SRFM 10-K & 10-Q changes, risk factors and insider trading

Our success is largely dependent on the ability to raise debt and equity capital, increase our membership base, increase passenger loads, and continue to expand into regions profitably throughout the United States.States and ultimately, successfully develop our Air Technology business.

We have funded our operations and capital needs primarily through the net proceeds received from the issuance of various debt instruments, convertible securities and preferred and common share financing arrangements. A significant amount of funding to date has been provided by a small number of entities, including entities affiliated with a co-founder of the Company. We will need additional financing to implement our full business plan, including our plans to develop our software technology platforms and to electrify our fleet, which is a core part of our growth strategy, and to service our ongoing operations. We are evaluating, and will continue to evaluate, strategies to obtain additional funding for future operations. These strategies may include, but are not limited to, obtaining additional equity financing, issuing additional debt, entering into other financing arrangements, or restructuring of operations to grow revenues and decrease expenses.

Our prospects and ongoing business activities are subject to the risks and uncertainties frequently encountered by companies in new and rapidly evolving markets. Risks and uncertainties that could materially and adversely affect 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, (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 our business model.

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 and those mentioned below that have impacted our 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.

We have incurred significant losses since the Company’s inception. We incurred net losses of $74.9$110.6 million and $250.7$74.9 million for the years ended December 31, 20242025 and 2023,2024, respectively. We expect our operating expenses to increase over the next several years as we endeavorinvest toin increaseour Air Mobility and Air Technology businesses, including through increasing our flight cadence,cadence hireand growing our scheduled network, hiring more employees and fundfunding SurfOS development and third-party research and development efforts relating to the development of ouraircraft electrification technology, as well as due to macroeconomic factors such as rising inflation rates.inflation. These efforts may be more costly than we expect and may not result in increased revenue or growth in our business. Any failure to increase our revenue sufficiently to keep pace with our investments and other expenses could prevent us from achieving or maintaining profitability or positive cash flow. Furthermore, if our future growth and operating performance fail to meet investor or analyst expectations, or if we continue to have negative cash flow or losses resulting from our investment in increasing our member base and passenger loads or expanding our operations into regions throughout the United States, our business, financial condition and results of operations could be materially adversely affected. Going forward, our future losses may be larger than anticipated, and we may not achieve profitability when expected, or at all. Even if we achieve profitability, we may not be able to maintain or increase profitability.

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. We may request advances from GEM (“GEM Advances”) at any time in an aggregate amount of up to $100 million, consisting of incremental advances of up to $25 million each provided that the first GEM Advance may not exceed $7.5 million without the consent of GEM. Any GEM Advance will reduce amounts that we can request for future draw downs. We have drawn upon the GEM Advances in 2024 and 2025 and may continue to draw upon the GEM Advances in 20252026 to augment our capital resources to address our capital needs.

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)). We may ultimately decide to sell to GEM all, some or none of the remaining shares of our common stock that may be available for us to sell to GEM pursuant to the Share Subscription Facility. Depending on market liquidity at the time, resales of those shares by GEM may cause the public trading price of our common stock to decrease.

Our past financial results may not be a reliable indicator of our future results. Further, our results of operations may fluctuate significantly, which makes our future results of operations difficult to predict and could cause our results of operations to fall below expectations or any guidance itwe may provide.

Our past financial results may not be a reliable indicator of our future results, particularly given our development and commercialization of SurfOS and expected move toward fully-electric and hybrid-electric powertrain technology. Further, our quarterly and annual results of operations may fluctuate significantly, which makes it difficult for us to predict our future results of operations. As a result, comparing our results of operations on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance.

This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or results of operations fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue or earnings guidance itwe may provide.

We will need to raise capital in the future to fund our operations and to execute on our anticipated growth strategy, including development and commercialization of SurfOS and the development of our plannedaircraft electrification technology. For example, the cost of aircraft is a significant portion of our operating costs and is subject to change. As part of our agreement with TAI, we have committed to the purchase of 90four Cessna Caravans over a five-year period beginning in 2024, with an option for up to 25 additional Cessna Caravans,2026, 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. 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.

There are a number of factors that may limit our ability to raise financing or access capital markets in the future, including current and future debt and contractual obligations, our liquiditycash position and credit status, our operating cash flows, a lack of liquidity in our stock, market conditions in the aviation industry, U.S. and global economic conditions, the financial impact of global events such as wars and pandemics, the general state of the banking system and capital markets and the financial position of the major providers of aircraft and other aviation industry financing. Any additional financing required by us may not be available on terms acceptable to us, or at all. If we are unable to source financing on acceptable terms, or unable to source financing at all, our business could be materially adversely affected. If we are unable to raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned activities or substantially change our corporate structure.

The regional air mobility market is still emerging and has not been established with precision. It is uncertain to what extent market acceptance will grow, if at all. We have historically operated in a limited number of regional areas. The success of the regional markets in which we operate and the opportunity for future growth in such markets may not be representative of the potential market for regional air mobility in other regional areas. Our success will depend to a substantial extent on the willingness of commuters and travelers to widely adopt regional air mobility, particularly point-to-point versus the currently predominant hub-and-spoke industry configuration, as an alternative for ground transportation. Although we believe our ability to develop AI-enhanced software to drive our growth and profitability and, in the future, to offer to other charter brokers, air operators, and aircraft owners to improve their operating efficiencies, will be a key factor in our future growth, ifIf we are unable to develop our SurfOS software solutions to meet the needs of our commercial partners, the actual operating efficiencies from using our software are less than anticipated, or charter brokers, air operators and aircraft owners do not adopt our software, 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. As a result, the number of potential customers using our future services and the number of operators adopting our planned fully-electric and hybrid-electric powertrainstechnology cannot be predicted with any degree of certainty, and we cannot provide assurance that we will be able to operate in a profitable manner in any of our current or targeted future markets. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Our business is concentrated on regional air mobility, which is vulnerable to changes in consumer preferences, discretionary spending and other market changes impacting luxury goods and discretionary purchases (including as a result of concerns regarding the impact of a global recession). The global economy has in the past, and may in the future, experience recessionary periods and periods of economic instability, such as uncertainty in the banking system, rising fuel costs and ongoing business disruptions and related financial impactsimpacts, including resulting from public health crises such as pandemics, including changes in inflation and interest rates, and disruptions in manufacturing, delivery and overall supply chain. In particular, as a result of the current international trade environment (including uncertainties in global trade policies, potential escalation of tensions under the newcurrent U.S. administration, and the unpredictable impact of tariffs and trade restrictions), the conflict between Russia and Ukraine and any potential increase in hostilities in the Middle East and South America and rising prices and interest rates, many market observers anticipate that the global economy could face a recession in the foreseeable future. During such periods, our customers have chosen not to make discretionary purchases or to reduce overall spending on discretionary purchases. Such changes could result in reduced consumer demand for air transportation, including our air mobility services, or could shift demand from our air mobility services to other methods of air or ground transportation for which we do not offer a competing service. Any reduction in consumer demand for air transportation could also reduce demand for, or revenue from, our SurfOS software. If we are unable to generate demand or there is a future shift in consumer spending away from air mobility, there could be a material adverse effect on our business, financial condition and results of operations.

The regional air mobility industry is still developing and evolving, but we expect it to be highly competitive. We have a number of competitors in the regional air mobility market. For example, we compete against existing on-demand mobility air travel services, as well as ground transportation alternatives. Additionally, for certain of our longer routes, we compete against providers, including legacy commercial airlines, which have larger aircraft. We compete against companies that use technology that differs from the technology we intend to deploy in our aircraft in the future. For example, we will likely compete against other companies that utilize and develop fixed-wing electrification aircraft as well as competitors that pursue electric vertical takeoff and landing aircraft. We also face competition for our SurfOS software solutions. Our potential competitors may be able to devote greater resources to the development of their current and future technologies or the promotion and sale of their offerings, or offer lower prices. Our potential competitors also may establish cooperative or strategic relationships among themselves or with third parties, including regional or national airport operations that we rely on to offer our air mobility services, which may further enhance their resources and offerings. It is possible that domestic or foreign companies or governments, some with greater experience in the air mobility industry or greater financial resources than we possess, will seek to provide products or services that compete directly or indirectly with ours in the future. Any such foreign competitor could benefit from subsidies or other protective measures provided by its home country. In addition, our potential customers may build their own software solutions rather than subscribe to our SurfOS software.

We must continue to increase the strength of our reputation and brands as reliable, experience-driven and cost-effective air mobility solutions providers in order to attract and retain qualified third-party aircraft operators and customers. In addition, our growth strategy includes, among other things, exploring complementary strategic mergers and acquisitions, as well as strategic partnerships, to expand our capabilities and market opportunities, all of which benefit from our reputation and brand recognition. The successful development of our reputation and brands will depend on a number of factors, many of which are outside of our control. Negative perception of our businessbusiness, platform, or platformproducts may have a material adverse effect on our reputation and brands, including as a result of:

In addition, changes we may make to enhance and improve our offerings, and to balance the needs and interests of our third-party aircraft operators and customers may be viewed positively from one group’s perspective (such as customers) but negatively from another’s perspective (such as third-party aircraft operators), or may be viewed negatively by either third-party aircraft operators or customers. If we fail to balance the interests of third-party aircraft operators and customers or make changes that they view negatively, third-party aircraft operators and customers may stop using our platform or take fewer flights, or not adopt our software solutions, any of which could have a material adverse effect on our reputation, brands, business, financial condition and results of operations. Moreover, we may fail to adequately differentiate our brand, services, and aircraft from others in the market, which could impact our ability to attract customers or engage with other key stakeholders.

We currently generate substantially all of our revenue from the sale of air transportation. Our success will depend in part on our ability to cost-effectively attract new customers, retain existing customers and increase utilization of our platform by existing customers. 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. This market is new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, new aircraft announcements and changing consumer demands and behaviors. If customers do not broadly adopt this new form of mobility or are not willing to pay the prices we anticipate for our air mobility services, our business, including our planned Aircraft-as-a-Service initiative, may never materialize and there could be a material adverse effect on our prospects, financial condition and results of operations.

We will beare dependent on our senior management team and other highly skilled personnel, and if we are not successful in attracting and/or retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

Our success will depend,depends, in significant part, on the continued services of our senior management team and on our ability to attract, motivate, develop and retain a sufficient number of other highly skilled personnel, including finance, marketing, sales and technology and support personnel. The loss of any one or more members of our senior management team, for any reason, including resignation or retirement, could impair our ability to execute our business strategy and have an adverse effect on our business, financial condition and results of operations. If we are unable to attract and retain skilled employees to support our operations and growth, there could be a material adverse effect on our financial condition and results of operations.

We intend to explore potential strategic acquisitions of businesses, as well as strategic partnerships, to expand our capabilities and market opportunities, as well as the establishment of a wholly-owned or joint venture aircraft and powertrain financing company. There can be no assurance that any future acquisitions or partnerships will be consummated successfully, if at all. We may also not be successful in identifying appropriate targets for such transactions. In addition, we may not be able to continue the operational success of such businesses or successfully finance or integrate any businesses that we acquire or with which we form a partnership. We may have potential write-offs of acquired assets and/or an impairment of any goodwill recorded as a result of acquisitions. Furthermore, the integration of any acquisition, includingfor example the acquisition of Southern, or the establishment of a partnership or joint venture may divert management’s time and resources from our core business and disrupt our operations or may result in conflicts with our business. 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. We cannot ensure that any acquisition or partnership we make will not have a material adverse effect on our business, financial condition and results of operations.

If our operations continue to grow as planned, of which there can be no assurance, we will need to expand our sales, marketing,marketing and operations departments and the number of aircraft operators with whom we do business. Our continued growth could increase the strain on our resources, and we could experience operating difficulties, including difficulties in hiring, training and managing an increasing number of employees. These difficulties may result in the erosion of our brand image, divert the attention of management and key employees and impact our financial condition and results of operations. In addition, in order to continue to increase our presence, we expect to incur substantial expenses as we continue to attempt to increase our route offerings, flight frequency, passenger terminal footprint and employee base. The continued expansion of our business may also require additional space for administrative support. If we are unable to drive commensurate growth, these costs, which include lease commitments, marketing costs and headcount, could result in decreased margins, which could have a material adverse effect on our business, financial condition and results of operations.

We have invested, and will continue to invest, significant time, effort, and financial resources into the developmentdevelopment, implementation and implementationcommercialization of SurfOS, our AI-enhanced software operating system. The success of SurfOS is critical to our strategy of enhancing operational efficiency and providing advanced technological solutions to our customers. However, there are several risks associated with this initiative. The development of SurfOS involves complex software engineering and integration with our existing systems and operations. Any delays or technical challenges in the development process could postpone the deployment of SurfOS, potentially leading to increased costs and missed market opportunities. Additionally, unforeseen technical issues could arise, requiring further investment and resources to resolve. Even if SurfOS is successfully developed and deployed, its success depends on market acceptance and adoption by our customers and partners. If SurfOS does not meet the expectations of our customers or fails to deliver the anticipated benefits, we may not achieve the desired return on our investment. ThisAdditionally, there are a limited number of customers who may utilize SurfOS, and we may not be able to generate sufficient revenue to achieve the desired return on our investment. The foregoing could adversely affect our financial performance and competitive position.

TheOur joint venturecollaborations to develop SurfOS createscreate risks through technology dependence, potential partnercollaborator misalignment, relationship challenges, and funding uncertainties that could significantly impact the company'sCompany's business.

Our joint venturecollaborations with Palantirthird parties to develop SurfOS and other software solutions introducesintroduce additional risks that could impact our business. The success of SurfOS is heavily reliant on Palantir'sthird-party proprietary software platformsplatforms, including Palantir’s, and their implementation engineering services. Any disruption in Palantir'sour third-party collaborators’ ability to deliver these services, or any deterioration in our relationship with Palantir,one or more of them, could adversely affect the development and functionality of SurfOS. Additionally, any changes in Palantir'sour collaborators’ business strategy or priorities could impact their commitment to theour jointcommercial venture.relationships, The joint venturewhich requires close collaboration and alignment between us and Palantir.alignment. Any misalignment in strategic goals, operational processes, or management decisions could hinder the progress of SurfOS development and its subsequent commercialization. Furthermore, disagreements or conflicts between the parties could lead to delays, increased costs, or even the dissolution of the joint venture. The joint venture is expected to be capitalized by outside third-party investors.collaboration. If we are unable to secure sufficient funding or if the capital raised is inadequate to support the development and commercialization of SurfOS, the project may face significant setbacks. Additionally, the allocation of resources between SurfOS and other business priorities could strain our financial and operational capabilities. InThe summary, while SurfOS represents a significant opportunity for innovation and growth, it also carries substantial risks related to its development, market acceptance, and the dynamics of our joint venture with Palantir. Theseforegoing risks could materially and adversely affect our business, financial condition, and results of operations.

We, as well as our development and supply chain partners, have limited experience to date in the development and manufacturing of fully-electric and hybrid-electric powertrains and integrating those newly developed powertrains into existing certified airframes, and we may neverfail developto orrealize manufacturethe anydesired return on our investments with respect to fully-electric and hybrid-electric powertrains.

If we fail to execute our plans to develop, produce, assemble, market, sell, install and service our fully-electric and hybrid-electric powertrain solutions then we may not be able to generate sufficient revenue to achieve the desired return on our investment. Our ability, including with development and supply chain collaborators, such as TAI and AeroTec, to develop and produce fully-electric and hybrid-electric powertrain solutions of sufficient quality and appeal to customers on schedule and at scale is unproven. There can be no assurance as to whether we or our current or future third-party collaborators will be able to develop efficient, automated, low-cost production capabilities and processes and/or obtain reliable sources of component supply to allow us to meet the quality, price, engineering, design and production standards and production volumes required to successfully develop, manufacture and market fully-electric and hybrid-electric powertrains. Moreover, unlike the market for electric automobiles, the commercialization of electric and hybrid-electric aircraft remains unproven. Although we believe that the component technology to electrify small aircraft exists today, there is currently no other producer of fully-electric or hybrid-electric aircraft in the industry. Any delay in the development, manufacture and launch of electrification technology could adversely affect our brand, operations and the delivery of our growth strategy, particularly if it results in a failure to expand our market share in the regional air mobility market as anticipated.anticipated Any such delaysand could require us to incur additional costs. Even if we and our third-party partnerscollaborators are successful in developing our fully-electric and hybrid-electric powertrains and reliably sourcing our component supply, we do not know whether we will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond our control such as problems with suppliers and vendors, force majeure events, delays in meeting commercialization schedules, or failure to satisfy the requirements of customers and potential customers. Any such failure could have a material adverse effect on our business, financial condition and results of operations.

designdesign, produce and producesource safe, reliable and quality fully-electric and hybrid-electric powertrains on an ongoing basis;

Our competitors may commercialize their technology before us, either in general or in specific markets, or we may otherwise not be able to fully capture thea first mover advantage that we anticipate.advantage.

While we strive to be the first to market providing air mobility services with a hybrid-electricelectrified aircraft, we expect this industry to be increasingly competitive and it is possible that our competitors could get to market before us, either generally or in specific markets. The timing of our production ramp is dependent upon finalizing certain aspects of the design, engineering, component procurement, testing, build out and manufacturing plans in a timely manner, andupon our ability to execute these plans within the current timeline and upon regulatory approval by the FAA, which can be a lengthy and unpredictable process.

Even if we or our collaborators are first to market with fully-electric or hybrid-electric aircraft, we may not fully realize the benefits we anticipate, and we may not receive any competitive advantage or may be overcome by other competitors. New companies or existing aerospace companies may launch competing solutions, including fully-electric and hybrid-electric aircraft in the markets in which we intend to operate, or fully-electric or hybrid-electric aircraft utilizing different technologies such as hydrogen fuel cells, and obtain large scale capital investment, which may result in increased competition.

Additionally, our competitors may benefit from our efforts in developing consumer and community acceptance for hybrid-electricelectrified aircraft and air mobility, making it easier for them to obtain the permits and authorizations required to operate an air mobility service in the markets in which we intend to launch or in other markets. InIf theour eventcompetitors get to market before us, or we doare notovercome captureby theother first mover advantage that we anticipate,competitors, it could have a material adverse effect on our business, financial condition, results of operations and prospects.

The planned fully-electric and hybrid-electric powertrain solutions may not result in the operating cost savings we anticipate, which could negatively impact the future economics of our network operations as well as our ability to successfully sell and market our planned future Aircraft-as-a-Service initiative.strategy.

Disruption of operations at airports, whether caused by natural disasters including fires, 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, government shutdowns or other disruptions at the FAA, power outages, or changes in federal, state and local regulatory requirements could have a material adverse effect on our business.

Our aircraft utilization may be lower than expected and our aircraft may be limited in performance during certain weather conditions. We are vulnerable to delays, cancellations or flight rescheduling, as we will rely on maintaining a high daily aircraft usageutilization rate, and need to aggregate customers on our by-the-seat flights to lower direct costs to third-party operators.rate.

Our aircraft may not be able to fly safely in poor weather or environmental conditions, including snowstorms, thunderstorms, lightning, hail, known icing conditions or fog.fog or during extreme heat or smoky conditions from fires. The aircraft models that we have flown to date and the smaller airports out of which they operate are more vulnerable to delays of this nature and we have experienced delays and disruptions as a result of extreme weather. Our inability to operate in these conditions in the future willmay reduce our aircraft utilization and cause delays and disruptions in our services. We intend to maintain a high daily aircraft utilization rate which is the amount of time our aircraft spend in the air carrying passengers. High daily aircraft utilization is achieved in part by reducing turnaround times at airports so we can fly more hours on average in a day. Aircraft utilization is reduced by delays and cancellations from various factors, many of which are beyond our control, including adverse weather conditions, security requirements, air traffic congestion and unscheduled maintenance events. The success of our business is dependent, in part, on the utilization rate of our aircraft and reductions in utilization will have a material adverse effect on our financial condition as well as cause passenger dissatisfaction.

Our success also depends on our ability to generate more revenue per flight by maintaining high customer utilization rates (i.e., the number of seats purchased on each flight). Customer utilization rates may be reduced by a variety of factors, including the introduction of new routes or schedules. In some cases, we may choose to offer flights with low customer utilization rates to increase or maintain customer satisfaction, brand recognition, and for marketing or other purposes. We have utilized monthly and annual commuter passes and annual corporate bulk purchasing options to increase our customer utilization rates in the past; however, demand for these products may bedecline lessfor appealingreasons followingoutside COVID-19.of our control, including economic uncertainty or downturns.

Our pilots are subject to stringent pilot qualification and crew member flight training standards (“FAA Qualification Standards”), which among other things require minimum flight time for pilots and mandate strict rules to minimize pilot fatigue. The existence of such requirements effectively limits the supply of qualified pilot candidates and increases pilot salaries and related labor costs. Such requirements also impact pilot scheduling, work hours and the number of pilots required to be employed for our operations, all of which could have a material adverse effect on our business, results of operation and financial condition.

We are subject to legal, regulatory and physical risks associated with the environment and climate change, including the potential increased impacts of severe weather events on our operations and infrastructure.

We are subject to federal, state, and local laws and regulations relating to the protection of the environment and noise, including those relating to emissions to the air, discharges (including storm water and de-icing fluid discharges) to surface and subsurface waters, safe drinking water and the use, management, disposal and release of, and exposure to, hazardous substances, oils and waste materials. CertainFederal, legislative bodiesstate and regulatory authorities are increasingly focused on climate change and have taken actions to implement additionallocal laws, regulations, and programsenforcement intendedpriorities related to protect the environment. For example, the federal government, as well as several stateenvironment and localclimate governments,change havecontinue implementedto legislativeevolve and regulatoryremain proposals and voluntary measures intended to reduce greenhouse gas emissions.inconsistent. Compliance with laws, regulations, and other programs intended to reduce emissions or otherwise protect the environment may require us to reduce our emissions secure carbon offset credits or otherwise pay for emissions, or make capital investments to modify certain aspects of our operations to reduce emissions.operations. Future policy, legal, and regulatory developmentsdevelopments, including enforcement actions or investigations, relating to the protection of the environment, including modifications to or reversals of such developments, could expose us to additional legal, financial, or reputational risks and unpredictable reporting obligations or business requirements, increase our costs and have a material adverse effect on our operations. Additionally, we may be subject to risks associated with climate change litigation, and to avoid the risks associated with climate change litigation, we would be required to manage our climate impacts responsibly, which may result in considerable expenses being incurred.

Although none of our employees are currently represented by a labor union, it is common throughout the airline industry generally for many employees to belong to a union, which can result in higher employee costs and increased risk of work stoppages. As we expand our business thereThere can be no assurances that our employees will not join or form a labor union or that we will not be required to become a union signatory. We are also directly or indirectly dependent upon companies with unionized work forces, such as parts suppliers, and work stoppages or strikes organized by such unions could have a material adverse effect on our business, financial condition or results of operations. If a work stoppage occurs, it could delay the manufacture and sale of our performance hybrid-electric vehicles and could have a material adverse effect on our business, financial condition or results of operations.

Hazards are inherent in the aviation industry and may result in loss of life and property, potentially exposing us to substantial liability claims arising from the operation of aircraft. Safe operation of aircraft is the responsibility of ourselves and our third-party operators who are held liable for accidents, thus incidents related to aircraft operation are covered by ours and our third-party operators’ insurance. We maintain general liability aviation insurance policies. Additionally, we maintain directors and officers insurance, as well as other insurance policies, and we believe our level of coverage is customary in the industry and adequate to protect against claims. A limited number of hull and liability insurance underwriters provide coverage for our third-party aircraft operators. Insurance underwriters are required by various federal and state regulations to maintain minimum levels of reserves for known and expected claims. However, there can be no assurance that our or third-party aircraft operators’ insurance policies will be sufficient to cover potential claims or that present levels of coverage will be available in the future at reasonable cost, or that underwriters have established adequate reserves to fund existing and future claims. Further, we expect our insurance needs and costs to increase as we grow our commercial operations, add routes, increase flight and passenger volumes and expand into new markets. It is too early to determine what impact, if any, the commercial operation of our future hybrid-electricelectric aircraft will have on our insurance costs.

Our fleet requires regular maintenance work, which can cause operational disruption. Our inability to perform timely maintenance and repairs could result in our aircraft being underutilized which could have an adverse effect on our business, financial condition and results of operations. For example, duringin 2023January we2025, werethe requiredCompany voluntarily cancelled a number of scheduled flights to perform additionaladdress maintenance andconcerns repairsregarding duecertain aircraft. While flights returned to unforeseenfull weatherschedule conditionsin and,the tofirst aquarter largerof extent,2025, supplythe chain disruptions, whichcancellations resulted in lowerlost utilization of aircraftrevenues and aoperating decreaseincome inand scheduledadditional flightunplanned hours,maintenance which negatively impacted scheduled revenue.costs. In addition, when flight hours of our aircraft increase we have experienced an increase in maintenance as a result of an increase in flight hours on our aircraft,maintenance, which resultedresults in an increase in maintenance and repairrepairs and corresponding costs. A prolonged period of maintenance or repair work would result in disruptions to our routesroutes, lower revenues and/or increased costs. On occasion, airframe manufacturers or regulatory authorities may require mandatory or recommended modifications to be made across a particular fleet which may mean having to ground a particular type of aircraft. This may cause operational disruption to and impose significant costs on us. Furthermore, our operations in remote locations, where delivery of components and parts could take a significant period of time, could result in delays in our ability to maintain and repair our aircraft. Any such delays may pose a risk to our business, financial condition and results of operations. Moreover, as our aircraft base increases, our maintenance costs could potentially increase. We have no historical experience maintaining fully-electric and hybrid-electric powertrains. While we believe the newly developed powertrains will require reduced maintenance activity per flight hour, our operations could be negatively impacted if our assumptions on reliability or cost of maintenance prove incorrect.

While we intend to maintain operational processes designed to ensure that the design, testing, manufacture, performance, operation and servicing of our aircraft meet rigorous quality standards, there can be no assurance that we will not experience operational or process failures and other problems, including through flight test accidents or incidents, manufacturing or design defects, pilot error, cyber-attacks or other inadvertent or intentional acts or omissions, that could result in potential safety risks. Any actual or perceived safety issues may result in significant reputational harm to our business, in addition to tort liability, maintenance, increased safety infrastructure and other costs that may arise. Such issues could result in delaying or cancellingcanceling planned flights, increased regulation or other systemic consequences. Our inability to meet our safety standards or adverse publicity affecting our reputation as a result of accidents, mechanical or operational failures, or other safety incidents could have a material adverse effect on our business, financial condition and results of operation. 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.

We intend to collaborate with leading aerospace OEMs and industry leading engineering-for-hire firms to develop a set of fully-electric and hybrid-electric powertrains.aircraft. We have entered into agreements with TAI for, among other things, the purchase of 90four 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.aircraft. We have also entered into an agreement with AeroTEC to develop, and to apply for STCs from the FAA for, fully-electric and hybrid-electric variants of the Cessna Caravan, as well as the development and supply of aircraft electric propulsion units (“EPUs”) for fully-electric and hybrid-electric powertrains, to be initially designed for the Cessna Caravan.

We have entered into a joint venture agreementcollaborations with Palantirthird parties for the development of SurfOS.SurfOS, Theas jointmore venturefully introducesdescribed significantin “Risks Related to the Development of the SurfOS Software Platform - Our collaborations to develop SurfOS create risks for us, includingthrough technology dependence on Palantir's proprietary software platforms,dependence, potential misalignmentcollaborator misalignment, relationship challenges, and relationship challenges with Palantir, andfunding uncertainties in securing adequate funding, all of whichthat could adverselysignificantly impact the Company'sCompany’s business operations and financial stability.business.”

Such strategic business relationships will be a critical component in the growth and success of our business and, in particular, our ability to develop and commercialize SurfOS and deploy fully-electric and hybrid-electric powertrains and related aircraft.aircraft within our fleet. However, there are no assurances that we will be able to timely meet all of the conditions of these agreements, if at all, maintain these relationships or continue to identify or secure suitable business relationship opportunities in the future, or that our competitors will not capitalize on such opportunities before we do. Moreover, identifying such opportunities could require substantial management time and resources, and negotiating and financing relationships involves significant costs and uncertainties.

If any conflicts arise between our strategic partners and us, the other party may act in a manner adverse to us and could limit our ability to implement our business strategies, which could impact our projected productionbusiness timelines and number of powertrains produced or aircraft modified.timelines. Our strategic partners may also develop, either alone or with others, products in related fields that are competitive with our products. Specifically, conflicts with our key strategic partners, including TAI and AeroTEC, could adversely impact our ability to develop and manufacture our planned powertrain and our planned subsequent modification of aircraft, which, in turn could have a material adverse effect on our prospects, business, financial condition and results of operation.

OurIf successwe willare depend on our abilityunable to economically outsource the production, assembly and installation of our fully-electric and hybrid-electric powertrain solutions at scale,scale andor our suppliers forsource the parts and components of these powertrains arethen anwe importantmay partnot realize the benefit of our businessinvestment model.in these technologies.

In the event potential competitors establish cooperative or strategic relationships with third-party aircraft operators in the markets we serve, offer to pay third-party aircraft operators more attractive rates or guarantee a higher volume of flights than we offer, we may not have access to the necessary number of aircraft to achieve our planned growth. Though we have successfully incentivized our operators to add aircraft to support our growth in the past, there is no guarantee we will be able to continue doing so without incurring significant additional costs. Increased use of private aircraft since the outbreak of the COVID-19 pandemic has added competitive pressure for access to aircraft, which may make it more difficult or costly for third-party operators to expand to meet our needs. If our third-party aircraft operators are unable or unwilling to add aircraft, or are only able to do so at significantly increased expense, or otherwise do not have capacity or desire to support our growth, or we are unable to add new operators on reasonable terms, or at all, our business and results of operations could be adversely affected. As the air mobility market grows, we expect competition for third-party aircraft operators to increase. Further, we expect that as competition in the air mobility market grows, the use of exclusive contractual arrangements with third-party aircraft operators, sometimes requiring volume guarantees, may increase, as may the cost of securing their services.

We expect that in the future we will rely on patentspatents, copyrights, and trade secrets to protect any proprietary technology we develop. We routinely enter into agreements with employees, consultants, third parties and other relevant persons and take other measures to protect our intellectual property rights, such as limiting access to our trade secrets and other confidential information. However, we cannot guarantee that we have entered into or will enter into such an agreement with each person that has access to such information or that the steps we take to protect our intellectual property will otherwise be adequate. For example, unauthorized parties may attempt to obtain and use information that we regard as proprietary and, if successful, may potentially harm our ability to compete, accelerate the development programs of our competitors, and/or our competitive position in the market. Moreover, our agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to ours, and there can be no assurance that our counterparties will comply with the terms of these agreements, or that we will be able to successfully enforce such agreements or obtain sufficient remedies if they are breached. There can be no assurance that the intellectual property rights we own or license will offer us meaningful protection for our business, provide competitive advantages or will not be challenged or circumvented by our competitors.

Further, obtaining and maintaining patentpatent, copyright, and trademark protection can be costly, and we may choose not to, or may fail to, pursue or maintain such forms of protection for our technology, products or services in the United States or foreign jurisdictions, which could harm our ability to obtain or maintain a competitive advantage in such jurisdictions. It is also possible that we will fail to identify patentable aspects of our technology before it is too late to obtain patent protection, that we will be unable to devote the resources needed to file and prosecute patent applications for such technology, or that we will inadvertently abandon them by failing to comply with all procedural, documentary, payment, and similar obligations during the patent prosecution process. Even if we obtain patent protection in future, we cannot assure you that such patents would be sufficiently broad to protect our proprietary technology to prevent competitors or other third parties from using the same or similar technologies. Failure to comply with legal requirements to maintain a patentpatent, copyright, or trademark registration can result in lapse or cancellation of the patentpatent, copyright, or trademark registration, which could result in the loss of patent or trademark rights. If this occurs, we may not be able to exclude our competitors from using patented technology that we have developed or our trademarks. Also, patentspatents, copyrights, and trademark registrations may be challenged in court or administrative proceedings.

We may need to defend ourselves against intellectual property infringement claims or misappropriation claims, which may be time-consuming and expensive and, if adversely determined, could limit our ability to commercialize our software solutions or our aircraft.

Third parties, including our competitors, may own or obtain patents, trademarks or other proprietary rights that could prevent or limit our ability to operate under our current branding, provide air mobility services or to make, use, develop or deploy our software solutions, aircraft, the powertrain we are developing with our commercial partners or other aircraft components, which could harm our business.

The following discussion and analysis reflects the historical results of operations and financial position of Surf Air Mobility Inc., and its consolidated subsidiaries. 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. Unless otherwise indicated, all dollar amounts are set forth in thousands, except share and per share data.

Surf Air Mobility Inc. (“Surf Air Mobility”, the “Company”, “us”, “we” or “our”), a Delaware corporation, is a regional air mobility platform that aims to transform regional flying. The Company is currently comprisedoperates one of itsthe Airlargest Mobilitycommuter business,airlines within the goalUnited ofStates furtherby developingscheduled departures as well as an expanding on-demand charter marketplace for passengers in the U.S. and enhancingglobally. itsThe serviceCompany’s operations provide scale, distribution and real-world operating data to validate and, eventually, deploy the software and technology offerings throughit itsis Aircurrently Technologydeveloping business.to support the modernization of air operations and the adoption of next-generation aircraft.

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. 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.

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 20232024 and 20242025 and believes perceived recessionary risks have impacted the 20242025 results. For example, perceived recessionary risksrisks, as a result of tariff or trade uncertainty or otherwise, as well as shifting travel patterns, may cause companies and individuals to reduce travel for either professional or personal reasons, and drive higher prices in the supply chain the Company relies upon. In addition, the Company incurred greater than expected losses and negative cash flows from operating activities during 20242025 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.

During January 2025, the Company utilized an abundance of caution and voluntarily cancelled a significant number of scheduled flights due to maintenance concerns. The Company took actions to mitigate these concerns and returned its operations to full schedule during the first quarter of 2025. The most significant financial impacts of these cancellations have beenwere lost revenues, lost operating income, decreased operating cash flows, and unplanned maintenance costs.

Revenue increaseddecreased by $58.9$12.9 million, 97%,or 11%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. The increasedecrease in revenue was attributable to the following changes in on-demand and scheduled revenues (in thousands, except percentages):

Scheduled revenue increaseddecreased by $51.3$13.7 million, or 130%,15%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. AbsentThe thedecrease impact of the Southern Acquisition, the totalin scheduled revenue decreased by $0.6 million, or -17%, which was primarily attributablerelated to athe declineexiting inof ourunprofitable membershiproutes, subscriptionpartially base.offset by higher completion factors.

On-demand revenue increased by $7.6$0.9 million, or 36%,3%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. OfThe increase in on-demand revenue was related to a greater recent focus on larger jet charter sales, partially offset by the totalexiting 3,515of several 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 comparedproducts to 2,282focus on-demandon charterprofitability flightsrather duringthan thenear-term yearmarket ended December 31, 2023.penetration.

Technology and development expenses increaseddecreased by $3.2$13.7 million, or 15%,57%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. The increasedecrease was driven primarily by ana increasedecrease of $12.5 million in expenses associated with the Textron data license agreement and a reduction in expenses related to software development work with Palantir of $4.1$1.3 million. These increases were partially offset by a decrease in labor and labor related expenses for the technology team of $0.9 million due to a decrease in headcount.

Sales and marketing expenses decreasedincreased by $2.5$0.7 million, or -25%,9%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023,2024, primarily due to aan decreaseincrease in brand awareness and strategic digital marketing expenses ofduring $0.5the millionyear andended aDecember $2.031, million decrease in management incentive plan expenses.2025.

General and administrative expenses decreasedincreased by $70.8$23.4 million, or -70%,79%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. The primary drivers of the decreaseincrease in general and administrative expenses were aan decreaseincrease in stock-based compensation expense of $54.3$16.0 million, an increase in transaction-related costs, associated with the Company’s convertible note financing in November 2025, of $6.4 million, and an increase in incentive bonus plan accruals of $4.2 million. These increases were partially offset by a decrease in non-transaction professional fees of $2.1 million and decreases in transactionother relatedgeneral costs associated with the Company’s public listing,expenses of $22.0 million. These decreases were partially offset by an increase in professional fees not associated with the Company’s public listing of $3.5$1.1 million due to a higher volume of corporate transactions during the year ended December 31, 2024.2025.

Depreciation and amortization expenses increased by $4.6$1.0 million, or 122%,11%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 20232024 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.aircraft.

Other expense, net decreasedincreased by $42.3$19.1 million, or -74%,128%, for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. There are two primary drivers for the decreaseincrease in other expense:

The total decreaseincrease in net loss of $175.8$36.0 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 is primarily due to athe reduction$12.9 ofmillion expensesdecrease in revenues and $19.1 million increase in other expenses, as described above, including reductions in goodwill impairment of $60.0 million, decreases in general and administrative expenses of $70.8 million, and decreases in other expenses of $42.3 million.above.

For the year ended December 31, 2023, netNet cash used in operating activities wasincreased $64.4period over period by $9.8 million, driven by a $36.0 million increase in net loss of $250.7 million and a $2.1decrease of $6.0 million reductionin changes in operatingaccrued leaseexpenses and other liabilities. TheseThis operatingwas outflows were partiallylargely offset by non-cashan changes in fair valueincrease of financial$16.0 instrumentsmillion of $50.2 million, non-cash impairment of goodwill of $60.0 million,in non-cash stock-based compensation expensesexpenses, a $9.3 million increase in loss on extinguishment of $48.3debt, million,and increasesa $5.4 million increase in accountsnon-cash payablecontract andsettlement 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.expense.

For the year ended December 31, 2024,2025, net cash used in investing activities was $3.6$5.7 million, aan decreaseincrease of $3.5$2.1 million compared to the year ended December 31, 2023,2024, driven by ana increasedecrease of $10.5$7.8 million in cash from sales of fixed assets and partially offset by an increase in fixed asset purchases of $4.2$5.8 million and $2.2 million in internal use software development costs. Totals for 2023 include $0.7 million in net cash received from the Southern Acquisition.million.

For the year ended December 31, 2024,2025, net cash provided by financing activities was $77.2$71.0 million primarily due to proceeds from borrowings under longconvertible termnote agreements of $65 million, proceeds from the issuance of common stock of $51.4 million, and proceeds of $47.2 million under the GEM Share Purchase Agreement. These proceeds were partially off-set by $49.9 million of repayments under long-term debt agreements, net of repayments,new borrowings, $38.6 million of $36.2repayments million, borrowings from related parties of $34.5 million, net proceeds of $2.8 million from collateralized borrowings, and proceeds fromunder the GEM shareMandatory purchaseConvertible agreementSecurity, and $4 million of $3.9repayments million.under convertible note agreements.

For the year ended December 31, 2023,2024, net cash provided by financing activities was $73.0$77.2 million fromprimarily proceedsdue from the issuance of preferred shares, common stock, and exercise of share options of $30.2 million,to proceeds from borrowings ofunder SAFElong andterm convertibledebt notesagreements, net of $11.7repayments, of $36.2 million, proceedsborrowings from borrowings due to related parties of $22.4$34.5 million, net proceeds of $2.8 million from collateralized borrowings, and proceeds from the GEM share purchase agreement of $10.2$3.9 million. 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 increaseddecreased period over period by $4.2$6.2 million, primarily driven by increasesa in net borrowings of long term debt of $37.5$121 million and a $12.0 million increasedecrease in borrowings fromunder long-term debt and related parties.party lending agreements, compounded by $38.6 million of repayments under the GEM Mandatory Convertible Security, and $4 million of repayments under convertible note agreements. These increasesoutflows were partially offset by reductions in proceeds from the GEM Purchase of $25.0 million, reductions in proceeds from the Share Purchase Agreement of $6.3 million, an $8.0$65 million reduction in borrowings under convertible note agreements, and a $3.7 million reduction in proceeds from SAFEthe instrumentsissuance of common stock of $51.4 million, and the saleproceeds of convertible$47.2 preferredmillion shares.under the GEM Share Purchase Agreement.

The Company has incurred losses from operations, negative cash flows from operating activities and has a working capital deficit. In addition, the Company is currently in default of certain excise and property taxes as well as certain debt obligations. These tax and debt obligations are classified as current liabilities on the Company’s Consolidated Balance Sheets as of December 31, 20242025 and December 31, 2023.2024. As discussed in Note 15,13, Commitments and Contingencies, on May 15, 2018, the Company received a notice of a tax lien filing from the Internal Revenue Service (“IRS”) for unpaid federal excise taxes for the quarterly periods from October 2016 through September 2017 in the amount of $1.9 million, including penalties and interest as of the date of the notice. The Company agreed to a payment plan (the “Installment Plan”) whereby the IRS would take no further action and remove such liens at the time such amounts have been paid. In 2019, the Company defaulted on the Installment Plan. Defaulting on the Installment Plan can result in the IRS nullifying such plan, placing the Company in default and taking collection action against the Company for any unpaid balance. The Company is currently in default of these obligations, with a total outstanding federal excise tax liability, including accrued penalties and interest, of $7.7$9.9 million included in accrued expenses and other current liabilities on the Consolidated Balance Sheet as of December 31, 2024.2025. The Company is currently considering available options regarding settlement of its federal excise tax liability. The Company has also defaulted on its property tax obligations in various California counties in relation to fixed assets, plane usage and aircraft leases. The Company’s total outstanding property tax liability including penalties and interest is approximately $1.6$0.9 million as of December 31, 2024.2025. Additionally, Los Angeles County hashad previously imposed a tax lien on four of the Company’s aircraft due to the late filing of the Company’s 2022 property tax return. AsDuring ofthe year ended December 31, 2024, the amount of property tax, interest and penalties related to2025, the Los Angeles County tax lienliens forwere allreleased unpaidas tax years was approximately $1.1 million. Thethe Company isfinalized in the processremediation of remediating the late filingfiling, and paymentinclusive of the completion of county audits, and made payments of $1.0 million on all property taxes due to Los Angeles County.County that were underlying the prior aircraft liens. As of December 31, 2024,2025, the Company was also in default of the Simple Agreements for Future Equity with Token allocation (“SAFE-T”) note, where the note matured in July 2019 (see Note 11,9, Financing Arrangements). The SAFE-T note is subordinate to most of the Company’s Convertibledebt Note Purchase Agreementobligations (see Note 11,9, Financing Arrangements); therefore, the Company cannot pay the outstanding balance prior to paying amounts due under themore Convertiblesenior Notedebt Purchase Agreement.obligations. The SAFE-T note had an outstanding principal amount of $0.5 million as of December 31, 20242025 and December 31, 2023.2024.

The Company’s prospects and ongoing business activities are subject to the risks and uncertainties frequently encountered by companies in new and rapidly evolving markets. Risks and uncertainties that could materially and adversely affect the Company’s business, results of operations or financial condition include, but are not limited to the ability to (i) raise additional capital (or financing) to fund operating losses, (ii) refinance its current outstanding debt, (iii) maintain efficient aircraft utilization, primarily through the proper utilization of pilots and managing market shortages of maintenance personnel and critical aircraft components, (iv) sustain ongoing operations, (v) attract and maintain customers, (vi) integrate, manage and grow recent acquisitions and new business initiatives, (vii) obtain and maintain relevant regulatory approvals, and (viii) measure and manage risks inherent to the business model.

The Company is currently implementing operational improvements and stringent operating expenses management to improve the profitability of its airline operations. In parallel, the Company is advancing its technology initiatives, including its software technology platform and Caravan electrification programs. In addition, the Company continues to evaluate strategies to obtain additional funding for future operations. These strategies may include, but are not limited to, obtaining additional equity financing, issuing additional debt or entering into other financing arrangements, forming joint venture and other partnerships, and restructuring of operations to grow revenues and decrease expenses. There can be no assurance that the Company will be successful in achieving its strategic plans, or that new financing will be available to the Company in a timely manner or on acceptable terms, if at all. If the Company is unable to raise sufficient financing when needed or events or circumstances occur such that the Company does not meet its strategic plans or,plans, the Company will be required to take additional measures to conserve liquidity, which could include, but are not necessarily limited to, reducing certain spending, altering or scaling back development plans, including plans to further develop our software technology platforms and to further develop our software technology platforms and to equip our regional airline operations with fully-electric or hybrid-electric aircraft, or reducing funding of capital expenditures, which could have a material adverse effect on the Company’s financial position, results of operations, cash flows, and ability to achieve its intended business objectives. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

The Company’s capital expenditures in 20242025 and in 20232024 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. 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 90delivery of four Cessna Grand Caravan aircraft in 2026 with an option for an additional 26purchases, Cessnapending Grandthe CaravanCompany aircraft,placing witha expecteddeposit and the parties agreement on a delivery taken over the next five years.schedule. The Company took delivery of four aircraft under this agreement during 2024. As of December 31, 2024,2025, the Company had made deposits of $2.0 million for aircraft that are scheduled to be delivered in 2026. 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. 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.

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. 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.

Except for the risk factors below,below and those discussed in Part II, Item 1A “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025:2025.

The following discussion and analysis is intended to help the reader understand the Company’s results of operations and financial condition. This discussion and analysis is provided as a supplement to, and should be read in conjunction with, the information included in Item 1. Financial Statements in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to the Company’s plans and strategy for its business, includes forward-looking statements that involve risks and uncertainties. The Company’s actual results and outcomes, and the timing of its results and outcomes, may differ materially from management’s expectations as a result of various factors, including but not limited to those discussed in the section entitled “Special Note Regarding Forward-Looking Statements” included in this Quarterly Report on Form 10-Q, the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 filed with the U.S. Securities and Exchange Commission (“SEC”) on May 11, 2026, and the sections entitled “Risk Factors” included within this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (“SEC”) on March 12, 2026.

Since 2020, the Company has been incurring expenses to support the development of the technology of its digital platform with the aim of enabling the regional air mobility market to operate at scale and to enhance the user’s ability to make informed decisions based on multiple first and third-party data sources as well as connected aircraft, and the Company expects these development expenses to continue to be incurred. Additionally, the Company isintends to continue developing fully-electricfully electric and hybrid-electric powertrain technologies with its commercial partners to electrify existing fleets and new aircraft. As a result, the Company expects to incur significant costs in the future to support the development of this technology.

In addition to incremental costs incurred in the execution of the Company’s near and long-term business strategy, the Company has experienced inflationary pressures, which have materially increased the Company’s costs for aircraft fuel, wages and benefits and other goods and services critical to its operations during 2024 and 2025 and believes perceived recessionary risks have impacted the 20252026 results. For example, perceived recessionary risks, as a result of tariff or trade uncertainty or otherwise, as well as shifting travel patterns, may cause companies and individuals to reduce travel for either professional or personal reasons, and drive higher prices in the supply chain the Company relies upon. In addition, the Company has incurred greater than expected losses and negative cash flows from operating activities due to previous inefficient aircraft utilization, primarily caused by an underutilization of pilots and a shortage of maintenance personnel and critical aircraft components,components. which,This, coupled with operating cost variability in aggregate,the current global economic setting, have challenged the Company’s ability to serve its customers as desired and, in turn, cover expenses, specifically related to its scheduled service offerings.

Results of the Company’s Operations for the Three Months Ended MarchJune 31,30, 2026 and 2025

The following table sets forth our condensed consolidated statements of operations data for the three months ended MarchJune 31,30, 2026 and 2025 (in thousands, except percentages):

Revenue increased by $2.1 million, or 9%,8%, for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. The increase in revenue was attributable to the following changes in scheduled and on-demand revenues (in thousands, except percentages):

Scheduled revenue decreased $2.3$4.0 million, or 13%,19%, for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. The decrease in scheduled revenue was primarily related to the exiting of unprofitable routes, partially offset by higher completion factors.

On-Demand revenue increased $4.4$6.1 million, or 77%,101%, for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. The increase in on-demand revenue was related to a focus on larger jet charter sales, driving higher average revenue per charter flight, as well as an increase in the number of charter flights flown.

Cost of revenue increased by $1.2$5.4 million, or 5%,22%, for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. The decrease of $3.0$1.8 million in scheduled cost of revenue was primarily attributable to a reduction in block hours flown as a result of exiting unprofitable routes, partially offset by higher average fuel costs and investments to improve operations. The increase of $4.2$7.2 million in on-demand cost of revenue was primarily associated with achieving higher revenue performance, slightly offset by improving on-demand margins with higher volumes.

Technology and development expenses decreased by $0.2$1.0 million, or 9%,35%, for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. The flatdecrease in technology and development expense is due to a similarhigher mixamount of productcost developmentcapitalization activities relatedrelating to the Company’s Surf O/S platform.

Sales and marketing expenses increased by $0.3$1.6 million, or 19%,109%, for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025, primarily due to an increase of $0.3 millionincreases in external marketing initiatives.

General and administrative expenses decreased by $4.8$1.1 million, or 44%,9%, for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. The decrease in general and administrative expense was driven primarily by a $2.7 million reduction in short term incentive bonus accruals, a $1.3 million decrease in compensation expense, a $0.5$1.0 million decrease in stock-based compensation expense, and a $0.3 million decrease in other general expenses.expense.

Depreciation and amortization expenses increasedwere byconsistent $0.4 million, or 19%, forbetween the three months ended MarchJune 31,30, 2026,2026 compared toand the three months ended MarchJune 31,30, 2025. This was primarily due to overall increases in aircraft depreciation due to capital expenditures subsequent to March 31, 2025.

Other expense, net increaseddecreased by $7.0$2.7 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. This was primarily attributable to a $9.0$1.0 million increasedecrease in losses from changes in fair value of financial instruments, primarily due to the impact of changes in price of our common stock on valuations of convertible notes and the GEM Global Yield LLC SCS (“GEM”) mandatory convertible security, and a $0.6$2.5 million increase in other expense, primarily driven by non-cash transaction costs. This was offset by a $2.7 million decreasereduction in interest expense due to restructuring of high interest debt in favor of zero-coupon, convertible, obligations. This was offset by a $0.7 million increase in other expense, primarily driven by a $1.1 million loss on the disposal of aircraft.

The increase in net loss of $1.8$1.9 million, or 10%,4%, for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025, was primarily attributable to increases in operating expenses of $1.8 million and increases in other expense of $7.0$4.3 million. This was partially offset by an increase in revenue of $2.1 million, coupled with decreases in operating expenses of $3.1$4.2 million.

For the threesix months ended MarchJune 31,30, 2026, net cash used in operating activities was $12.3$13.4 million, primarily driven by a net loss of $20.3$48.4 million. Operating outflows were partially offset by depreciation and amortization expense of $2.6$5.0 million, stock-based compensation expense of $1.4$4.1 million, and changes in fair value of financial instruments of $3.6$10.4 million, increases in accounts payable of $3.7 million, and increases in deferred revenue of $12.2 million.

For the threesix months ended MarchJune 31,30, 2025, net cash used in operating activities was $15.8$26.4 million, primarily driven by a net loss of $18.5$46.5 million. These operating outflows were partially offset by depreciation and amortization expense of $2.1$4.6 million, stock-based compensation expense of $5.7 million, changes in fair value of financial instruments of $2.4 million, and an $8.2 million increase in accounts payable and lossesaccrued on disposals of fixed assets of $0.7 million.liabilities.

For the threesix months ended MarchJune 31,30, 2026, net cash used in investing activities was $3.5$11.3 million, aan decreaseincrease of $4.3$10.2 million compared to the threesix months ended MarchJune 31,30, 2025. The increase was driven by an increase of $1.6$8.7 million in purchases of property and equipment and internal use software development costs, partiallyand offsetcompounded by a decrease in proceeds from the sale of fixed assets of $2.7$1.5 million.

For the threesix months ended MarchJune 31,30, 2026, net cash provided by financing activities was $7.3$20.4 million, primarily from $12.0$25.0 million in advances under the GEM Share Purchase Agreement (as defined below), $14.3 million in proceeds from equity issuances, and $9.0 million in debt issuances with external and related parties. These were partially offset by $4$23 million in repayments of borrowings under convertible note agreements.

The Company has incurred losses from operations, negative cash flows from operating activities and has a working capital deficit. In addition, the Company is currently in default of certain excise and property taxes as well as certain debt obligations. These tax and debt obligations are classified as current liabilities on the Company’s Condensed Consolidated Balance Sheets as of MarchJune 31,30, 2026 and December 31, 2025. As discussed in Note 10, Commitments and Contingencies, on May 15, 2018, the Company received a notice of a tax lien filing from the Internal Revenue Service (“IRS”) for unpaid federal excise taxes for the quarterly periods from October 2016 through September 2017 in the amount of $1.9 million, including penalties and interest as of the date of the notice. The Company agreed to a payment plan (the “Installment Plan”) whereby the IRS would take no further action and remove such liens at the time such amounts have been paid. In 2019, the Company defaulted on the Installment Plan. Defaulting on the Installment Plan can result in the IRS nullifying such plan, placing the Company in default and taking collection action against the Company for any unpaid balance. The Company is currently in default of these obligations, with a total outstanding federal excise tax liability, including accrued penalties and interest, of $9.9$11.1 million included in accrued expenses and other current liabilities on the Company’s Condensed Consolidated Balance Sheet as of MarchJune 31,30, 2026. The Company has also defaulted on its property tax obligations in various California counties in relation to fixed assets, plane usage and aircraft leases. The Company’s total outstanding property tax liability including penalties and interest is approximately $0.9 million as of MarchJune 31,30, 2026. Additionally, Los Angeles County had previously imposed a tax lien on four of the Company’s aircraft due to the late filing of the Company’s 2022 property tax return. During the year ended December 31, 2025, the Los Angeles County tax liens were released as the Company finalized remediation of the late filing, inclusive of the completion of county audits, and made payments of $1.0 million on all property taxes due to Los Angeles County that were underlying the prior aircraft liens. As of MarchJune 31,30, 2026, the Company was also in default of the Simple Agreements for Future Equity with Token allocation (“SAFE-T”) note, where the note matured in July 2019 (see Note 7, Financing Arrangements). The SAFE-T note is subordinate to most of the Company’s debt obligations (see Note 7, Financing Arrangements); therefore, the Company cannot pay the outstanding balance prior to paying amounts due under more senior debt obligations. The SAFE-T note had an outstanding principal amount of $0.5 million as of MarchJune 31,30, 2026 and December 31, 2025.

During the threesix months ended MarchJune 31,30, 2026, the Company received $12$25.0 million in advances under the Share Purchase Agreement with GEM,GEM (the “SPA”), of which $8.3$25.0 million had been settled through the issuance of 4,350,41221,100,000 shares of the Company’s common stock. As of MarchJune 31,30, 2026, the contractual terms allow the Company to make further advances of up to $85.5$72.5 million under the Share Purchase Agreement.SPA. Additionally, the Company has the ability to draw an additional $251.4 million under the Share Purchase Agreement,SPA, subject to daily volume limitations and GEM’s requirement to hold less than 10% of the fully-diluted shares of the Company. As of MarchJune 31,30, 2026, GEM held 0% of the then fully-diluted shares of the Company. At MarchJune 31,30, 2026, the daily volume limitations under the Share Purchase Agreement significantlySPA restricted our ability to take additional draws under the Share Purchase AgreementSPA to approximately 8.633.5 million shares per draw. Additionally, the Company’s ability to draw upon the Share Purchase AgreementSPA is contingent on the Company’s common stock being listed on a national exchange. The original termination date of the SPA has been extended from July 2026 to the earlier of (i) January 2, 2028 and (ii) the date which GEM has purchased the Aggregate Limit under the SPA.

There have been no material changes to our critical accounting policies and estimates during the threesix months ended MarchJune 31,30, 2026 as compared to those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.