Business Context and Reporting Period
Company: Surf Air Mobility Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: June 30, 2026
Reporting Period: Events occurring on June 30, 2026, with a press release issued July 1, 2026.
Context: The Company entered into significant financing transactions to restructure existing debt, secure new asset-backed financing, and amend letter of credit arrangements.
Key Financial Metrics and Debt Structure
Debt Restructuring (Exchange Agreement):
- Prior Note Exchanged: Senior Secured Convertible Note due 2028 with an outstanding principal balance of $46,857,142.89.
- New Convertible Note: $16,857,142.89 principal, due July 1, 2027. Matures at 110% of principal if not converted. Initial conversion price approx. $1.116/share.
- New Term Note: $30,000,000 principal, due January 1, 2028. Interest rate of 12% per annum (accrues Jan 1, 2027). Matures at 110% of principal.
- Total Face Amount: $21,600,000 issued by subsidiaries (Southern Airways Pacific, LLC and Southern Airways Express, LLC).
- Initial Issuance: Approx. $7,000,000 on June 30, 2026 (used for aircraft purchase).
- Remaining Balance: Approx. $14,000,000 (to be issued upon closing conditions for working capital).
- Terms: 13.5% interest per annum; Original Issue Discount (OID) of $600,000; Monthly amortization of $220,000 starting June 30, 2027; Maturity June 30, 2031.
- Must maintain minimum unrestricted cash of $5,000,000 at all times.
- Must maintain minimum unrestricted cash of $8,000,000 for at least 45 days out of any 60-day period.
- Must maintain $30,000,000 in available equity line or "at-the-market" offering capacity.
- Warrant Price Reduction: Existing warrants exercise price reduced from $3.32 to $1.12 per share.
- New Warrants (Debentures): Tranche A (710,294 shares @ $1.2555) and Tranche B (617,647 shares @ $1.6740).
- New Warrants (Park Lane): Up to 2,500,000 shares at "Minimum Price" as consideration for credit support.
- Debenture Letter of Credit: $14,000,000 standby letter of credit issued to backstop Debentures.
- Note Letter of Credit: Existing $30,000,000 letter of credit amended to reference New Notes.
- Reimbursement Terms: 15.00% interest on drawn amounts; 1.00% annual fee on outstanding principal.
Note: This filing does not provide revenue, profit, cash flow, or margin data for the period.
Material Changes vs. Prior Period
- Debt Composition: Replaced a single $46.86M convertible note with a split structure of a $16.86M convertible note and a $30M term note, extending maturity dates and introducing a 12% interest rate on the term portion.
- New Debt Incurrence: Added $21.6M in secured debentures (asset-backed) with a 13.5% interest rate and monthly amortization requirements.
- Equity Dilution Potential: Increased potential share issuance through new warrants (approx. 1.33M shares from debentures, 2.5M shares from Park Lane) and reduced exercise prices on existing warrants.
- Covenant Tightening: Implemented strict liquidity maintenance covenants ($5M-$8M cash) and equity capacity requirements ($30M).
Guidance, Risks, and Contingencies
Management Commentary & Outlook:
The filing indicates a strategic move to secure working capital and finance aircraft purchases while restructuring existing obligations. The Company is relying on private placement exemptions for these transactions.
Risks and Contingencies:
- Liquidity Risk: Failure to maintain the required $5M-$8M cash balance or $30M equity capacity constitutes a default.
- Interest Rate Exposure: High interest rates (12% on Term Note, 13.5% on Debentures, 15% on drawn LOCs) increase fixed costs.
- Collateral Risk: New debt is secured by substantially all assets, including aircraft, and guaranteed by subsidiaries.
- Fundamental Change Repurchase: Holders can force repurchase of New Notes at a premium if a change in control or asset sale occurs.
- Partial Redemption Obligation: The New Convertible Note holder can demand monthly partial redemptions (cash or stock), creating cash flow pressure.
Investor Verification Checklist
- Verify current unrestricted cash and cash equivalents to ensure compliance with the $5M-$8M liquidity covenants.
- Confirm the status of the $14M remaining balance of the Secured Debentures and whether closing conditions have been met.
- Review the Company's ability to maintain $30M in available equity line or ATM offering capacity.
- Assess the impact of the 12% and 13.5% interest rates on future cash flow projections.
- Monitor the potential dilution from the issuance of up to 3.83M new warrant shares plus the 16.19M shares issuable upon conversion of the New Convertible Note.
- Check for any events of default that could trigger the drawdown of the $44M in total Letters of Credit.