Surf Air Mobility (SRFM) risk factors, FY2024 10-K

Risks Related to Our Financial Position and Capital Requirements

1. 01There is substantial doubt about our ability to continue as a going concern. We will need additional financing to execute our business plan, to fund our operations and to continue as a going concern
2. 02Our 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
3. 03We have incurred significant losses since our inception and expect to incur significant expenses and continuing losses for the foreseeable future. We may not be able to achieve or maintain profitability or positive cash flows
4. 04We have previously defaulted on our debt and other obligations and there can be no assurance that we will be able to fulfill our obligations under any current or future indebtedness we may incur
5. 05leading to the possibility of default on future debt obligations
6. 06Our 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 it may provide
7. 07We may never realize the full value of our intangible assets or our long-lived assets causing us to record impairments that may negatively affect our financial condition and operating results
8. 08Our contractual obligations could impair our liquidity and materially adversely affect our business, results of operations and financial condition
9. 09We may not be able to accurately predict our future capital needs, and we may not be able to obtain additional financing or access the capital markets to fund our ongoing operations and execute on our growth strategy on acceptable terms and conditions
10. 10We may utilize the GEM Advances, as necessary, in 2025 to address our capital needs. We may also seek additional capital through a combination of equity and debt financings
11. 11Agreements governing our debt obligations include financial and other covenants that provide limitations on our business and operations under certain circumstances, and failure to comply with any of the covenants in such agreements could adversely impact us

Risks Related to Our Business and Industry

1. 12The market for regional air mobility has not been established with precision, is still emerging and may not achieve the growth potential we expect or may grow more slowly than expected
2. 13Our prospects and operations may be adversely affected by changes in consumer preferences, discretionary spending and other economic conditions that affect demand for our services
3. 14We expect to face intense competition in the regional air mobility industry
4. 15If we are not able to successfully enter into new markets, offer new routes and services and enhance our existing offerings, our business, financial condition and results of operations could be adversely affected
5. 16If we experience harm to our reputation and brands, our business, financial condition and results of operations could be adversely affected
6. 17any of the foregoing with respect to our competitors, to the extent such resulting negative perception affects the public’s perception of us or the aviation industry as a whole, and particularly if we are unable to adequately differentiate our brand, services and aircraft from others in the market
7. 18We may be unable to reduce end-user pricing for our air mobility services over time at rates sufficient to stimulate demand and drive expected growth for our air mobility services
8. 19From time to time, the aircraft industry has experienced periods of oversupply during which lease rates and aircraft values have declined, and any future oversupply could materially adversely affect our financial results and growth prospects
9. 20airport and air traffic control infrastructure constraints
10. 21Any failure to offer high-quality customer support may harm our relationships with customers and could adversely affect our reputation, brands, business, financial condition and results of operations
11. 22The success of our business will be highly dependent on our ability to effectively market and sell our air mobility solutions as a substitute for alternate methods of transportation
12. 23We will be 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
13. 24As part of our growth strategy, we are engaging in, and may in the future engage in, acquisitions that could disrupt our business and have a material adverse effect on our financial condition
14. 25We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy

Risks Related to the Development of the SurfOS Software Platform

1. 26We may not realize the expected return on our significant investment in SurfOS due to development delays, technical challenges, or lack of market acceptance, which could undermine our financial performance and competitive position
2. 27The joint venture to develop SurfOS creates risks through technology dependence, potential partner misalignment, relationship challenges, and funding uncertainties that could significantly impact the company's business

Risks Related to the Development of Electrification Technology

1. 28Our competitors may commercialize their technology before us, either in general or in specific markets, or we may otherwise not be able to fully capture the first mover advantage that we anticipate
2. 29The 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
3. 30Our future fully-electric and hybrid-electric aircraft may require maintenance at frequencies or at costs which are unexpected and could adversely affect our business and operations

Risks Related to Our Operations and Infrastructure

1. 31If we are unable to obtain and maintain access to adequate facilities and infrastructure in desirable locations, including securing access to key infrastructure such as airports, we may be unable to offer our service in a way that is useful to passengers
2. 32The supply of pilots to the airline industry is limited and may negatively affect our operations and financial condition. Increases in our labor costs, which constitute a substantial portion of our total operating costs, may have a material adverse effect on our business, financial condition and results of operations
3. 33We are subject to legal, regulatory and physical risks associated with climate change, including the potential increased impacts of severe weather events on our operations and infrastructure
4. 34Our business may be adversely affected by union activities
5. 35Our or our third-party aircraft operators’ insurance may become too difficult or expensive to obtain. Increases in insurance costs or reductions in insurance coverage may have a material adverse effect on our financial condition and results of operations
6. 36premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim
7. 37We may incur substantial maintenance costs as part of our leased aircraft return obligations
8. 38We are exposed to operational disruptions due to maintenance
9. 39The profitability of our current operations is dependent on the availability and pricing of aircraft fuel. Periods of significant disruption in the supply of aircraft fuel or elevated pricing could have a significant negative impact on our results of operations and liquidity
10. 40operators’ ability to perform our flights, which could result in loss of revenue and adversely affect our ability to provide our services
11. 41Unsatisfactory safety performance of our aircraft could have a material adverse effect on our business, financial condition and results of operations
12. 42The operation of aircraft is subject to various risks, and we expect demand for our air mobility services to be impacted by accidents or other safety issues regardless of whether such accidents or issues involve our aircraft
13. 43Moreover, such accidents or incidents could also have a material impact on our ability to obtain or maintain FAA certification for our aircraft in a timely manner, or at all

Risks Related to Our Dependence on Third Parties

1. 44Our success will depend on our ability to economically outsource the production, assembly and installation of our fully-electric and hybrid-electric powertrain solutions at scale, and our suppliers for the parts and components of these powertrains are an important part of our business model
2. 45If our third-party aircraft operators are unable to support our operations or the growth of our business, or we are unable to add alternative third-party aircraft operators to meet demand, our costs may increase and our business, financial condition and results of operations could be adversely affected
3. 46If we encounter problems, such as workforce disruptions, with any of our third-party aircraft operators or third-party service providers, our operations could be adversely affected by a resulting decline in revenue or negative public perception about our services
4. 47We rely on third-party web service providers to deliver our offerings to users on our platform, and any disruption of or interference with our use of third-party web services could adversely affect our business, financial condition and results of operations
5. 48Aircraft purchase agreements are often subject to indexed price escalation clauses which could subject us to unanticipated expenses

Risks Related to Our Intellectual Property and Information Technology

1. 49If we fail to adequately protect our intellectual property rights, our competitive position could be impaired and we may lose market share, generate reduced revenue and incur costly litigation to protect our rights
2. 50We 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 aircraft
3. 51We will rely on our information technology systems to manage numerous aspects of our business. A cyber-attack of these systems could disrupt our ability to deliver services to our customers and could lead to increased overhead costs, decreased sales and harm to our reputation
4. 52System failures, defects, errors or vulnerabilities in our website, applications, backend systems or other technology systems or those of third-party technology providers could harm our reputation and brand and adversely affect our business, financial condition and results of operations
5. 53We will need to improve our financial and operational systems to manage our growth effectively and support our business arrangements, and an inability to do so could harm our business, financial condition and results of operations
6. 54Our business will be subject to a variety of extensive and evolving laws and regulations, which may result in increases in our costs, disruptions to our operations, limits on our operating flexibility, reductions in the demand for air travel and competitive disadvantages
7. 55such as the aircraft used in our operations, at such airports. The imposition of any limits on the use of such aircraft at any airport at which we operate could have a material adverse effect on our operations
8. 56the adoption of new or increased aircraft noise restrictions
9. 57We may be unable to obtain or maintain relevant regulatory approvals for the commercialization of our electrification of aircraft
10. 58and implement our plans to install them in aircraft on the timelines we project, which, in turn, could have a material adverse effect on our business, financial condition and results of operations
11. 59We may be unable to comply with relevant regulations applicable to our on-demand business
12. 60Continued access to Essential Air Service revenue is of critical importance to us
13. 61We may fail to continue to meet the requirements necessary to operate our air services
14. 62We must comply continuously with Fitness and Citizenship requirements administered by the DOT to perform scheduled air transportation

Risks Related to Our Operating as a Public Company

1. 63The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members
2. 64Our management has limited prior experience in operating a public company
3. 65If we fail to maintain effective disclosure controls and procedures and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired
4. 66We may be subject to securities litigation, which is expensive and could divert management attention
5. 67Investors’ expectations of our performance relating to ESG factors may impose additional costs and expose us to new risks
6. 68Delaware law and our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable
7. 69Our Amended and Restated Bylaws and our Amended and Restated Certificate of Incorporation limit voting rights of certain foreign persons
8. 70The provisions of our Amended and Restated Certificate of Incorporation requiring exclusive forum in the Court of Chancery of the State of Delaware for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers

Risks Related to Ownership of Our Common Stock

1. 71The trading price of our common stock may be volatile
2. 72general economic and political conditions, such as the effects of public health threats, recessions, interest rates, local and national elections, fuel prices, international currency fluctuations, corruption, political instability and acts of war or terrorism
3. 73Our shareholders may experience dilution from several sources to varying degrees, namely as shares of our common stock are issued and sold in subsequent offerings
4. 74We do not intend to pay cash dividends for the foreseeable future
5. 75If analysts do not publish research about our business or if they publish inaccurate or unfavorable research, our stock price and trading volume could decline
6. 76Sales of substantial amounts of our common stock in the public markets or the perception that sales might occur, could cause the trading price of our common stock to decline
7. 77Our business and financial performance may differ from any projections that we disclose or any information that may be attributed to us by third parties
8. 78Our common stock is listed on the NYSE under the symbol “SRFM.” We are required to satisfy the continued listing requirements of the NYSE to maintain such listing, including, among other things, the maintenance of a certain market capitalization and average closing price of our common stock
9. 79We are exposed to the impact of rising inflation rates, which could negatively affect our results of operations and our ability to invest and hold our cash
10. 80If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected