SURF AIR MOBILITY INC
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
SRFM$0.70+1.5%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0000950170-24-097145
Item 1A. Risk FactorsUnregistered Sales of Equity Securities and Use of ProceedsDefaults Upon Senior SecuritiesMine Safety DisclosuresOther InformationCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0000950170-24-127106
Item 1A. Risk FactorsUnregistered Sales of Equity Securities and Use of ProceedsDefaults Upon Senior SecuritiesMine Safety DisclosuresOther InformationThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 23 previous paragraphs and 46 current paragraphs.
9 unchanged; 1 reworded; 35 added; 13 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
Except as disclosed below and as previously disclosed in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Current report
Agreements 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.
Current report
Our current and any future financing agreements that we may enter into from time to time, contain certain affirmative, negative and financial covenants, and other customary events of default. Under certain circumstances, such covenants require us to maintain minimum liquidity levels, limit our ability to enter into certain strategic transactions, make certain investments, pay dividends and make certain other specified restricted payments. Certain covenants in our financing agreements are subject to important exceptions, qualifications and cure rights, including, under limited circumstances, the requirement to provide additional collateral or prepay or redeem certain obligations. In addition, certain of our financing agreements are cross-collateralized, such that an event of default or acceleration of indebtedness under one agreement could result in an event of default under other financing agreements. If we fail to comply with such covenants, if any other events of default occur for which no waiver or amendment is obtained, or if we are unable to timely refinance the debt obligations subject to such covenants or take other mitigating actions, the holders of our indebtedness could, among other things, declare outstanding amounts immediately due and payable and, subject to the terms of relevant financing agreements, repossess or foreclose on collateral, including certain of our aircraft or other assets used in our business. The acceleration of significant indebtedness or actions to repossess or foreclose on collateral may cause us to renegotiate, repay or refinance the affected obligations, and there is no assurance that such efforts would be successful or on terms we deem attractive. In addition, any acceleration or actions to repossess or foreclose on collateral under our financing agreements could result in a downgrade of any credit ratings then applicable to us, which could result in additional events of default or limit our ability to obtain additional financing.
Current report
For example, the Company’s 4-year credit agreement with certain affiliates of Comvest Partners, as lenders, is backstopped by a letter of credit issued by HSBC Bank USA, N.A. and arranged by Park Lane Investments, LLC, which is an entity owned by a family member of a co-founder of the Company (the “Credit Support Provider”). In connection with the foregoing, the Company is party to a senior secured reimbursement agreement with the Credit Support Provider (the “Reimbursement Agreement”) to, among other things, reimburse the Credit Support Provider for the costs of the letter of credit, and any amounts for which the letter of credit is drawn. The Reimbursement Agreement contains covenants that, among other things, restrict the ability of the Company to: (i) acquire or dispose of assets or businesses; (ii) incur additional indebtedness or liens; (iii) make cash distributions; and (iv) prepay outstanding debt, and otherwise restrict corporate activities of the Company without the consent of the Credit Support Provider. The Reimbursement Agreement also requires the Company to maintain a certain level of minimum liquidity and to limit variance to cash flow projections. Economic conditions and other variables could result in the inability of the Company to satisfy the requirements under the Reimbursement Agreement, could result in one or more events of default thereunder.
Current report
Except as previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on October 8, 2024, there have been no unregistered sales of equity securities during the three months ended September 30, 2024.
Current report
(a)The information below included in this Item 5 is provided in lieu of filing such information on a Current Report on Form 8-K under Items 1.01, 2.03 and 3.02 as designated below.
Current report
On November 14, 2024, Surf Air Mobility Inc. (the “Company”) entered into a 4-year Credit Agreement with certain affiliates of Comvest Partners, as lenders (the “Credit Agreement”), pursuant to which the Company borrowed $44.5 million of term loans, with $5.5 million of delayed draw commitments.
Current report
The loans under the Credit Agreement accrue interest at a rate of (x) SOFR (subject to a 1.00% floor) plus (y) 5.00%, and are subject to a prepayment premium for 18 months after the initial funding date. There was a 1.50% fee on the aggregate loans and commitments, paid at the initial funding. The loans under the Credit Agreement have no required amortization.
Current report
The obligations of the Company under the Credit Agreement are subject to a security interest on assets of the Company, subject to certain exceptions.
Current report
The Credit Agreement is fully backstopped by a letter of credit issued by HSBC Bank USA, N.A. and arranged by Park Lane Investments LLC, which is an entity owned by a family member of a co-founder of the Company (“Credit Support Provider”), and in connection therewith, the Company has entered into a reimbursement agreement with Credit Support Provider described below.
Current report
The Credit Agreement contains certain representations and warranties, covenants and events of default. Upon the occurrence of certain events of default, the lenders would have the right to draw upon the letter of credit referenced above.
Current report
This summary is qualified in its entirety by reference to the full text of the form of the Credit Agreement, which is attached as Exhibit 10.3 to this Quarterly Report on Form 10-Q.
Current report
On November 14, 2024, in connection with the letter of credit backstopping the Credit Agreement, the Company entered into a Reimbursement Agreement with Credit Support Provider (the “Reimbursement Agreement”), which contains certain representations and warranties, covenants and events of default.
Current report
If the backstop letter of credit is drawn, the Company will be required to reimburse the Credit Support Provider for the drawn amount of the letter of credit, pay interest to the Credit Support Provider at 15.00% per annum on such drawn amounts (subject to increase in the event of default). The Company is separately obligated to pay a fee of 1.00% per annum to the Credit Support Provider on the outstanding face amount of the backstop letter of credit. 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 remitted to Credit Support Provider to be held in trust in accordance with the Reimbursement Agreement.
Current report
The obligations under the Reimbursement 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.
Current report
In connection with the Reimbursement Agreement, Credit Support Provider will have the right to appoint a board observer with respect to the Company.
Current report
This summary is qualified in its entirety by reference to the full text of the form of the Reimbursement Agreement, which is attached as Exhibit 10.4 to this Quarterly Report on Form 10-Q.
Current report
On November 14, 2024, the Company entered into a note exchange agreement with LamVen pursuant to which the Company issued a secured convertible promissory note (the “LamVen Note”) in aggregate principal amount of $50.0 million to LamVen LLC, an entity owned by a co-founder of the Company (“LamVen”), to refinance certain existing notes.
Current report
The LamVen Note will accrue interest at the greater of (x) SOFR (subject to a 1.00% floor) plus 5.00% and (y) 9.75% (subject to increase in the event of default). In the event the Company raises capital in certain equity offerings, a portion of the net cash proceeds from such equity offerings and the net cash proceeds from certain asset sales are required to be applied to repay the obligations under the LamVen Note. The maturity of the LamVen Note is December 31, 2028, which may be accelerated upon the occurrence of certain events of default.
Current report
At the election of LamVen from time to time, on one or more occasions, the outstanding principal amount of the LamVen Note (or any portion thereof), together with all accrued but unpaid interest thereon, can be converted into a number of shares of common stock, using a conversion price per share equal to the Minimum Price, as defined in New York Stock Exchange Listed Company Manual Section 312.04(h) (the “Minimum Price”); provided, however, that LamVen shall not be able to convert the note if so doing would increase its beneficial ownership interest in the Company to 10% or more of the Company’s then outstanding common stock.
Current report
In addition, on November 14, 2024, a portion of the principal of existing LamVen notes being refinanced equal to $7,473,131 was exchanged for (i) 750,000 shares of common stock of the Company issued to LamVen at $1.83 per share, which represents the official closing price of the Company’s common stock on the New York Stock Exchange on the date immediately preceding November 14, 2024 (the “LamVen Shares”), and (ii) 3,389,398 warrants to purchase common stock of the Company issued to LamVen with a strike price of $1.83 per share (the “LamVen Warrants”).
Current report
The obligations under the LamVen Note 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.
Current report
This summary is qualified in its entirety by reference to the full text of the form of the LamVen Note, which is attached as Exhibit 10.5 to this Quarterly Report on Form 10-Q.
Current report
Entry into Amendment to PFG Convertible Note Purchase Agreement
Current report
On November 14, 2024, the Company amended the existing Convertible Note Purchase Agreement with Partners for Growth V, L.P. (“PFG”), which had an outstanding principal amount of $8.0 million (the “PFG Note”) upon amended.
Current report
The PFG Note will accrue interest at the greater of (x) SOFR (subject to a 1.00% floor) plus 5.00% and (y) 9.75% (subject to increase in the event of default). 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 PFG Note. The maturity of the PFG Note is December 31, 2028, which may be accelerated upon the occurrence of certain events of default.
Current report
PFG has the right to convert, at its option, the amounts outstanding under the PFG Note into common stock of Company, at conversion price of $42.00 per share.
Current report
The obligations under the PFG Note 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.
Current report
This summary is qualified in its entirety by reference to the full text of the conformed Convertible Note Purchase Agreement which is attached as Exhibit 10.6 to this Quarterly Report on Form 10-Q.
Current report
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Current report
The information provided in response to item 1.01 is incorporated herein by reference.
Current report
The information provided in response to item 1.01 is incorporated herein by reference. The issuance of the LamVen Note, LamVen Shares, and LamVen Warrants are exempt from registration under Section 4(a)(2) under the Securities Act of 1933, as amended, as transactions by an issuer not involving any public offering.
Removed paragraphs (13)
Previous report
During the three months ended June 30, 2024, the following risk factor has been identified in addition to those already disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023:
Previous report
We may fail to qualify for continued listing on the NYSE, which could make it more difficult for our stockholders to sell their shares.
Previous report
Our 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.
Previous report
On April 2, 2024, we received formal notice from the NYSE indicating that we were not in compliance with Section 802.01C of the NYSE Listed Company Manual because the average closing price of our Common Stock was less than $1.00 over a consecutive 30 trading-day period. We subsequently notified the NYSE of our intent to regain compliance with the requirements of Section 802.01C. We are able to regain compliance at any time within the six-month period following receipt of the notice if, on the last trading day of any calendar month during this cure period (or the last trading day of this cure period), we have a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the prior 30 trading-day period. If we do not regain compliance with Section 802.01C within such cure period, the NYSE may commence delisting proceedings.
Previous report
Additionally, on May 20, 2024, we received formal notice from the NYSE indicating that we were no longer in compliance with Section 802.01B of the NYSE Listed Company Manual because our average total market capitalization over a consecutive 30 trading-day period was less than $50 million and, at the same time, our stockholders’ equity was less than $50 million. We subsequently submitted a plan within 45 days of the notice advising the NYSE of definitive action we have taken or will take to be in compliance with Section 802.01B within 18 months of receipt of the notice. If our plan is not accepted, we would be subject to delisting proceedings. If the NYSE accepts our plan, our Common Stock will continue to be listed and traded on the NYSE during the 18-month cure period, subject to our compliance with the plan and other continued listing standards. The NYSE will review us on a quarterly basis to confirm compliance with the plan. If we fail to comply with the plan or do not meet the continued listing standards at the end of the 18-month cure period, we will be subject to the prompt initiation of NYSE suspension and delisting procedures.
Previous report
There can be no assurance that we will be able to regain compliance with the NYSE’s continued listing requirements. If our stock price does not increase and if our market capitalization does not meet the minimum standards, we may not be able to meet the standards for continued listing on the NYSE within the compliance period. In the event that we do not regain compliance with the NYSE continued listing standards, we could face significant material adverse consequences, including:
Previous report
an adverse effect on the market price of our Common Stock;
Previous report
loss of confidence from stakeholders, employees and potential business partners;
Previous report
reduced liquidity with respect to our Common Stock;
Previous report
a determination that our shares are a “penny stock,” which will require brokers trading in our shares to adhere to more stringent rules, and which may limit demand for our Common Stock among certain investors;
Previous report
In May 2024, we issued an aggregate of 137,729 shares of Common Stock to one accredited investor for in-kind services worth $137,500 in a transaction exempt from registration under Section 4(a)(2) of the 1933 Act (or Rule 506(b) of Regulation D promulgated thereunder) as a transaction by an issuer not involving a public offering.
Previous report
In June 2024, we issued an aggregate of 4,856,727 shares of Common Stock to one accredited investor for in-kind services worth $2,000,000 in a transaction exempt from registration under Section 4(a)(2) of the 1933 Act (or Rule 506(b) of Regulation D promulgated thereunder) as a transaction by an issuer not involving a public offering.
Reworded paragraphs (1)
Previous wording
During the three months ended June 30, 2024, none of our directors or officers (as defined in Section 16 of the Exchange Act), adopted orterminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K of the Exchange Act).
Current wording
During the three months ended September 30, 2024, none of our directors or officers (as defined in Section 16 of the Exchange Act), adopted orterminated anycontract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy theaffirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K of the Exchange Act).
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Item 3.02 Unregistered Sales of Equity Securities