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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[Mark One]


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-41759

Surf Air Mobility Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware	4522	36-5025592
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

12111 S. Crenshaw Blvd.

Hawthorne, CA 90250

(424) 332-5480

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.0001 par value per share	SRFM	New York Stock Exchange

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 8, 2025, 42,826,070 shares of common stock, $0.0001 par value per share, were outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements, including statements regarding the Company’s future results of operations and financial position, business strategy and plans and objectives of management for future operations are forward-looking statements. Forward-looking statements may be identified by the use of words such as “estimate”, “plan”, “project”, “forecast”, “intend”, “will”, “expect”, “anticipate”, “believe”, “seek”, “target”, “designed to” or other similar expressions that predict or indicate future events or trends, although the absence of these words does not mean that a statement is not forward-looking. The Company cautions readers of this Quarterly Report on Form 10-Q that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond the Company’s control, that could cause the actual results and outcomes, and the timing of actual results and outcomes, to differ materially from the expected results. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of financial and performance metrics, projections of market opportunity and market share, potential benefits and the commercial attractiveness to its customers of the Company’s products and services, the Company’s dependence on third-party partnerships in the development of fully-electric and hybrid-electric powertrains, the potential success of the Company’s marketing and expansion strategies and the Company’s ability to continue as a going concern. These statements are based on various assumptions, whether or not identified in this Quarterly Report on Form 10-Q, and on the current expectations of the Company’s management, and are not predictions of actual results and outcomes. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied upon, by any investor as a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. These forward-looking statements are subject to a number of risks and uncertainties, including:

•

the Company’s future ability to pay contractual obligations and liquidity, which will depend on operating performance, cash flow and ability to secure adequate financing;

•

the Company’s ability to meet the requirements of its term loan credit facility or other debt obligations;

•

the Company’s limited operating history and the powertrain technology the Company plans to develop does not yet exist and remains subject to approval by regulators;

•

the impact of changes in the U.S. or foreign trade policies, including the imposition of tariffs and other protectionist trade measures, and other factors beyond our control;

•

the Company’s ability to maintain and strengthen the Company’s brand and its reputation as a regional airline;

•

any accidents or incidents involving aircraft including those involving fully-electric or hybrid-electric aircraft;

•

the Company’s ability to accurately forecast demand for products and manage product inventory in an effective and efficient manner;

•

the dependence on third-party partners and suppliers for the components and collaboration in the Company’s development of fully-electric and hybrid-electric powertrains, software technology platforms, and other products and services, and any interruptions, disagreements or delays with those partners and suppliers;

•

the Company’s ability to execute business objectives and growth strategies successfully or sustain the Company’s growth;

•

risks from the integration of business acquisitions that could adversely affect the Company’s business, divert the attention of management, and dilute shareholder value;

•

increased costs as a result of operating as a public company, and the requirement that management devote substantial time to comply with the Company’s public company responsibilities and corporate governance practices;

•

the ability of the Company’s customers and potential customers to pay for the Company’s services;

•

the Company’s ability to obtain additional financing or access the capital markets to fund its ongoing operations on acceptable terms and conditions;

•

the outcome of any legal proceedings that might be instituted against the Company; and

•

risks associated with the Company’s ability to comply with applicable laws, government regulations and rules and standards of the New York Stock Exchange as well as with changes in applicable laws or regulations, and the impact of the regulatory environment.

All forward-looking statements included herein attributable to the Company or any person acting on any party’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, the Company undertakes no obligations to update these forward-looking statements for any reason, including to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

TABLE OF CONTENTS


		Page
	Special Note Regarding Forward Looking Information
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets	1
	Unaudited Condensed Consolidated Statements of Operations	2
	Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Deficit	3
	Unaudited Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	38

PART II.	OTHER INFORMATION	41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Surf Air Mobility Inc.

Unaudited Condensed Consolidated Balance Sheets

June 30, 2025 and December 31, 2024

(in thousands, except share and per share data)

(Unaudited)


	June 30, 2025			December 31, 2024
Assets:
Current assets:
Cash	$	22,571		$	21,107
Accounts receivable, net		5,308			4,257
Prepaid expenses and other current assets		10,836			8,511
Total current assets		38,715			33,875
Restricted cash		4,978			568
Property and equipment, net		42,003			42,213
Intangible assets, net		21,543			23,118
Operating lease right-of-use assets		14,983			17,046
Finance lease right-of-use assets		957			1,115
Other assets		5,804			6,123
Total assets	$	128,983		$	124,058
Liabilities and Shareholders’ Deficit:
Current liabilities:
Accounts payable	$	19,466		$	17,976
Accrued expenses and other current liabilities		49,590			45,496
Deferred revenue		17,853			17,393
Current maturities of long-term debt		2,610			2,543
Operating lease liabilities, current		3,809			4,120
Finance lease liabilities, current		263			265
SAFE notes at fair value, current		9			13
Due to related parties, current		3,476			1,804
Total current liabilities		97,076			89,610
Long-term debt, net of current maturities		60,695			59,883
Convertible notes at fair value, non-current		5,879			7,347
Operating lease liabilities, long term		10,524			11,540
Finance lease liabilities, long term		813			948
Due to related parties, long term		50,046			50,457
Other long-term liabilities		19,433			24,270
Total liabilities	$	244,466		$	244,055
Commitments and contingencies (Note 10)
Shareholders’ deficit:
Common stock, $0.0001 par value; 800,000,000 shares authorized as of both June 30, 2025 and December 31, 2024; 36,561,659 shares issued and outstanding as of June 30, 2025 and 16,933,692 shares issued and outstanding as of December 31, 2024	$	4		$	2
Additional paid-in capital		608,420			557,444
Accumulated deficit		(723,907	)		(677,443	)
Total shareholders’ deficit	$	(115,483	)	$	(119,997	)
Total liabilities and shareholders’ deficit	$	128,983		$	124,058

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Surf Air Mobility Inc.

Unaudited Condensed Consolidated Statements of Operations

Three and Six Months Ended June 30, 2025 and 2024

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
Revenue	$	27,431		$	32,366		$	50,937		$	62,990
Operating expenses:
Cost of revenue, exclusive of depreciation and amortization		24,058			27,729			48,764			56,218
Technology and development		2,734			5,658			5,414			12,667
Sales and marketing		1,501			2,578			3,154			5,587
General and administrative		12,628			19,596			23,514			44,205
Depreciation and amortization		2,441			2,062			4,589			4,040
Total operating expenses		43,362			57,623			85,435			122,717
Operating loss	$	(15,931	)	$	(25,257	)	$	(34,498	)	$	(59,727	)
Other income (expense):
Changes in fair value of financial instruments carried at fair value, net	$	(7,753	)	$	(154	)	$	(2,357	)	$	(669	)
Interest expense		(3,766	)		(1,911	)		(7,661	)		(3,582	)
Gain on extinguishment of debt		—			—			39			—
Other income (expense)		(612	)		304			(2,104	)		(51	)
Total other income (expense), net	$	(12,131	)	$	(1,761	)	$	(12,083	)	$	(4,302	)
Loss before income taxes		(28,062	)		(27,018	)		(46,581	)		(64,029	)
Income tax benefit		64			35			117			81
Net loss	$	(27,998	)	$	(26,983	)	$	(46,464	)	$	(63,948	)
Net loss per share applicable to common stockholders, basic and diluted	$	(1.34	)	$	(2.31	)	$	(2.46	)	$	(5.62	)
Weighted-average number of shares of common stock used in net loss per share applicable to common stockholders, basic and diluted		20,902,901			11,698,708			18,925,445			11,371,407

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Surf Air Mobility Inc.

Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Deficit

Three and Six Months Ended June 30, 2025 and 2024

(in thousands, except share data)

(Unaudited)


	Stockholders’ Equity (Deficit)
	Common Stock
	Number of Shares		Amount		Additional Paid-In Capital		Accumulated Deficit			Total Shareholders' Deficit
Balance at March 31, 2025		17,198,257	$	2	$	560,270	$	(695,909	)	$	(135,637	)
Issuance of common stock related to restricted shares		572,060		—		—		—			—
Issuance of common stock related to performance-based restricted shares		360,000		—		—		—			—
Issuance of common stock in private placements		816,326		—		2,000		—			2,000
Issuance of common stock in direct offerings		12,800,002		1		27,891		—			27,892
Issuance of warrants to placement agents in direct offerings		—		—		1,494		—			1,494
Issuance of common stock under Share Purchase Agreement		3,750,000		1		10,743		—			10,744
Issuance of common stock in settlement of vendor payables		24,457		—		60		—			60
Issuance of common stock under software license agreement		1,040,557		—		2,152		—			2,152
Stock-based compensation expense		—		—		3,810		—			3,810
Net loss		—		—		—		(27,998	)		(27,998	)
Balance at June 30, 2025		36,561,659	$	4	$	608,420	$	(723,907	)	$	(115,483	)


	Stockholders’ Equity (Deficit)
	Common Stock
	Number of Shares		Amount		Additional Paid-In Capital		Accumulated Deficit			Total Shareholders' Deficit
Balance at March 31, 2024		11,702,455	$	1	$	533,198	$	(639,500	)	$	(106,301	)
Issuance of common stock related to restricted shares		16,548		—		—		—			—
Issuance of common stock related to stock option exercises		278		—		1		—			1
Issuance of common stock under software license agreement		693,818		—		2,000		—			2,000
Issuance of common stock under marketing agreement		19,676		—		137		—			137
Issuance of common stock under Share Purchase Agreement		—		—		—		—			—
Stock-based compensation expense		—		—		3,056		—			3,056
Net loss		—		—		—		(26,983	)		(26,983	)
Balance at June 30, 2024		12,432,775	$	1	$	538,392	$	(666,483	)	$	(128,090	)


	Stockholders’ Equity (Deficit)
	Common Stock
	Number of Shares		Amount		Additional Paid-In Capital		Accumulated Deficit			Total Shareholders' Deficit
Balance at December 31, 2024		16,933,692	$	2	$	557,444	$	(677,443	)	$	(119,997	)
Issuance of common stock related to restricted shares		592,614		—		—		—			—
Issuance of common stock related to performance-based restricted shares		360,000		—		—		—			—
Issuance of common stock in private placements		816,326		—		2,000		—			2,000
Issuance of common stock in direct offerings		12,800,002		1		27,891		—			27,892
Issuance of warrants to placement agents in direct offerings		—		—		1,494		—			1,494
Issuance of common stock under Share Purchase Agreement		3,750,000		1		10,743		—			10,744
Issuance of common stock in settlement of vendor payables		24,457		—		60		—			60
Issuance of common stock under software license agreement		1,284,568		—		3,099		—			3,099
Stock-based compensation expense		—		—		5,689		—			5,689
Net loss		—		—		—		(46,464	)		(46,464	)
Balance at June 30, 2025		36,561,659	$	4	$	608,420	$	(723,907	)	$	(115,483	)


	Stockholders’ Equity (Deficit)
	Common Stock
	Number of Shares		Amount		Additional Paid-In Capital		Accumulated Deficit			Total Shareholders' Deficit
Balance at December 31, 2023		10,878,634	$	1	$	525,049	$	(602,535	)	$	(77,485	)
Issuance of common stock related to restricted shares		60,984		—		—		—			—
Issuance of common stock related to stock option exercises		278		—		1		—			1
Issuance of common stock under software license agreement		1,272,686		—		6,000		—			6,000
Issuance of common stock under marketing agreement		26,144		—		187		—			187
Issuance of common stock under Share Purchase Agreement		194,049		—		1,456		—			1,456
Stock-based compensation expense		—		—		5,699		—			5,699
Net loss		—		—		—		(63,948	)		(63,948	)
Balance at June 30, 2024		12,432,775	$	1	$	538,392	$	(666,483	)	$	(128,090	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Surf Air Mobility Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2025 and 2024

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2025			2024
Cash flows from operating activities:
Net loss	$	(46,464	)	$	(63,948	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		4,589			4,040
Loss (gain) on sale of fixed asset		818			(187	)
Non-cash operating lease expense		2,765			2,762
Gain on extinguishment of debt		(39	)		—
Stock-based compensation expense		5,689			19,995
Changes in fair value of financial instruments carried at fair value, net		2,357			669
Amortization of debt discounts and debt issuance costs		1,210			92
Deferred income taxes		(117	)		(81	)
Changes in operating assets and liabilities:
Accounts receivable, net		(1,051	)		478
Prepaid expenses and other current assets		(2,325	)		703
Other assets		319			396
Accounts payable		2,745			11,980
Due to a related party		—			2,598
Accrued expenses and other current liabilities		5,455			6,350
Deferred revenue		460			(1,552	)
Operating lease liabilities		(2,849	)		(2,714	)
Other liabilities		(9	)		(13	)
Cash flows used in operating activities	$	(26,447	)	$	(18,432	)
Cash flows from investing activities:
Purchase of property and equipment		(2,483	)		(1,420	)
Proceeds from the sale of assets		2,681			—
Internal-use software development costs		(1,222	)		(1,201	)
Net cash used in investing activities	$	(1,024	)	$	(2,621	)
Cash flows from financing activities:
Borrowings on long-term debt		1,833			—
Principal payments on long-term debt		(1,318	)		(1,547	)
Proceeds from advances under Share Purchase Agreement		10,744			3,811
Principal payments on Mandatory Convertible Security		(9,503	)		—
Proceeds from the issuance of common stock, net of transaction expenses		31,386			—
Proceeds from collateralized borrowings, net of repayment		340			(964	)
Proceeds from borrowings from related parties		—			19,508
Proceeds from exercise of stock options		—			1
Payment of finance lease obligations		(137	)		(113	)
Net cash provided by financing activities	$	33,345		$	20,696
Increase (decrease) in cash, cash equivalents and restricted cash		5,874			(357	)
Cash, cash equivalents and restricted cash at beginning of period		21,675			2,431
Cash, cash equivalents and restricted cash at end of period	$	27,549		$	2,074

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Surf Air Mobility Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Description of Business

Organization

Surf Air Mobility Inc. (the “Company”), a Delaware corporation, is a regional air mobility platform that aims to transform regional flying. The Company is currently comprised of its Air Mobility business, and has a goal of further developing and enhancing its service and technology offerings through its Air Technology business.

Surf Air Global Limited (“Surf Air”) is a British Virgin Islands holding company and was formed on August 15, 2016. Surf Air is a technology-enabled regional air travel network, offering on-demand charter flights. Its customers consist of regional business and leisure travelers. Headquartered in Hawthorne, California, Surf Air commenced flight operations in June 2013.

The Company was incorporated in 2021 and became the ultimate parent of both Surf Air and Southern Airways Corporation (“Southern”) in July of 2023 following the Company’s public listing on the New York Stock Exchange (“NYSE”).

Reverse Stock Split

On August 16, 2024, the Company effected a seven-for-one reverse stock split for all shares of the Company’s common stock issued and outstanding. As a result of the reverse stock split, every seven shares of the Company’s old common stock were converted into one share of the Company’s new common stock. Fractional shares resulting from the reverse stock split were settled by cash payment.

Options, and other like awards, to purchase the Company’s common stock were also adjusted in accordance with their terms to reflect the reverse stock split.

Adjustments resulting from the reverse stock split have been retroactively reflected as of all periods presented herein.

At the Company’s 2025 Annual Meeting of Stockholders, the Company’s stockholders approved a proposal to effect a reverse stock split of the Company’s common stock at a reverse stock split ratio ranging from 2:1 to 5:1 inclusive. The Company’s Board of Directors, in its sole discretion, has the authority to decide, at any time prior to December 31, 2025, whether to implement the reverse stock split.

Liquidity and Going Concern

The Company has incurred losses from operations, negative cash flows from operating activities and has a working capital deficit. In addition, the Company is currently in default of certain excise and property taxes as well as certain debt obligations. These tax and debt obligations are classified as current liabilities on the Company’s Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024. As discussed in Note 10, Commitments and Contingencies, on May 15, 2018, the Company received a notice of a tax lien filing from the Internal Revenue Service (“IRS”) for unpaid federal excise taxes for the quarterly periods from October 2016 through September 2017 in the amount of $1.9 million, including penalties and interest as of the date of the notice. The Company agreed to a payment plan (the “Installment Plan”) whereby the IRS would take no further action and remove such liens at the time such amounts have been paid. In 2019, the Company defaulted on the Installment Plan. Defaulting on the Installment Plan can result in the IRS nullifying such plan, placing the Company in default and taking collection action against the Company for any unpaid balance. The Company is currently in default on these obligations, with a total outstanding federal excise tax liability, including accrued penalties and interest, of $8.8 million included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheet as of June 30, 2025. The Company is currently considering available options regarding settlement of its federal excise tax liability. The Company has also defaulted on its property tax obligations in various California counties in relation to fixed assets, plane usage and aircraft leases. The Company’s total outstanding property tax liability including penalties and interest is approximately $1.8 million as of June 30, 2025. 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 June 30, 2025, the amount of property tax, interest and penalties related to the Los Angeles County tax lien for all unpaid tax years was approximately $1.2 million. The Company is in the process of remediating the late filing, inclusive of the completion of county audits, and payment of the property taxes due to Los Angeles County. As of June 30, 2025, the Company was also in default of the Simple Agreements for Future Equity with Token allocation (“SAFE-T”) note, which matured in July 2019 (see Note 7, Financing Arrangements). The SAFE-T note is subordinate to the Company’s Convertible Note Purchase Agreement (see Note 7, Financing Arrangements); therefore, the Company cannot pay the outstanding balance prior to paying amounts

due under the Convertible Note Purchase Agreement. The SAFE-T note had an outstanding principal amount of $0.5 million as of June 30, 2025 and December 31, 2024.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The airline industry and the Company’s operations are cyclical and highly competitive. The Company’s success is largely dependent on the ability to raise debt and equity capital, achieve a high level of aircraft and crew utilization, increase flight services and the number of passengers flown, and continue to expand into regions profitably throughout the United States.

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

The Company historically has funded its operations and capital needs primarily through the net proceeds received from the issuance of various debt instruments, convertible securities, related party funding, and preferred and common stock financing arrangements and expects to continue to do so, as available. In particular, as market conditions permit, the Company may raise additional funds through sales of equity (including through the second amended and restated Share Purchase Agreement (the “Share Purchase Agreement” with GEM Global Yield LLC SCS (“GEM”)) or convertible debt, using proceeds (as available) to strengthen the Company’s balance sheet, among other things.

During the six months ended June 30, 2025, the Company received net proceeds of $31.4 million through the issuance and sale of 13,616,328 shares of its common stock (or pre-funded warrants in lieu thereof). Additionally, during the year ended December 31, 2024, the Company entered into a 4-year credit agreement with certain affiliates of Comvest Partners, as lenders (the “Comvest Credit Agreement”), pursuant to which the Company borrowed $44.5 million under a four-year term loan, and $5.5 million of delayed draw commitments (the “Credit Agreement”). As of June 30, 2025, $2.3 million has been drawn under the delayed draw commitments. Additionally, during the six months ended June 30, 2025, the Company received $10.7 million through draws under the Share Purchase Agreement with GEM. The Company had previously filed a Form S-1 registration statement (File No. 333-275434) with the Securities and Exchange Commission (“SEC”), registering up to 42,857,143 shares of the Company’s common stock, which represents the balance of the full amount of shares of common stock that the Company estimated could be issued and sold to GEM for advances under the Share Purchase Agreement, plus the amount of shares the Company estimated could be sold to GEM for $50.0 million under the Share Purchase Agreement, (the “Prior Registration Statement”). In connection with the GEM Mandatory Convertible Security (as defined below, see Note 8, Share Purchase Agreement, GEM Purchase, and Mandatory Convertible Security), the Company deregistered all of the shares registered but unsold under the Prior Registration Statement on June 4, 2024. The combined 46,428,571 shares contemplated under the Prior Registration Statement have been included in a Form S-1 Registration Statement (File No. 333-279929), which was declared effective by the SEC on August 7, 2024. As of June 30, 2025, the contractual terms allow the Company to make further advances of up to $97.5 million under the Share Purchase Agreement. Additionally, the Company has the ability to draw an additional $287.9 million under the Share Purchase Agreement, subject to daily volume limitations and GEM’s requirement to hold less than 10% of the fully-diluted shares of the Company. As of June 30, 2025, GEM held 0% of the then fully-diluted shares of the Company. At June 30, 2025, the daily volume limitations under the Share Purchase Agreement restricted our ability to take additional draws under the Share Purchase Agreement to approximately 3.6 million shares per draw. These restrictions do not impact the Company’s ability to execute advances under the Share Purchase Agreement. Additionally, the Company’s ability to draw upon the Share Purchase Agreement is contingent on the Company’s common stock being listed on a national exchange. The Company is currently attempting to resolve one listing requirement violation, pertaining to its market capitalization, with the New York Stock Exchange. Absent an extension granted by the New York Stock Exchange, the Company would need to regain compliance by November 2025. While the Company is currently above the market capitalization threshold, and is not currently subject to de-listing, it has not yet met the threshold for the time period required to cure the deficiency. The Company’s inability to cure this listing requirement violation would impact its ability to raise capital through existing sources.

The Company is currently implementing operational improvements and stringent operating expenses management to improve the profitability of its airline operations. In parallel, the Company is advancing its technology initiatives, including its software technology platform and Caravan electrification programs. In addition, the Company continues to evaluate strategies to obtain additional funding for future operations. These strategies may include, but are not limited to, obtaining additional equity financing, issuing additional debt or entering into other financing arrangements, forming joint venture and other partnerships, and restructuring operations to grow

revenues and decrease expenses. There can be no assurance that the Company will be successful in achieving its strategic plans, or that new financing will be available to the Company in a timely manner or on acceptable terms, if at all. If the Company is unable to raise sufficient financing when needed or events or circumstances occur such that the Company does not meet its strategic plans, the Company will be required to take additional measures to conserve liquidity, which could include, but are not necessarily limited to, reducing certain spending, altering or scaling back development plans, including plans to equip regional airline operations with fully-electric or hybrid-electric aircraft, or reducing funding of capital expenditures, which could have a material adverse effect on the Company’s financial position, results of operations, cash flows, and ability to achieve its intended business objectives. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Note 2. Summary of Significant Accounting Policies

Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the SEC for interim financial information. Accordingly, the interim financial statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2024 and the related notes, as included in the Company’s Form 10-K filed on March 21, 2025. The information herein reflects all material adjustments, including normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for the period presented. The results for the six months ended June 30, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025.

Except to the extent discussed below, there have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2025 from those disclosed in the notes to the Company’s consolidated financial statements for the year ended December 31, 2024.

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements include the assets, liabilities, and operating results of the Company. All intercompany balances and transactions have been eliminated in consolidation.

Cash and Restricted Cash

Cash and restricted cash consists of cash on hand held in commercial bank accounts. The Company classifies all cash with use limited by contractual provisions as restricted cash. As of June 30, 2025 and December 31, 2024 the Company had restricted cash of $5.0 million and $0.6 million, respectively, consisting of contractually restricted amounts under the Park Lane Reimbursement Agreement (see Note 16. Related Party Balances and Transactions) and collateral related to a corporate credit card. The Company has classified the restricted cash as long term, which represents the expected duration of the restrictions.

Accounts Receivable, Net

Accounts receivable primarily consist of amounts due from the U.S. Department of Transportation (“DOT”) in relation to certain air routes served by the Company under the Essential Air Service or EAS program, amounts due from airline, non-airline business partners, and pending transactions with credit card processors. Receivables from the U.S. DOT and our business partners are typically settled within 30 days. All accounts receivable are reported net of an allowance for credit losses, which was not material as of June 30, 2025, and December 31, 2024. The Company has considered past and future financial and qualitative factors, including aging, payment history and other credit monitoring indicators, when establishing the allowance for credit losses.

Mandatory Convertible Security

The Company’s Mandatory Convertible Security with GEM, entered into as of August 7, 2024, is a financial instrument whereby GEM is able to convert portions of the par amount, either before or at maturity, into shares of common stock of the Company (the “Mandatory Convertible Security”). Due to certain provisions included in the Mandatory Convertible Security, including potential settlement of the outstanding par amount in a variable number of shares of the Company’s common stock, it has been classified as a liability as of December 31, 2024 and June 30, 2025 (see Note 8, Share Purchase Agreement and GEM Mandatory Convertible Security).

The Company has accounted for the Mandatory Convertible Security as an equity-linked debt instrument, which requires it to be remeasured to fair value at each reporting period with changes in fair value recorded in Changes in fair value of financial instruments carried at fair value, net on the Consolidated Statements of Operations.

The fair value of the Mandatory Convertible Security is estimated using a model based on multiple stock price paths developed through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the Company will not be able to satisfy the liability through the issuance of shares of common stock. A Monte Carlo simulation model requires the use of various assumptions, including the underlying stock price, volatility, contractual term, and the risk-free interest rate as of the valuation date. The estimated fair value of the instrument is considered a Level 3 fair value measurement as there are significant inputs not observable in the market. The resulting liability is included as part of Other long-term liabilities on the Condensed Consolidated Balance Sheets.

Collateralized Borrowings

On August 9, 2024, the Company entered into a new revolving accounts receivable financing arrangement that will allow the Company to borrow a designated percentage of eligible accounts receivable, as defined, up to a maximum unsettled amount of $5.0 million. The agreement is secured by a first security interest in certain assets of Southern Airways Express, a subsidiary of Southern. The financing arrangement is uncommitted, and upon funding does not qualify for sale accounting as the Company does not relinquish control of the receivables based on, among other things, the nature and extent of the Company’s continuing involvement.

Accordingly, the accounts receivable remain on the Company’s Condensed Consolidated Balance Sheets until paid by the customer and cash proceeds from the financing arrangement are recorded as collateralized borrowing in Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets, with attributable interest expense recognized over the life of the related transactions. Interest expense and contractual fees associated with the collateralized borrowings are included in interest expense and other expense, net, respectively, in the accompanying Condensed Consolidated Statements of Operations.

Restricted Stock Unit Awards

The grant date fair value of restricted stock units (“RSUs”) is estimated based on the fair value of the Company’s common stock on the date of grant. Prior to the Company’s direct listing in July 2023, RSUs granted by the Company vested upon the satisfaction of both service-based vesting conditions and liquidity event-related performance vesting conditions. The liquidity event-related performance vesting conditions were achieved upon the consummation of the Company's direct listing. Stock-based compensation related to such awards was recorded in full, as of the date of the Company’s direct listing. Since the Company’s direct listing in July 2023, the Company has only granted RSUs that vest upon the satisfaction of a service-based vesting condition and the compensation expense for these RSUs is recognized on a straight-line basis over the requisite service period.

The Company has granted founder performance-based restricted stock units (“Founder PRSUs”) that contain a market condition in the form of future stock price targets. The grant date fair value of the Founder PRSUs was determined using a Monte Carlo simulation model and the Company estimates the derived service period of the Founder PRSUs. The grant date fair value of Founder PRSUs containing a market condition is recorded as stock-based compensation over the derived service period. If the stock price goals are met sooner than the derived service period, any unrecognized compensation expenses related to the Founder PRSUs will be expensed during the period in which the stock price targets are achieved. Provided that each founder continues to be employed by the Company, stock-based compensation expense is recognized over the derived service period, regardless of whether the stock price goals are achieved.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of income and expense during the reporting period.

On an ongoing basis, the Company evaluates its estimates using historical experience and other factors including the current economic and regulatory environment as well as management’s judgment. Items subject to such estimates and assumptions include: revenue recognition and related allowances, valuation allowance on deferred tax assets, certain accrued liabilities, useful lives and recoverability of long-lived assets, fair value of assets acquired and liabilities assumed in acquisitions, legal contingencies, assumptions underlying convertible notes and convertible securities carried at fair value and stock-based compensation. These estimates may change as new events occur and additional information is obtained and such changes are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates, and any such differences may be material to the Company’s condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its financial statements.

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires public entities to disaggregate, in a tabular presentation, certain income statement expenses into different categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The guidance is effective for fiscal years beginning after December 15, 2026, with early adoption permitted, and may be applied retrospectively. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and related disclosures.

Note 3. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):


	June 30, 2025		December 31, 2024
Prepaid marketing	$	2,381	$	2,434
Engine reserves		2,297		1,667
Prepaid software		2,019		2,177
Employee retention credit		1,695		—
Vendor operator prepayments		906		744
Prepaid insurance		495		766
Prepaid fuel		31		39
Other		1,012		684
Total prepaid expenses and other current assets	$	10,836	$	8,511

Note 4. Property, Plant and Equipment, Net

Property and equipment, net, consists of the following (in thousands):


	June 30, 2025			December 31, 2024
Aircraft, equipment and rotable spares	$	40,181		$	40,290
Equipment purchase deposits		2,000			2,000
Leasehold improvements		2,932			2,301
Office, vehicles and ground equipment		1,230			1,158
Internal-use software		3,952			2,729
Property and equipment, gross		50,295			48,478
Accumulated depreciation		(8,292	)		(6,265	)
Property and equipment, net	$	42,003		$	42,213

The Company recorded depreciation expense of $1.6 million and $1.2 million for the three months ended June 30, 2025 and 2024, respectively. The Company recorded depreciation expense of $2.9 million and $2.2 million for the six months ended June 30, 2025 and 2024, respectively. Depreciation expense is recognized as a component of Depreciation and Amortization expense in the accompanying Condensed Consolidated Statement of Operations.

For the three and six months ended June 30, 2025 the Company recorded losses of $0.1 million and $0.8 million, respectively, on the sale of property and equipment, and for the three and six months ended June 30, 2024, any gain or loss on disposal of property and equipment was not material.

Note 5. Intangible Assets, Net

Intangibles assets, net, consists of the following (in thousands):


	June 30, 2025			December 31, 2024
EAS contracts	$	25,770		$	25,770
Tradenames and trademarks		8,340			8,340
Software		3,122			3,122
Other intangibles		225			225
Intangible assets, gross		37,457			37,457
Accumulated amortization		(15,914	)		(14,339	)
Intangible assets, net	$	21,543		$	23,118

The Company recorded amortization expense of $0.7 million and $0.9 million for the three months ended June 30, 2025 and 2024, respectively. The Company recorded amortization expense of $1.6 million and $1.8 million for the six months ended June 30, 2025 and 2024, respectively. Amortization expense is recognized as a component of Depreciation and Amortization expense in the accompanying Condensed Consolidated Statement of Operations.

Expected future amortization as of June 30, 2025 is as follows (in thousands):


	Amount
Remainder of 2025	$	1,476
2026		2,915
2027		2,764
2028		2,577
2029		2,577
Thereafter		9,234
Total	$	21,543

Note 6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


	June 30, 2025		December 31, 2024
Software license fee payable	$	11,061	$	9,953
Accrued professional services		10,313		10,431
Excise and franchise taxes payable		8,863		7,729
Accrued compensation and benefits		6,097		5,940
Collateralized borrowings		6,064		5,842
Accrued Monarch legal settlement		1,314		1,314
Accrued major maintenance		2,567		427
Interest and commitment fee payable		140		114
Other accrued liabilities		3,171		3,746
Total accrued expenses and other current liabilities	$	49,590	$	45,496

Collateralized Borrowings

The Company has a revolving accounts receivable financing arrangement that currently allows the Company to borrow a designated percentage of eligible accounts receivable, as defined in the agreement, up to a maximum unsettled amount of $5.0 million. The agreement is secured by a first security interest in all assets of Southern Airways Express, LLC, a subsidiary of Southern. The related interest rate is the prime rate plus 1% per annum. Additionally, the Company pays certain ancillary fees associated with each borrowing that vary depending on the borrowed amount and duration, which is generally no more than 45 days.

For the three months ended June 30, 2025, the Company borrowed a total of $10.5 million under this financing facility, of which $7.4 million was settled through the transfer of pledged receivables. Interest expense incurred on these borrowings for the three months

ended June 30, 2025 amounted to $118 thousand, and is included in interest expense in the accompanying Condensed Consolidated Statements of Operations.

For the six months ended June 30, 2025, the Company borrowed a total of $19.0 million under this financing facility, of which $16.0 million was settled through the transfer of pledged receivables. Interest expense incurred on these borrowings for the six months ended June 30, 2025 amounted to $240 thousand, and is included in interest expense in the accompanying Condensed Consolidated Statements of Operations.

As of June 30, 2025, and December 31, 2024, the outstanding amount due under this facility amounted to $3.1 million and $2.8 million, respectively. As of June 30, 2025, and December 31, 2024, the Company was in compliance with all covenants.

In addition, during the year ended December 31, 2024, the Company received an advance payment of $3.0 million from a financing institution related to an expected future payment under the IRS’ Employee Retention Credit Program. As of December 31, 2024 and June 30, 2025, the Company has recorded $3.0 million within Collateralized borrowings. Such amounts are collateralized against the value of the credits to be received, as well as other assets of Southern Airways Express, a subsidiary of Southern. During the three months ended June 30, 2025, the Company recognized $1.7 million in receivables relating to the IRS’ Employee Retention Credit Program, which were received and settled against the advanced borrowing in July 2025.

Accrued Professional Services

During the fourth quarter of 2024, the Company entered into agreements with several professional service firms engaged in support of the Company’s July 27, 2023 direct listing on the NYSE. These agreements modify the payment terms of prior service agreements to be contingent on future equity or debt financing by the Company. The Company estimates that a total of $7.1 million will be due under these agreements over the next five years. Given the uncertainty regarding the timing and amount of payment, all amounts have been classified as current liabilities with the Company’s consolidated balance sheet.

Note 7. Financing Arrangements

The Company’s total debt due to unrelated parties consist of the following (in thousands):


	June 30, 2025			December 31, 2024
Note payable to bank, fixed interest rate of 4.65%, due November 2025	$	4		$	8
Note payable to a financing company, fixed interest rate of 5.49%, due December 2026		89			120
Notes payable to Clarus Capital, fixed interest rate of 8.66%, due April, June and September 2027		13,298			14,022
Note payable to Skywest, fixed interest rates of 4%, due April 2028		2,154			2,497
Note payable to Tecnam, fixed interest rate of 6.75%, due July and August 2032		2,830			2,962
Comvest Credit Agreement, floating interest rate of SOFR + 5%, due November 2028		46,817			44,984
Debt issuance costs		(1,887	)		(2,167	)
Long-term debt, gross	$	63,305		$	62,426
Current maturities of long-term debt		(2,610	)		(2,543	)
Long-term debt, net of current maturities	$	60,695		$	59,883

Future maturities of total debt as of June 30, 2025 are as follows (in thousands):


	June 30, 2025
Remainder of 2025	$	1,279
2026		2,708
2027		12,028
2028		47,502
2029		421
Thereafter		1,254
Total	$	65,192

The Company is subject to customary affirmative covenants and negative covenants on all of the above notes payable. As of June 30, 2025, the Company was in compliance with all covenants in the loan agreements.

Fair Value of Convertible Instruments

The Company has elected the fair value option for the convertible notes, which requires them to be remeasured to fair value each reporting period with changes in fair value recorded in changes in fair value of financial instruments carried at fair value, net, on the Condensed Consolidated Statements of Operations, except for change in fair value that results from a change in the instrument specific credit risk which is presented separately within other comprehensive income. The fair value estimate includes significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

On June 21, 2023, the Company entered into a convertible note purchase agreement (the “Convertible Note Purchase Agreement”) with Partners for Growth V.L.P. (“PFG”) for a senior unsecured convertible promissory note for an aggregate principal amount of $8.0 million. The note bears interest at a rate of 9.75% and matures on December 31, 2024. All unpaid principal and interest balances may be converted into shares of the Company’s common stock, at the option of the holder, at a price equal to 120% of the initial listing price of the Company’s common stock.

On July 27, 2023, the Company received $8.0 million in funding, following satisfaction of all conditions precedent outlined under the Convertible Note Purchase Agreement. Based on the $35.00 per share opening price on the first day of listing of the Company’s common stock, the principal of the Convertible Note Purchase Agreement would be convertible into 190,476 shares of the Company’s common stock.

On November 14, 2024, the Company amended the existing Convertible Note Purchase Agreement with PFG, which had an outstanding principal amount of $8.0 million issued to PFG upon amendment.

The Convertible Note Purchase Agreement will accrue interest at the greater of (x) SOFR (subject to a 1.00% floor) plus 5.00% and (y) 9.75%. In the event the Company raises capital in certain equity offerings, a portion of the net cash proceeds from such equity offerings is required to be applied to repay the obligations under the Convertible Note Purchase Agreement. The maturity of the Convertible Note Purchase Agreement is December 31, 2028, which may be accelerated upon the occurrence of certain events of default.

PFG has the right to convert, at its option, the amounts outstanding under the Convertible Note Purchase Agreement into common stock of the Company, at a conversion price of $42.00 per share.

The obligations under the Convertible Note Purchase Agreement are guaranteed by certain of the Company’s subsidiaries, and subject to a security interest on assets of the Company and the subsidiary guarantors, subject to certain exceptions.

As of June 30, 2025, the Company was in compliance with all covenants under the Convertible Note Purchase Agreement.

Fair value of convertible notes (in thousands):


	Fair Value at
	June 30, 2025		December 31, 2024
Convertible Note Purchase Agreement	$	5,879	$	7,347
Total	$	5,879	$	7,347

Fair Value of SAFE Notes

The Company’s SAFE-T note is carried at fair value, with fair value determined using Level 3 inputs. The Company determined that the SAFE-T instruments should be classified as liabilities based on evaluating the characteristics of the instruments, which contained both debt and equity-like features. The SAFE-T instrument matured in July 2019. As of June 30, 2025 and December 31, 2024, the Company was in default of the SAFE-T note, but the holder has elected not to effect an equity conversion of the instrument. The SAFE-T note is subordinate to the Company’s Convertible Note Purchase Agreement; therefore, the Company cannot pay the outstanding balance prior to paying amounts due under the Convertible Note Purchase Agreement. The SAFE-T note had an outstanding principal amount of $0.5 million as of June 30, 2025 and December 31, 2024. Subsequent changes in the fair value of the SAFE-T notes are recorded as part of changes in fair value of financial instruments carried at fair value, net, within the Condensed Consolidated Statements of Operations.

Fair value of SAFE-T note (in thousands):


	Fair Value at
	June 30, 2025			December 31, 2024
SAFE-T	$	9		$	13
Total	$	9		$	13
Less: SAFE notes at fair value, current		(9	)		(13	)
SAFE notes at fair value, long term	$	—		$	—

Note 8. Share Purchase Agreement and GEM Mandatory Convertible Security

Share Purchase Agreement

During 2020, the Company entered into a Share Purchase Agreement (“SPA”) with GEM and an entity affiliated with GEM to provide incremental financing in the event the Company completed a business combination transaction with a SPAC, IPO, or direct listing. On May 17, 2022, February 8, 2023, and September 18, 2023, the SPA was amended to increase the maximum aggregate shares of the Company’s common stock that may be required to be purchased by GEM from $200.0 million to $400.0 million (the “Aggregate Limit”) and amend the commitment fee required under the SPA from $4.0 million to 571,429 shares of the Company’s common stock. Pursuant to the amended and restated SPA, and subject to the satisfaction of certain conditions, the Company will have the right from time to time at its option to direct GEM to purchase up to the Aggregate Limit of shares of the Company’s common stock over the term of the amended and restated SPA. Upon its public listing, the Company may request GEM to provide advances under the SPA in an aggregate amount of up to $100.0 million, provided that individual advances are not to exceed $25.0 million each, with the first advance not to exceed $7.5 million. Each advance will reduce the amount that the Company can request for future purchases under the SPA. Following an advance, the number of shares to be transferred to GEM will be based on an average of the volume-weighted average trading price of the Company’s common stock over a period of fifteen trading days following the receipt of an advance, subject to a 15 day extension in certain circumstances. This average price will be subject to a contractual discount of 10%. Additionally, contractual provisions within the SPA provide that in no event may GEM receive a share issuance, from a draw under the SPA, that would raise their share ownership percentage above 10% of the Company. This provision may impact the Company’s ability to request additional draws under the SPA.

The Company has accounted for the shares issuance contracts under the SPA, as amended, as derivative financial instruments which are recorded at fair value within Other long-term liabilities on the Consolidated Balance Sheets. During the year ended December 31, 2024, the Company settled $2.5 million in advances received from GEM through the issuance of 1,311,235 shares of the Company’s common stock. The Company also received total proceeds of $1.4 million during the year ended December 31, 2024, through draws under the SPA. This resulted in the issuance of 236,535 shares of the Company’s common stock. Additionally, liabilities related to advances received under the SPA prior to March 1, 2024 were reclassified as part of the Mandatory Convertible Security, as discussed below.

During the three months ended June 30, 2025, the Company received total proceeds of $10.7 million through completed draws under the SPA, resulting in the issuance of 3,750,000 shares of the Company’s common stock. As of June 30, 2025, the Company had $287.9 million in remaining availability for draws under the SPA.

As there were no unsettled draws or advances as of the end of both periods, the fair value of the liability related to the SPA was $0 and $0 as of June 30, 2025 and December 31, 2024, respectively. Changes in fair value were recorded in Changes in fair value of financial instruments carried at fair value, net on the Consolidated Statements of Operations.

GEM Mandatory Convertible Security

On March 1, 2024, the Company entered into a mandatory convertible security purchase agreement (the “MCSPA”) with GEM. Pursuant to the MCSPA, the Company has agreed to issue and sell to GEM, and GEM has agreed to purchase from the Company, a mandatory convertible security with a par amount of up to $35,200,000 (the “Mandatory Convertible Security”), which shall be convertible into a maximum of 1,142,857 shares of the Company’s common stock, par value $0.0001 per share, subject to adjustment as described in the MCSPA.

The Company issued the Mandatory Convertible Security on August 7, 2024. The Mandatory Convertible Security will mature on August 7, 2029 (the “Maturity Date”), unless earlier converted or redeemed pursuant to the terms set forth in the Mandatory Convertible Security. As partial consideration for GEM’s purchase of the Mandatory Convertible Security, GEM delivered to the Company 900,000 shares of the Company’s common stock. In addition, the Company’s ability to take both regular drawdowns of up to

$300.0 million and advance drawdowns of up to $100.0 million pursuant to the Company’s share subscription facility with GEM, which provides the Company with the option from time to time to direct GEM to purchase a specified number of shares of the Company’s common stock for an aggregate purchase price of up to $400.0 million, was restored to full capacity. The respective formulas that the Company and GEM used to determine the par amount of the Mandatory Convertible Security and the consideration for GEM’s purchase of the Mandatory Convertible Security are each set forth in the MCSPA.

On the Maturity Date, the Company will pay to GEM, at the Company’s option, cash or shares of the Company’s common stock in an amount equal to the then outstanding par amount of the Mandatory Convertible Security divided by the lesser of (a) $31.15 (the “Fixed Conversion Price”) and (b) the average of the five lowest volume-weighted average prices per share for the Company’s common stock trading on the NYSE during the 30 trading days immediately preceding the Maturity Date (the “Floating Conversion Price”).

Prior to the Maturity Date, GEM will have the option to convert any portion of the Mandatory Convertible Security into shares of the Company’s common stock at a conversion rate equal to the portion of the par amount to be converted into shares of the Company’s common stock divided by the lesser of (a) the Fixed Conversion Price and (b) the Floating Conversion Price. If, following the conversion by GEM of any portion of the Mandatory Convertible Security into 1,142,857 shares of the Company’s common stock at any time prior to the Maturity Date, any par amount of the Mandatory Convertible Security remains outstanding, the Company will have the option to (x) increase the maximum number of shares of the Company’s common stock into which the Mandatory Convertible Security may convert, with such increase to be at the Company’s sole discretion, (y) pay to GEM an amount in cash equal to 115% of the remaining outstanding par amount or (z) increase the remaining outstanding par amount by 15% of the amount outstanding immediately after issuance of the 1,142,857 shares of the Company’s common stock. GEM may not convert any portion of the Mandatory Convertible Security into shares of the Company’s common stock to the extent that GEM (together with its affiliates and any other parties whose holdings would be aggregated with those of GEM for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended) would beneficially own more than 4.99% of the shares of the Company’s common stock outstanding after such conversion; provided, however, that GEM may increase or decrease such maximum limitation percentage to not more than 9.99% upon 61 days’ notice to the Company.

The Company may, at its option, redeem the Mandatory Convertible Security, in whole or in part, in cash at a price equal to 115% of the outstanding par amount to be redeemed. During the three months ended June 30, 2025, the Company made payments against the outstanding principal of the Mandatory Convertible Security totaling $9.5 million. The outstanding principal balance of the Mandatory Convertible Security at June 30, 2025 and December 31, 2024 was $29.1 million and $38.6 million, respectively.

Pursuant to the terms of the MCSPA and the Mandatory Convertible Security, GEM has agreed that, beginning March 1, 2024 and for so long as any shares of the Company’s common stock are beneficially owned by GEM (together with its affiliates and any entity managed by GEM, the “GEM Entities”), the GEM Entities will limit the daily volume of sales of shares of the Company’s common stock then beneficially owned by the GEM Entities to no more than 1/10th of the daily trading volume of shares of the Company’s common stock on the NYSE on the trading day immediately preceding the applicable date of such sales.

The fair value of the liability was estimated using a model based on multiple stock price paths developed through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the Company will not be able to satisfy the liability through the issuance of shares of common stock and taking into account the value of the consideration transferred to the Company upon closing of the MCSPA. This was inclusive of the value of the shares returned to the Company and the cancellation of the share transfers due in settlement of the GEM derivative liability (see Note 9, Fair Value Measurements). For the three and six months ended June 30, 2025, the Company recorded losses on the change in fair value of financial instruments carried at fair value of $8.6 million and $4.7 million, respectively, related to the Mandatory Convertible Security, resulting in a liability of $18.4 million as of June 30, 2025, which was included as part of other long-term liabilities within the Condensed Consolidated Balance Sheets. Significant inputs in determining period end fair values of the Mandatory Convertible Security are as follows:


	June 30, 2025			December 31, 2024
Par amount		29,112			38,615
Expected volatility		157.1	%		155.7	%
Discount rate		3.7	%		4.3	%
Share price	$	3.69		$	5.39

Note 9. Fair Value Measurements

The fair values of the convertible notes, SAFE instruments, preferred stock warrant liabilities, and derivative liability were based on the estimated values of the notes, SAFE instruments, warrants, and derivatives upon conversion including adjustments to the

conversion rates, which were probability weighted associated with certain events, such as a sale of the Company or the Company becoming a public company. The estimated fair values of these financial liabilities were determined utilizing the Probability-Weighted Expected Return Method and is considered a Level 3 fair value measurement.

Assets and liabilities are classified in the hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

The following tables summarize the Company’s financial liabilities that are measured at fair value on a recurring basis in the condensed consolidated financial statements (in thousands):


	Fair Value Measurements at June 30, 2025 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Convertible notes at fair value	$	—	$	—	$	5,879	$	—
SAFE notes at fair value		—		—		9		—
LamVen Note		—		—		50,000		—
Mandatory Convertible Security		—		—		18,393		—
Total financial liabilities	$	—	$	—	$	74,281	$	—


	Fair Value Measurements at December 31, 2024 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Convertible notes at fair value	$	—	$	—	$	7,347	$	—
SAFE notes at fair value		—		—		13		—
LamVen Note		—		—		50,000		—
Mandatory Convertible Security		—		—		23,221		—
Total financial liabilities	$	—	$	—	$	80,581	$	—

The following table provides a reconciliation of the Company’s financial liabilities that are measured at fair value using inputs classified as Level 3 (in thousands):


	Convertible Notes at Fair Value			SAFE Notes			LamVen Note		Mandatory Convertible Security
Balance at December 31, 2024	$	7,347		$	13		$	50,000	$	23,221
Change in fair value		(1,468	)		(4	)		—		4,675
Payments		—			—			—		(9,503	)
Balance at June 30, 2025	$	5,879		$	9		$	50,000	$	18,393

Long-Term Debt

The carrying amounts and fair values of the Company’s long-term debt obligations were as follows:


	As of June 30, 2025				As of December 31, 2024
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current maturities	$	65,192	$	65,866	$	64,593	$	64,707

In assessing the fair value of the Company’s long-term debt, including current maturities, the Company primarily uses an estimation of discounted future cash flows of the debt at rates currently applicable to the Company for similar debt instruments of comparable maturities and comparable collateral requirements.

Note 10. Commitments and Contingencies

Software License Agreements

On May 18, 2021, the Company executed two agreements with Palantir Technologies Inc. (“Palantir”) to license a suite of software for the term of seven years commencing on the effective date. The agreements identify two phases where Palantir provides services to customize the software: an initial term from May 18, 2021 through June 30, 2023 with a cost of $11.0 million and an enterprise term from July 1, 2023 to June 30, 2030 with a cost of $27.5 million, for a total cost of $38.5 million. As of June 30, 2025 and December 31, 2024, the Company capitalized $3.3 million and $3.1 million, respectively, related to the software that Palantir has provided to the Company. During the six months ended June 30, 2025, the Company settled $3.1 million in outstanding payables to Palantir through the issuance of 1,284,568 shares of the Company's common stock. As of June 30, 2025, the Company had $24.3 million in remaining commitments under these agreements.

Licensing, Exclusivity and Aircraft Purchase Arrangements

Textron Agreement

On September 15, 2022, the Company entered into agreements with Textron Aviation Inc. and one of its affiliates (collectively, “TAI”), for engineering services and licensing, sales and marketing, and aircraft purchases, which became effective as of the Company’s direct listing on July 27, 2023 (“TAI Effective Date”).

The engineering services and licensing agreement provides, among other things, that TAI will provide the Company with certain services in furtherance of development of an electrified powertrain technology (the “SAM System”). The engineering agreement requires payment by the Company as such services are provided by TAI. Under this agreement, the Company agrees to meet certain development milestones by specified dates, including issuance of a supplemental type certificate by the Federal Aviation Administration (“FAA”). Should the Company fail to meet certain development milestones, TAI has the right to terminate the collaboration agreement. The Company is currently complying with necessary development milestones under this agreement.

The licensing agreement grants the Company a nonexclusive license to certain technical information and intellectual property for the purpose of developing an electrified propulsion system for the Cessna Caravan aircraft, and to assist in obtaining Supplemental Type Certificates (“STC”) from the FAA, including any foreign validation by any other aviation authority, for electrified propulsion upfits/retrofits of the Cessna Caravan aircraft. The licensing agreement provides for payment by the Company of license fees aggregating $60.0 million over a multi-year period, with an initial $12.5 million in deposits being made as of December 31, 2023. During the year ended December 31, 2024, the Company and TAI agreed to apply a previous deposit under the aircraft purchase agreement to amounts due under the licensing agreement. Remaining payments due under the initial license fees of $9.5 million are due in 2025. The remaining $35.0 million of payments under the licensing agreement will be due, via annual payments, following the Company’s receipt of the STC, which the Company continues to actively pursue.

Under the sales and marketing agreement, the parties agreed to develop marketing, promotional and sales strategies for the specifically configured Cessna Grand Caravans and further agreed to: (a) include Cessna Grand Caravans fitted with the SAM System (the “SAM Aircraft”) in sales and marketing materials (print and digital) distributed to authorized dealers, (b) prominently display the SAM Aircraft on their respective websites and social media, (c) include representatives of the Company and TAI at trade show booths, (d) market the SAM Aircraft and conversions to SAM Aircraft to all owners of pre-owned Cessna Grand Caravans, and (e) not advertise or offer any third-party-developed electrified variants of the Cessna Grand Caravan. Certain technologies for aircraft propulsion are specifically carved out from TAI’s agreement to exclusively promote the SAM System for Cessna Grand Caravans. The sales and marketing agreement provides for payment by the Company of exclusivity fees aggregating $40.0 million, with certain amounts deferred such that the aggregate fee is payable over four years commencing on the earlier of the year after the Company obtains an STC for the SAM System on the Cessna Grand Caravan or the 5th anniversary of the TAI Effective Date. The Company’s obligation to pay exclusivity fees in any year may be offset, in whole or in part, based on the achievement of certain sales milestones of SAM Aircraft and Cessna Grand Caravans subsequently converted to a SAM System.

Under the aircraft purchase agreement, the Company may purchase from TAI 90 specifically configured Cessna Caravans at prevailing market rates whereby the aggregate purchase price could be approximately $297.0 million, with an option to purchase an additional 26 specifically configured Cessna Caravans having an aggregate purchase price in excess of $85.8 million, over the course of 7 years. The final price to be paid by the Company will be dependent upon a number of factors, including the final specifications of such aircraft and any price escalations. As of June 30, 2025, the Company has made deposits of $2.0 million under this agreement, with the Company being required to make an additional deposit of $8.0 million during 2025. The Company accepted delivery of four aircraft under the aircraft purchase agreement during 2024.

Jetstream Agreement

On October 10, 2022, the Company and Jetstream Aviation Capital, LLC (“Jetstream”) entered into an agreement (the “Jetstream Agreement”) that provides for a sale and/or assignment of purchase rights of aircraft from the Company to Jetstream and the leaseback of such aircraft from Jetstream to the Company within a maximum aggregate purchase amount of $450.0 million, including a $120.0 million total minimum usage obligation by the Company. The agreement may be terminated: (i) upon a termination notice by either party in the event that a material adverse change in the business of the other party is not resolved within 30 days of such notice; and (ii) as mutually agreed in writing by the parties. No transactions have been executed under this agreement as of June 30, 2025.

Palantir Joint Venture

On August 9, 2024, the Company entered into a joint venture agreement (the “JV Agreement”) with Palantir. Pursuant to the JV Agreement, the Company established Surf Air Technologies Inc. (“Surf Air Technologies”), a subsidiary of the Company, in order to develop, market, sell, maintain, and support an artificial intelligence-powered software platform for the advanced air mobility industry, to provide operators of all types of aircraft, amongst other software products and solutions, with systems for the management of planes, airline operations, and customer facing applications (the “Software Platform”).

The closing of the JV Agreement was anticipated to occur no later than June 30, 2025. In lieu of the consummation of the JV Agreement, the Company and Palantir modified the enterprise term of the existing software license agreement during July 2025, as an expansion and refinement of the overall relationship between the companies (Note 19. Subsequent Events).

Guarantees

The Company indemnifies its officers and directors for certain events or occurrences arising as a result of the officer or director serving in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential future amount the Company could be required to pay under these indemnification agreements is unlimited. The Company believes its insurance sufficiently covers liabilities that may arise from the acts of its officers and directors and as of June 30, 2025 the Company is not aware of any pending claims or liabilities.

The Company enters into indemnification provisions under agreements with other parties in the ordinary course of business, typically with business partners, contractors, customers, landlords and investors. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of its activities or, in some cases, as a result of the indemnified party’s activities under the agreement. These indemnification provisions sometimes include indemnifications relating to representations the Company has made with regards to intellectual property rights. These indemnification provisions generally survive termination of the underlying agreement. The maximum potential future amount the Company could be required to pay under these indemnification provisions is unlimited.

Legal Contingencies

In 2017, the Company acquired Rise U.S. Holdings, LLC (“Rise”). Prior to the close of the acquisition, Rise Alpha, LLC and Rise Management, LLC (both of which are wholly-owned subsidiaries of Rise and hereinafter referred to as the “Rise Parties”), were served with a petition for judgment by Menagerie Enterprises, Inc. (“Monarch Air”), relating to breach of contract for failure to pay Monarch Air pursuant to the terms and conditions of a flight services agreement with Monarch Air, which occurred prior to the Company’s acquisition of Rise. The Rise Parties filed numerous counterclaims against Monarch Air, including fraud, breach of contract and breach of fiduciary duty. Rise, a subsidiary of the Company, was named as a party in the lawsuit. During 2018 and 2019, certain summary judgments were granted in favor of Monarch Air.

On November 8, 2021, the Rise Parties entered into a final judgment in respect of litigation to finally resolve all claims raised by Monarch Air and the Rise Parties agreed to pay actual damages of $1.0 million, pre-judgment interest of $0.2 million, attorneys’ fees of $60 thousand and court costs of approximately $3 thousand. Since then, Monarch Air has been conducting post-judgment discovery. The full settlement had been accrued within Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets by the Company as of June 30, 2025 and December 31, 2024.

The Company is also a party to various other claims and matters of litigation incidental to the normal course of its business, none of which were expected to have a material adverse effect on the Company as of June 30, 2025. However, the resolution of, or increase in any accruals for, one or more matters may have a material adverse effect on the Company’s results of operations and cash flows.

FAA Matters

Our operations are highly regulated by several U.S. government agencies, including the U.S. DOT, the FAA and the Transportation Security Administration. Requirements imposed by these regulators (and others) may restrict the ways we may conduct our business, as

well as the operations of our third-party aircraft operator customers. Failure to comply with such requirements may result in fines and other enforcement actions by the regulators.

Tax Commitment

On May 15, 2018, the Company received notice of a tax lien filing from the IRS for unpaid federal excise taxes for the quarterly periods beginning October 2016 through September 2017 in the amount of $1.9 million, including penalties and interest as of the date of the notice. The Company agreed to an Installment Plan whereby the IRS agreed to take no further action and remove such liens upon the payment of such amounts. In 2019, the Company defaulted on the Installment Plan. Defaulting on the Installment Plan can result in the IRS nullifying such plan, placing the Company in default and taking collection action against the Company for any unpaid balance. The Company’s total outstanding federal excise tax liability, including accrued penalties and interest, is recorded in Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets and is in the amount of $8.7 million and $7.7 million as of June 30, 2025 and December 31, 2024, respectively. In June 2024, the Company submitted a formal offer-in-compromise (“OIC”) to the IRS, seeking to resolve all consolidated excise tax liabilities. Under the terms of the OIC, all collection actions against the Company, in relation to these matters, were abated and the Company made $34 thousand monthly payments on historical excise tax liabilities through November 2024. In December 2024, the Company received notice from the IRS that the OIC had been rejected on an administrative basis. The Company intends to resubmit a revised OIC once these administrative matters are resolved. Additionally, the Company will continue to explore all additional available options regarding settlement of its federal excise tax liability.

During 2018, the Company defaulted on its property tax obligations in various California counties in relation to fixed assets, plane usage and aircraft leases. The Company’s total outstanding property tax liability including penalties and interest is $1.8 million and $1.6 million as of June 30, 2025 and December 31, 2024, respectively.

Note 11. Disaggregated Revenue

The disaggregated revenue for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Scheduled	$	21,405	$	24,242	$	39,189	$	47,223
On-Demand		6,026		8,124		11,748		15,767
Total revenue	$	27,431	$	32,366	$	50,937	$	62,990

The revenue deferred and recognized for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands):


	Three Months Ended June 30,					Six Months Ended June 30,
	2025			2024		2025		2024
Deferred revenue, beginning of period	$	16,519		$	21,230	$	17,482	$	21,726
Revenue deferred		15,351			17,972	$	26,613	$	35,211
Revenue recognized		(14,017	)		(19,026

SURF AIR MOBILITY INC. 10-Q