SURF AIR MOBILITY INC.

Current report

Changes in U.S. or foreign trade policies, including the imposition of tariffs and other protectionist trade measures, and other factors beyond our control may adversely impact our business, financial condition, and results of operations.

Current report

Since January 2025, the United States has announced significant new tariffs on imports from a wide range of countries, including China, which was followed by retaliatory tariffs by China and a number of countries and a cycle of further retaliatory tariff announcements and trade actions. Certain of the tariffs have been and may be delayed, but others have taken or may take effect. Further, tariffs announced or imposed by the United States could be altered or delayed through presidential action, bilateral negotiations, judicial orders or congressional action, and tariffs announced or imposed by other countries can be affected by similar developments. These and future changes in tariffs and trade policies by the United States or China, or trade actions by or directed toward other countries, such as Mexico or Canada, or retaliatory trade measures in response, may continue to result in additional costs and pricing pressures, supply chain disruptions, volatile or unpredictable customer spending patterns, and increased economic or geopolitical risks, any or all of which could adversely impact our business, financial condition, and results of operations, perhaps materially or in ways that we cannot predict. For example, we plan to outsource the majority of the production, assembly and installation of our fully-electric and hybrid-electric solutions, and international trade disputes and tariffs may increase costs of production and/or otherwise disrupt production, supply, or transit of products to their final destination. In addition, macroeconomic uncertainty tends to make consumers and businesses hesitant about discretionary purchases, which could result in reduced customer demand for air transportation, including our air mobility services, or could shift demand from our air mobility services to other methods of air or ground transportation for which we do not offer a competing service.

Current report

We are actively monitoring and evaluating these developments and the potential impacts of trade policy and tariffs on our business and results of operations. If tariffs continue to be maintained at current levels, and/or the U.S. government or foreign governments impose further retaliatory tariffs or other trade restrictive measures in response, we expect that such actions could negatively impact our revenue growth and margins in future periods through increased costs, decreased demand and other adverse economic impacts. The net effect of these actions on our business will depend on our ability to successfully mitigate and offset their impact, which efforts may not be effective. If we are unable to mitigate these risks through supply chain adjustments or other measures, our business could be negatively affected.

Current report

(a)None.

Previous 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.

Previous 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.

Previous 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.

Previous report

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Previous 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.

Previous report

Entry into Senior Secured Term Loan Facility

Previous 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.

Previous 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.

Previous 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.

Previous 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.

Previous 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.

Previous 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.

Previous report

Entry into Reimbursement Agreement

Previous 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.

Previous 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.

Previous 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.

Previous report

In connection with the Reimbursement Agreement, Credit Support Provider will have the right to appoint a board observer with respect to the Company.

Previous 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.

Previous report

Entry into LamVen Note

Previous 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.

Previous 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.

Previous 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.

Previous 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”).

Previous 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.

Previous 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.

Previous report

Entry into Amendment to PFG Convertible Note Purchase Agreement

Previous 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.

Previous 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.

Previous 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.

Previous 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.

Previous 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.

Previous report

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

Previous report

The information provided in response to item 1.01 is incorporated herein by reference.

Previous report

Item 3.02 Unregistered Sales of Equity Securities

Previous 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.