SRFM

Business Context and Reporting Period

Company: Surf Air Mobility Inc. (SRFM)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2026
Business Overview: Surf Air Mobility operates a regional air mobility platform providing scheduled commercial air service and an on-demand charter marketplace. The company is also developing proprietary AI-enhanced aviation software and electrification technologies for regional aircraft.

Key Financial Metrics

Revenue Composition (Six Months 2026): Scheduled revenue was $32.8 million (down 16% YoY), while On-Demand revenue was $22.3 million (up 90% YoY).

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 8% year-over-year for both the three and six-month periods, driven primarily by a 101% increase in On-Demand revenue. Scheduled revenue declined 19% due to the exit of unprofitable routes.
• Operating Expenses: Cost of revenue increased 22% (three months) and 14% (six months), largely due to higher on-demand costs and fuel prices, partially offset by reduced block hours on scheduled routes. General and Administrative expenses decreased 25% (six months) due to reduced incentive bonus accruals and stock-based compensation.
• Other Expenses: Interest expense decreased significantly (68% reduction for six months) due to debt restructuring. However, losses from changes in the fair value of financial instruments increased to $10.4 million (six months) compared to $2.4 million in the prior year.
• Operating Metrics: Scheduled flight hours decreased 22% and headcount decreased 20%, while On-Demand flights increased 52%.

Guidance, Outlook, Risks, and Contingencies

Going Concern Warning: The filing explicitly states that substantial doubt exists regarding the Company's ability to continue as a going concern. This is due to recurring operating losses, negative cash flows, a working capital deficit, and defaults on certain tax and debt obligations.

Liquidity and Financing:

• The Company raised $14.3 million via a registered direct offering and $25.0 million in advances under a Share Purchase Agreement (SPA) with GEM Global Yield LLC SCS during the six months ended June 30, 2026.
• As of June 30, 2026, the Company has $72.5 million in remaining availability for advances and $251.4 million in remaining draw capacity under the SPA, subject to volume limitations.
• On June 30, 2026, the Company entered into an agreement to exchange its High Trail Convertible Note for new Senior Secured Convertible and Term Notes (closed July 1, 2026).

Material Risks and Defaults:

• Tax Liens: The Company is in default of federal excise tax obligations totaling $11.1 million and property tax obligations of approximately $0.9 million.
• Debt Defaults: The Company is in default of the SAFE-T note (matured July 2019) and certain other debt obligations.
• NYSE Compliance: On July 24, 2026, the Company received notice from the NYSE regarding non-compliance with minimum bid price requirements (average closing price below $1.00). Failure to regain compliance within six months could result in delisting.
• Internal Controls: Management concluded that disclosure controls and procedures were not effective as of June 30, 2026, citing material weaknesses in the control environment, IT general controls, and accounting for complex transactions.

Investor Verification Checklist

• Going Concern Status: Verify the Company's ability to secure additional financing to cover the $11.1 million federal excise tax liability and ongoing operating losses.
• NYSE Delisting Risk: Monitor the stock price to ensure it meets the $1.00 average closing price requirement to avoid delisting proceedings.
• Debt Restructuring: Confirm the terms and covenants of the new Senior Secured Notes exchanged for the High Trail Convertible Note (closed July 1, 2026).
• Internal Control Remediation: Assess the progress of remediation plans for material weaknesses in financial reporting and IT controls.
• Revenue Mix Sustainability: Evaluate the long-term viability of the shift from scheduled service to on-demand charter revenue, given the decline in scheduled flight hours.