024 and believes perceived recessionary risks have impacted the 2024 results.
Income taxes are accounted for under the asset and liability method in accordance with U.S. GAAP. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carryforwards.
Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carryforwards.
Depreciation and Amortization Depreciation and amortization expenses increased by $2.7 million, or 266%, for the year ended December 31, 2023, compared to the year ended December 31, 2022 primarily due to depreciation of engines and aircraft acquired from Southern, as well as amortization of intangibles acquired in the Southern Acquisition.
Depreciation and Amortization Depreciation and amortization expenses increased by $4.6 million, or 122%, for the year ended December 31, 2024, compared to the year ended December 31, 2023 primarily due to depreciation of engines and aircraft, as well as amortization of intangibles acquired in the Southern Acquisition for the full twelve months during year ended December 31, 2024.
We have elected to account for forfeitures as they occur. The use of the Black-Scholes option pricing model requires the use of subjective assumptions, including the following: • Fair Value of Common Stock —Prior to the Company’s direct listing, the absence of an active market for our Common Stock required us to estimate the fair value of our Common Stock.
The use of the Black-Scholes option pricing model requires the use of subjective assumptions, including the following: • Fair Value of Common Stock —Prior to the Company’s direct listing, the absence of an active market for our common stock required us to estimate the fair value of our common stock. See the subsection titled “common stock Valuations” below.
Headquartered in Hawthorne, California, Surf Air was originally founded in 2013 as a Delaware corporation and commenced flight operations in June 2013. Internal Reorganization On July 21, 2023, SAGL Merger Sub Inc., a wholly-owned subsidiary of the Company, was merged with and into Surf Air, after which Surf Air became a wholly-owned subsidiary of the Company (the “Internal Reorganization”).
Internal Reorganization On July 21, 2023, SAGL Merger Sub Inc., a wholly-owned subsidiary of the Company, was merged with and into Surf Air, after which Surf Air became a wholly-owned subsidiary of the Company (the “Internal Reorganization”).
For historical financial information of Southern prior to the Acquisition Date, refer to the sections entitled “Unaudited Condensed Consolidated Financial Statements for Southern Airways Corporation” and “Audited Financial Statements for Southern Airways Corporation as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021” in the Form 8-K/A filed August 29, 2023. 2023 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 providing a delightful, premium flying experience, and the Company expects these development expenses to continue to be incurred.
For historical financial information of Southern prior to the Acquisition Date, refer to the sections entitled “Unaudited Condensed Consolidated Financial Statements for Southern Airways Corporation” and “Audited Financial Statements for Southern Airways Corporation as of December 31, 2022 and 2021 and for the Years Ended December 31, 2022 and 2021” in the Form 8-K/A filed August 29, 2023. 2024 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.
On-demand revenue increased by $5.2 million, or 32%, for the year ended December 31, 2023, compared to the year ended December 31, 2022.
On-demand revenue increased by $7.6 million, or 36%, for the year ended December 31, 2024, compared to the year ended December 31, 2023.
As the Internal Reorganization did not take effect until July 21, 2023, the financial statements presented in this Annual Report on Form 10-K reflect the financial position, results of operations and cash flows of Surf Air, the predecessor to the Company, for all periods prior to the date of the Internal Reorganization.
As the Internal Reorganization took place on July 21, 2023, the financial statements presented herein reflect the financial position, results of operations and cash flows of Surf Air, the predecessor to the Company, for all periods prior to July 21, 2023.
The Company intends to 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 facilities that it intends to obtain. See the section entitled “ Risk Factors — Risks Related to SAM’s Financial Position and Capital Requirements — SAM has no 60 operating history.
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 facilities that it intends to obtain.
As a result of the Internal Reorganization and settlements of SAFE notes as part of the Company’s direct listing, these balances have been significantly reduced as of December 31, 2023.
As a result of the Internal Reorganization and settlements of SAFE notes as part of the Company’s direct listing, these balances have been significantly reduced as of December 31, 2024. The Company has accounted for the Mandatory Convertible Security with GEM at fair value.
Our past financial results may not be a reliable indicator of SAM’s future success. ” The Company has engaged AeroTEC to develop fully-electric and hybrid-electric Supplemental Type Certificates (“STCs”) for the Cessna Grand Caravan in partnership with TAI. A portion of these costs are expected to be funded through the Share Purchase Agreement.
See the section entitled “ Risk Factors — Risks Related to Our Financial Position and Capital Requirements — Our past financial results may not be a reliable indicator of our future results. ” The Company has engaged AeroTEC to develop fully-electric and hybrid-electric Supplemental Type Certificates (“STCs”) for the Cessna Grand Caravan in partnership with TAI.
The Company’s total outstanding federal excise tax liability including accrued penalties and interest of approximately $7.6 million is included in accrued expenses and other current liabilities on the Consolidated Balance Sheet as of December 31, 2023 and December 31, 2022. In May 2023, the Company made a payment to the IRS totaling $0.2 million.
The Company is currently in default of these obligations, with a total outstanding federal excise tax liability, including accrued penalties and interest, of $7.7 million included in accrued expenses and other current liabilities on the Consolidated Balance Sheet as of December 31, 2024.
Year Ended December 31, Change 2023 2022 Increase/ Decrease % Scheduled Flight Hours (1) 34,388 2,524 31,864 1,262 % On-Demand Flights (2) 2,831 1,696 1,135 67 % Scheduled Passengers (3) 176,131 7,131 169,000 2,370 % Headcount (4) 833 85 748 880 % Scheduled Departures (5) 31,476 2,002 29,474 1,472 % (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.
Year Ended December 31, Change 2024 2023 Increase/ Decrease % Scheduled Flight Hours (1) 67,918 34,388 33,530 98 % On-Demand Flights (2) 3,515 2,831 684 24 % Scheduled Passengers (3) 353,077 176,131 176,946 100 % Headcount (4) 703 833 (130 ) (16 )% Scheduled Departures (5) 69,000 31,476 37,524 119 % (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.
The weighted-average grant date fair value of the PRSUs granted in October was $0.81 per share for the 50,000 RSUs vesting upon an Average Closing Price equaling or exceeding $5 per share, $0.55 per share for the 75,000 RSUs vesting upon an Average Closing Price equaling or exceeding $10 per share, and $0.39 per share for the 75,000 RSUs vesting upon an Average Closing Price equaling or exceeding $15 per share.
The weighted-average grant date fair value of the PRSUs granted in October was $5.67 per share for the 7,143 RSUs vesting upon an Average Closing Price equaling or exceeding $35 per share, $3.85 per share for the 10,714 RSUs vesting upon an Average Closing Price equaling or exceeding $70 per share, and $2.73 per share for the 10,714 RSUs vesting upon an Average Closing Price equaling or exceeding $105 per share.
Our management believes that the accounting estimates listed below are those that are most critical to the portrayal of our financial condition and results of operations, and that require management’s most difficult, subjective and complex judgments in estimating the effect of inherent uncertainties. Goodwill We have made acquisitions in the past that included goodwill.
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 income and expense during the reported period. 63 Our management believes that the accounting estimates listed below are those that are most critical to the portrayal of our financial condition and results of operations, and that require management’s most difficult, subjective and complex judgments in estimating the effect of inherent uncertainties.
The Company’s capital expenditures in 2022 and in 2023 were limited to payments made for aircraft supply deposits, aircraft parts, engines, immaterial purchases and internally developed software.
The Company’s capital expenditures in 2024 and in 2023 were limited to payments made for aircraft purchases under the TAI Aircraft Supply Agreement, aircraft supply deposits, aircraft parts, engines, immaterial purchases and internally developed software. The Company intends to invest significantly in expansion of its network footprint and in development of electrified powertrain technology and its commercial platform.
Prior to the Company’s direct listing in July 2023, the Company 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 share financing arrangements.
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, 2023, the Company received $8 million under a convertible note purchase agreement with Partners for Growth V, L.P.
For the year ended December 31, 2022, net cash used in operating activities was $28 million, primarily driven by a net loss of $74.4 million and a gain on extinguishment of debt of $6.0 million.
For the year ended December 31, 2023, net cash used in operating activities was $64.4 million, driven by a net loss of $250.7 million and a $2.1 million reduction in operating lease liabilities.
Securities and Exchange Commission (the “SEC”) registering up to 300.0 million shares of the Company’s Common Stock, which represents the balance of the full amount of shares of Common Stock that the Company estimates could be issued and sold to GEM for advances under the Share Purchase Agreement, plus the amount of shares the Company estimates could be issued and sold to GEM for $50 million of draw-downs under the Share Purchase Agreement.
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”).
The increase in revenue was attributable to the following changes in on-demand and scheduled revenues (in thousands, except percentages): Year Ended December 31, Change 2023 2022 $ % Scheduled $ 39,397 $ 4,324 $ 35,073 811 % On-Demand 21,108 15,950 5,158 32 % Total revenue $ 60,505 $ 20,274 $ 40,231 198 % Scheduled revenue increased by $35.1 million, or 811%, for the year ended December 31, 2023, compared to the year ended December 31, 2022.
The increase in revenue was attributable to the following changes in on-demand and scheduled revenues (in thousands, except percentages): Year Ended December 31, Change 2024 2023 $ % Scheduled $ 90,735 $ 39,397 $ 51,338 130 % On-Demand 28,690 21,108 7,582 36 % Total revenue $ 119,425 $ 60,505 $ 58,920 97 % Scheduled revenue increased by $51.3 million, or 130%, for the year ended December 31, 2024, compared to the year ended December 31, 2023.
This was partially offset by $12.5 million in non-cash stock-based compensation expenses, $27.7 million in changes in fair value of financial instruments, and accounts payable and other liabilities of $11 million.
This was largely offset by a decrease of $38.5 million in non-cash changes in fair value of financial instruments, a decrease of $60.0 million in impairment of goodwill charges, decreases of $54.2 million in non-cash stock-based compensation expenses, and a decrease of $10.5 million in changes in accrued expenses and other liabilities.
Other expenses also increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to an increase in interest expense of $2.4 million driven by $1.3 million of expense due to debt acquired from Southern and $1.1 million primarily attributable to higher interest rates.
Technology and Development Technology and development expenses increased by $3.2 million, or 15%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase was driven primarily by an increase in expenses related to software development work with Palantir of $4.1 million.
These were offset by net cash received from the acquisition of Southern of $0.7 million.
Totals for 2023 include $0.7 million in net cash received from the Southern Acquisition.
These factors were offset by $1.5 million due to payments on long-term debt and amounts due under finance leases acquired from Southern.
These factors were offset by $1.5 million due to payments on long-term debt and amounts due under finance leases acquired from Southern. Net cash provided by financing activities increased period over period by $4.2 million, primarily driven by increases in net borrowings of long term debt of $37.5 million and a $12.0 million increase in borrowings from related parties.
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. 54 Key Operating Measures In addition to the data presented in our 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 Company continues to actively 57 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.
Cash Flow from Investing Activities For the year ended December 31, 2023, net cash used in investing activities was $7.1 million, an increase of $6.8 million compared to the year ended December 31, 2022, driven by $5.0 million of cash paid for aircraft purchase deposits and $2.5 million of property and equipment.
Cash Flow from Investing Activities For the year ended December 31, 2024, net cash used in investing activities was $3.6 million, a decrease of $3.5 million compared to the year ended December 31, 2023, driven by an increase of $10.5 million in cash from sales of fixed assets and partially offset by an increase in fixed asset purchases of $4.2 million and $2.2 million in internal use software development costs.
These increases in expenses were offset by an increase of $40.2 million in revenue, of which $36.7 million was a attributable to the inclusion of Southern’s operations from the July 27, 2023 acquisition date. 57 Cash Flow Analysis The following table presents a summary of our cash flows ( in thousands ): Year Ended December 31, 2023 2022 Net cash provided by (used in): Operating activities $ (64,371 ) $ (28,037 ) Investing activities (7,100 ) (298 ) Financing activities 72,990 27,673 Net change in cash and cash equivalents $ 1,519 $ (662 ) Cash Flow from Operating Activities For the year ended December 31, 2023, net cash used in operating activities was $64.4 million, driven by a net loss of $250.7 million and a $2.1 million reduction in operating lease liabilities .
Cash Flow Analysis The following table presents a summary of our cash flows ( in thousands ): Year Ended December 31, 2024 2023 Net cash provided by (used in): Operating activities $ (54,322 ) $ (64,371 ) Investing activities (3,609 ) (7,100 ) Financing activities 77,175 72,990 Net change in cash and cash equivalents $ 19,244 $ 1,519 Cash Flow from Operating Activities For the year ended December 31, 2024, net cash used in operating activities was $54.3 million, driven by a net loss of $74.9 million, net reversals of $6.0 million in non-cash stock-based compensation, and a $4.3 million reduction in deferred revenue.
The Company’s total outstanding property tax liability including penalties and interest is approximately $1.9 million as of December 31, 2023. Of the total outstanding property tax liability, $1.2 million is from a tax lien from Los Angeles County for four of the Company’s aircraft due to the outstanding liability of its 2018 through 2022 property tax returns.
Additionally, Los Angeles County has imposed a tax lien on four of the Company’s aircraft due to the late filing of the Company’s 2022 property tax return. As of December 31, 2024, the amount of property tax, interest and penalties related to the Los Angeles County tax lien for all unpaid tax years was approximately $1.1 million.
It is a certified Part 135 operator that operates a fleet of over 50 aircraft, including the 53 Cessna Caravan, the Cessna Grand Caravan, the King Air Super 200, the Saab 340, the Pilatus PC-12, the Tecnam Traveller, and the Citation Bravo.
Southern is a scheduled service commuter airline serving cities across the United States that is headquartered in Palm Beach, Florida and commenced flight operations in June 2013. It is a certified Part 135 operator that operates a fleet of over 50 aircraft, including the Cessna Caravan, the Cessna Grand Caravan, the Pilatus PC-12, and the Tecnam Traveller.
(“PFG”), $25 million through a share purchase with GEM Global Yield LLC SCS (“GEM”) and an entity affiliated with GEM that provides incremental financing, and $10.2 million in advances under the Share Purchase Agreement (see Note 12, Share Purchase Agreement and GEM Purchase ). On November 9, 2023, the Company filed a Form S-1 registration statement with the U.S.
(“PFG”), $25.0 million through the Share Purchase Agreement with GEM Global Yield LLC SCS (“GEM”) and $10.2 million in advances and draws under the second amended and restated Share Purchase Agreement with GEM (see Note 12, Share Purchase Agreement, GEM Purchase, and Mandatory Convertible Security ).
The following table summarizes the Company’s contractual commitments and obligations (in thousands) : Total 2024 2025 2026 2027 2028 Thereafter Long-term debt $ 25,794 $ 5,175 $ 2,612 $ 2,819 $ 12,828 $ 685 $ 1,675 Operating leases 14,392 6,571 4,484 2,398 939 — — Finance leases 1,813 359 348 336 330 440 — Repayment of related party term loans 18,610 18,610 — — — — — Minimum payments under aircraft supply agreements 292,000 31,400 26,400 72,600 66,000 66,000 29,600 Minimum payments under data license agreements 12,500 12,500 — — — — — Minimum payments under sales and marketing agreements 40,000 15,000 10,000 10,000 5,000 — — Minimum payments under technology development agreements 31,000 8,000 8,000 8,000 7,000 — — Total $ 436,109 $ 97,615 $ 51,844 $ 96,153 $ 92,097 $ 67,125 $ 31,275 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.
The following table summarizes the Company’s contractual commitments and obligations (in thousands) : Total 2025 2026 2027 2028 2029 Thereafter Long-term debt $ 64,593 $ 2,543 $ 2,676 $ 12,032 $ 45,669 $ 421 $ 1,252 Operating leases 20,690 6,561 4,603 3,158 2,219 2,218 1,931 Finance leases 1,537 389 372 336 264 176 — Repayment of related party term loans 50,000 — — — 50,000 — — Repayment of convertible notes 8,034 — — — 8,034 — — Minimum payments under aircraft supply agreements 283,800 3,000 13,200 13,200 13,200 62,700 178,500 Minimum payments under data license agreements 9,500 9,500 — — — — — Minimum payments under sales and marketing agreements 40,000 15,000 10,000 10,000 5,000 — — Minimum payments under technology development agreements 27,400 8,400 8,000 8,000 3,000 — — Total $ 505,554 $ 45,393 $ 38,851 $ 46,726 $ 127,386 $ 65,515 $ 181,683 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.
The Company has placed an order with TAI for 100 Cessna Grand Caravan aircraft with an option for an additional 50 Cessna Grand Caravan aircraft, with expected delivery taken over the next five years. As of December 31, 2023, the Company had made deposits of $5.0 million for aircraft that are scheduled to be delivered starting in Q2 2024.
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 an order in place 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.
For the year ended December 31, 2022, net cash provided by financing activities was $27.7 million from proceeds from borrowings of SAFE and convertible notes of $19.1 million, proceeds from borrowings due to related parties of $7.1 million, and proceeds from issuance of preferred shares of $1.4 million.
Cash Flow from Financing Activities For the year ended December 31, 2024, net cash provided by financing activities was $77.2 million due to proceeds from borrowings under long term debt agreements, net of repayments, of $36.2 million, borrowings from related parties of $34.5 million, net proceeds of $2.8 million from collateralized borrowings, and proceeds from the GEM share purchase agreement of $3.9 million.
The impact of the Southern Acquisition contributed an increase of $35.6 million, or 823%, to scheduled revenue primarily related to EAS revenue of $19.2 million, passenger revenue of $14.9 million, and other revenue of $1.5 million since the acquisition of Southern at the beginning of the third quarter.
The impact of the Southern Acquisition contributed an increase of $52 million, or 146%, to scheduled revenue primarily related to EAS revenue of $30.3 million, passenger revenue of $20.2 million, and other revenue of $1.5 million, due to the results of Southern only being included for the period from July 27 to December 31, 2023 for purposes of the Company’s 2023 financial results.
These were partially offset by an increase of $22.3 million in non-cash changes in fair value of financial instruments, an increase of $60.0 million in impairment of goodwill charges, increases of $36.1 million in non-cash stock-based compensation expenses, increases of $17.1 million in accounts payable and other liabilities, a $6.3 million increase in loss on extinguishment of debt, and increases of $2.8 million in depreciation and amortization.
These operating outflows were partially offset by changes in fair value of financial instruments of $11.7 million, increases in accrued expenses and other current liabilities of $8.4 million, and depreciation and amortization expenses of $8.3 million.
Technology and Development Technology and development expenses increased by $17.6 million, or 534%, for the year ended December 31, 2023, compared to the year ended December 31, 2022.
Other Income/(Expense) Other expense, net decreased by $42.3 million, or -74%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThese macroeconomic conditions also negatively impact consumer discretionary spend and coupled with slower than expected increases in business and leisure travel during and following the COVID-19 pandemic, including as a result of many workplaces adopting remote or hybrid models, led to slowed revenue growth during 2023.
Biggest changeThese macroeconomic conditions also negatively impact consumer discretionary spend and coupled with slower than expected increases in business and leisure travel, including as a result of many workplaces adopting remote or hybrid models, led to slowed revenue growth during 2024.
In order to mitigate these risks, we have implemented and may in the future have to implement additional cost cutting measures, as described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting our Business.”
In order to mitigate these risks, we have implemented and may in the future have to implement additional cost cutting measures, as described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting our Business.” 69
For example, during 2023, as a result of global supply chain issues and extreme weather conditions, we experienced supply chain disruptions for critical spare parts and major maintenance, which resulted in higher prices and delayed delivery for those products.
For example, during 2024, as a result of global supply chain issues and extreme weather conditions, we experienced supply chain disruptions for critical spare parts and major maintenance, which resulted in higher prices and delayed delivery for those products.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK We have operations solely within the United States, and we are exposed to market risks in the ordinary course of our business. The primary risks we face are commodity price risks and macroeconomic risks. Commodity Price Risks We are exposed to commodity price risks.
ITEM 7A. QUANTITATIVE AND QUALITITATIVE DISCLOSURES ABOUT MARKET RISK We have operations solely within the United States, and we are exposed to market risks in the ordinary course of our business. The primary risks we face are commodity price risks and macroeconomic risks. Commodity Price Risks We are exposed to commodity price risks.
Additionally, as a result of continued inflation, we have seen an increase in wage rates and costs of revenue during fiscal year 2023, which has had a negative impact on our financial results.
Additionally, as a result of continued inflation, we have seen an increase in wage rates and costs of revenue during fiscal year 2024, which has had a negative impact on our financial results.

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