Item 1A. Risk Factors
Investing in our securities involves risks. You should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report, including Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before deciding whether to purchase any of our securities. Our business, results of operations, financial condition, and prospects could also be harmed by risks and uncertainties that are not presently known to us or that we currently believe are not material. If any of these risks actually occur, our business, results of operations, financial condition, and prospects could be materially and adversely affected. Unless otherwise indicated, references in these risk factors to our business being harmed will include harm to our business, reputation, brand, financial condition, results of operations, and prospects. In any such event, the market price of our securities could decline, and you could lose all or part of your investment.
Risks Related to Our Business and Industry
We are an early-stage company with a history of losses, and we expect to incur significant expenses and continuing losses for the foreseeable future.
As of December 31, 2025, we incurred a net loss of $618.2 million, and we have incurred a net loss of approximately $2.3 billion since inception. We expect to continue incurring operating and net losses each quarter until at least the time we begin generating significant revenues from our planned lines of business. Even if we successfully launch our planned lines of business, there can be no assurance that they will be financially viable.
We expect losses could increase as we develop and expand operations, including to:
• design, develop, and certify our aircraft in the United States and other countries;
• design and develop UAM networks and operations;
• expand our business lines and operations, including our defense program, operations at Hawthorne Airport, and aviation services and technologies;
• engage third parties on the design, development, manufacturing, certification and marketing of our products and services;
• attract, retain and motivate talented employees;
• expand our aircraft manufacturing capabilities and manufacture an inventory;
• build inventories of parts and components for our aircraft;
• expand design, development and servicing capabilities;
• increase sales and marketing activities and develop distribution infrastructure; and
• develop pilot training programs.
We may also be unable to manage growth effectively, which could strain resources and create operational challenges such as hiring, training, and managing personnel, distracting management, and harming our brand and financial results. Expansion may require additional office space, infrastructure, personnel, and increased insurance coverage. We expect insurance needs and costs to rise as we build production facilities, manufacture aircraft, establish commercial operations, add routes, increase flight and passenger volumes, and expand into new markets. It is too early to predict the impact of commercial eVTOL operations on insurance costs, which may adversely affect our business, financial condition, and results of operations.
Because these costs are expected before significant revenues, our losses in future periods are expected to be significant. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in the revenues we expect, which could further increase our losses.
We are developing our eVTOL aircraft and related UAM operations, which remain in the early stages, and our business and future prospects are subject to significant risks.
We were incorporated in October 2018 and have a limited operating history in designing, developing, and certifying eVTOL aircraft.Our eVTOL aircraft is in the development stage, and we depend on continued engagement with the FAA, DOT, and other regulators in the U.S. and certain other countries to obtain required certifications and authorizations for aircraft design, production, and operations. Delays, interruptions, or unwillingness by regulatory agencies to engage with us could postpone or prevent certification. For example, the U.S. government shutdown in 2025 disrupted operations at certain agencies, including the FAA. Although we plan to develop Hawthorne Airport into our flagship Los Angeles hub, including for the LA28 Olympic Games, there can be no assurance we will receive all required approvals on time, if at all. In addition, our competitors may obtain regulatory approvals in the U.S. or non-U.S. markets before we do.
Table of Contents
Our operations also depend on the performance and availability of a Midnight aircraft platform, and any delays, defects, or grounding of this aircraft could significantly disrupt our business. In addition, we may face airspace integration and operational constraints, including airspace capacity limits, air traffic control restrictions, vertiport availability, and local operating limitations, which could reduce aircraft utilization, limit the number of flights we can operate, and adversely affect our business and the scaling of our planned operations.
We and our partners may not be able to obtain necessary production certificates, ramp up manufacturing, or develop supply chains capable of meeting quality, price, engineering, design, target aircraft specifications, and production standards, as well as required production volumes. We face significant challenges in the following areas, any of which could harm our business:
• designing, certifying, manufacturing, and operating safe, reliable, and quality aircraft that meet intended use cases and target aircraft specifications;
• obtaining and maintaining timely regulatory approvals for manufacturing, marketing, selling, operating UAM networks, or conducting defense-related programs;
• building and protecting a respected brand and expanding our customer base;
• marketing, selling, and servicing our aircraft and other technologies;
• maintaining spare parts availability and customer support;
• scaling manufacturing and operations efficiently;
• managing growth effectively;
• obtaining and maintaining adequate facilities and infrastructure;
• attracting, retaining, and motivating skilled employees; and
• adapting to technological change, competitive pressures, market trends, and evolving global regulations.
As an organization, we have no experience in volume aircraft manufacturing and we may be unable to scale our production to meet future demand or achieve targeted, cost, quality and delivery metrics. Some of our current and potential competitors are larger, have more experience in the aerospace industry or have substantially greater resources, enabling them to develop technologies faster, promote and sell offerings more effectively. In particular, our competitors may receive FAA or foreign government certifications for their eVTOL aircraft before we are able to do so. Competitors may also form strategic partnerships that enhance their capabilities, and some foreign competitors could benefit from subsidies or protective measures, placing us at a competitive disadvantage.
We are developing aircraft and related services intended to support multiple use cases and market entry strategies, which may not achieve our anticipated benefits. For example, through our Launch Edition program, we are offering aircraft, services and technologies to governments and customers to support the commercialization of our Midnight aircraft in markets outside the U.S., including early trial operations, pilot training, maintenance and certification support. Agreements with program partners remain conditional, and there is no assurance we will execute definitive agreements timely, or at all. In the U.S., we have applied for participation in the eIPP, but selection is not guaranteed. If selected, we plan to conduct trial operations in participating cities. Investments and expenses in early adopter markets and UAM networks, such as Southern California, including vertiport and charging infrastructure and customer-focused products and services, may not achieve anticipated competitive advantages or benefits.
Our business plan requires a significant amount of capital. In addition, our future capital needs may require us to issue additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or our ability to pay dividends.
We expect our capital expenditures and operating expenses to continue to be significant as we develop our aircraft and business, and to be driven primarily by aircraft development, certification, and customer demand. We believe our current cash and cash equivalents and other sources of liquidity, including existing borrowings, will be sufficient to fund our current operating plan for at least the next 12 months. However, we expect that over the coming years we will continue to make significant investments in our business, including development of aircraft and related technologies and services for our commercial and defense businesses, manufacturing ramp up, UAM network build out, development of Hawthorne Airport, and investments in our brand.
Our investments and expenses may be greater than currently anticipated or there may be unforeseen costs, and we may not succeed in acquiring sufficient capital to offset these expenses and achieve significant revenue generation. We have a limited operating history and no historical data on the demand for our planned products and services. As a result, our future capital requirements are difficult to predict and our actual capital requirements may be different from those we currently anticipate. We may need to seek equity or debt financing to fund future capital requirements. Such financing might not be available to us when
Table of Contents
needed or on terms that are acceptable, or at all. Additionally, we also issue equity securities as consideration for products and services provided to us by certain vendors, which results in dilution to our stockholders.
Our ability to obtain the necessary capital to carry out our current business plan is subject to a number of factors, including general economic and market conditions, as well as investor sentiment regarding our planned business. These factors may make the timing, amount, terms and conditions of any such financing unattractive or unavailable to us. The current macroeconomic environment may increase our cost of financing or make it more difficult to raise additional capital on favorable terms, if at all. If we are unable to raise sufficient capital, we may have to significantly reduce our spending and/or delay or curtail operations or planned activities.
Further, disruptions in the financial services sector, including liquidity constraints, bank failures, or counterparty insolvencies, could limit our access to cash and financial instruments. In addition, our future capital needs and other business needs or plans could require us to issue additional equity or debt securities or obtain a credit facility. The issuance of additional equity or equity-linked securities could dilute our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations or our financial flexibility.
The markets for our offerings are still in development and our growth strategies will require additional resources. If these markets do not materialize, grow more slowly than we expect or fail to reach the scale we anticipate, our business, results of operations, and prospects could be harmed.
The markets for eVTOL aircraft are still developing, and our success depends on our ability to design, develop, and certify eVTOL aircraft, promote air taxis as a substitute for existing methods of transportation and execute our marketing and growth strategies. If the public, or, for our defense program, government entities, do not see eVTOL aircraft/UAM as beneficial or choose not to adopt eVTOL aircraft/UAM as a result of concerns regarding safety, noise, affordability or for other reasons, then the market for our offerings may grow more slowly than expected or may not reach our anticipated potential.
Management regularly makes strategic decisions about how to deploy limited resources, such as aircraft, personnel and funds across various opportunities to commercialize and grow our business, and the opportunities we pursue may not ultimately be successful. For example, we have submitted proposals to participate in the eIPP and to devote significant resources to the program, which may require us to forgo certain other opportunities. If we are not selected, the program is cancelled, or our test operations under the program are not successful, our prospects may be adversely affected.
Growth of our business requires significant investments. If we lack sufficient capital to support these investments or if our competitors adopt more effective strategies, our competitive position and business will be affected. Expanding operations also require improving operational systems, internal controls, infrastructure, human resources, and other systems, which will require significant capital expenditures and valuable management and employee resources.
The eVTOL aircraft industry may not develop as expected, eVTOL aircraft may not be certified, adopted or become an attractive alternative to existing modes of transportation, which could adversely affect our prospects, business, financial condition and results of operations.
eVTOL aircraft involve a complex set of technologies and infrastructure, including charging, which we must continue to further develop and rely on our commercial and defense program customers to adopt. Before our eVTOL aircraft can fly passengers, we must obtain extensive government certifications and approvals from the FAA, DOT and other regulatory authorities in the U.S. and other countries. There are currently no FAA-certified eVTOL aircraft for commercial operations in the United States and regulatory standards and certification pathways for eVTOL aircraft continue to evolve globally. We may not achieve timely or successful certification in the United States or internationally, or at all, which could delay or prevent commercialization of our aircraft. The FAA and the DOT have primary regulatory authority over air transportation operations in the United States. As we build out our UAM operations, additional federal, state, and local requirements may apply, including approvals for take-off and landing locations, zoning, and land use.
In order to achieve FAA certification, the performance, reliability and safety of eVTOL aircraft must be established, none of which can be assured. In particular, there is a risk that we will not obtain one or more certifications from the FAA that are required for ultimate commercial use of our aircraft, or that we will experience delays in receiving one or more of these certifications. Even if we obtain aircraft certifications, operators must receive regulatory approvals to operate eVTOL aircraft, and pilots must be licensed, which could further delay adoption and limit customer demand. Additional challenges to adoption include regulatory and licensing requirements, infrastructure readiness, market acceptance, and public perception of safety.
Existing laws, regulations and standards may apply to eVTOL aircraft, including standards those not originally intended for electric aircraft. The promulgation of additional federal, state, and local laws and regulations that address eVTOL aircraft more specifically, such as the operational regulations, or Special Federal Aviation Regulation (“SFAR”), adopted by the FAA in October 2024, could delay commercial launch or require us to modify our approach to certification. We have designed our
Table of Contents
aircraft to be certified under the current FAA regulatory framework and substantial regulatory changes could delay certification or require changes to our aircraft design or certification strategy, resulting in additional costs and delays. We are seeking certification of our aircraft in other countries, and evolving or uncertain foreign regulatory frameworks could delay these efforts.
There can be no assurance that the market will accept eVTOL aircraft, that we will be able to execute on our business strategy, or that our offerings utilizing eVTOL aircraft will obtain the necessary government approvals or succeed commercially. Public skepticism of this technology may be heightened and there could be negative public perception surrounding eVTOL aircraft, including the overall safety and the potential for injuries or death occurring as a result of accidents involving eVTOL aircraft, regardless of whether any involve us. Any of the risks could adversely affect our prospects, business, financial condition and results of operations.
Our future success depends on our senior management team and other highly skilled personnel and our ability to attract and retain these individuals.
Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel, including pilots, engineers and aircraft mechanics. In particular, we are dependent on the continued contributions of members of our management team. The loss of any key personnel could adversely affect our business and our ability to execute our strategy. Although we have entered into employment offer letters with certain key personnel, these arrangements are generally at-will and do not provide for any guaranteed term of employment.
Competition for highly skilled personnel is intense, particularly in the San Francisco Bay Area, and we may incur significant costs to attract and retain qualified individuals. We have experienced, and expect to continue to experience, difficulty in hiring and retaining qualified personnel, including due to industry-wide shortages of pilots and certified aircraft mechanics. Equity awards are an important component of our compensation strategy, and a decline in the perceived value of our equity could adversely affect our ability to attract and retain talent.
Operation of aircraft involves inherent risks, and any accident involving aircraft, including eVTOL aircraft, could result in losses, adverse publicity, and reputational harm.
The operation of aircraft involves various risks, and air transportation has and may in the future be impacted by accidents or other safety issues, regardless of whether they involve our eVTOL aircraft or third-party eVTOL aircraft. Air transportation hazards, such as adverse weather conditions, fire and mechanical failures, may cause injury or death, reducing confidence in a particular aircraft type or the industry as a whole, which could lead to a reduction in passenger volume. Safety statistics for air travel are reported by multiple parties, including the DOT and National Transportation Safety Board, and are often separated into categories of transportation. Because our aircraft may include multiple transportation methods, fliers may have difficulty assessing safety, and accident classifications could negatively affect perceptions of eVTOL aircraft and air taxi services.
Safety and reliability are critical for attracting and retaining customers. Failure to maintain satisfactory standards of safety and reliability could adversely impact our ability to attract and retain customers and expose us to negative publicity. Such incidents could involve employees, contractors, partners or third-party operators. Accidents, incidents, regulatory actions, or investigations involving our aircraft or those operated by others could result in reputational harm, legal liability, financial losses, or operational disruptions, which may not be fully covered by insurance. Events occurring in or near take-off and landing sites, such as vertiports, could also disrupt operations until the accident has been cleared and repairs or investigations are completed.
Additionally, the battery packs that we use in our aircraft and sell to third parties, use battery (including lithium-ion) cells, which on rare occasions, can rapidly release the energy by venting smoke and flames in a manner that can ignite nearby materials. While we have taken safety measures, battery failures could result in lawsuits, recalls, or costly redesigns, any of which would be time-consuming and expensive. Any incident involving battery cells, even if it does not involve our aircraft, or negative public perceptions about the suitability of lithium-ion cells for aerospace applications, could seriously harm our business.
From time to time, we and our manufacturing partners store battery cells (including lithium-ion cells), which if mishandled, could disrupt operation of our facilities or our manufacturers, cause manufacturing delays, create adverse publicity or trigger recalls. Safety incidents involving competitors, partners, or customers may also indirectly affect public confidence in our aircraft and the eVTOL industry generally.
We currently rely and will continue to rely on third-party partners to provide and store the parts and components required to manufacture our aircraft, and to supply critical components and systems, which exposes us to risks outside our control.
We depend on a limited number of suppliers and service providers, including single-source and custom manufacturers, for the parts, components and materials used in our aircraft. If any supplier or service partner is unable to meet demand due to supply chain disruptions, changes in their tax and government incentives, quality issues, natural or man-made disasters, climate
Table of Contents
events, trade restrictions, tariffs, sanctions, financial distress, or other causes, this could result in production delays, increased costs, delays to our certification timeline, product redesign, revenue loss, reduced competitive advantage, and reputational harm. Further, if we are unable to successfully manage our relationship with our suppliers or service providers, the quality and availability of our aircraft may be harmed. Replacing suppliers or qualifying alternative manufacturing capacity would be costly and time-consuming, and prolonged disruptions at the operations or manufacturing facilities of any supplier or service provider could adversely affect our operations and prospects.
We do not control our suppliers or service providers or such parties’ labor and other legal compliance practices, including their environmental, health and safety practices. If our current suppliers or service providers, or any other suppliers or service providers which we may use in the future, violate U.S. or foreign laws or regulations, we may be subjected to extra duties, significant monetary penalties, adverse publicity, the seizure and forfeiture of products that we are attempting to import or the loss of our import privileges.
We are or may be subject to risks associated with strategic relationships or other opportunities and may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future.
We have entered into, and may continue to pursue, strategic relationships, joint ventures, minority investments, acquisitions, and licensing arrangements, including our previously announced partnership with Anduril to jointly develop a next generation aircraft for military applications, our acquisitions of certain intellectual property, manufacturing and other assets and our proposed manufacturing relationship with Stellantis. These arrangements expose us to risks including intellectual property leakage, counterparty non-performance, operational disruptions, cost overruns, reputational harm, and integration challenges.
Onboarding new strategic partners involves various inherent risks that could adversely affect our production capacity, product quality, and negatively impact revenue, margins and costs. Additionally, where our strategic relationships involve milestone-based payments or performance criteria, our operating results may vary significantly from quarter to quarter, and there can be no assurance that we or our partners will complete certain technical milestones or that partners will fulfill their payment obligations. Any reduction, delay or termination of expected funding from strategic partners could disrupt our development timelines, or materially impact our business and financial results.
When appropriate opportunities arise, we may acquire or license additional assets, products, technologies or businesses that are complementary to our existing business. In addition to possible stockholder approval, we may need approvals and licenses from relevant government authorities for the acquisitions or licenses and to comply with any applicable laws and regulations, which could result in increased delay and costs, and may disrupt our business strategy if we fail to do so. Furthermore, acquisitions or licenses and the subsequent integration of new assets and businesses into our own would likely require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our operations. Acquisitions or licenses could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.
There can be no assurance that we will identify or successfully execute future strategic opportunities. Acquisitions or licenses may require regulatory approvals, significant capital, management attention, and integration efforts, and may not result in anticipated benefits, and could expose us to unknown liabilities. If we are unable to successfully source and execute on strategic relationship opportunities in the future, our overall growth could be impaired.
We are party to certain purchase agreements and other contract orders for our Midnight aircraft and the provision of related services that contain conditions with respect to the purchase of our aircraft or that require us to perform and provide certain deliverables. If the conditions to or performance obligations under such contracts are not met, or if such contracts are otherwise canceled, modified or delayed, our prospects, results of operations, liquidity and cash flow will be harmed.
We are party to certain purchase agreements to deploy Midnight aircraft and related technologies and services, including the United Purchase Agreement (as defined below) and contracts with USAF, that contain conditions with respect to the purchase of our aircraft or that require us to perform and deliver certain tests, certificates and other services. Payment obligations under the agreement with United Airlines Inc. (“United”) for the conditional purchase of up to $1.0 billion worth of aircraft, with an option for another $500.0 million worth of aircraft (as amended, the “United Purchase Agreement”), for example, are conditioned upon, among other things, us receiving certification of our aircraft by the FAA and further negotiation and reaching mutual agreement on certain material terms, such as aircraft specifications, warranties, usage and transfer of the aircraft, performance guarantees, delivery periods, most favored nation provisions, the type and extent of assistance to be provided by United in obtaining certification of the aircraft for its intended use, territorial restrictions, rights to jointly developed intellectual property, escalation adjustments and other matters. The obligations of United to consummate an order pursuant to the United Purchase Agreement will arise only after all such material terms are agreed by the parties. Payment obligations under the USAF Contracts are predicated upon, among other things, our ability to complete the design, development
Table of Contents
and ground test of our Midnight aircraft, our delivery of certain test reports and certificates, the receipt of an FAA Airworthiness Certificate, the development of pilot and maintenance training workshops, the completion of flight tests and the delivery of a certain number of our Midnight production aircraft. The obligations of the USAF to provide funding will arise only after a particular deliverable has been received and accepted by the USAF. Further, with respect to the United Purchase Agreement, in addition to other termination rights set forth in the United Purchase Agreement and the Collaboration Agreement with United (the “United Collaboration Agreement”), if the parties do not agree on such material terms, either party will have the right to terminate the agreements if such party determines in its discretion that it is not likely that such material terms will be agreed in a manner that is consistent with such party’s business and operational interests (as those interests may change from time to time). The USAF Contracts may be terminated by the USAF upon advanced written notice and may also be subject to stop orders issued by the USAF. If the United Purchase Agreement, the USAF Contracts or any future purchase agreements or contracts are canceled, modified or delayed, or otherwise not consummated, or if we are otherwise unable to convert our strategic relationships or collaborations into revenue, our prospects, results of operations, liquidity and cash flow will be affected.
Further, we are subject to counterparty risk with respect to our existing purchase agreements and may become further subject to such risk if and when we enter into additional purchase agreements, which could adversely impact our business, results of operations, financial condition and prospects. Our business is, and may in the future be, subject to the risks of non-payment and non-performance by our counterparties. Additionally, the availability of financing for the purchase of our aircrafts is based in part on our counterparties’ creditworthiness, and there can be no assurance that they will be able to secure financing from third parties.
We are in the early stages of developing our defense program and have not developed, and may be unable to develop a VTOL aircraft that meets the requirements of the defense industry, and we can provide no assurance that we will achieve some or any of the expected benefits of the program.
Our defense program is in its early stages and its success depends on a number of factors including, anticipating and addressing defense industry requirements, timely and successful research and development; effective pricing; demand forecasting, inventory management, controlling manufacturing and supply costs and quality and reliability of our aircraft. Our defense strategy may require us to work with prime contractors, joint venture partners, and other third parties, and our ability to achieve our objectives will depend in part on our ability to establish, manage, and maintain these relationships on commercially reasonable terms.
Unanticipated problems in developing aircraft for our defense program, including delays or performance failures by partners or suppliers, could also divert resources, delay development or enhancements of our aircraft and increase costs. Problems in the design or quality of our aircraft, including components provided by third parties may impact our business, reputation and customer demand.
If we fail to successfully manage our defense program, including our relationships with strategic partners, contractors and suppliers, and the development, manufacturing, and marketing our aircraft, we may incur higher than expected costs, weaker than anticipated demand for our defense program and aircraft, and changes in demand for our products and services, any of which can harm our business, financial condition, and operating results.
Some of the contract orders for our Midnight aircraft are with U.S. government entities, which are subject to unique risks.
We have purchase agreements with the USAF, a U.S. governmental organization, and may enter into contracts with other governmental organizations in the future. Sales to U.S. and foreign government customers involve unique risks, including:
• new or changes to regulations, could increase compliance costs, and payments may be withheld and/or future business reduced if we fail to comply with new or existing requirements;
• government demand and payment may be impacted by public sector budget cycles and funding approvals, with payment reductions or delays resulting from sudden, unforeseen and disruptive events such as government shut downs, governmental defaults on indebtedness, political changes, geopolitical conflicts, terrorism, natural disasters, or public health emergencies;
• governments routinely audit contractors, and any unfavorable audit could result in reduced or cancelled purchases, fines, or, if improper or illegal activities are identified, civil or criminal liability;
• governments may require certain products to be manufactured, sourced or offered solely in their country or in higher-cost locations and we may not be able to meet these requirements, affecting our ability to sell to such customers; and
• a government agency’s refusal to grant certain certifications or clearance or its determination that our products or services do not meet certain standards, may harm our reputation and negatively affect our relationships with other government agencies.
Table of Contents
Any of these factors could delay or limit purchases from government customers and adversely affect our business and operating results.
Failure to comply with the debt covenants in our loan agreements could result in our inability to borrow additional funds and adversely impact our business.
Our outstanding credit agreements contain restrictive financial and operational covenants including covenants relating to our liquidity. As of December 31, 2025, we were in compliance with the applicable covenants under our credit facilities.
A covenant breach could accelerate repayment obligations, restrict additional borrowing, and adversely affect liquidity and operations, as well as our ability to pursue other business opportunities that we would otherwise consider in our best interests. In addition, our creditors could proceed against any loan collateral, which could adversely affect our operations,
Our business may be impacted by political and macroeconomic challenges, including the effects of inflation, volatile interest rates or an economic downturn or recession.
Political and macroeconomic conditions and related effects, such as inflation, interest rate volatility, trade and regulatory changes, tariffs, federal budget and debt ceiling uncertainty, banking sector instability, geopolitical conflicts, supply chain disruptions, and regional or global economic downturns, have affected and may continue to affect our business, strategy, financial condition, and results of operations. The existence of inflation in certain economies has resulted in, and may continue to result in, volatile interest rates and capital costs, supply shortages, increased costs of labor, components, manufacturing and shipping, as well as weakening exchange rates and other similar effects. Our mitigation efforts may be ineffective or delayed, and adverse conditions could materially harm our business, liquidity, and results of operation. Even if such measures are effective, there could be a delay between the adverse effect of macroeconomic conditions and the timing of when those beneficial actions impact our results of operations.
Our initial air taxi operations will be concentrated in a limited number of metropolitan areas.
We expect to initially launch our air taxi operations in limited jurisdictions subject to receipt of the necessary approvals, which will increase our exposure to localized infrastructure, regulatory, economic, weather, and operational risks of these jurisdictions. Any changes to local laws or regulations within these jurisdictions that affect our ability to operate or increase our operating expenses in these markets would have an adverse effect on our business, financial condition and operating results.
Disruption at the operations of our initial take-off and landing locations, including labor issues, utility or communications disruptions or outages, or challenges in obtaining charging infrastructure, could harm our business. Certain locations may impose restrictions on flight operations, including limits on takeoffs and landings, bans on eVTOL aircraft, new permitting requirements, changes to operating rules, or introduce or increase take-off and landing fees. These restrictions could adversely affect customer demand, as well as our business, financial condition, and operating results.
Our long-term success and ability to significantly grow our revenue will depend, in part, on our ability to differentiate our products and services from our competitors, establish and expand into international markets and/or expand market segments.
Our future results will depend, in part, on our ability to expand into international markets and additional market segments, such as defense or logistics/cargo. Entering into these international markets and market segments may require significant upfront investment, and expenses, and we may not be able to achieve our anticipated returns. Our international expansion will depend upon our ability to, among other things, obtain required government approvals, adapting to local market and technology requirements and, in some cases, working through joint ventures, minority investments, partnerships or co-marketing with established companies. If we are unable to identify suitable partners or negotiate favorable terms, our growth and market penetration may be limited.
Our ability to compete effectively depends on many factors, including: speed to market of our initial aircraft and UAM and other services, effective strategy and execution of aircraft and service offerings, product safety and performance, pricing, and quality of customer support. Competitors with greater scale, more established customer relationships, and resources could limit our market penetration.
If we experience harm to our reputation and brand, our business, financial condition and results of operations could be adversely affected.
Our reputation and brand are critical to our ability to attract customers, partners, talent, and investors. Negative perception of our technology, industry or our company may harm our reputation and brand, including as a result of:
• complaints or negative publicity or reviews about our aircraft or service offerings from our customers or negative publicity reviews about other brands or events we are associated with, even if factually incorrect or based on isolated incidents;
Table of Contents
• changes to our operations, safety and security, privacy or other policies that users or others perceive as overly restrictive, unclear or inconsistent with our values;
• misconduct by employees, management, customers, or partners;
• actual or perceived disruptions or defects in our aircraft or technology, such as data security incidents, platform outages, payment processing disruptions or other incidents that impact the availability, reliability or security of our offerings;
• accidents or incidents involving aircraft operated by one of our commercial partners or another member of the aerospace industry;
• litigation, regulatory investigations or certification delays;
• our inability to operate our air taxi operations in the Los Angeles area and for use during the LA28 Olympic Games due to any potential delays in certification;
• perception of our treatment of employees, contractors, customers or our other business partners, including in response to political or social issues; or
• any of the foregoing with respect to our competitors, to the extent such resulting negative perception affects the public’s perception of us or our industry as a whole.
In addition, changes we make to improve offerings or balance stakeholder interests may be viewed positively by some and negatively by others, or by none. Failure to balance stakeholder interests or meet customer expectations could reduce adoption and materially harm our business.
Our business may be adversely affected by labor and union activities.
While none of our employees are currently unionized, many aerospace companies have unionized workforces, which can result in higher employee costs and increased risk of work stoppages. We also rely on other companies, such as suppliers and freight providers, that may have unionized employees, and strikes or labor disruptions at these companies could negatively affect our business, financial condition, or operations.
Our customer purchase agreements may include price escalation clauses, which could lead to losses if our costs rise faster than the agreed escalation rates.
Commercial aircraft contracts are often signed years before delivery. To account for economic changes during that period, prices usually include fixed amounts adjusted by escalation formulas based on labor, commodity, and other indices. Our revenue estimates assume certain escalation formulas, but the actual adjustments are outside of our control and can vary significantly, affecting revenue and operating margins. We can make no assurance that any customer, current or future, will exercise purchase options, fulfill existing purchase commitments or purchase additional products or services from us. The final terms and conditions of the United Purchase Agreement, including any price escalation clauses have not yet been determined, and there is no assurance that we will fully mitigate these risks.
We may fail to realize the anticipated benefits from our planned operations at Hawthorne Airport.
We believe that there are significant benefits that may be realized through our planned operations at Hawthorne Airport. However, the efforts to realize these benefits will be a complex process and may disrupt our existing operations if not implemented in a timely manner.
Failure to achieve the anticipated benefits from our planned operations at Hawthorne Airport could adversely affect our business, results of operations, or financial condition, decrease or delay any accretive effect of our acquisition of the Hawthorne Airport, divert the attention of certain personnel and management, adversely affect the price of our Class A common stock and cause our business to not perform as expected. In addition, while we expect key management that has, since 2005, operated the facilities we acquired at Hawthorne Airport to continue operating these facilities following the transaction, there can be no assurance that such individuals will continue to remain employed by us for any period of time. Our management has limited experience operating the properties and the aviation business that we have acquired. If we fail to effectively manage such businesses and the risks and challenges inherent therewith, we may not realize the anticipated benefits of our planned operations at Hawthorne Airport and our operating results and financial condition will be materially and adversely affected. Our ability to generate revenue from these assets will depend, in part, on our abilities to attract and maintain customers to use the airport and hangar facilities and integrate the property into our planned infrastructure for our anticipated air taxi operations.
We are also planning on completing certain capital projects at Hawthorne Airport, including preparing the site for planned air tax operations in the Los Angeles area and for use during the LA28 Olympic Games. The estimated costs of, and the projected schedule for, our planned capital projects are subject to a number of uncertainties. Our ability to complete these
Table of Contents
projects within budgets and on expected schedules may be adversely affected by various factors including, but not limited to: errors in our estimated costs and projected schedule; design and engineering errors; cost increases because of demand for labor and materials; cost increases due to instituted or proposed changes in trade policies; contractors’ difficulty in predicting costs over a lengthy construction period; changes to the scope of the projects; material and/or labor shortages; adverse weather conditions; contractor defaults and bankruptcy; labor disputes; unanticipated levels of inflation; litigation; certification, licensing, or permitting denials or delays; other regulatory impediments; and environmental issues. We expect to complete the redevelopment of up to 200,000 square feet of hangar space and to build a planned advanced air mobility center of excellence. Eventually, we aim to develop Hawthorne Airport into an AI-powered operations platform with such features as AI-powered air traffic coordination, AI-coordinated ground operations for managing aircraft, crews and turns, VR-based flight simulation with adaptive AI feedback, operational forecasting driven by AI models, machine learning to detect maintenance needs and biometric and AI-enabled screening for more seamless and secure boarding. These efforts to build the airport of the future, including our plans to use Hawthorne Airport as a innovation hub for the next generation of AI-based aviation technologies, will require significant additional capital and other resources for implementation and may require additional authorization from federal, state, or local regulators. If we are unable to access such capital, obtain the necessary regulatory approval, or develop the proper AI models to support this AI-powered operations platform, we may not be able to realize our long term plan for Hawthorne Airport.
Our operations at Hawthorne Airport subject us to additional federal and state regulations that may result in additional costs.
Our operations at Hawthorne Airport subject us to additional regulatory requirements and compliance with those requirements could result in additional costs. For example, the FAA, from time to time, issues directives and other regulations relating to the management, maintenance, operation, and use of airport facilities. Compliance with those requirements may cause us to incur significant expenditures.
In addition, the City of Hawthorne is subject to its own regulatory and contractual obligations as the owner and operator of Hawthorne Airport. The City of Hawthorne has entered into agreements with the FAA or its predecessor agencies that govern, among other things, how the city may operate and manage Hawthorne Airport and use airport revenue. If the FAA were to determine that the City of Hawthorne is noncompliant with any of those agreements, the FAA could order the city to remedy such noncompliance, including in ways that could materially limit our business operations at Hawthorne Airport or the value of our investment in the airport’s facilities or services. Additionally, if the FAA found the City of Hawthorne noncompliant with any of those agreements, the FAA could withhold future federal airport grants from the city until the FAA determines that the city has achieved compliance. Such withholding could reduce the funds available for maintenance or improvement of Hawthorne Airport infrastructure, including runways and taxiways, on which we or our tenants at the airport may rely for our respective operations.
Caltrans separately regulates aspects of Hawthorne Airport’s maintenance and operations, primarily to ensure airport safety, and Caltrans regularly inspects the airport for compliance with federal and state requirements. If Caltrans were to find the airport noncompliant with those requirements, it could direct the City of Hawthorne to remedy such noncompliance. Those remedies could limit our use or development of facilities at Hawthorne Airport or require the airport’s tenants, including us or our subtenants, to pay higher or additional fees to subsidize any required remedial measures.
The aviation business is subject to numerous, often-stringent federal, state, local, and foreign laws, regulations, and ordinances relating to the protection of the environment and noise, including those relating to emissions to the air, discharges, and the use, management, disposal, and release of, and exposure to, hazardous substances and waste materials. There is increasing litigation and regulatory focus in the U.S. concerning the potential health hazards of per- and polyfluoroalkyl substances (“PFAS”), a group of chemical compounds that have been used in various applications, including in firefighting foam at some airports. We have no knowledge of PFAS use or contamination at Hawthorne Airport, but we have no basis to determine whether any airport users have dispensed PFAS-containing firefighting foam or other products at Hawthorne Airport in the past. If PFAS contamination were found at Hawthorne Airport, we could be subject to liability or be required to undertake environmental remediation that could prove costly and materially impact our operations at the airport. In addition, Hawthorne Airport may be required to comply with Title III of the ADA to the extent that it is considered a “public accommodation” as defined under the ADA.
Our master ground lease with the City of Hawthorne for the property on which Hawthorne Airport is located may not be renewed or may be amended on unfavorable terms, potentially limiting our operations and increasing costs.
We do not own the property on which Hawthorne Airport is located. Instead, we have assumed an existing master ground lease with the City of Hawthorne that gives us the right to manage and sublease most of the airport’s commercial and hangar facilities consistent with city approvals and subject to FAA requirements. The remaining term of that master ground lease runs through 2055. The master ground lease contains provisions for a fixed rate increase over the life of the lease on the rent to be paid to the City of Hawthorne. The city authorities may choose not to renew a lease at all or to only renew the lease on terms
Table of Contents
that are unfavorable to us. At the conclusion of a lease, we may be required to participate in a bidding process to renew the master ground lease, which could require unanticipated capital spending and could divert management’s attention during the pendency of the process.
In addition, our master ground lease at Hawthorne Airport is subject to the City of Hawthorne’s airport grant agreements with the FAA. If the FAA were to find the master ground lease in conflict with any such grant agreement, the FAA could require the City of Hawthorne to amend the master ground lease to resolve the conflict. Such an outcome could materially limit our use of the master ground lease or otherwise materially limit the value of the master ground lease to us.
The final terms of our proposed manufacturing relationship with Stellantis and its affiliates remain uncertain and are subject to the negotiation of definitive documentation.
We entered into a Memorandum of Understanding effective November 1, 2024 with FCA US LLC, a wholly-owned subsidiary of Stellantis, containing additional detail regarding the terms of the planned manufacturing relationship with Stellantis. We have not yet executed the final agreement and there is no assurance that we will execute the agreement in the near term or at all.
Failure to maintain effective internal controls and disclosure controls could materially harm our business, operating results, and financial condition.
Ineffective controls could lead to inaccurate financial reporting, regulatory noncompliance, restatements, fraud, or loss of investor confidence, which could negatively affect our reputation and the market price of our Class A common stock. Our controls may become inadequate due to changes in our business, and control weaknesses have been identified in the past and may be identified in the future, including through adverse findings by our independent registered public accounting firm. Our independent registered public accounting firm has in the past or may in the future issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Compliance with public company reporting requirements, including Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), requires significant management time, resources, and expense, and may divert attention from our core business and increase operating costs.
Public health threats, including epidemics and pandemics, could materially harm our business, prospects, financial condition, and operating results.
We face various risks related to public health issues, including epidemics, pandemics and other outbreaks that could significantly harm our operations and financial results. Such events may disrupt manufacturing, supply chains, and operations, as seen during COVID-19. The impact and duration of these risks are highly uncertain and depend on factors such as severity, government responses, and the pace of economic recovery. Even after these events subside, we may continue to experience adverse effects, including ongoing supply chain disruptions.
A major health or safety incident could adversely affect our reputation, business and results of operations.
Manufacturing lines, airports, and aviation infrastructure are inherently dangerous, and operating in this industry involves certain inherent health and safety risks. Given the regulatory requirements governing health and safety, as well as our operations at Hawthorne Airport and other sites, maintaining strong health and safety performance is critical to the success of all aspects of our business.
Any failure in health and safety performance, whether at our own facilities or those of our contract manufacturers and suppliers, may result in penalties for non-compliance with applicable laws or regulations, regulatory investigations, or litigation. A major or significant health and safety incident could also result in substantial costs, generate negative publicity, and materially harm our reputation and relationships with regulators, governmental authorities, and local communities. Such impacts could have a material adverse effect on our business, and results of operations.
Failure to comply with aviation and eVTOL-related laws and regulations could materially harm our business, financial condition, and operating results.
Our aircraft, UAM operations, and other services are subject to extensive and evolving regulation, including aircraft certification, production certification, passenger and flight operations, airspace use, safety, security, and infrastructure requirements. For example, in October 2024, the FAA published the operational regulations, or SFAR, for eVTOL aircraft. Any other regulatory changes or revisions could delay our ability to obtain type certification, and could delay our ability to launch our UAM and other services.
Rigorous testing and the use of approved materials and equipment are among the requirements for achieving aircraft certification with the FAA and other comparable regulators. Our failure to obtain or maintain certification for our aircraft or infrastructure would have a material adverse effect on our business and operating results. We will also need to obtain and
Table of Contents
maintain operational authority necessary to provide our envisioned UAM and other services. A transportation or aviation authority may determine that we cannot manufacture, provide, or otherwise engage in those services as we have contemplated. The inability to implement our envisioned services could adversely affect our results of operations, financial condition, and prospects.
Compliance is costly and time-consuming, and regulatory changes could delay certification, limit operations, postpone or restrict operations and increase costs. If we fail to obtain or maintain required certifications or operating approvals, or if laws change in ways that make compliance impractical or prohibitively expensive, our business and prospects could be adversely affected. As we expand internationally, we will face additional complex regulatory requirements, which could further restrict our operations and increase costs.
Our business and reputation are impacted by information technology system failures and network disruptions.
We and our global supply chain rely on complex information technology systems and are exposed to information technology system failures or network disruptions caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, ransomware or other cybersecurity incidents, or other events or disruptions. These incidents could disrupt our operations; result in the loss, theft or misuse of intellectual property; compromise sensitive, personal or confidential information; jeopardize facility or aircraft security; or impair the performance of aircraft systems and software.
We collect, store, transmit and otherwise process data from our aircraft, customers, employees and others, including personal information or confidential or proprietary information. We also work with partners and third-party service providers or vendors that collect, store and process such data on our behalf and in connection with our aircraft Although we have implemented security controls, there can be no assurance that our security controls or those of our partners and vendors will prevent all security breaches. A data breach or cybersecurity incident could result in contractual liability, regulatory penalties, remediation costs, loss of customer trust, and reputational damage.
Our aircraft and operational systems have avionics and flight control software services and functionality that utilize data connectivity to monitor aircraft performance and to enhance safety and preventative maintenance. Disruptions, vulnerabilities, unauthorized access, or misuse of these systems and software could negatively affect aircraft performance, safety, operations, and customer acceptance. We intend to use our avionics and flight control software and functionality to log information about each aircraft’s use in order to aid us in aircraft diagnostics and servicing. Our customers may object to the use of this data, and applicable laws may restrict data use, retention, or cross-border transfers, increasing compliance costs and limiting operational flexibility.
Our aircraft contain complex information technology systems and built-in data connectivity to share aircraft data with ground operations. We plan to design and implement security measures to protect these systems, they may be vulnerable to unauthorized access, data breaches or cybersecurity incidents. A significant breach of our third-party partners’, service providers’ or vendors’ or our own network security and systems could adversely affect our business and prospects, including possible fines, penalties and damages, reduced customer demand, and reputational harm.
Developing, expanding and upgrading our information technology systems involve inherent risks that could disrupt key business processes, including data management, procurement, production, finance, and supply chain. These risks could impair our ability to manage our data and inventory, procure parts, manufacture, deploy, deliver and service our aircraft, protect intellectual property and comply with legal and contractual requirements. Failure in our systems or those of third-party vendors or suppliers could disrupt our operations and financial reporting, expose intellectual property and require us to expend significant resources to make corrections or find alternative sources for performing these functions.
Cybersecurity threats are evolving rapidly, including phishing, social engineering, and sophisticated attacks by nation-state or state-sponsored actors, particularly during geopolitical conflicts. Laws, regulations, and industry standards governing cybersecurity, data protection, and software security continue to evolve globally, which may increase compliance obligations and costs. Breaches may require disclosure to affected individuals, regulators, or other stakeholders, which could harm our reputation, erode customer trust, and result in substantial remediation expenses. While we maintain cybersecurity insurance, coverage may be insufficient or unavailable for certain claims, and large claims could exceed coverage, increase premiums, or reduce insurance availability, adversely affecting our business and financial condition.
Failure to comply with laws and regulations relating to privacy, data protection and consumer protection, or the expansion of current laws and regulations or the enactment of new laws or regulations in these areas, could adversely affect our business and our financial condition.
We are subject to numerous U.S. and foreign laws, regulations, contractual obligations and industry standards relating to privacy, data protection, and consumer protection, including the California Consumer Privacy Act and the European Union and U.K. General Data Protection Regulations. These laws govern the collection, storage, retention, protection, use, processing,
Table of Contents
transmission, sharing and disclosure of personal information and impose obligations such as security safeguards, breach notifications, and rights for individuals to access or control their data. Compliance can be resource-intensive and we may need to implement additional policies, systems, and controls. Non-compliance by us or our third-party vendors, can result in civil or criminal liability, regulatory investigations, fines or penalties, private litigation, and reputational harm.
The regulatory landscape is rapidly evolving. In the U.S., many states have enacted or are considering comprehensive consumer privacy laws, and federal regulatory authorities such as the Federal Trade Commission and state attorneys general continue to interpret and enforce consumer protection and data privacy requirements. Internationally, new cross-border data transfer frameworks, local storage requirements, and differing regulatory interpretations may increase operational complexity, compliance costs, and risk of enforcement. The scope and interpretation of the laws are often uncertain and may be inconsistent across jurisdictions.
We publish privacy policies and other documentation regarding our collection, processing, use and disclosure of personal information and/or other confidential information. Although we endeavor to comply with these policies, we may at times fail or be perceived to have failed to do so. Moreover, despite our efforts, we may not achieve compliance if employees, contractors, service providers or vendors fail to comply with these policies. Such failures can subject us to potential regulatory action if we are found to be deceptive, unfair, or misrepresentative of our actual practices. Claims alleging violations of privacy rights, data protection laws or applicable privacy notices, even if we are not found liable, could be expensive and time-consuming to defend and result in adverse publicity.
Our investment in AI initiatives and use of AI exposes us to risk, which could adversely affect our reputation, business, operating results, and financial condition.
We are making investments in AI initiatives, including with respect to our services and technologies at Hawthorne Airport. AI technologies are complex and rapidly evolving, and we are subject to an evolving regulatory landscape. Our efforts to incorporate AI may result in new or enhanced governmental or regulatory scrutiny, litigation, ethical concerns, or other complications that could adversely affect our business, operating results and financial condition. For example, AI models, training data, outputs, or applications may be inaccurate, biased, harmful, or non-compliant with current or future laws and regulations, including those relating to aviation safety, consumer protection, intellectual property, and privacy, and may expose us to litigation or regulatory liability. Moreover, our use of third-party AI models relies on safeguards implemented by their developers, including with respect to data quality, accuracy, and bias, and these safeguards may be insufficient.
If our AI initiatives result in unintended or controversial outcomes because of their impact on human rights, privacy, employment, or other social, economic, or political issues, or if we fail to maintain effective governance, policies, and controls over AI development and use, we may suffer reputational harm, loss of customer trust, competitive disadvantage, or legal liability. Moreover, our competitors may introduce AI-enabled products or services that achieve greater market acceptance than ours. In our industry, failures, errors, or vulnerabilities in AI systems used in safety, security, or mission-critical workflows (including adversarial attacks, model drift, hallucinations, or data leakage) could result in safety incidents, operational disruptions, service delays, or grounding, and may delay or prevent regulatory approvals or certifications, trigger investigations or enforcement by aviation authorities, increase compliance costs, or expose us to product liability and contractual claims. We may also become subject to new or expanded regulatory and industry requirements, which could require changes to our systems, increase compliance costs, or limit certain uses of AI.
We may also face requirements under emerging AI and safety regulations and sector standards that could necessitate changes to our systems and processes or limit certain uses of AI. Our insurance coverage may not extend to all AI-related risks or losses. Any of these factors could adversely affect our business, operating results, and financial condition.
Our current international operations and our expansion plans could subject us to political, operational and regulatory challenges.
We sell our aircraft and are developing UAM operations outside the United States, and we are continuing to expand our international operations as part of our growth strategy. For example, we have established relationships with suppliers and potential partners in select international markets and have begun working with regulators in other countries to pursue commercialization opportunities in those markets. International operations are subject to risks such as differing or more stringent regulations, political or economic instability, cross-border tensions, import/export compliance, tariffs, trade barriers, privacy and data protection requirements, weaker intellectual property protection, overlapping tax regimes, information security, labor and employment matters, and anti-corruption or anti-bribery liabilities.
Our business is also subject to stringent U.S. import and export control laws and sanctions, which may include the Export Administration Regulations (“EAR”), the International Traffic in Arms Regulations, and economic sanctions administered by the Treasury Department’s Office of Foreign Assets Control. Compliance requires licenses and controls on technology transfers, and changes in laws, classifications, or policies could restrict operations, delay commercialization, impact our ability
Table of Contents
to compete successfully, or lead to penalties, debarment, or reputational harm. Changes in U.S. trade control laws and regulations, or reclassifications of our products or technologies, may restrict our operations.
Recent and potential changes in U.S. and foreign trade policies, including tariffs, trade restrictions, and renegotiation or termination of trade agreements, have increased uncertainty and affected the pricing and availability of our products and components. Retaliatory tariffs, further increases in U.S. tariffs, and ongoing trade uncertainties may adversely affect demand for our aircraft and services. Certain aircraft components are difficult or impossible to source domestically. As a result, changes in trade conditions could increase our costs, disrupt supply chains, require significant management attention, and harm our business and operating results if not effectively managed.
Our aircraft operations and infrastructure may be affected by adverse weather and other factors.
Adverse weather conditions,, such as storms, floods, fires, high winds, extreme heat,and other climate-related events, could impact our aircraft operations, infrastructure, and financial results. These risks may include damage to facilities or assets, flight cancellations or delays, reduced aircraft availability, increased regulatory or reporting requirements, reputational effects, and costs to enhance climate resiliency. In addition, adverse weather and operational constraints, including airspace congestion, vertiport availability, and local limits, could reduce aircraft utilization and adversely affect our efficiency and ability to scale. We cannot predict the materiality of any potential losses or costs associated with these factors.
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain additional executive management and qualified board members.
As a public company, we are required to comply with a number of laws and regulations such as the Exchange Act, Sarbanes-Oxley Act, Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and NYSE listing standards. Compliance with these rules and regulations has increased, and will continue to increase, our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources. Changes in laws or their interpretation could further increase costs, create uncertainty, or lead to legal action. We may also face higher insurance costs and challenges attracting qualified board members and executives.
As a result of disclosure of information in the filings required of a public company, our business and financial condition is more visible, which may result in threatened or actual litigation, including by competitors. If such claims are successful, our business and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and operating results.
We may face legal proceedings, which can be costly and time-consuming.
Pending legal proceedings and other future legal proceedings against us or our employees, regardless of outcome or merit, could be time consuming and expensive to defend or resolve, result in substantial diversion of management and technical resources, delay or prevent commercialization of our aircraft, harm our reputation, or require us to stop using certain intellectual property. In the event of an adverse outcome of litigation, we may have to cease developing and/or using the asserted intellectual property, which could significantly adversely impact our business, financial condition, or results of operation.
Our business may be adversely affected if we are unable to protect our intellectual property rights from unauthorized use by third parties.
Protecting our patents, trade secrets, trademarks, copyrights, and other intellectual property is critical to maintaining competitive advantage. Our success depends, at least in part, on our ability to protect our key technology and intellectual property and to maintain access to intellectual property licensed or acquired from third parties. We will rely on a combination of patents, trade secrets (including know-how), employee and third-party non-disclosure agreements, copyrights, trademarks, intellectual property licenses and other contractual rights to establish and protect our rights in our technology. However, the measures we take may not be effective for various reasons, including: patent applications may not be granted and issued patents may be challenged, invalidated or found too narrow to fully protect our proprietary rights; employees or business partners may breach their confidentiality, non-disclosure and non-use obligations to us; third parties may independently develop similar technologies or design around our patents; and costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make enforcement impracticable. We also depend on intellectual property that we license or otherwise acquire from third parties. These arrangements may limit our rights to use, modify, sublicense, or commercialize such intellectual property, may contain obligations that increase our operating costs, and may be subject to termination under certain conditions. If these licenses or other agreements are terminated, restricted, or not renewed on favorable terms, or if we are unable to obtain or maintain necessary licenses on commercially reasonable terms, we may be required to redesign our products, delay development or commercialization, or incur substantial additional costs, any of which could materially adversely affect our business.
Table of Contents
Also, while we have registered and applied for trademarks in an effort to protect our investment in our brand and goodwill with customers, competitors may challenge the validity of those trademarks and other brand names in which we have invested. Such challenges can be expensive and may adversely affect our ability to maintain the goodwill gained in connection with a particular trademark. Further, intellectual property laws differ across countries and to the extent we expand our international activities, our exposure to unauthorized use of our technologies and proprietary information may increase. Protecting our intellectual property abroad may require the attention of management significant resources, including litigation, and may not always succeed.
Our certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions, fiduciary claims, and certain other lawsuits be brought only in the Delaware Court of Chancery, or in U.S. federal courts for Securities Act claims.
Our amended and restated certificate of incorporation requires, unless we agree otherwise in writing, that certain lawsuits brought by stockholders be filed only in the Delaware Court of Chancery or, for claims under the Securities Act, in federal district courts. This applies to derivative actions, fiduciary duty claims, claims under Delaware law or our governing documents, and other matters related to our internal affairs. Anyone who owns or acquires our stock is deemed to consent to this provision.
This forum selection may limit stockholders’ ability to choose a preferred court for disputes and could discourage lawsuits. However, there is no assurance that a court would enforce the choice of forum provision contained in our amended and restated certificate of incorporation. If a court were to find such provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Certain of our warrants are classified as liabilities and changes in their value could materially affect our financial results.
On April 12, 2021, the staff of the SEC expressed its view that certain terms and conditions common to special purpose acquisition company (“SPAC”) warrants may require liability classification. As a result, our public and private placement warrants were classified as derivative liabilities at fair value, with changes in fair value reported in its statement of operations for each reporting period. See Note 11 - Warrants in the accompanying notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report for additional information about our public and private placement warrants. Accounting Standards Codification (“ASC”) 815-40 provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in the consolidated statements of operations. Because these warrants are remeasured each reporting period, our financial results may fluctuate quarterly due to factors beyond our control, which could be material non-cash gains or losses.
Evolving scrutiny and expectations from regulators and stakeholders regarding our environmental, social and governance (ESG) practices and value proposition could adversely affect our business, brand and reputation.
Evolving expectations from investors, regulators, customers, employees, and other stakeholders regarding ESG practices could affect our business and reputation. If our ESG practices, disclosures, or goals do not meet expectations or comply with regulations, we may face litigation, regulatory enforcement, or criticism. Failures—or perceived failures—could harm our brand, employee retention, and willingness of customers and third parties to work with us. Changes in ESG reporting frameworks, negative public perception, or increased compliance costs could divert management attention and negatively impact our business.
New accounting standards or changes in interpretation could adversely affect our financial results.
Changes in accounting standards or varying interpretations of existing or new accounting pronouncements could adversely affect our financial results. Significant costs may be required to comply with these changes, and misalignment of systems or processes could delay reporting or affect internal controls. Management judgments and assumptions based on these standards may differ from actual outcomes, potentially causing operating results to fall below guidance or analyst expectations, which could lower our stock price.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2025, we had approximately $1,372.4 million and $146.8 million of federal and state net operating loss carryforwards (“NOLs”) and $77.2 million and $45.0 million federal and state research and development tax credits. Federal NOLs after 2017 may be carried forward indefinitely but are limited to 80% of the excess, if any, of current year taxable income (without regard to deductions). Our ability to use NOLs and other tax attributes may be limited by “ownership change” rules under Sections 382 and 383 of the Internal Revenue Code or similar state laws, including past or future stock ownership changes beyond our control. In addition, at the state level, there may be periods during which the use of net operating losses is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a
Table of Contents
result, even if we attain profitability, we may be unable to use all or a material portion of our net operating losses and other tax attributes, which could have an adverse impact on our business, financial condition and results of operations.
New or revised tax laws could materially affect our business, cash flows, or financial results.
New tax laws, statutes, rules, regulations or ordinances could materially affect our business, cash flows, or financial results. Existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. Changes in corporate tax rates, the realization of net deferred tax assets, taxation of foreign earnings, and expense deductibility could result in significant one-time charges, and could increase our future U.S. tax expense.
Risks Related to Ownership of Our Securities
The price of our Class A common stock and warrants may be volatile, and you could lose all or part of your investment.
The price of our Class A common stock and warrants may fluctuate due to various factors, including changes in macroeconomic, geopolitical, market, and industry conditions; volatility in interest rates, inflation, and currency exchange rates; supply chain disruptions; political events, regulatory developments, and acts of war or terrorism; our financial performance and guidance relative to expectations; actions by us or our competitors; strategic transactions and capital commitments; changes in management; declines in equity markets generally; future issuances or sales of our securities; investor sentiment; litigation or regulatory investigations; accounting changes; actions by significant stockholders; and other events beyond our control.
In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and management attention from our business regardless of the outcome of such litigation.
We may be required to take write-downs or write-offs, or incur restructuring, impairment or other charges that could significantly harm our financial condition, results of operations and the price of our Class A common stock, potentially causing you to lose some or all of your investment.
Factors outside of our control may, at any time, arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure operations, or incur impairment or other charges. resulting in reporting losses. Even if these charges are non-cash and do not immediately affect liquidity, they could contribute to negative market perceptions and may make it more difficult or expensive to obtain financing.
There is no assurance we will maintain compliance with NYSE continued listing standards. If we fail to meet these requirements, the NYSE could delist our securities, limiting investors’ ability to trade them and imposing additional trading restrictions.
Our Class A common stock and public warrants are listed on the NYSE under the symbols “ACHR” and “ACHR WS.” If delisted and we cannot list on another national exchange, our securities may trade over-the-counter, which could result in: limited market quotations for our securities, reduced liquidity, classification of our Class A common stock as a “penny stock” triggering stricter broker rules and potentially lower trading activity, reduced news and analyst coverage, and decreased ability to issue additional securities or raise financing.
Our Class A common stock price and trading volume may be affected by industry and financial analysts’ reports.
If analysts fail to cover us, downgrade us or our sector, or publish inaccurate or unfavorable research, our stock price could decline. In addition, some financial analysts may have limited expertise with our model and operations. Losing analyst coverage could reduce market visibility and further impact stock price and trading volume.
We do not expect to pay cash dividends on our Class A common stock in the foreseeable future. We intend to retain any earnings to fund the growth and development of our business, and as a result, investors may not receive a return on their investment unless they sell their shares, and the value of our common stock may not appreciate.
Future sales, or perceived future sales of our Class A common stock by us or our stockholders could reduce our stock price.
Sales or perceived sales of our Class A common stock by us or other stockholders could also reduce stock price and make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. All shares that were registered on our registration statement on Form S-4, which was declared effective on August 11, 2021, are freely tradable without restriction by persons other than our “affiliates,” (as defined under Rule 144 of the Securities Act (“Rule 144”)), including our directors, executive officers and other affiliates. Some stockholders are contractually restricted from selling shares for a specified period or have rights, subject to some conditions, to require us to file registration statements for the public resale of shares of Class A common stock or to include such shares in registration statements that we may file for us or other stockholders. Any registration statement we file to register additional shares, whether as a result of registration rights or otherwise, could cause the market price of our Class A common stock to decline or be volatile.
Table of Contents
As restrictions on resale end or if these stockholders exercise their registration rights, the market price of our Class A common stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our Class A common stock or other securities.
We have an aggregate of 25,394,997 public and private placement warrants, which entitle the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per whole share, subject to adjustment. These public and private placement warrants expire in September 2026. Moreover, as of December 31, 2025, we have an additional 19,340,138 outstanding private warrants issued to certain parties, 8,200,162 of which remain subject to vesting conditions. Exercise of these warrants will dilute existing stockholders and increase the number of shares in the public market.
Shares reserved for issuance under our equity incentive plans will also become eligible for public sale once issued, subject to vesting provisions, and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable. We have filed, and will continue to file, Form S-8 registration statements to register these shares, making them available for sale in the open market.
We have and may issue our securities as consideration for services and in connection with investments or acquisitions. Such issuances could significantly dilute existing stockholders and increase the number of shares available in the public market.
Anti-takeover provisions in our governing documents could delay or prevent a change of control.
Certain provisions of our amended and restated certificate of incorporation and bylaws have anti-takeover effects and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control, even if such transaction may benefit stockholders or offer a premium for their shares.
These provisions provide for, among other things: the board of directors’ ability to issue one or more series of preferred stock, a classified board, advance notice requirements for director nominations and stockholder proposals at annual meetings, limits on calling special stockholder meetings, limits on stockholder action by written consent; and our board of directors has the authority to adopt, amend or repeal our amended and restated bylaws.
These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the offer might be considered beneficial by many of our stockholders, which could limit stockholders’ ability to obtain a premium for their shares. They could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choice or influence other corporate actions.
Table of Contents
