Item 1A. Risk Factors.
An investment in our Class A common stock involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, results of operations, financial condition or prospects could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of the Class A common stock could decline due to any of these risks, and, as a result, you may lose all or part of your investment. Certain statements in this “Risk Factors” section are forward-looking statements. See “Special Note Regarding Forward-Looking Statements.”
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Risks Related to Our Business and Industry
Our business plan requires a significant amount of capital. We expect to require additional future funding to support our operations and implementation of our growth plans and we may be unable to access the capital and credit markets or borrow on affordable terms to obtain additional capital that we may require.
Our proposed operations and our business strategy contemplate significant manufacturing capacity and aircraft and infrastructure development, including additional vertiports where our aircraft can land, both within the U.S. and internationally. Construction of additional manufacturing and testing facilities, chargers and other facilities will require significant capital expenditures, as will future expansion of and improvements to our operations. Based on our recurring losses and management’s expectations that significant on-going operating expenditures will be necessary to successfully implement our business plan and develop our powerhouses, we expect to require additional funding to continue our operations through commercialization. Although we intend to partner with or pursue leasing or other arrangements with third parties in relation to certain of our facility needs, we cannot be assured that such partnership opportunities or other arrangements will be available on commercially reasonable terms, or at all.
In addition, as our facilities and aircraft mature, our business will require capital expenditures for the maintenance, renovation and improvement of such facilities to remain competitive. This creates an ongoing need for capital, and, to the extent we cannot fund capital expenditures from cash flows from operations, we will need to borrow or otherwise obtain funds.
We expect to continue funding our operations through equity offerings or debt financings, credit or loan facilities, potential other capital resources, or a combination of one or more of these funding sources. Such financings may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business.
Periods of instability in the capital and credit markets (both generally and those impacting the aerospace industry in particular), including as a result of global health crises or other events contributing to the disruption and volatility of global financial markets, could limit our ability to access these markets to raise debt or equity capital on affordable terms or to obtain additional financing. Among other things, our lenders may seek to increase interest rates, enact tighter lending standards, refuse to refinance existing debt at maturity on favorable terms or at all and may reduce or cease to provide funding to us. For example, increased interest rates in 2022 and 2023 led to a widespread slowdown in investment and funding opportunities, especially for pre-revenue companies. We may sell equity securities or debt securities in one or more transactions at prices and in a manner that may materially dilute our current investors. Any debt financing, if available, may involve restrictive covenants that could reduce our operational flexibility or profitability. Debt financing, if available, may result in a significant financial burden if interest rates remain high for a prolonged period or increase in the future. We expect that our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months.
However, our operating plan may change as a result of factors currently unknown to us, and we may need to seek additional funding sooner than planned. If we cannot raise funds or otherwise enter into financing arrangements on acceptable terms, we may be forced to delay, reduce, or eliminate our research and product development programs or future commercialization effort, or we may not be able to grow our business or respond to competitive pressures, any of which may have an adverse impact on our business, results of operations, financial condition and prospects.
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We expect to be significantly dependent upon revenue generated from the sale of our electric aircraft, our batteries and our core technologies, along with the utilization of our charging infrastructure, and our future success will be dependent upon our ability to design and achieve market acceptance, adoption and utilization of these new technologies.
We expect to generate a significant portion of our revenue from the sale of our electric aircraft and batteries and the commercialization of our infrastructure and critical charging and software systems. While we believe we are uniquely positioned to capture revenues across the full aircraft lifecycle, from new aircraft sales for commercial and military applications to revenues from sales of related products and services, including batteries, motors, components, maintenance, training and charging solutions, each of our aircraft requires significant investment prior to commercial introduction, and may never be successfully developed or commercially successful. There can be no assurance that we will be able to design future models of electric aircraft or infrastructure and charging technologies that will meet the expectations of our customers or that our future models will become commercially viable. In particular, it is common in our industry for the production aircraft to have a styling and design different from that of the concept aircraft, which may happen with our future aircraft. As technologies change in the future for aircraft in general and electric aircraft specifically, we will be expected to upgrade or adapt our aircraft and introduce new models in order to continue to provide aircraft with the latest technology. To date, we have limited experience simultaneously designing, testing, manufacturing and selling our electric aircraft.
We may experience significant delays in the design, manufacture, certification and commercial rollout of our aircraft, which could harm our business, brand, results of operations, financial condition and prospects.
Any significant delay in the commercialization of our aircraft could materially damage our business, brand, results of operations, financial condition and prospects. Aircraft manufacturers often experience delays in the design, manufacture, certification and commercial release of new aircraft models. We may experience such delays in launching our aircraft, and any such delays could be significant.
In addition, final designs for our eVTOL and large passenger electric aircraft are still in process, and various aspects of the aircraft component procurement and manufacturing plans have not yet been determined. We are continually evaluating, qualifying and selecting our suppliers for the planned production of our aircraft. However, we may not be able to engage suppliers for the remaining materials and components in a timely manner, at an acceptable price or in the necessary quantities. In addition, we will also need to do extensive testing to ensure that our aircraft are in compliance with applicable airworthiness regulations and other applicable requirements prior to beginning mass production and delivery of the aircraft. Our plan to begin commercial production of our aircraft is dependent upon the timely availability of funds, upon our finalizing the related design, engineering, component procurement, testing, certification, build out and manufacturing plans in a timely manner and upon our ability to execute these plans within the current timeline.
The markets for our offerings are still in development, and if such markets do not materialize, or grow more slowly than we expect or fail to grow as large as we expect, our business, results of operations, financial condition and prospects could be harmed.
The markets for electric aircraft (as well as for technologies and product and service offerings relating to same) are still in development, and our success in these markets is dependent upon our ability to effectively design, develop, and certify electric aircraft and to market and gain traction in respect of electric aircraft utilization as a substitute for existing methods of transport, as well as the effectiveness of our other marketing and growth strategies. If our business customers, including, in the case of our defense program, government entities, do not perceive electric aircraft as beneficial or choose not to adopt electric aircraft as a result of concerns regarding safety, noise, affordability or for other reasons, then the market for our offerings may not materialize, may develop more slowly than we expect or may not achieve the growth potential we expect, any of which could harm our business, results of operations, financial condition and prospects.
Growth of our business will require significant investments in our infrastructure, technology and sales and marketing efforts, including significant expansion of our production facilities in the future. If our business does not have sufficient capital required to support these investments, our results of operations will be negatively affected. Further, our ability to effectively manage growth and expansion of our operations will also require us to enhance our operational systems, internal controls and infrastructure, human resources policies and reporting systems. These enhancements will require significant capital expenditures and allocation of valuable management and employee resources.
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The electric and hybrid electric aviation (including VTOL) industry may not continue to develop, electric aircraft may not be adopted by the market, eVTOL aircraft may not be certified by government authorities or electric aircraft may not be an attractive alternative to existing modes of transportation, any of which could adversely affect our business, results of operations, financial condition and prospects.
Electric aircraft involve a complex set of technologies, which we must continue to further develop and rely on our commercial and defense program customers to adopt. However, as a prerequisite to commercializing our electric aircraft for sale to business customers or the U.S. government, we must receive requisite certifications and approvals from applicable governmental authorities. See “—Risks Related to Laws and Regulations” for a discussion of risks associated with such regulatory and related requirements. There are currently no electric aircraft certified by the FAA and operating commercially in the United States, and there can be no assurance that our design, development and certification efforts will result in our receiving FAA certification of our aircraft. In order to achieve FAA certification, the performance, reliability and safety of electric 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 rollout and use of our aircraft, or that we will experience delays in receiving one or more of these certifications. Even if our electric aircraft receive Type Certification and airworthiness certificates and we receive Production Certification, aircraft operators must conform their operational authorizations to include electric aircraft, including eVTOL, which requires FAA approval of aircraft and operational procedures, and individual pilots also must be trained and ultimately approved by the FAA to fly such aircraft, which could contribute to delays in any widespread use of electric aircraft and potentially limit the number of electric aircraft operators available to purchase aircraft from or partner with us. Additional challenges to ensuring the demand for our aircraft, technologies and related services, all of which are outside of our control, include:
• market acceptance of electric aircraft, including CTOL and VTOL;
• federal, state and local regulations for our electric aircraft and charging infrastructure;
• necessary changes to existing airport or vertiport infrastructure to enable adoption, including installation of necessary charging, navigation, lighting and other equipment;
• ability for customers to obtain all government approvals necessary to operate our aircraft between commercially desirable origins and destinations;
• ability for customers to obtain access to economical insurance policies for operating eVTOL aircraft; and
• public perception regarding the safety of eVTOL aircraft and the resulting demand for our business customers’ services.
There are a number of existing laws, regulations and standards that may apply to eVTOL aircraft, including standards that were not originally intended to apply to 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 the SFAR adopted by the FAA in December 2024, could delay our ability to launch commercial production of our eVTOL aircraft as well as our customers’ ability to launch commercial eVTOL operations which could impact our business plans and expectations with respect to revenue from both aircraft and aftermarket components. In addition, depending on the nature of any revised or new regulations, we may need to modify our approach to certification, and we may not be able to timely comply with such regulations. Further, we have designed our aircraft to be certified under the current FAA regulatory framework. If the applicable FAA regulations are substantially changed or new regulations are adopted, we may need to modify the design of our aircraft to comply with the new regulations, which could cause us to incur significant expenses and scheduling delays in developing and commercializing our aircraft production and may impact the performance or functionality of the certified aircraft adversely, which could adversely affect our business, results of operations, financial condition and prospects. See “—Risks Related to Laws and Regulations—Failure to comply with applicable laws and regulations relating to the aerospace business in general and electric aircraft testing, certification and production specifically, could adversely affect our business, results of operations, financial condition and prospects.”
There can be no assurance that the market will accept electric aircraft, that we will be able to execute on our business strategy or that our electric aircraft or customers of our aircraft or our related or other offerings will obtain the necessary government approvals or be successful in the applicable target market or markets. There may be heightened public skepticism of this nascent technology and its adopters. In particular, there could be negative public perception surrounding electric aircraft, including the overall safety and the potential for injuries or death occurring as a result of accidents involving electric aircraft, regardless of whether any such safety incidents occur involving us. Any of the foregoing risks and challenges could adversely affect our business, results of operations, financial condition and prospects.
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Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of investment.
We are an early-stage company with limited operating history. As such, we may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown factors as we seek to a transition to a company capable of supporting commercialization. If we do not successfully address these risks, our business, results of operations, financial condition and prospects will be materially and adversely harmed. We were formed and began designing our electric aircraft in 2018.
Our revenues were $15.1 million for the year ended December 31, 2024 and $35.6 million for the year ended December 31, 2025. We have a very limited operating history on which investors can base an evaluation of our business, results of operations, financial condition and prospects. We intend in the longer term to derive substantial revenues from the sales of our aircraft.
It is difficult to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business. In the event that actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial position could be materially affected.
We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to achieve or maintain profitability.
We incurred net losses of $276 million and $746 million for the years ended December 31, 2024 and 2025, respectively. It is difficult for us to predict our future operating results. As a result, our losses may be larger than anticipated, and we may not achieve profitability when expected, or at all, and even if we do, we may not be able to maintain or increase profitability. While we expect that our existing cash and cash equivalents will enable us to fund our current and planned operating expenses and capital expenditures for at least the next 12 months, until such time as we can generate significant revenue, if ever, the Company expects to fund its operations through public and private financing. There is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all. Such conditions, if they continue, may raise substantial doubt about the Company’s ability to continue as a going concern. The perception that we may be unable to continue as a going concern may make it more difficult to obtain financing for the continuation of our operations on terms that are favorable to us, or at all, and could result in the loss of confidence by investors.
We expect our operating expenses to increase over the next several years as we move towards commercial launch, continue to attempt to streamline our manufacturing process, increase our flight cadence, hire more employees and continue research and development efforts relating to new products and technologies. These efforts may be more costly than we expect and may not result in increased revenue or growth in our business. Any failure to increase our revenue sufficiently to keep pace with our investments and other expenses could prevent us from achieving or maintaining profitability or positive cash flow. Furthermore, if our future growth and operating performance fail to meet investor or analyst expectations, or if we have future negative cash flow or losses resulting from our investment in acquiring customers or expanding our operations, this could have a material adverse effect on our business, financial condition and results of operations.
We have in the past and will continue to invest significant resources in developing new product offerings and exploring the application of our Enabling Technologies for other uses and those opportunities may never materialize.
While our primary focus has been on the design, manufacture and operation of our electric aircraft, we have invested in the past and will continue to invest significant resources in developing new technologies, services, products or offerings, such as those relating to the innovation and development of electric propulsion systems, charging solutions, motors and controls. However, we may not realize the expected benefits of these investments.
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Such research and development initiatives may also have a high degree of risk and involve unproven business strategies and technologies with which we have limited operating or development experience. They may involve claims and liabilities, expenses, regulatory challenges and other risks that we may not be able to anticipate. We may not be able to predict whether customer demand for such initiatives will exist or be sustained at the levels that we anticipate, or whether we will generate sufficient revenue to offset any expenses or liabilities associated with these investments. For example, we plan to continue to invest resources in developing, with an eye toward ultimate commercialization, of our large passenger electric aircraft. Any such research and development efforts could distract management from current operations and would divert capital and other resources from our more established technologies. Even if we are successful in developing new products, services, offerings or technologies, regulatory authorities may subject us to new rules or restrictions in response to our innovations that may increase our expenses or prevent us from successfully commercializing new products, services, offerings or technologies and have an adverse impact on our business, results of operations, financial condition and prospects.
Our long-term success and ability to significantly grow our revenue will depend, in part, on our ability to establish and expand our presence within international markets.
Our future results will depend, in part, on our ability to establish and expand our presence within international markets. Our ability to expand into new markets involves various risks, including, but not limited to, the need to invest significant resources in such expansion, and the possibility that returns on such investments will not be achieved in the near future or at all in these less familiar competitive environments. Our ability to expand internationally will depend upon our ability to, among other things, obtain the necessary government approvals, adapt to international markets, understand the local customer base and address any unique local technological requirements. We may also choose to conduct our international business through joint ventures, minority investments or other partnerships with local companies as well as co-marketing with other established brands. If we are unable to identify partners or negotiate favorable terms, our international growth may be limited. In addition, we may incur significant expenses in advance of generating revenues, if any, as we attempt to establish our presence in particular international markets or market segments outside of aircraft sales, operating our charging network and our defense program.
Our growing charging network is subject to location-specific risks and regulatory uncertainties.
The footprint of our charging network is growing, which makes such part of our business susceptible to wide-ranging regulatory, economic, social, weather and other conditions and related uncertainties. Significant or repeated interruption or disruption in service in an airport or area where we have established charging infrastructure could have an adverse impact on our business, reputation, results of operations, financial condition and prospects. Disruption of operations at vertiports, whether caused by labor relations, utility or communications issues, power outages or changes in federal, state and local regulatory requirements could harm our business. Certain airports may regulate electric aircraft, including limiting the number of landings, banning operations or introducing new permitting requirements, which could significantly disrupt our charging operations and could, potentially, albeit indirectly, negatively impact customer demand for our aircraft.
Our competitors may commercialize their technology before us, or we may not be able to fully capture the first mover advantage that we anticipate.
While we believe we are well positioned to be the first manufacturer to achieve FAA Type Certification for an electric airplane, we expect the electric and hybrid electric aviation (including VTOL) industry to be increasingly competitive and our competitors could get to market with their eVTOL or eCTOL aircraft before or at the same time as us, either generally or in specific markets. Even if we are first to market, we may not fully realize the benefits we anticipate, and we may not receive any competitive advantage or may be overcome by other competitors. If new or existing companies launch competing solutions in the markets in which we intend to operate and obtain large scale capital investment, we may face increased competition. Additionally, our competitors may benefit from our efforts in developing customer and community acceptance of electric aircraft and its related infrastructure, making it easier for them to obtain the permits and authorizations required to certify and successfully commercialize their technology and operations.
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If our current and potential competitors are larger and have substantially greater resources or are affiliated with larger companies that may allocate greater resources than we have and expect to have in the future, they may devote greater resources to the development, certification and marketing of their products and services or to offer lower prices. Our competitors may also establish strategic relationships amongst themselves or with third parties that may further enhance their resources and offerings. Some could have more experience in the electric and hybrid electric aviation (including VTOL) industry than we have, and any foreign competitors could benefit from subsidies or other protective measures offered by their home countries. If our competitors commercialize their technology before us, or if we do not capture the first mover advantage that we anticipate, it may harm our business, results of operations, financial condition and prospects.
Our future growth is dependent upon the market’s willingness to adopt electric aircraft and its supporting infrastructure, and the resulting impact of such market demand on our customers’ need for our aircraft and other offerings.
Our growth is highly dependent upon the adoption by customers of, and we are subject to an elevated risk of any reduced demand for, alternative fuel aircraft in general and electric aircraft in particular. If the market for electric aircraft and its supporting infrastructure does not develop as quickly or otherwise in the manner consistent with our expectations or those of our customers, our business, results of operations, financial condition and prospects will be harmed. The market for alternative fuel aircraft is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, increasingly frequent new aircraft announcements and changing demands and behaviors of customers and other stakeholders. Factors that may influence the adoption of alternative fuel aircraft, and specifically electric aircraft, include:
• perceptions about electric aircraft quality, safety (in particular with respect to battery packs, including those utilizing lithium-ion cells), design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of electric aircraft;
• perceptions about aircraft safety in general, in particular safety issues that may be attributed to the use of advanced technology, including aircraft electronics;
• the limited range over which electric aircraft may be flown on a single battery charge;
• the decline of an electric aircraft’s range resulting from deterioration over time of the battery’s ability to hold a charge;
• concerns about electric grid capacity and reliability, which could derail our past and present efforts to promote electric aircraft as a practical solution to aircraft which require jet fuel or aviation gasoline;
• the availability of alternative fuel aircraft, including plug-in hybrid electric aircraft;
• improvements in the fuel economy of conventional internal combustion or turbine engines;
• the availability of maintenance services for electric aircraft;
• the importance of environmental considerations to customers and other stakeholders;
• volatility in the cost of crude oil and, relatedly, aviation fuels;
• customers’ and other stakeholders’ perceptions of the dependency of the United States on oil from unstable or hostile countries;
• government regulations and economic incentives promoting fuel efficiency and alternate forms of energy;
• access to chargers, standardization of electric aircraft charging systems and customers’ and other stakeholders’ perceptions about convenience and cost to charge an electric aircraft;
• the availability of tax and other governmental incentives to purchase and operate electric aircraft or future regulation requiring increased use of nonpolluting aircraft;
• perceptions about and the actual cost of alternative fuel; and
• macroeconomic factors.
Additionally, we may become subject to regulations that may require us to alter the design of our aircraft, which could negatively impact interest in our aircraft.
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The influence of any of the factors described above may cause current or potential customers not to purchase our electric aircraft, which would materially adversely affect our business, results of operations, financial condition and prospects.
Our customers’ and others’ perception of us and our reputation may be impacted by the broader industry and customers may not differentiate us from our competitors.
Customers and other stakeholders may not differentiate between us and the broader aerospace industry or, more specifically, the electric and hybrid electric aviation (including VTOL) industry. If other participants in this market have problems related to matters such as safety, technology development, engagement with certification authorities or other regulators, community engagement, security, data privacy, flight delays or customer service, such problems could impact the public perception of the entire electric and hybrid electric aviation (including VTOL) industry, including our business. We may fail to adequately differentiate our brand, our aircraft and other product offerings from others in the market which could impact our ability to attract customers or engage with other key stakeholders and have an adverse impact on our business, results of operations, financial condition and prospects.
If we are unable to keep up with advances in electric aircraft technology, we may suffer a decline in our competitive position.
It may be challenging to keep up with changes in electric aircraft technology. Any failure to keep up with advances in electric aircraft technology would result in a decline in our competitive position which could materially and adversely affect our business, results of operations, financial condition and prospects. Our research and development efforts may not be sufficient to adapt to changes in electric aircraft technology. As technologies evolve, we plan to upgrade or adapt our aircraft, charging systems and infrastructure and introduce new developments in order to continue to provide the latest technology, in particular battery cell technology. However, we may not compete effectively with our competitors if we are not able to source and integrate the latest technology into our aircraft and related components.
If we are unable to design, develop, market and sell new electric aircraft and services that address additional market opportunities, our business, results of operations, financial condition and prospects results will suffer.
We may not be able to successfully develop new electric aircraft and services, address new market segments or develop a significantly broader customer base. To date, we have focused our business on the design of high-performance electric aircraft and our Enabling Technologies that support our aircraft. We will need to address additional markets and expand our customer demographic in order to further grow our business. We have not completed the design, component sourcing or manufacturing process for our aircraft, so it is difficult to forecast their eventual cost, manufacturability or quality. Therefore, there can be no assurance that we will be able to deliver aircraft that is ultimately competitive in the electric aircraft market. Our failure to address additional market opportunities would harm our business, results of operations, financial condition and prospects.
The aircraft market is highly competitive, and we may not be successful in competing in this industry. We currently face competition from traditional aerospace companies and recent market entrants and expect to face competition from others in the future.
The worldwide aircraft market, particularly for alternative fuel aircraft, is highly competitive today and we expect it will become even more so in the future. With respect to our aircraft, we currently face strong competition from established electric aircraft manufacturers and recent market entrants who are also developing electric aircraft. Furthermore, electric aircraft have already been brought to market in China and may be brought to market in other foreign countries in the near-term.
Many of our current and potential competitors have significantly greater financial, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products. Our competitors may be in a stronger position to respond quickly to new technologies and may be able to design, develop, market and sell their products more effectively.
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We expect competition in the electric and hybrid electric aviation (including VTOL) industry to intensify in the future in light of increased demand for alternative fuel aircraft, continuing globalization, and consolidation in the worldwide aircraft industry. Factors affecting competition include product quality and features, innovation and development time, pricing, reliability, safety, fuel economy, customer service, and financing terms. Increased competition may lead to lower aircraft unit sales, which may adversely affect our business, results of operations, financial condition, and prospects. Our ability to successfully compete in our industry will be fundamental to our future success in existing and new markets and our market share. There can be no assurances that we will be able to compete successfully in our markets.
Demand in the electric and hybrid electric aviation (including VTOL) industry is highly volatile.
Volatility of demand in the electric and hybrid electric aviation (including VTOL) industry may materially and adversely affect our business, results of operations, financial condition, and prospects. The passenger, military, and logistics end markets in which we primarily compete and plan to compete in the future have been subject to considerable volatility and unpredictability with respect to demand in recent periods. Demand for electric and hybrid electric (including VTOL) aircraft sales and related products, technologies, and services depends to a large extent on general, economic, political and social conditions in a given market and the introduction of new aircraft and technologies. As a new aircraft manufacturer and low volume producer, we have fewer financial resources than more established aircraft manufacturers to withstand changes in the market and disruptions in demand. As our business grows, in addition to macroeconomic factors, economic conditions and trends in other countries and regions where we sell our aircraft will also impact our business, results of operations, financial condition, and prospects. Demand for our electric aircraft may also be affected by factors directly impacting aircraft price or the cost of purchasing, operating, charging, and maintaining aircraft (including the availability of financing and other incentives), prices of raw materials and parts and components, cost of fuel and governmental regulations, including tariffs, import regulation and other taxes. These effects may have a more pronounced impact on our business given our relatively smaller scale and financial resources as compared to many incumbents, and in particular, traditional, aircraft manufacturers.
Crashes, accidents or incidents of electric and hybrid aircraft, as well as accidents or incidents involving battery solutions, such as lithium-ion batteries, could have a material adverse effect on our business, results of operations, financial condition and prospects.
The operation of aircraft is subject to various risks, and demand for air transportation of persons as well as cargo, including in connection with our commercial offerings and defense program, has been, and may in the future be, impacted by accidents or other safety issues regardless of whether such accidents or issues involve any electric aircraft of ours. Air transportation hazards, such as adverse weather conditions, fire and mechanical failures and incidents caused by human error may result in death or injury to personnel and passengers or harm to property, which could impact customer or passenger confidence in a particular aircraft type or the air transportation services industry as a whole and could lead to a reduction in passenger or cargo volume. Safety statistics for air travel are reported by multiple parties, including the Department of Transportation and National Transportation Safety Board, and are often separated into categories of transportation. Because our commercial offerings and defense program may include a variety of transportation methods, fliers may have a hard time determining how safe electric aircraft and related products and services are and their confidence in electric aircraft and such products or services may be impacted by, among other things, the classification of accidents in ways that reflect poorly on electric aircraft and such products or services.
Test flying prototype aircraft is inherently risky, and crashes, accidents, or incidents involving our aircraft, or other companies’ prototype aircraft that may utilize our products, are possible. Whether or not it involves our aircraft or our related technology, any such occurrence in the future could negatively impact our development, testing, and certification efforts, and could result in re-design, certification delay, and/or postponements or delays to our commercial launch.
We expect demand for our aircraft and other offerings (and, in some contexts, others’ services utilizing the same) to be impacted by accidents or other safety issues regardless of whether such accidents or issues involve our aircraft. Such accidents or incidents could also have a material impact on our ability to obtain or maintain airworthiness authorization with regulators, including the FAA, for our aircraft and could impact confidence in our aircraft type or the electric industry as a whole, particularly if such accidents or incidents were due to a safety fault or oversight.
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We believe that safety and reliability are two of the primary attributes our potential customers consider when selecting a provider of electric aircraft or related products or services. Any failure by us to maintain standards of safety and reliability that are satisfactory to our customers, their clients or other end users could adversely impact our ability to attract and retain customers. We believe that regulators and the general public are still forming their opinions about the safety and utility of aircraft that are highly reliant on lithium-ion batteries and advanced flight control software capabilities and that operate in and around urban areas, among other things. An accident or incident involving either our aircraft or a competitor’s aircraft while these opinions are being formed could have a disproportionate impact on the longer-term view of the emerging market for electric and hybrid electric (including VTOL) aircraft.
We are at risk of adverse publicity stemming from any public incident involving us, our people or our brand. Such an incident could involve the actual or alleged behavior of our employees, contractors or partners. Further, if our electric aircraft, whether operated by us or a third party, were to be involved in a public incident, accident, catastrophe or regulatory enforcement action, we could be exposed to significant reputational harm and potential legal liability. The insurance we carry may be inapplicable or inadequate to cover any such incident, accident, catastrophe or action. In the event that our insurance is inapplicable or inadequate, we may be forced to bear substantial losses from an incident or accident. Any such incident, accident, catastrophe or action involving our electric aircraft or electric aircraft generally could create an adverse public perception, which could harm our reputation, result in customers, passengers or other end users being reluctant to use our products or services, and adversely impact our business, results of operations, financial condition and prospects.
Additionally, the battery packs that we sell, and that are expected to power our electric aircraft, use battery (including lithium-ion) cells. On rare occasions, battery cells, including lithium-ion cells, can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other cells. It is possible that a field or testing failure of our aircraft could occur in the future, which could subject us to lawsuits, EHS-related liabilities, product recalls or redesign efforts, any of which would be time-consuming and expensive. Also, negative public perceptions regarding the suitability of battery (including lithium-ion) cells for aerospace applications or any future fire or other incident involving battery cells could seriously harm our business. Moreover, any such failure of or otherwise in relation to a competitor’s electric aircraft may cause indirect adverse publicity for us and our aircraft. Such adverse publicity could negatively affect our brand and harm our business, results of operations, financial condition and prospects.
We store batteries, including lithium-ion batteries, at our Final Assembly Facility and testing facilities. Such storage and the handling of batteries and battery materials in connection with our research and development and other business activities poses risks. For example, in August 2022, we experienced a thermal runaway fire event with respect to one of our battery packs awaiting testing, and while such incident did not have a significant impact on our business operations or certification timing, any occurrence in the future of a similar incident or other fire involving or relating to our batteries could negatively impact our development, testing and certification efforts and could result in re-design, certification delay and/or postponements or delays in respect of our commercialization timeline. In addition, our manufacturing partners and suppliers are expected to store a significant number of batteries, including lithium-ion batteries, at their facilities. Any unanticipated use, or use beyond the scope of recommended parameters, in the transport, testing, storage or other use of battery cells, including lithium-ion cells, may cause disruption to the operation of our facilities or our manufacturers’ operations. A safety issue or fire related to the cells could disrupt operations or cause manufacturing delays, and could lead to adverse publicity and, potentially, a safety recall, depending on the extent of any resultant damage or related injury.
We are subject to many hazards and operational risks that can disrupt our business, including interruptions or disruptions in service at our facilities, for which we may not be able to secure adequate insurance policies, or secure insurance policies at reasonable prices.
Our operations are subject to many hazards and operational risks, including general business risks, product liability, and damages to third parties, the environment, our infrastructure or properties that may be caused by natural or manmade disasters, power losses, telecommunications failures, terrorist attacks (including hijacking, use of the aircraft as a weapon, or use of the aircraft to disperse a chemical or biological agent), security related incidents, human errors or certain EHS risks and hazards to our employees or third parties associated with our manufacturing operations. See also “—We could incur significant costs in complying with EHS laws and regulations and could be adversely affected by liabilities or obligations imposed under such laws and regulations.”
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We maintain general liability insurance, aircraft liability coverage, directors and officers (“D&O”) insurance and other insurance coverages and policies. The insurance coverages that we maintain may include deductibles or self-insured retentions, limitations in coverage, and exclusions, and we cannot be certain that our insurance coverage will be sufficient to cover all potential losses or claims or that present levels of coverage will be available in the future at reasonable cost or at all. Further, we expect our insurance needs and costs to increase as we grow and enhance production facilities and capabilities, manufacture aircraft and other aircraft parts and related products, establish commercial operations and expand into new markets. It is too early to determine what impact, if any, the commercialization of electric aircraft will have on our insurance costs, which may have an adverse impact on our business, results of operations, financial condition and prospects.
We may become subject to product liability claims, which could harm our business, reputation, results of operations, liquidity, financial condition and prospects if we are not able to successfully defend or insure against such claims.
We may become subject to product liability claims, which could harm our business, brand, results of operations, liquidity, financial condition, and prospects. The aircraft industry experiences significant product liability claims and we face inherent risk of exposure to claims in the event our aircraft do not perform as expected or malfunction resulting in personal injury or death. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our industry, aircraft, and business and inhibit or prevent commercialization of other future aircraft candidates which would have material adverse aircraft on our business, brand, results of operations, liquidity, financial condition, and prospects. We maintain product liability insurance for our aircraft and our products on a claims made basis, but we cannot assure that our insurance will be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have a material adverse effect on our business, brand, results of operations, liquidity, financial condition, and prospects. We may not be able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if we do face liability for our products and are forced to make a claim under our insurance policies.
We are highly dependent on the continued service and leadership of our founder, President and Chief Executive Officer and a member of our Board, Kyle Clark, and if we are unable to retain Mr. Clark, our ability to compete and overall performance could be harmed.
Our future success depends substantially on the continued contributions of our founder, Kyle Clark, whose vision, strategic direction and deep understanding of our technology, industry, target markets and mission have been integral to our innovation and growth outlook to date. Mr. Clark routinely engages directly with regulators and peers with first-hand experience and expertise not only as our CEO and Board member, but also as chair of the General Aviation Manufacturers Association (“GAMA”) Electric Propulsion & Innovation Committee (“EPIC”). Mr. Clark is also a test pilot for our company. From engineering and product development to talent recruitment and long-term strategic planning, Mr. Clark plays a central role in virtually all aspects of our business, and while every member of our team is valuable, retaining the services and leadership of Mr. Clark is paramount.
We maintain, and we expect to continue to maintain, a key person life insurance policy with respect to Mr. Clark. If Mr. Clark were to discontinue his current role in the future or should he be unable to fulfill his duties for some reason, this could significantly disrupt our operations, impede the execution of our business strategy or otherwise have a material adverse effect on our ability to compete in an increasingly complex, evolving market. Although we have assembled a strong, capable leadership team, there is no guarantee that we could replace Mr. Clark with someone of comparable expertise and vision.
Our future success depends on the continuing efforts of our key personnel and on our ability to attract and retain highly skilled personnel and senior management.
Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. In particular, we are highly dependent on the contributions of our senior management team and other key personnel. While our efforts to hire key personnel have generally been successful overall, the industry in which we operate is generally characterized by high levels of competition for skilled employees. Certain members of management, including our Chief Executive Officer, participate in various high-risk activities, such as recreational aviation, which carries the risk of serious injury and death. Relatedly, we support access to a flight program and use of aircraft by those of our personnel who elect to participate in our flight program. The loss of key personnel, including members of management as well as key engineering, product development, marketing and sales personnel, could disrupt our operations and make it more difficult to achieve our business plans.
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Compensation packages for highly skilled personnel have increased over time and will likely continue to increase, and competition for highly skilled personnel is often intense, and we may incur significant costs to attract and retain our personnel. Although we have generally entered into employment offer letters with our key personnel, these letters have no specific duration and provide for at-will employment, which means our key personnel may terminate their employment relationship with us at any time. We may not be successful in attracting, integrating or retaining qualified personnel to fulfill our current or future needs. We have, from time to time, experienced, and we expect to continue to experience, difficulty or delay in hiring and retaining highly skilled personnel with appropriate qualifications. In addition, job candidates and existing personnel often consider the value of the equity awards they receive in connection with their service. If the perceived value of our equity or equity awards declines, it may adversely affect our ability to retain highly skilled personnel. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business, results of operations, financial condition and future growth prospects could be harmed.
Our business may be adversely affected by labor and union activities.
Although none of our employees are currently represented by a labor union, unionized labor is common throughout the aerospace industry and can result in higher employee and benefit costs and increased risk of work stoppages, strike,s and labor disputes. We may also directly and indirectly depend upon other companies with unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could harm our business, results of operations, financial condition and prospects.
We expect to conduct a portion of our business pursuant to U.S. government contracts, which are subject to unique risks.
We may enter into contracts with governmental organizations in the future. Sales to governmental organizations are subject to a number of challenges and risks that may adversely affect our business and operating results, including the following risks:
• new regulations, or changes to existing regulations, could result in increased compliance costs, and we could be subject to withheld payments and/or reduced future business if we fail to comply with new or existing requirements in the future;
• government demand and payment for our aircraft, motors, batteries and technologies may be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our offerings, including as a result of sudden, unforeseen and disruptive events such as government shutdowns, governmental defaults on indebtedness, competing priorities of a new administration, war, regional geopolitical conflicts around the world, incidents of terrorism, natural or manmade disasters, and public health concerns, including epidemics or pandemics;
• governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our aircraft or other offerings, grants or other forms of government funding, which would adversely impact our revenue and operating results, or institute fines or civil or criminal liability if an investigation, audit, or other review, were to uncover improper or illegal activities;
• contracts with governments are subject to additional requirements such as protective statutes (e.g., the civil False Claims Act), suspension and debarment as well as other legal actions and proceedings that generally do not apply to purely commercial contracts;
• governments may require certain products and technologies to be manufactured, developed, produced or offered solely in their country or in other relatively high-cost locations, and we may not manufacture, develop, produce, or offer all products or technologies (or certain aspects thereof) in locations that meet these requirements, affecting our ability to sell these products or technologies to governmental agencies;
• refusal to grant certain certifications or clearance by one government agency, or a decision by one government agency that our products or technologies do not meet certain standards, may cause reputational harm and cause concern with other government agencies;
• certain types of contracts impact contractor profitability, intellectual property rights, and compliance requirements, increasing associated costs and risks; and
• heightened physical and cybersecurity requirements associated with information and access to manufacturing facilities and secure locations.
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The occurrence of any of the foregoing could cause governmental organizations to delay or refrain from purchasing our aircraft or other offerings in the future or otherwise adversely affect our business and operating results.
The U.S. government may modify or terminate one or more of our existing or future contracts.
We have previously been awarded contracts with the U.S. Military and other U.S. government organizations and may enter into additional contracts with U.S. governmental organizations in the future. However, such opportunities carry the risk of the U.S. government’s ability to modify or terminate one or more of such contracts without prior notice and at the U.S. government’s convenience. We believe that the U.S. Military may be shifting its priorities under the Agility Prime program towards hybrid aircraft and autonomous flight technology; however, any future contracts we secure with the U.S. government could be modified or terminated under standard U.S. government contract terms. Moreover, opportunities to pursue such contracts could be less than we currently anticipate. In addition, funding may be reduced or withheld as part of the annual U.S. Congressional appropriations process due to fiscal constraints, changing priorities, geopolitical or other reasons. For example, a Company research & development grant from the Department of Energy was canceled in October 2025. Any loss or reduction of expected funding and/or modification or termination of one or more U.S. government contracts that may be awarded to us could have a material adverse effect on our access to government testing facilities and/or our ability to secure pre-certification operating experience and/or revenues, which could have an adverse impact on our business, results of operations, financial condition, and prospects.
We may be unable to secure contracts or continue to grow our relationship with the U.S. government and the U.S. Military.
We are currently pursuing contracts with the U.S. government that may enable us to supply our aircraft, charging capabilities and other products and technologies, and/or services related to them, to the U.S. Military or other U.S. government agencies both prior to receiving a Type Certification from the FAA and after. While we believe we are uniquely qualified to participate in future initiatives, particularly those related to autonomous flight and hybrid aircraft, there can be no guarantees of our ability to negotiate and secure additional contracts in these areas. The timing of securing additional contracts may also be impacted by several factors that depend on actions by U.S. government personnel and the possibility remains that the time to secure additional contracts may be extended in the event of a bid protest. Our market is growing increasingly competitive and will continue to draw interest by large defense contractors as technology advances. Failure to obtain these contracts could limit our ability to gain additional operational learnings about our aircraft and other offerings and secure meaningful revenue, which could have a material adverse effect on business, results of operations, financial condition, and prospects.
Our ability to attract and retain a U.S. Military customer base and the related success of our defense program may be dependent upon our personnel obtaining and maintaining required security clearances for U.S. government classified work, as well as our ability to maintain our facility security clearance for the organization.
We maintain a Secret-level facility security clearance for the performance of classified U.S. Military contracts and subcontracts. We operate under a Security Control Agreement, which currently requires that the U.S. Military approve one Director who is considered the Outside Director whose duties require that such director balance our business interests with U.S. national security interests in board-level decisions. In the future, one or more U.S. government contracts could require certain of our personnel to maintain various levels of security clearances in connection with our facility security clearance. The U.S. Military has strict security clearance requirements for personnel who work on classified programs. Obtaining and maintaining security clearances for personnel involves a lengthy process, and it is difficult to identify, recruit and retain personnel who already hold security clearances. If our employees or other personnel are unable to obtain security clearances in a timely manner, or at all, or if our employees who hold security clearances are unable to maintain the clearances or terminate employment with us, then a potential or then-existing customer requiring classified work could elect not to award us a contract, terminate its contract with us or decide not to renew a contract upon its expiration, as applicable. In addition, we expect that many of the contracts on which we will bid will require us to demonstrate our ability to employ personnel with specified types of security clearances in addition to maintaining the organization’s facility security clearance. To the extent we are not able to engage personnel with the required security clearances for a particular contract, we may not be able to bid on or win defense or other government contracts, or effectively rebid on future contracts.
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The National Industrial Security Program requires that a company maintaining a facility security clearance be effectively insulated from foreign ownership, control or influence (“FOCI”). We are party to a Security Control Agreement, dated June 15, 2025, by and among the U.S. Military, QIA Industrials Holding LLC and BETA Technologies, Inc. (the “SCA”), as a suitable FOCI mitigation arrangement under the National Industrial Security Program Operating Manual Rule. Depending on changes to our ownership and governance composition, DCSA may determine, from time to time, that a different FOCI mitigation arrangement is appropriate.
We may be subject to risks associated with our strategic relationships.
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 strategic relationships, and may in the future enter into additional strategic relationships or joint ventures or minority equity investments, in each case with various third parties for the production or operation of our aircraft as well as with other collaborators with capabilities on data and analytics and engineering.
We have also entered into agreements with potential partners in a number of international markets to establish operations in these markets. These alliances subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third-party and increased expenses in establishing new strategic relationships, any of which may adversely affect our business. We may have limited ability to monitor or control the actions of these third parties and, to the extent any of these strategic third parties suffer negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.
Strategic business relationships will be an important factor in the growth and success of our business. However, there can be no assurances that we will be able to continue to identify or secure suitable business relationship opportunities in the future or our competitors may capitalize on such opportunities before we do. Moreover, identifying such opportunities could require substantial management time and resources, and negotiating and financing relationships involves significant costs and uncertainties. If we are unable to successfully source and execute on strategic relationship opportunities in the future, our overall growth could be impaired, and our business, prospects, financial condition, and operating results could be adversely affected. Even if we are able to successfully source, negotiate and execute on strategic relationship opportunities, there can be no assurances that the expected synergies contemplated by the strategic business relationship will materialize, advance our business strategy, meet the expected return-on-investment targets or prove successful or effective for our business See also “—Our current partnership with GE Aerospace and future strategic alliances could have an adverse effect on our financial condition and results of operations.”
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. Acquired or licensed assets or businesses may not generate the financial or operating results we expect. Acquisitions or licenses could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the incurrence of additional indebtedness, 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.
If conflicts arise between our collaborators or strategic partners and us, the other party may act in a manner adverse to us which could limit our ability to implement our strategies.
Our collaborators or strategic partners may develop, either alone or with others, products in related fields that are competitive with our products. Specifically, conflicts with key collaborators may adversely impact our ability to manufacture aircraft or scale production or sales. Conflicts with foreign partners may adversely impact our ability to scale operations outside the U.S. effectively. If such conflicts arise it may adversely affect our business, results of operations, financial condition and prospects.
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We enter into aerospace commercial contracts, which are subject to unique risks, particularly with respect to contracts for our electric aircraft.
Contracts in the aerospace industry, and particularly aircraft contracts, may include complex technical terms governing the sale of our electric aircraft and/or maintenance, repair and overhaul support requirements. Pursuant to such contracts, we may provide services on an integrated basis, and may be required to provide warranty service and international support and/or meet certain service level, hardware performance and/or timing requirements, which may require us to assume additional risks associated with cost over-runs, delays, and project losses.
Providing services on an integrated basis may also require us to assume additional risks associated with operating cost inflation, labor availability and productivity, supplier pricing and performance. and potential claims for liquidated damages and other financial and contractual remedies for nonperformance. Circumstances out of our control, including disruptions in our supply chain, could delay our performance of such contracts. If the amount we are required to pay for these goods and services exceeds the amount we have estimated to be recognized as revenue, we could experience losses in the performance of these contracts. These delays and additional costs may be substantial, and we may be required to compensate customers for these delays, which may have an adverse impact on our business, results of operations, financial condition, and prospects.
Our current partnership with GE Aerospace and future strategic alliances could have an adverse effect on our financial condition and results of operations.
We may form strategic alliances, partnerships, or collaborations, such as our current partnership with GE Aerospace, or create joint ventures with third parties that we believe will complement or augment our existing business. If we enter into strategic alliances, partnerships, or collaborations with promising technologies, we may not be able to realize the benefit of collaborating with such businesses if we are unable to successfully execute on the objectives of such strategic alliances or if exclusivity provisions prevent us from exploring alternative partnerships. In particular, our partnership with GE Aerospace includes exclusive supply and right of first refusal provisions that may limit our ability to independently develop, source, or commercialize certain technologies, which could impact our flexibility and operational decision-making. We may encounter difficulties in developing, manufacturing and marketing any new technologies resulting from a strategic alliance, partnership, or collaboration, including our current partnership with GE Aerospace, that delay or prevent us from realizing their expected benefits or enhancing our business and may have an adverse effect on our results of operations. We cannot assure our stockholders that, following any such strategic alliance, partnership, or collaboration, we will achieve the expected synergies to justify the transaction.
We may not realize all expected sales.
We cannot assure you that we will realize the revenue we expect to generate from our B acklog in the periods we expect to realize such revenue, or at all. Our Backlog represents the aggregate of our Firm Orders and Options. Agreements relating to our Backlog generally contain conditions with respect to the purchase of our aircraft or that require us to perform and provide certain deliverables ahead of completion of a purchase order. Certain of our contracts depend on certification of our aircraft by the FAA. Payment obligations arise after meeting certain manufacturing milestones. If the conditions to or performance of obligations under such agreements are not met, or if such agreements are otherwise canceled, modified or delayed, we may not generate the revenue we expect, which would materially and adversely affect our business, results of operations, financial condition and prospects. In addition, expected sales of our chargers, components and other offerings may not be realized.
A loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment, could negatively impact our revenues, results of operations and cash flows.
Historically, we have been dependent on a relatively small number of customers for our sales, and a small number of customers have accounted for a material portion of our revenue. For the year ended December 31, 2025, the U.S. government and United Therapeutics constituted 27% and 16% of total revenues, respectively. The loss of any one of our significant customers, their inability to perform under their contracts, or their default in payment, could have a materially adverse effect on our revenues, results of operations and cash flows.
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We depend on suppliers and service partners for raw materials and certain parts and components.
Despite our high degree of vertical integration, we still rely on purchased materials and parts for our aircraft and all products and manufacturing equipment, which we source from suppliers globally, some of whom are currently single source suppliers, and certain of the components used in our aircraft that are custom made for us by third parties. To date, we have not qualified alternative sources for most of the single sourced components used in our aircraft and we generally do not maintain long-term agreements with our single source suppliers. For example, while several sources of the lithium-ion cell we have selected for battery packs are available, we have fully qualified only one supplier for these lithium-ion cells. While we believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable to do so in the short term or at all at prices or costs that are favorable to us. In particular, while we believe that we will be able to secure alternate sources of supply for almost all of our single sourced components on a relatively short time frame, qualifying alternate suppliers or developing our own replacements for certain highly customized components of our electric aircraft, such as avionics, sidesticks or servos which are supplied to us by Garmin, Sensata Technologies and Volz Servos, respectively, may be time consuming and costly.
We face risks relating to the availability of these materials, parts and components, including that we will be subject to demand shortages and supply chain challenges and generally may not have sufficient purchasing power to eliminate the risk of price increases for the raw materials and lines we need. To the extent that we are unable to enter into commercial agreements with any of our suppliers on beneficial terms, or any of our suppliers experience difficulties ramping up their supply to meet our requirements, the production of our batteries and aircraft will be delayed and we will not be able to meet our production timelines.
Separately, we may be subject to various supply chain requirements regarding, among other things, conflict minerals, hazardous substance management, environmental sustainability and labor practices. We may be required to incur substantial costs to comply with these and potential future requirements, which may include locating new suppliers to replace existing ones, and could also be subject to substantial costs or penalties in the event of non-compliance. We may not be able to find any new suppliers for certain raw materials or components required for our operations, or such suppliers may be unwilling or unable to provide what we require. While we believe that we may be able to establish alternate supply relationships and can obtain substitutes, we may be unable to do so in the short-term, or at all, at prices that are favorable to us.
We expect to incur significant costs related to procuring various materials required to manufacture and assemble our batteries, aircraft and other products, which will require us to negotiate purchase agreements and delivery lead-times on advantageous terms. We may not be able to control fluctuation in the prices for these materials or negotiate agreements with suppliers on terms that are beneficial to us. Substantial increases in the prices for our raw materials, or our inability to reduce our raw material costs as we scale, would negatively impact our prospects.
In addition, currency fluctuations, geopolitics, trade barriers, embargoes, tariffs or shortages and other general economic or political conditions may limit our ability to obtain key materials or components for our batteries and aircraft or significantly increase freight charges, raw material costs and other expenses associated with our business.
While we have not experienced material supply chain disruptions to date, we may experience material supply chain disruptions in the future. Any disruption in the supply of materials, parts, services or outsourced components could temporarily disrupt research and development activities or production of our batteries or aircraft and could impede our commercialization efforts. Changes in business conditions, unforeseen circumstances, governmental and regulatory changes, and other factors beyond our control or which we do not presently anticipate could also affect our suppliers’ ability to deliver to us on a timely basis. Any of the foregoing could materially and adversely affect our business, results of operations, financial condition, and prospects.
We may be unable to seek, obtain, maintain, protect or enforce our intellectual property rights, or to otherwise defend our intellectual property rights from unauthorized access or use by third parties.
Our success depends, in part, on our ability to seek, obtain, maintain, protect, defend, or enforce our intellectual property rights, including technologies deployed in our current or future aircraft or utilized in our aircraft components and related products and services. To date, we have relied primarily on patents, trade secrets, trademarks, and other intellectual property and contractual rights to protect our know-how, technology and proprietary information. Our software is also subject to certain protections under copyright law, though we have chosen to protect the software as a trade secret.
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We routinely take steps to maintain, protect and enforce our intellectual property and proprietary technology. Although we seek to enter into agreements, including confidentiality, non-disclosure, and intellectual property assignment agreements, with parties who have access to our intellectual property and proprietary technology, such as our employees, contractors, consultants, and other third parties, no assurance can be given that these agreements will be effective in controlling access to and distribution of our technology and proprietary information. In addition, such agreements may be breached, may not be self-executing or we may fail to enter into such agreements with all relevant individuals and entities. We may become subject to claims that current or former employees, contractors, consultants, and other third parties engaged by us for development of intellectual property misappropriated intellectual property rights from their previous employers. Further, our employees are able to leave and may unintentionally take certain intellectual property with them to direct and indirect competitors. As such, we may also become subject to claims challenging the inventorship or ownership of our intellectual property, or claims that former employees, collaborators or other third parties have an ownership interest in our intellectual property. Accordingly, we cannot guarantee that the steps we have taken to protect our intellectual property will be adequate to prevent infringement of our rights or misappropriation of our technology, trade secrets, or know-how that we have secured, or will be able to secure, appropriate permissions or protections for all of the intellectual property rights we use or claim rights to.
We also limit access to and restrict disclosure of our trade secrets and other proprietary or confidential information. For example, we rely on physical and electronic security measures to protect our proprietary information. However, we cannot provide assurance that these security measures will not be breached or will provide adequate protection for our proprietary or confidential information. We intend to continue to rely on the foregoing steps and other means in the future, but the steps we take to protect our intellectual property may be ineffective or inadequate to deter infringement, misappropriation, or other violations of our proprietary information or other intellectual property, and unauthorized parties may attempt to copy, reverse engineer or misappropriate aspects of our intellectual property or obtain and use information that we regard as proprietary. Additionally, it is possible that others will design around our intellectual property, independently develop the same, similar or superior technology or otherwise obtain access to our unpatented technology in a manner that does not violate our intellectual property rights, and in such cases we may have difficulty asserting trade secret rights against such parties or otherwise may not be able to successfully assert our intellectual property or other proprietary rights against them.
Costly and time-consuming litigation could be necessary to enforce and determine the scope of our intellectual property and related confidentiality and nondisclosure provisions. However, even if we initiate litigation against third parties such as suits alleging infringement, misappropriation, or other violations of our intellectual property, we may not prevail. Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Moreover, third parties may challenge, invalidate, or circumvent our intellectual property and other proprietary rights, or otherwise assert rights therein or ownership thereof, including through administrative processes or litigation, and we may be unable to successfully resolve any such conflicts in our favor or to our satisfaction. Additionally, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. An adverse determination of any litigation proceedings could put our intellectual property at risk of being invalidated, unenforceable or interpreted narrowly and could put any of our related intellectual property at risk of not issuing or being cancelled. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. Moreover, adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets. Trade secrets can be difficult to protect. While we strive to undertake measures that protect and preserve our trade secrets, such measures can be breached and would require extensive litigation to be compensated appropriately. In addition, our trade secrets may be independently discovered by competitors. Accordingly, if we fail to obtain or maintain our intellectual property, or if our competitors obtain our trade secrets or independently develop technology similar or superior to ours, our competitive market position could be materially adversely affected. Even if we obtain or maintain our intellectual property rights, we cannot guarantee that such rights will be valid, enforceable, sufficiently broad in scope or provide adequate protection of our intellectual property and any other proprietary rights.
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Further, obtaining and maintaining patent, trademark, and copyright protection can be costly. We may choose not to, or may fail to, pursue or maintain such forms of protection for our technology in the United States or foreign jurisdictions, which could harm our ability to maintain our competitive advantage in such jurisdictions. It is also possible that we will fail to identify patentable aspects of our technology before it is too late to obtain patent protection, that we will be unable to devote the resources to file and prosecute all patent applications for such technology or that we will lose protection for failing to comply with all procedural, documentary, payment and other obligations during the patent prosecution process. Additionally, we do not know whether any of our pending patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims. Even if granted, there can be no assurance that the patent protections will not be narrowed or lost completely due to third party re-examination and other post-grant proceedings.
The laws of some countries do not protect proprietary rights to the same extent as the laws of the United States, and mechanisms for enforcement of intellectual property rights in some foreign countries may be inadequate to prevent other parties from infringing our proprietary technology. We may also fail to detect unauthorized access or use of our intellectual property, or to take appropriate steps to enforce our intellectual property rights, or we may be required to expend significant resources to monitor and protect our intellectual property rights, including engaging in litigation, which may be costly, time-consuming and divert the attention of management and resources, and may not ultimately be successful. If we fail to meaningfully establish, maintain, protect and enforce our intellectual property rights, our business, results of operations, financial condition, and prospects could be adversely affected.
We have used certain of our intellectual property in performance of contracts with the U.S. government, and may do so more broadly in the future. The Federal Acquisition Regulation and Defense Federal Acquisition Regulation Supplement provide that the U.S. government may obtain certain rights in intellectual property, including patents, developed by us and our subcontractors and suppliers in performance of government contracts or with government funding. The U.S. government may use or authorize others (including our competitors) to use such patents and intellectual property for government and other purposes. The U.S. government is pursuing aggressive positions on the acquisition of broad data and software packages as well as the scope and applicability of these rights once acquired. The U.S. Military is also implementing an overarching intellectual property acquisition policy that will require a greater focus and planning as to intellectual property rights for its programs, with the potential impacts of this policy or any associated regulatory changes on future acquisitions yet to be determined. The U.S. Military’s efforts could affect our ability to protect and exploit our intellectual property. Governments may also challenge the sufficiency of intellectual property rights we have granted in government contracts and attempt to obtain greater rights, which could reduce our ability to protect our intellectual property rights and to compete. Relatedly, our ability to procure and perform government contracts requires us to obtain certain rights in the intellectual property of others through government grants. Governments may deny us the right to obtain such rights in the intellectual property of others, which may affect our ability to perform government contracts. Additionally, the U.S. government may choose to apply secrecy orders to various patent applications precluding their publication, foreign filing, and enforcement even if they become granted and issued patents.
Third parties may claim that we infringe, misappropriate or otherwise violate their intellectual property.
We have in the past been subject to, and could in the future be subject to, claims and legal proceedings regarding alleged infringement, misappropriation or other violation by us of the intellectual property rights of third parties. Such claims, whether or not meritorious, have in the past resulted in, and may in the future result in, the expenditure of significant time and financial, managerial, and engineering resources. To resolve these claims, we may enter into royalty-bearing and cross-licensing agreements, which may be only available on terms that are less favorable than currently available, or not at all, or we may be required to modify, redesign, undertake workarounds or substantial reengineering, stop selling or otherwise limit our ability to use or offer affected technologies, products, services, and branding materials, or pay damages, including damages to satisfy indemnification commitments with our customers. Even if a license is available to us, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, which could adversely affect our business, financial condition, and results of operations. Adverse outcomes could also include monetary damages, including legal fees, settlement payments, and other costs or damages, or injunctive relief that may limit or prevent importing, marketing, and selling our products or services that have infringing, misappropriating, or otherwise violating technologies. These risks have been amplified by the increase in third parties whose sole or primary businesses are to assert such claims.
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Intellectual property rights do not necessarily address all potential threats.
The degree of future protection afforded by our intellectual property and other proprietary rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:
• we might not have been the first to invent the inventions covered by our patent portfolio;
• we might not have been the first to file the patent application covering our patent portfolio or future patents;
• it is possible that any patent applications we may file in the future will not lead to issued patents;
• others may have access to intellectual property rights which have been licensed to us on a non-exclusive basis;
• our competitors might conduct research and development activities in countries where we do not have patent rights, or in countries where research and development safe harbor laws exist, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
• we may choose not to file a patent for certain inventions, instead choosing to rely on trade secret protection or know-how, and a third party may independently develop such invention and subsequently file a patent covering such invention; and
• the patents of third parties or pending or future applications of third parties, if issued, may have an adverse effect on our business.
Should any of these events occur, it could significantly harm our business, financial condition and results of operations.
Interruption to, interference with, or failure of our complex information technology and communications systems could hurt our ability to effectively operate our business.
We depend on our: (a) operational systems, including business, financial, accounting, product development, data processing or production processes, owned by us or our third-party vendors or suppliers; (b) facility security systems, owned by us or our third-party vendors or suppliers; (c) aircraft technology, including powertrain and avionics and flight control software, owned by us or our third-party vendors or suppliers; (d) integrated software in our aircraft and GSE; or (e) customer data that we process or our third-party vendors or suppliers process on our behalf. These systems could fail or be interrupted due to conditions beyond our control, including security incidents, cyber-attacks and agreement terminations with third-party service providers. A failure of or interruption to our systems could disrupt our business operations, result in loss of intellectual property, trade secrets or other proprietary or competitively sensitive information, compromise certain information of customers, employees, suppliers or others, jeopardize the security of our facilities or affect the performance of in-product technology and the integrated software in our aircraft and GSE.
We collect, store, transmit, and otherwise process data from our aircraft and GSE, our employees and others as part of our business and operations, which may include personal, confidential, or proprietary information. We also work with partners and third-party service providers or vendors that collect, store and otherwise process such data on our behalf and in connection with our aircraft and GSE.
We plan to use data connectivity software to monitor aircraft performance, enhance safety and enable cost-saving preventative maintenance. Our services depend on the availability, effectiveness and continued operation of information technology and communications systems and our ability to obtain and maintain satisfactory contracts with service providers. Our systems, or those of our third-party service providers, may be vulnerable to damage or interruption from physical theft, fire, terrorist attacks, natural or manmade disasters, power loss, actual or threatened acts of war, telecommunications failures, insider theft or misuse, human error, and similar events. We and our third-party service providers are also vulnerable to cybersecurity-related incidents, including, among others, computer viruses, worms, trojan horses, bugs, distributed denial or degradation of service attacks, ransomware, malware, infiltration by unauthorized persons, malicious and destructive code, phishing attacks, social engineering schemes, or other attempts to harm our systems or those of our third-party service providers. We intend to log information about each aircraft’s use to aid in aircraft diagnostics and servicing. Our customers may object to the use of this data or place limitations that materially restrict its use, which may increase our aircraft maintenance costs and harm our business prospects.
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There are inherent risks associated with developing, improving, expanding and updating our current systems, such as the disruption of our data management, procurement, production execution, finance, supply chain, sales, and service processes. These risks may affect our ability to manage our data and inventory, to procure parts or supplies, to manufacture, deploy, deliver, and service our aircraft and GSE, to adequately protect our intellectual property, or to achieve and maintain compliance with, or to realize available benefits under, applicable laws, regulations, and contracts. We cannot be sure that these systems, including those of our third-party vendors or suppliers, will be effectively implemented, maintained or expanded as planned. If we do not successfully implement, maintain or expand these systems as planned, our operations may be disrupted and our ability to accurately and timely report our financial results could be impaired. Moreover, our proprietary information or intellectual property could be compromised or misappropriated, which could adversely affect our reputation. We may need to expend significant resources to make corrections or find alternative sources for these functions if such functions do not operate as intended.
We, along with our third-party service providers, vendors and suppliers, are at risk for cybersecurity-related attacks and cyber-incidents, which may adversely affect our business.
Cybersecurity risks and cyber-incidents may adversely affect our business by disrupting our operations or those of our third-party service providers, vendors and suppliers, compromising or corrupting our confidential information and/or damaging our business relationships, all of which could negatively impact our business, reputation, results of operations, financial condition and prospects. Although we have implemented a variety of security measures, our computer systems, networks and data, like those of other companies, could be subject to cyber-incidents, including intentional attacks or unauthorized access, use, alteration or destruction. Third parties, including activist, criminal, nation-state, or terrorist actors, may attempt to fraudulently induce us or our personnel to disclose sensitive information (including passwords) in order to gain access to data, accounts, funds or other assets, or otherwise to inflict harm. In the event that we are subject to a successful cyber-attack or other cyber-incident, substantial losses may occur in the form of stolen, lost or corrupted: (i) data or payment information; (ii) financial information; (iii) software, contact lists or other databases; (iv) proprietary information or trade secrets; or (v) other items.
As our reliance on technology has increased, including internet or cloud-based programs, so have the risks posed to our internal and third-party information systems. Our aircraft contain complex information technology systems and built-in data connectivity to share aircraft data with ground operations infrastructure. We design, implement and test security measures intended to prevent unauthorized access to our information technology networks, our aircraft and related systems but these measures do not guarantee that a cyber-attack or cyber-incident will not occur. Hackers may attempt to gain unauthorized access to modify, alter, or use such networks, aircraft and systems to gain control of or to change our aircraft’s functionality or performance characteristics, or to gain access to data stored in or generated by the aircraft. A significant breach of our third-party service providers’ or vendors’ or our own network security and systems could have serious negative consequences for our business and future prospects, including possible fines, penalties and damages, reduced customer demand for our aircraft and harm to our reputation and brand.
Cybersecurity threats are constantly evolving and are difficult to predict due to advances in the technological capabilities and methods of threat actors, including phishing, social engineering, or other illicit acts. We cannot be sure that any security measures that we or our third-party service providers or vendors have implemented will be effective against current or future security threats. For example, we may have limited insight into the data privacy or cybersecurity practices of third-party service providers and vendors. Even if our own security measures remain intact, cyber-attacks, data breaches, security incidents, malicious internet-based activities or other incidents or failures at one of our third-party service providers or our vendors could compromise our systems and data. Further, in such a circumstance, we may not receive timely notice of, or sufficient information about, the breach or other incident or failure, or be able to exert any meaningful control of or influence over how and when the breach or other incident or failure is addressed. Any theft, loss, or misappropriation of, or access to, clients’ or other proprietary data, or other breach of our third-party service providers’ and vendors’ information technology systems, could disrupt our operations, damage our reputation, result in fines, legal claims, or proceedings, including regulatory investigations and actions, liability for failure to comply with privacy and information security laws, or otherwise result in loss of revenue, fraudulent transactions, loss of clients, transaction errors, processing inefficiencies, service reliability and increased costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. Further, the costs of mitigating cybersecurity risks may be significant, including, but not limited to, retaining the services of cybersecurity providers; compliance costs arising out of existing and future cybersecurity, data protection and privacy laws and regulations; and costs related to maintaining redundant networks, data backups, and other damage-mitigation measures. Moreover, the mere perception of a security breach involving us or any part of the broader aerospace industry, whether or not true, could also damage our business, operations or reputation.
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Threat actors, nation-states, and nation-state supported actors now engage, and are expected to continue to engage, in cyber-attacks, including for geopolitical reasons and in connection with military conflicts and operations. During times of war and other major conflicts, we and our third-party vendors or suppliers may be vulnerable to heightened risk of these attacks. Our systems, networks and physical facilities could be breached, or personal information could otherwise be compromised due to employee error or malfeasance, if, for example, third parties attempt to fraudulently induce our employees or our customers to disclose information or usernames and/or passwords. Third parties may also exploit vulnerabilities in, or obtain unauthorized access to, platforms, systems, networks and/or physical facilities utilized by our third-party service providers and vendors. If a compromise of data were to occur, we may become liable under our contracts with other parties and under applicable law for damages, incur penalties and be responsible for other costs to respond to such an incident.
In addition, we are subject to domestic and international cybersecurity-related laws and regulations, alongside government, customer and other cybersecurity requirements. The scope and breadth of these requirements have expanded our compliance obligations, and cybersecurity regulatory enforcement activity has grown. We expect regulatory and compliance requirements to continue to evolve. Staying apace with these regulatory changes could require us, our suppliers and our business partners to modify existing practices, increase operational and compliance expenditures and incur new or additional information technology and product development expenses. Given that compliance with regulatory changes can take time, it is possible that our practices may not at all times comply fully or partially with all applicable requirements. Additionally, a failure to comply with the National Institute of Standards and Technology Special Publication 800-171, 32 CFR Part 117 or other applicable U.S. government or U.S. Military cybersecurity requirements and guidelines, including the Cybersecurity Material Model Certificate (“CMMC”), whether or not resulting in a security breach or disruption, could restrict our ability to bid for, be awarded and perform on U.S. Military contracts. U.S. Military requirements to comply with the CMMC and its obligations now and in the future may cause additional expense. We plan to implement cybersecurity policies and frameworks based on industry and governmental standards to align closely with U.S. Military requirements, instructions and guidance. Moreover, we continue to work with the U.S. Military on assessing cybersecurity risk and on policies and practices aimed at mitigating these risks.
We may be subject to increased compliance burdens by certain regulators and customers with respect to our aircraft and products, as well as additional costs to oversee and monitor security risks. Most jurisdictions have enacted laws mandating companies to inform individuals, stockholders, regulatory authorities and/or others of security breaches. In addition, some of our customer agreements may require us to promptly report security breaches on our systems. These mandatory disclosures can be costly, harm our reputation, erode customer trust and require significant resources to mitigate issues stemming from actual or perceived security breaches.
While we currently maintain cyber liability insurance, our insurance may be insufficient or may not cover all liabilities we could incur. A successful claim against us that exceeds our available cyber liability insurance coverage or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements) could adversely affect our business. In addition, we cannot be sure that our existing cyber liability insurance coverage will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim.
We are subject to evolving privacy laws, which subjects us to a number of potential regulatory and reputational risks. We may face investigations, fines and sanctions as a result of our or our service providers’ actual or perceived failure to comply with the Privacy Laws and incur increased operational costs in order to ensure future compliance.
We currently do, and in the future expect to continue to, collect, store, transmit and otherwise process data from our aircraft and GSE, our customers, our employees and others as part of our business and operations, which may include personal, 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 and GSE. As such, we are subject to data protection, privacy, cybersecurity and/or information security laws, regulations, and industry standards in the jurisdictions in which we do business (collectively, the “Privacy Laws”). These Privacy Laws impose obligations in relation to the collection, use, and disclosure of personal information, including providing consumers with certain rights to access, correct, delete, and restrict the processing of their personal information.
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The Privacy Laws are constantly evolving and can be subject to significant change. As a result, the application, interpretation and enforcement of the Privacy Laws and regulations are often uncertain, particularly in the new and rapidly evolving industries in which we operate. These laws and regulations may be interpreted and applied inconsistently from jurisdiction to jurisdiction and inconsistently with our current policies and practices. For example, regulatory or legislative actions or litigation could adversely affect the manner in which we provide our products and services, or adversely affect our financial results, including by imposing significant fines that increasingly may be calculated based on global revenue. Compliance with applicable Privacy Laws may require adhering to stringent legal and operational obligations and necessitate dedicating substantial time and financial resources, which may increase over time.
Numerous jurisdictions, including other states in the United States, have either passed, proposed, adopted or are considering laws and regulations related to the collection, use or other processing of data. Given the rapidly evolving landscape of data privacy and security laws, we cannot yet determine the full impact these privacy, security, and data protection laws and regulations, or other such future privacy, security, and data protection laws and regulations, may have on our current or future business. Such laws and regulations are expected to vary from jurisdiction to jurisdiction, thus increasing costs, operational and legal burdens, and the potential for significant liability for regulated entities. Additionally, these laws and regulations, and any changes or new laws or regulations, could impose significant limitations, require changes to our business, or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct. In addition, any such changes could compromise our ability to develop an adequate marketing strategy and pursue our growth strategy effectively, which, in turn, could adversely affect our business, results of operations, financial condition and prospects. Finally, any actual or perceived failure to comply with these laws could result in a costly investigation, enforcement actions, fines or litigation resulting in potentially significant liability or other costs and a material and adverse impact on our reputation and business.
Our use of AI technologies may adversely impact our business, reputation, financial condition and results of operations.
We use AI technologies in connection with our business operations and intend to increase this use over time. Our use of AI technologies, particularly generative AI technologies, carries certain risks, including regarding the accuracy and quality of AI outputs, which may or may be perceived to be inaccurate, incomplete, biased, misleading, discriminator,y or otherwise inappropriate for our needs, which could adversely affect our business and reputation. Our use of AI, particularly generative AI, may also create legal and financial exposure, including for claims and liabilities associated with AI outputs that may be alleged to infringe the intellectual property rights of third parties.
Furthermore, our use or any use by our contractors, consultants, vendors, or service providers, of third-party AI providers to process our confidential or other sensitive information could put the confidentiality of such information at risk, including if any such third-party AI provider breaches its contractual obligations to us, suffers cyber-attacks or intentionally or inadvertently discloses, or misuses our confidential or sensitive information or otherwise incorporates the same into publicly available training sets. In such an instance, it is possible that our confidential or other sensitive information could become available to third parties, including our competitors. We or our employees may use AI technologies, inadvertently or otherwise, in a manner that puts our confidential information or intellectual property rights at risk. Any of the foregoing risks may result in diversion of management’s attention and resources, and may harm our business, reputation, results of operations, financial condition and prospects.
Further, any output created by us using AI technologies may not be subject to copyright protection, which may adversely affect our intellectual property rights in, or ability to commercialize or use, any such content. In the United States, a number of civil lawsuits have been initiated related to the foregoing and other concerns, any one of which may, among other things, require us to limit the ways in which we use AI technologies. To the extent that we do not have sufficient rights to use the data or other material or content used in or produced by the AI technologies we employ, or if we experience cybersecurity incidents in connection with our use of AI, it could adversely affect our reputation and expose us to legal liability or regulatory risk, including with respect to third-party intellectual property, privacy, data protection and cybersecurity, publicity, contractual or other rights. Further, our competitors or other third parties may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively.
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Additionally, changes in AI technology could require us to make significant ongoing investments to maintain and upgrade our technological capabilities. We may not successfully implement these developments in a timely or cost-effective manner, or at all, and the AI technologies in which we invest may be less effective than expected, or become unavailable to us on favorable terms, or at all. We may also be impacted by risks related to evolving laws, regulations and standards regarding the development and use of AI technologies. Changes in laws, regulations or industry standards governing AI use could lead to increased costs and compliance requirement or restrict our ability to use certain AI technologies in our operations altogether.
As the use of AI becomes more prevalent, we anticipate that it will continue to present new or unanticipated ethical, reputational, technical, operational, legal, competitive, and regulatory issues, among others. We expect that our incorporation of AI in our business will require additional resources, including the incurrence of additional costs, to develop and maintain our products and features to minimize potentially harmful or unintended consequences, to comply with applicable and emerging laws and regulations, to maintain or extend our competitive position, and to address any ethical, reputational, technical, operational, legal, competitive or regulatory issues which may arise as a result of any of the foregoing.
Social media and mobile messaging platforms present risks and challenges to maintaining and enhancing our brand, and any damage to our reputation or information leakage could adversely impact our business.
The inappropriate and/or unauthorized use of certain social media and mobile messaging channels could cause brand damage or information leakage or could lead to legal implications, including from the improper collection and/or dissemination of personally identifiable information. In addition, negative or inaccurate posts or comments about our company, technologies or products on any social networking platforms could damage our reputation, brand image, and goodwill. Further, the disclosure of non-public Company-sensitive information by our current or former personnel or others through external media channels could lead to information loss. Although we have internal communications, social media, and mobile messaging protocols that guide our employees on appropriate personal and professional use of these platforms for communication about the Company, the processes in place may not completely secure and protect information. Identifying potential new points of unauthorized entry as new communication tools expand also presents new challenges.
Moreover, repairing our brand and reputation in the case of any adverse event may be difficult, time-consuming and expensive. Our failure to address, or the appearance of our failure to address, issues that give rise to reputational risk could significantly harm our brand and reputation. To the extent we fail to respond quickly and effectively to address corporate crises and other threats to our brand and reputation, the ensuing negative public reaction could significantly harm our brand and reputation, which could result in loss of trust from our consumers, third-party service providers, and employees and could lead to an increase in litigation claims and asserted damages or subject us to regulatory actions or restrictions.
We are subject to risks associated with global climate change, including physical and transitional risks.
The potential physical effects of climate change, such as increased frequency and severity of high wind conditions, storms, floods, fires, fog, mist, freezing conditions, droughts, sea-level rise, and other climate-related events, could affect our operations, assets, infrastructure, supply chain, and financial results. Climate change risks could result in but are not limited to operational risk from the physical effect of climate events on our charging facilities, production facilities and other assets and we could incur significant costs to improve the climate resiliency of our aircraft or infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change. We may also be impacted by transitional risks related to climate change, including new or more stringent regulatory requirements, increased monitoring and disclosure requirements, and potential effects on our reputation and/or changes in our business. Changes in climate change laws or regulations could lead to increased costs and compliance requirements or otherwise could negatively impact our business and/or competitive position. Further, there is an increased focus from a variety of stakeholders, including governments, investors, lenders, and customers, on climate change matters, including increased pressure and regulatory requirements to expand disclosures related to the physical and transition risks related to climate change or to establish climate-related goals, such as the reduction of greenhouse gas emissions, which could expose us to market, operational and execution costs or risks. Our failure to comply with applicable requirements or establish such climate-related targets or targets that are perceived to be appropriate, as well as to achieve progress on those targets on a timely basis, or at all, could adversely affect the reputation of our brand and business and demand for our offerings. We are not able to accurately predict the materiality of any potential losses or costs associated with the physical effects of climate change.
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Our aircraft utilization may be lower than expected due to weather and other factors.
Although we design our aircraft to maximize operational utilization, our aircraft may not be able to fly in poor weather conditions, including snowstorms, thunderstorms, high winds, lightning, hail, known icing conditions, and/or fog. Our inability to operate in these conditions will reduce our aircraft utilization and cause delays and disruptions. We intend to maintain a high daily aircraft utilization rate, which is the amount of time our aircraft spend in the air. This is achieved, in part, by reducing turnaround times at vertiports. Aircraft utilization is reduced by delays and cancellations from various factors, many of which are beyond our control, including adverse weather conditions, security requirements, air traffic congestion, and unscheduled maintenance events. The success of our business is dependent, in part, on the utilization rate of our aircraft, and reductions in utilization would adversely impact our financial performance, cause customer dissatisfaction and could have an adverse impact on our business, results of operations, financial condition and prospects.
Our aircraft and chargers may require maintenance at frequencies or at costs which are unexpected.
Our aircraft and network of chargers will require regular maintenance and support. We are still developing our understanding of the long-term maintenance profile of these and certain of our other offerings. If useful lifetimes are shorter than expected, or if trained and qualified aircraft mechanics continue to be in short supply, this may lead to greater maintenance costs than we anticipate. If our aircraft and related equipment or our chargers require maintenance more frequently than anticipated or at costs that exceed our estimates, that could impact our commercialization efforts or, in the case of our charging network, could result in higher operating costs, or otherwise negatively impact customer satisfaction or demand with respect to our offerings. Any of these could have a material adverse effect on our business, results of operations, financial condition or prospects.
If we are unable to maintain adequate facilities and infrastructure, including securing access to key infrastructure, we may be unable to offer our aircraft and other products or charging services in a way that is useful to customers.
If we are unable to obtain and maintain adequate facilities and infrastructure, including access, on commercially viable terms, to key infrastructure such as airports where our chargers are then-located or proposed to be located, we may be unable to offer our aircraft and other products or charging services in a way that is useful to passengers. To operate and expand our current and planned business activities, we must secure or otherwise develop adequate manufacturing, testing, charging and maintenance infrastructure in fit-for-purpose and, in the case of our charging network, desirable locations.
There is also a complex patchwork of federal, regional and municipal regulatory considerations applicable to asset management and property development in general, and aviation assets and infrastructure in particular, including EHS regulations. See also “—We could incur significant costs in complying with EHS laws and regulations and could be adversely affected by liabilities or obligations imposed under such laws and regulations.” The nature and extent of any changes in these laws, rules, regulations and permits associated with these laws and regulations may be unpredictable and may have material effects on our business. Local community groups, some of which may be opposed to property development in general, and new aviation infrastructure in particular, can impact the application of these regulations or the development of new regulations.
Our facilities are subject to a risk of closure due to zoning, permitting and leasing issues. We may not be able to obtain necessary permits and approvals or to make necessary infrastructure changes to enable adoption of our aircraft, charging equipment or other offerings. Further, the destruction of or our inability to use any of our facilities for a prolonged period of time could materially impact our ability to meet our projected timelines. If we are unable to acquire, lease or otherwise maintain space and related facilities integral to our operations on terms and in locations that are favorable, this could prevent our aircraft and other offerings from being purchased or deemed desirable by our customers and, in turn, have a material adverse effect on our business, results of operations, financial condition and prospects.
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Our ability to use net operating losses and other tax attributes to offset future taxable income may be subject to certain limitations.
Under the Tax Cuts and Jobs Act of 2017 (“TCJA”), federal net operating losses (“NOLs”) generated in tax years through December 31, 2017 may be carried forward for 20 years and may fully offset taxable income in the year utilized and federal NOLs generated in tax years beginning after December 31, 2017 may be carried forward indefinitely but may only be used to offset 80% of taxable income annually. Further, under the TCJA, federal and state research and development tax credits may be carried forward for 20 years. Our U.S. federal and state NOLs and certain other tax credits (such as research and development tax credits) may be subject to limitation under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), respectively, and similar provisions of state law. Under those sections of the Code, a corporation that undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, is subject to limitations on its ability to utilize its pre-change NOLs and other pre-change tax attributes, such as research and development tax credits, to offset post-ownership change taxable income or taxes. Future changes in our stock ownership, many of which are outside of our control, could result in an “ownership change” under Sections 382 and 383 of the Code. “Ownership changes” that have occurred in the past or that may occur in the future could result in the imposition of an annual limit on the amount of pre-ownership change NOLs and other tax attributes we can use to reduce taxable income, potentially increasing and accelerating our liability for income changes.
Changes in financial accounting standards may cause adverse unexpected fluctuations and affect our reported results of operations.
A change in accounting standards or policies, and varying interpretations of existing or new accounting pronouncements, as well as significant costs incurred or that may be incurred to adopt and to comply with these new pronouncements, could have a significant effect on our reported financial results or the way we conduct our business. If we do not ensure that our systems and processes are aligned with the new standards, we could encounter difficulties generating quarterly and annual financial statements in a timely manner, which could have an adverse effect on our business, our ability to meet our reporting obligations and compliance with internal control requirements.
Management will continue to make judgments and assumptions based on our interpretation of new standards. If our circumstances change or if actual circumstances differ from our assumptions, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of the Class A common stock.
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Increasing scrutiny, regulatory requirements and changing expectations from various stakeholders with respect to sustainability and other environmental, social and governance matters may impose additional costs on us or expose us to reputational or other risks.
Investors, customers and other stakeholders have focused increasingly on sustainability and environmental, social and governance practices of companies, including, among other things, practices with respect to human capital resources, emissions, climate change and environmental impact. Stakeholder expectations are not uniform and support for and opposition to such matters have increasingly resulted in a range of activism and legal and regulatory developments. Expectations and requirements of our investors, customers and other third parties evolve rapidly, whether in support of or opposition to such matters, and are largely out of our control, and our initiatives and disclosures in response to such expectations and requirements may result in increased costs (including but not limited to increased costs related to compliance, stakeholder engagement, contracting and insurance), changes in demand for certain services, enhanced compliance or disclosure obligations or other adverse impacts to our business, financial condition and results of operations. While we have programs and initiatives in place related to our sustainability practices, there is no assurance that our stakeholders will agree with our sustainability-related strategies, and investors may decide to reallocate capital or to not commit capital as a result of their assessment of our services and practices. In addition, our customers, business partners and suppliers may be subject to similar expectations and may require that we implement certain additional procedures or standards to continue to do business with us, which may augment or create additional costs or risks, including costs or risks that may not be known to us. Relatedly, there is increasing focus by regulators, customers, and other stakeholders on greenwashing issues and environmental marketing and sustainability-related claims. There can be no assurance that we will not be subject to greenwashing allegations or claims associated with the veracity of our environmental- and sustainability-related claims, including those related to the environmental sustainability and energy efficiency of our aircraft, our renewable energy usage, or our battery recycling practices, among other things, which could expose us to liabilities or require us to incur additional costs to adequately prepare disclosures or improve internal controls. There is also increasing focus on environmental, social and governance and sustainability disclosure and regulation across various jurisdictions and exposure to any new regulatory and legal requirements may lead to increased operational costs and compliance burden for us. Any failure to comply with regulatory or legal requirements or adapt to investor, customer and other stakeholder expectations and standards, which are evolving and can conflict, or if we are perceived (whether validly or not) not to have responded effectively to their growing concerns around sustainability or environmental, social and governance issues, regardless of whether there is a legal requirement to do so, or to effectively respond to new or additional legal or regulatory requirements regarding such matters or potential regulatory/investor engagement or litigation, could cause or result in reputational harm to our business and could have a material adverse impact on our business, financial condition and results of operations.
We may in the future become subject to legal proceedings, which may be time-consuming and expensive and, if adversely determined, could delay, limit or prevent our ability to commercialize our aircraft or otherwise execute on our business plans.
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, limit or prevent our ability to make, develop, commercialize or deploy our aircraft and deteriorate our reputation and our business relationships, any of which could make it more difficult or impossible for us to operate our business or otherwise execute on our business plan and significantly adversely affect our business, results of operations, financial condition or prospects. 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, results of operations, financial condition or prospects.
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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 incur legal, accounting, and other expenses we did not previously incur. We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Sarbanes-Oxley Act of 2002 (“SOX”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of the NYSE, and other applicable securities rules and regulations. Compliance with these rules and regulations is expected 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, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that, as a public company, we file annual, quarterly and current reports with respect to our business and operating results. SOX requires, among other things, that, as a public company, we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to improve our internal controls and reporting infrastructure to satisfy public company requirements, but these efforts may be insufficient and could reduce management’s attention from other business concerns, which could adversely affect our business and operating results. Although we have hired additional employees to comply with these requirements, we may need to hire more employees in the future or engage outside consultants, which would increase our costs and expenses.
In the future, changes in laws or regulations governing our operations, changes in the interpretation thereof or newly enacted laws or regulations, and any failure by us to comply with these laws or regulations, could have a materially adverse effect on our business. In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure could create uncertainty for public companies, increase legal and financial compliance costs, and make some activities more time consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve or otherwise change over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations, and standards (or changing interpretations of them), and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may be adversely affected. As a public company, we also incur increased expenses in order to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain the same or similar coverage or obtain coverage in the future. These factors could also make it more difficult for us to attract and retain qualified members of our Board, particularly to serve on our audit committee, compensation committee and nominating and governance committee, and qualified executive officers.
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. In addition, as a result of the disclosure obligations as a public company, we may have reduced flexibility and be under pressure to focus on short-term results, which may adversely affect our ability to achieve long-term profitability.
Our management team has limited experience managing a public company.
Some members of our management team have limited experience managing a publicly traded company, interacting with public company investors and regulators and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage a newly public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely impact our business, results of operations, financial condition, and prospects.
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Risks Related to Laws and Regulations
Failure to comply with applicable laws and regulations relating to the aerospace business in general and electric aircraft testing, certification and production specifically, could adversely affect our business, results of operations, financial condition and prospects.
In order to commercialize our product offerings, we will need to obtain and maintain approvals from governmental authorities based on compliance with a variety of aerospace laws and regulations. If we are unable to obtain, experience delays in obtaining, or are unable to maintain such approvals, our business could be negatively impacted. Our electric aircraft, motors, and subsystems will be subject to substantial regulation in the jurisdictions in which we intend our electric aircraft and other offerings to be sold and used. We expect to incur significant costs in complying with these regulations. Regulations related to eVTOL aircraft in particular, including aircraft certification, Production Certification, passenger operation, flight operation (including operations under experimental and special airworthiness certificates), airspace operation, security regulation, and infrastructure regulation are currently evolving, and we face risks associated with the development, evolution, and enforcement of these regulations. For example, in October 2024, the FAA published the SFAR for eVTOL aircraft. Any other regulatory changes or revisions could delay our ability to obtain Type Certification, and could delay our ability to execute on our business plans with respect to sale of aircraft and certain other offerings.
Rigorous testing and the use of approved materials and equipment are among the requirements for achieving certification. Our failure to obtain or maintain certification for our aircraft would have a material adverse effect on our business and operating results. In addition to obtaining and maintaining certification of our aircraft, we will need to obtain and maintain a production certificate necessary to manufacture type certified aircraft and motors. A transportation or aviation authority may determine that we cannot manufacture, provide, or otherwise engage in those product or service offerings as we have contemplated. The inability to commercialize our envisioned product offerings could materially and adversely affect our business, results of operations, financial condition and prospects.
To the extent the laws change, our aircraft and/or related or other offerings may not comply with those laws, which would have an adverse effect on our business. Complying with changing laws could be burdensome, time consuming and expensive. To the extent compliance with new laws is cost prohibitive, our business, results of operations, financial condition and prospects could be adversely affected.
Our aircraft must be certified with the FAA in the United States or other comparable regulatory agencies in international jurisdictions. If we expand beyond the United States, there will be additional laws and regulations we must comply with, and there may be laws and regulations in other jurisdictions we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict our operations or business practices or that are difficult to interpret and change rapidly. See “—We may be unable to obtain relevant regulatory approvals for the commercialization of our aircraft, motors or subsystems, either in the United States or in foreign markets.”
Continued regulatory limitations and other obstacles interfering with our business operations could have a negative and material impact on our business, results of operations, financial condition and prospects.
We are required to comply with a wide variety of laws and regulations, and are subject to regulation by various federal, state and foreign agencies, and our failure to comply with existing and future regulatory requirements could adversely affect our business, results of operations, financial condition and prospects.
We expect to compete in markets in which we and our customers are subject to federal, state, local, international and transnational laws and regulations, including, but not limited to, laws and regulations relating to zoning and those imposing requirements with respect to business licenses and registrations. Any significant change in laws, regulations, and standards could impact the manner in which we conduct business, as well as the design, manufacture, and operation of our electric aircraft and other offerings, delay our timeline or reduce demand for our products or increase our expenses. For example, business licenses and the approval to operate can vary by country, state and municipality.
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We are also registered with the Directorate of Defense Trade Controls of the U.S. Department of State, as is required to manufacture and export goods controlled by the ITAR, and we are subject to strict export control and prior approval requirements related to these goods. Our failure to comply with the ITAR and other export control laws and regulations, as well as economic sanctions, could result in penalties, loss, or suspension of contracts or other consequences. Any of these could adversely affect our business, results of operations, financial condition, and prospects. Failure by us or by our customers to meet one or more of these various regulatory obligations could have adverse consequences in the event of material non-compliance. Compliance with relevant sanctions and export control laws could restrict our access to, and increase the cost of obtaining, certain products and at times could interrupt our supply of imported inventory or our ability to service certain customers. Conversely, compliance with these regulatory obligations may require us to incur significant expenses.
In addition, certain of our facilities and products are or will be certified to industry standards such as ISO, AS9100 and/or UL. These standards are voluntary safety and quality management system standards, the maintenance of which indicates to customers certain quality and operational norms. Customers may rely on contractual assurances that we make with respect to such certifications to transact business. Failure to comply with these standards can lead to observations of non-compliance or even suspension of such certifications. If we were to fail to obtain or maintain such a certification it could result in breach of contracts or difficulty in obtaining new customer contracts, which could adversely affect our business.
We may be unable to obtain relevant regulatory approvals for the commercialization of our aircraft, motors or subsystems, either in the United States or in foreign markets.
We may be unable to obtain the regulatory approvals needed for the commercialization of our aircraft, motors or subsystems in accordance with our business plan. The commercialization of new aircraft requires certain regulatory authorizations and certifications, including Type Certification, Production Certification, and FAA Airworthiness Certification. While we have received FAA special airworthiness certificates for certain ALIA CTOL aircraft, and while we anticipate being able to obtain the required authorizations and certifications with respect to our aircraft or motors, we may be unable to do so on the timeline we project or at all. Circumstances outside of our control could delay the receipt of our required certifications. For example, FAA staffing depends, in large part, on the annual appropriations process and the agency’s ability to retain and recruit sufficient resources with relevant experience and expertise. Failure to pass an annual appropriation bill has in the past resulted in temporary government shutdowns. A future shutdown, or a failure by Congress to pass an FAA reauthorization bill (or extension) could delay the rulemaking and certification process. Additionally, recent focus on reducing the size of the federal workforce could negatively impact the availability of resources within the FAA which could delay our progress towards certification.
We also plan to pursue regulatory approval of our aircraft, motors, and other offerings in other countries. While many of these countries have established processes for validating a Type Certification issued by the FAA, others are developing new processes to leverage our work with the FAA and provide a path for approval of initial operations that could precede Type Certification in the United States. The regulatory agencies charged with granting approvals with respect to our aircraft and other offerings in other countries may be subject to many of the same funding, staffing, and other risks that exist in the United States. Additionally, pursuing certification and operations outside the United States is subject to additional risks, including, but not limited to, other regulatory regimes being less familiar with or to us or having less experience in certifying and approving new and novel aircraft or technology. If we fail to obtain any of the required authorizations or certificates, or do so in a timely manner, or any of these authorizations or certificates are modified, suspended or revoked after we obtain them, we may be unable to launch our commercial rollout or do so on the timelines we project and there may be a resultant adverse impact on our business, results of operations, financial condition and prospects.
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We are subject to stringent U.S. export and import control laws and regulations, which may change. We may be unable to comply with these laws and regulations or U.S. government licensing policies, or to secure required authorizations in a timely manner.
Certain aspects of our business are subject to stringent U.S. import and export control laws and regulations as well as economic sanctions laws and regulations. We are required to import and export our products, software, technical data, technology, and services, and run our operations in the United States, in full compliance with such laws and regulations, which may include the EAR, the ITAR and the economic sanctions administered by the Treasury Department’s Office of Foreign Assets Control. Similar laws may impact our business in other jurisdictions. These trade controls prohibit, restrict or regulate our ability to, directly or indirectly, export, or transfer certain hardware, software, technical data, technology, software, or services to certain countries and territories, entities and individuals, and for certain end uses. In addition, the Treasury Department’s Committee on Foreign Investment in the U.S. (“CFIUS”) has the authority to review direct and indirect investments in U.S. businesses by foreign persons. Among other things, CFIUS is empowered to require certain foreign investors to make mandatory filings, charge filing fees related to such filings and self-initiate national security reviews of investments if the parties to that investment choose not to file voluntarily. In the case that CFIUS determines an investment to be a threat to national security, CFIUS has the power to place restrictions, conditions or limitations on or even prohibit, or require divestment of, the investment. If we are found to be in violation of these laws and regulations it could result in civil and criminal penalties, including the loss of export or import privileges, debarment, and reputational harm.
Pursuant to these trade control laws and regulations, we are required, among other things, to (i) determine the proper licensing jurisdiction and export classification of products, software and technical data/technology, (ii) obtain licenses or other forms of authorization to conduct our business, and (iii) manage physical access and security accordingly. These requirements include the need to get permission to release controlled technology to foreign person employees and other foreign persons in the United States. Changes in U.S. trade control laws and regulations, or reclassifications of our products or technologies, may restrict our operations. The inability to secure and maintain necessary licenses and other authorizations could negatively impact our ability to compete successfully or to operate our business as planned. Any changes in the export control regulations or U.S. licensing policy, such as those necessary to implement U.S. commitments to multilateral control regimes, may restrict our operations. Given the great discretion the government has in issuing or denying such authorizations, there can be no assurance we will be successful in our future efforts to secure and maintain necessary licenses, registrations, or other regulatory approvals which may have an adverse impact on our business, results of operations, financial condition and prospects.
In addition, the global economy has recently seen a rise in tariffs and threats of tariffs. While tariffs have not had a material impact on our business, results of operations, financial condition or prospects to date, new tariffs could increase the costs of raw materials and other goods, both for us and our suppliers, which could impact our business, particularly as we begin to scale our manufacturing operations.
We could incur significant costs in complying with EHS laws and regulations and could be adversely affected by liabilities or obligations imposed under such laws and regulations.
We are subject to a variety of increasingly stringent foreign, federal, state, and local EHS laws, regulations, and ordinances relating to the protection of the environment, including those relating to emissions to air and other environmental media, discharges (including storm water) to surface and subsurface waters, safe drinking water, wildlife preservation, operational constraints like noise abatement, including relating to aircraft noise, occupational health and safety, and the use, management, disposal and release of, and exposure to, hazardous substances, oils, and waste materials. We could incur significant costs, including fines, cleanup costs and third-party claims, as a result of violations of or liabilities under these laws and regulations, and may also incur significant costs to achieve or maintain compliance in the future. In addition, fines and penalties may be imposed for non-compliance with applicable EHS laws and regulations and the failure to have or to comply with the terms and conditions of required permits.
From time to time, our operations may not be in full compliance with the terms and conditions of our permits or licenses and we can provide no assurance that the cost of achieving and maintaining compliance with EHS laws and requirements will not become material in the future.
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In addition, it is difficult to accurately predict the nature and extent of environmental liabilities and obligations that may result from laws or regulations adopted in the future and how existing or future laws and regulations will be administered or interpreted. For example, changes in EHS laws, including laws relating to energy consumption and aircraft noise, could require additional investments in manufacturing designs, which may be more expensive or difficult to manufacture, and could increase environmental compliance expenditures. The adoption of new EHS regulations could result in increased costs and have an adverse impact on our results of operations.
Governmental regulations and reporting regarding aircraft noise, including those adopted by the FAA, the International Civil Aviation Organization (“ICAO”) and other jurisdictions, apply based on where the relevant aircraft is registered and operated. These regulations, as well as the potential for new and more stringent regulations, could limit the economic life of our aircraft, reduce their value, limit our ability to sell non-compliant aircraft or, if aircraft modifications are permitted, require us to make significant additional investments in the aircraft to make them compliant.
We may also be subject to potential strict, joint, and several liability for the investigation and remediation of contamination, including contamination caused by other parties, that may exist at properties we currently own, lease, or operate and previously owned, leased, or operated and at other properties where we or our predecessors have arranged for the disposal of hazardous substances. We may incur significant costs, including cleanup costs, and other environmental liabilities, as a result of any environmental conditions that are existing or discovered or obligations that are imposed in the future. From time to time, we may be involved in administrative and judicial proceedings, investigation and remediation activities and other claims relating to these and other environmental matters. As a result, the aggregate amount of future cleanup costs and other environmental liabilities and obligations could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are and will be subject to rapidly changing and increasingly restrictive Privacy Laws and other obligations relating to privacy, data protection and data security, which may be costly and difficult to comply with.
We are and will be collecting, using, disclosing or otherwise processing the personal information of customers, employees and others in the course of operating our business. These activities are or may become regulated by a variety of domestic and foreign laws and regulations relating to privacy, data protection and data security, which are complex, rapidly evolving and increasingly restrictive. Several states in the United States and foreign countries have granted their respective residents expanded rights related to their personal information. For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act, grants California residents the right to access and request the deletion of their personal information and receive detailed reports of how their personal information is processed, and provides a private right of action for certain data breaches involving the loss of personal data. Such laws and any laws adopted in the future could have potentially conflicting requirements that would make compliance challenging. Despite our best efforts, we may not be successful in complying with the rapidly evolving privacy, data protection, and data security requirements. The existence of comprehensive privacy laws in various jurisdictions will make our compliance obligations more complex and costly and may increase the likelihood that we may be subject to enforcement actions or otherwise incur liability for noncompliance. Any actual or perceived non-compliance could result in litigation and proceedings against us by governmental entities, customers or others, which could result in fines, civil or criminal penalties, limited ability, or inability to operate our business, offer our products and services or market our technologies in certain jurisdictions, negative publicity and harm to our brand and reputation, which could have a material adverse effect on our business, results of operations, financial condition or prospects. See also “—Risks Related to Our Business and Industry—We are subject to evolving Privacy Laws, which subjects us to a number of potential regulatory and reputational risks. We may face investigations, fines and sanctions as a result of our or our service providers’ actual or perceived failure to comply with the Privacy Laws and incur increased operational costs in order to ensure future compliance.”
We currently have subsidiaries located outside of the United States and plans for international operations in the future, which could subject us to political, operational and regulatory challenges.
While our primary operations are in the United States, we currently have a subsidiary in each of Canada, Ireland, and the UAE, certain of which are engaged in limited test manufacturing, research and development and other activities, and we may eventually expand our international operations further. We also 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 a number of risks, including regulations that may differ from or be more stringent than analogous U.S. regulations, local political, or economic instability, cross-border political tensions, import and export compliance, privacy, data protection, information security, labor and employment matters, and exposure to potential liabilities under anti-corruption or anti-bribery laws and similar laws and regulations. If any of these risks materialize, it could adversely impact our business.
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Changes in tax laws or regulations that are applied adversely to us may have a material adverse effect on our business, results of operations, cash flows or financial condition.
New income, sales, use or other tax laws, statutes, rules, regulations, or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, changed, modified, or applied adversely to us. Future changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.
Risks Related to Our Indebtedness
The covenants in our credit a greement may restrict our operations, and failure to comply with the covenants in our credit agreement could adversely impact our business.
Our credit agreement with the Export-Import Bank of the United States (“Ex-Im”) (such agreement, the “Credit Agreement” or the “Ex-Im Credit Agreement”) and the other financing documentation entered into in connection therewith impose restrictive covenants that may limit our ability to operate our business, including, without limitation, covenants that limit our ability to create liens and dispose of assets. If we violate these or any other covenants set forth therein, any loans outstanding under the Credit Agreement could become due and payable prior to their stated maturity dates, and Ex-Im could proceed against the collateral granted in connection therewith by exercising its rights and remedies with respect to its first-priority liens on and security interests in our Final Assembly Facility and such other collateral. These restrictions may also limit our flexibility to plan for, or react to, changes in our business and industry and our ability to borrow additional funds and pursue other business opportunities or strategies that we would otherwise consider to be in our best interests.
We may not be able to generate sufficient cash to service all of our indebtedness or repay such indebtedness when due, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or to refinance our indebtedness obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory, and other factors, some of which are beyond our control. We cannot be sure that our business will generate sufficient cash flows from operating activities, or that future borrowings will be available, to permit us to pay the principal, premium, if any, and interest on our indebtedness.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital, or restructure or refinance our indebtedness. The loans outstanding under our $170.1 million credit facility established pursuant to the Credit Agreement (the “Credit Facility”) mature in December 2038. We may not be able to implement any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may be on less favorable terms, may occur under unfavorable market conditions, and/or may not allow us to meet our scheduled debt service obligations. The Credit Agreement restricts our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facility.”
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would have a material adverse effect on our business, results of operations, financial condition and prospects.
If we cannot make scheduled payments on our indebtedness under our Credit Facility, we will be in default, and Ex-Im could cause any loans outstanding under our Credit Agreement to become due and payable prior to their stated maturity date and/or exercise its rights and remedies with respect to its first-priority liens on and security interests in our Final Assembly Facility and the other collateral granted in connection with our Credit Agreement, and as a result thereof, we could be forced into bankruptcy or liquidation.
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Risks Related to the Ownership of Our Class A Common Stock and Our Capital Structure
We have listed the Class A common stock on the NYSE under the symbol “BETA.” The price of the Class A common stock may continue to fluctuate significantly, and stockholders could lose all or part of their investment.
Our initial public offering (the “IPO”) occurred in November 2025. Therefore, there has been a public market for our common stock for a short period of time. Although we have listed our Class A common stock on NYSE under the symbol “BETA,” an active trading market for our shares may not be sustained. A public trading market having the desirable characteristics of depth, liquidity, and orderliness depends upon the existence of willing buyers and sellers at any given time, such existence being dependent upon the individual decisions of buyers and sellers over which neither we nor any market maker has control. Additionally, the lack of liquidity may result in wide bid-ask spreads, contribute to significant fluctuations in the market price of the Class A common stock and limit the number of investors who are able to buy the Class A common stock. The failure of an active and liquid trading market to develop and continue would likely have a material adverse effect on the value of our Class A common stock. The market price of our Class A common stock may decline, and our investors may not be able to sell their shares of our Class A common stock at or above the price paid, or at all. An inactive market may also impair our ability to raise capital to continue to fund operations by issuing shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
The market price of our Class A common stock has been volatile and will likely continue to fluctuate due to a variety of factors. The following is a non-exhaustive list of factors that could affect the market price of the Class A common stock:
• our operating and financial performance;
• quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues;
• the public reaction to our press releases, our other public announcements and our filings with the Securities and Exchange Commission (the “SEC”);
• strategic actions by our competitors;
• our failure to meet revenue or earnings estimates by research analysts or other investors;
• changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts;
• speculation in the press or investment community;
• the failure of research analysts to cover the Class A common stock;
• sales of the Class A common stock by us or other stockholders, or the perception that such sales may occur;
• changes in accounting principles, policies, guidance, interpretations or standards;
• additions or departures of key management personnel;
• actions by our stockholders;
• general market conditions, including fluctuations in commodity prices;
• domestic and international economic, legal and regulatory factors unrelated to our performance; and
• the realization of any risks described under this “Risk Factors” section.
As a result, we may fail to meet the expectations of investors and securities analysts, which could cause our stock price to decline.
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We are controlled by Kyle Clark, our Chief Executive Officer and a member of our Board, whose interests in our business may conflict with ours or yours.
The Class B common stock is beneficially owned by Kyle Clark, our Chief Executive Officer and a director of the Company, whose interests may differ from or conflict with the interests of our other stockholders. Each share of Class A common stock is entitled to one vote per share. Each share of our Class B common stock is entitled to 40 votes per share. As of December 31, 2025, Mr. Clark beneficially owned all of the issued and outstanding shares of Class B common stock and, accordingly, when combined with Class A common stock beneficially owned, Mr. Clark controlled approximately 7.0% of our outstanding capital stock and controlled approximately 62.0% of the voting power of our outstanding capital stock. As a result, Mr. Clark has the ability to exercise control over our affairs, including control over the outcome of all matters submitted to our stockholders for approval, including the election of directors and significant corporate transactions. The directors so elected, including Mr. Clark for so long as he continues to stand for reelection and serve as our director, have the authority, subject to the terms of our indebtedness and applicable rules and regulations, to issue additional stock, implement stock repurchase programs, declare dividends and make other decisions. Mr. Clark may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests.
For example, Mr. Clark may have differing incentives from other stockholders that could influence his decisions regarding whether and when to cause us to dispose of assets, incur new or refinance existing indebtedness or take other actions. Additionally, Mr. Clark may cause us to make strategic decisions or pursue acquisitions that could involve risks to you or may not be aligned with your interests. This concentrated control may have the effect of delaying, preventing or deterring a change in control of the Company, could deprive our stockholders of an opportunity to receive a premium on their shares of Class A common stock as part of a sale of the Company and might ultimately affect the market price of the Class A common stock. Moreover, while stockholders would generally be entitled to dissenters’ rights of appraisal under applicable Delaware law, there are certain exceptions. As a result, Mr. Clark is effectively able to control us.
Future transfers of Class B common stock will generally result in those shares converting into shares of Class A common stock upon any transfer, whether or not for value, except for certain permitted transfers described in our Amended and Restated Certificate of Incorporation, including transfers to the spouse, child (natural or adopted) or other direct lineal descendant of Mr. Clark (or his spouse) (all of the foregoing collectively referred to as “family members”), any custodian or trustee of any trust, partnership or limited liability company for the benefit of, or the ownership interests of which are owned wholly by Mr. Clark or any such family members, and partnerships, corporations and other entities exclusively owned by Mr. Clark or any such family member. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon the death or disability of Mr. Clark (as defined in our Amended and Restated Certificate of Incorporation) or Mr. Clark ceasing to provide services to the Company as an officer, employee or director of the Company.
Certain of our directors and members of management may have interests that are different from, or in addition to, those of other stockholders.
We have from time to time entered into transactions, arrangements or relationships with our directors, members of management or their respective affiliates. These transactions have in the past included, and in the future could include, without limitation, the purchase, sale or leasing of real or other property, the provision or receipt of financing or other business dealings. There is a risk that such transactions may not be on terms as favorable to us as those that could be obtained from unrelated third parties. Even if such transactions are subject to approval by disinterested directors or are otherwise conducted in accordance with applicable laws and policies, the existence of these relationships may give rise to actual or perceived conflicts of interest. These conflicts could result in decisions that are not in our or your best interests, and could adversely affect our business, financial condition or prospects. See Item 13. “Certain Relationships and Related Transactions and Director Independence.”
Provisions in our Amended and Restated Certificate of Incorporation relating to certain relationships and transactions address certain actual or potential conflicts of interest between us, on the one hand, and our directors, officers or employees, on the other hand.
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For example, certain of our non-employee directors and their affiliates may engage in a broad spectrum of activities, including investments in the electric aviation, aerospace, and related industries generally. In the ordinary course of their business activities, our non-employee directors and their affiliates may engage in activities where their interests’ conflict with our interests or those of our other stockholders, such as investing in or advising businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. Our Amended and Restated Certificate of Incorporation provides that none of our non-employee directors (including any non-employee director who serves as one of our officers in both his or her director and officer capacities) or their affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate, and that, to the fullest extent permitted by law, our non-employee directors and their affiliates will not be liable to us or our stockholders for breach of any fiduciary duty solely by reason of the fact of their engagement in such activities. Moreover, pursuant to our Amended and Restated Certificate of Incorporation, we have renounced any interest or expectancy in, or in being offered an opportunity to participate in, business opportunities that are from time to time presented to our non-employee directors or their affiliates, unless such opportunity is expressly offered to such director solely in his or her capacity as a director or officer of the Company and in writing. Our non-employee directors and their affiliates may pursue acquisition opportunities or other business opportunities that may be complementary to our business, including strategic partnerships, aircraft or technology development opportunities, investments in electric aviation companies, customer relationships, or other business opportunities in the electric aviation, aerospace, or related industries, and, as a result, those opportunities may not be available to us. This could result in conflicts of interest that may not be resolved in our favor and could adversely affect our business, results of operations, financial condition, and prospects.
In addition, our Amended and Restated Certificate of Incorporation provides GE Aerospace the right to designate one individual (the “GE Director”) for election to our Board for so long as GE Aerospace beneficially owns at least 6,217,138 shares of our Class A common stock or there exists a commercial relationship between us and GE Aerospace. So long as GE Aerospace retains this right, we must take all necessary actions to include the GE Director in the slate of director nominees recommended by our Board for election by stockholders at each applicable meeting. GE Aerospace has the exclusive right to remove without cause the GE Director from our Board, and for so long as GE Aerospace has the director designation right, the shares of our common stock held by GE Aerospace shall be the only shares entitled to vote on the removal without cause of the GE Director. GE Aerospace also has the exclusive right to fill any vacancy created by reason of death, resignation, retirement, disqualification, or removal of the GE Director. In addition to the director designation right, during the board representation period, GE Aerospace has the right to designate one board observer. The director designation right could provide GE Aerospace with the ability to influence our management and affairs and could result in decisions that are not in the best interests of all stockholders.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, such provisions of our Amended and Restated Certificate of Incorporation.
We are a “controlled company” within the meaning of the NYSE rules and, as a result, will qualify for, and rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.
Upon the listing of our Class A common stock on the NYSE, we became a “controlled company” within the meaning of the rules of the NYSE. Kyle Clark, our Chief Executive Officer and a member of our Board, continues to control a majority of the combined voting power of all classes of our stock entitled to vote generally in the election of directors through his beneficial ownership of the Class B common stock. As a result, we remain a “controlled company” within the meaning of the NYSE corporate governance standards. Under these rules, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a “controlled company” may elect not to comply with certain corporate governance requirements, including those which require, within one year of the date of the listing of the Class A common stock:
• a majority of our Board consist of independent directors;
• our Board have a compensation committee that is comprised entirely of independent directors; and
• our Board have a nominating and corporate governance committee that is comprised entirely of independent directors.
We intend to continue to utilize these exemptions. As a result, we may not have a majority of independent directors on our Board or a compensation committee or nominating and corporate governance committee composed entirely of independent directors as permitted by these exemptions. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements.
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Our issuance of additional capital stock or other equity-related securities in connection with financings, acquisitions, investments, our 2025 Omnibus Incentive Plan or otherwise could dilute each stockholder’s ownership interest or adversely affect the market price of the Class A common stock.
We may raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in complementary companies, products or technologies and issue equity securities to pay for any such acquisition or investment. We expect to issue additional equity securities in the future in connection with one or more of these practices. We also utilize equity-based compensation as a key component of our compensation program. Any additional issuances of common stock would have the effect of diluting our earnings per share and our existing stockholders’ respective individual ownership percentages and lead to volatility in the market price of the Class A common stock. We cannot predict the effect that future issuances of shares of common stock or other equity-related securities would have on the market price of the Class A common stock.
We do not intend to pay dividends and may never pay dividends.
Our Board may elect to declare cash dividends on the Class A common stock, subject to our compliance with applicable law. The declaration and amount of any future dividends is subject to the discretion of our Board, and we have no obligation to pay any dividends at any time. We do not intend to pay dividends for the foreseeable future and may never pay dividends. We have not adopted, and do not currently expect to adopt, a written dividend policy. Our future dividend policy will be based on the operating results and capital needs of our business, and any future earnings may be retained to finance our future expansion and for the implementation of our business plan.
The payment of dividends is dependent on, among other things, economic conditions, our financial condition, results of operations, projections, liquidity and earnings and legal requirements. Any financing arrangements or debt arrangements that we enter into in the future may also include restrictive covenants that limit our ability to pay dividends.
As an investor, you should take note of the fact that a lack of a dividend may affect the market value of the Class A common stock and could affect the value of any investment.
The multi-class structure of our common stock may adversely affect the trading market for the Class A common stock.
We cannot predict whether our multi-class structure will result in a lower or more volatile market price of the Class A common stock, adverse publicity or other adverse consequences. Certain stock index providers exclude or limit the ability of companies with multi-class share structures from being added to certain of their indices. In addition, several stockholder advisory firms and large institutional investors oppose the use of multiple class structures. As a result, the multi-class structure of our common stock may make us ineligible for inclusion in certain indices and may discourage such indices from selecting us for inclusion may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure, and may result in large institutional investors not purchasing shares of the Class A common stock. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, any exclusion from certain stock indices could result in less demand for the Class A common stock. Any actions or publications by stockholder advisory firms or institutional investors critical of our corporate governance practices or capital structure could also adversely affect the value of the Class A common stock.
Future sales of the Class A common stock in the public market could reduce the market price of the Class A common stock, and any additional capital raised by us through the sale of equity or convertible or exchangeable securities may dilute your ownership in us .
Sales of a substantial number of shares of our Class A common stock into the public market, particularly sales by our directors, executive officers and principal stockholders, or the perception that these sales might occur, could cause the market price of our Class A common stock to decline. Many of our pre-IPO security holders have substantial unrecognized gains on the value of the equity they hold, and may take steps to sell their shares or otherwise secure or limit their risk exposure to the value of their unrecognized gains on those shares. We are unable to predict the timing or effect of such sales on the market price of our Class A common stock.
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As of December 31, 2025, we had 220,726,547 outstanding shares of the Class A common stock. All of the shares of Class A common stock sold in our IPO are tradable without restrictions or further registration under the Securities Act of 1933, as amended (the “Securities Act”), except that any shares held by our affiliates, as defined in Rule 144 under the Securities Act, would only be able to be sold in compliance with Rule 144 and any applicable lock-up agreements described below. We, all of our directors and executive officers and the holders of substantially all of our pre-IPO Class A common stock (including any Class A common stock into or for which securities of the Company held by such parties are convertible or exchangeable) are subject to lock-up agreements and/or market standoff agreements that restrict our and their ability to sell or transfer shares of our capital stock for a period of 180 days from November 3, 2025, the date of the final prospectus, as filed with the SEC in connection with our IPO, subject to certain exceptions. In addition, Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC may release certain stockholders from the lock-up agreements prior to the end of the lock-up period. If not otherwise early released, when the applicable market standoff agreements or lock-up periods expire, we and our security holders subject to a lock-up agreement or such market standoff agreements will be able to sell our shares freely in the public market, except that any shares held by our affiliates, as defined in Rule 144 under the Securities Act, would only be able to be sold in compliance with Rule 144. Sales of a substantial number of such shares upon expiration of the lock-up agreements and market standoff agreements, or the perception that such sales may occur, or early release of these agreements, could cause our market price to fall and impair our ability to raise capital or make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate.
We filed a registration statement with the SEC on Form S-8 providing for the registration of shares of the Class A common stock issued or reserved for issuance under our equity compensation plans, subject to the satisfaction of vesting conditions, the expiration of lock-up and/or market standoff agreements described above and the requirements of Rule 144. Additionally, certain stockholders owning shares of our common stock are entitled, under our amended and restated investors’ rights agreement, to certain rights with respect to the registration of their Class A common stock, including shares of Class A common stock issuable upon conversion of shares of Class B common stock, under the Securities Act. These registration rights would facilitate the resale of such securities into the public market, and any such resale would increase the number of shares of our Class A common stock available for public trading.
We may sell additional shares of Class A common stock in subsequent public offerings. We may also issue additional shares of Class A common stock or convertible or exchangeable securities. We cannot predict the size of future issuances of the Class A common stock or securities convertible into or exchangeable for Class A common stock or other securities of the Company, or the effect, if any, that future issuances and sales of shares of the Class A common stock will have on the market price of the Class A common stock. Sales of substantial amounts of our Class A common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of the Class A common stock.
Terms of subsequent financings may adversely impact stockholder equity.
In accordance with Delaware law and the provisions of our Amended and Restated Certificate of Incorporation, we may issue one or more classes or series of preferred stock that ranks senior in right of dividends, liquidation or voting relative to the Class A common stock. Preferred stock may have such designations, preferences, limitations and relative rights, including preferences relative to the Class A common stock in respect of dividends and distributions, as our Board may determine, and the issuance of preferred stock would dilute the ownership of our existing stockholders. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of the Class A common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of our common stock. The terms of any series of preferred stock may also reduce or eliminate the amount of cash available for payment of dividends to holders of the Class A common stock or subordinate the claims of such holders to our assets in the event of our liquidation. The Class A common stock will not be subject to redemption or sinking fund provisions.
If securities analysts or industry analysts were to downgrade the Class A common stock, publish negative research or reports or fail to publish reports about our business, our competitive position could suffer, and the price and trading volume of the Class A common stock could decline.
The trading market for the Class A common stock will, to some extent, depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us should downgrade the Class A common stock or publish negative research or reports, cease coverage of the Company or fail to regularly publish reports about our business, our competitive position could suffer, and the price and trading volume of the Class A common stock could decline.
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We are obligated to develop and maintain proper and effective internal control over financial reporting in order to comply with Section 404 of SOX. We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which could adversely affect investor confidence in our company and, as a result, the value of the Class A common stock.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. We are in the very early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 of SOX. We may not be able to complete our evaluation, testing and any required remediation in a timely manner. If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our Class A common stock to decline, and we may be subject to investigation or sanctions by the SEC.
We will be required, pursuant to Section 404 of SOX, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting as of the end of the fiscal year that coincides with the filing of our second annual report on Form 10-K. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. We will also be required to disclose changes made in our internal control and procedures on a quarterly basis. However, our independent registered public accounting firm will not be required to report on the effectiveness of our internal control over financial reporting pursuant to Section 404 of SOX until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an “emerging growth company” as defined in the Jumpstart our Business Start-ups Act of 2012 (“JOBS Act”). At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.
Additionally, the existence of any material weakness or significant deficiency would require management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner. The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause shareholders to lose confidence in our reported financial information, all of which could materially and adversely affect our business and stock price. To comply with the requirements of being a public company, we may need to undertake various costly and time-consuming actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff, which may adversely affect our business, financial condition and results of operations.
Taking advantage of the reduced disclosure requirements applicable to “emerging growth companies” may make the Class A common stock less attractive to investors.
We qualify as an “emerging growth company” as defined in the JOBS Act. An emerging growth company may take advantage of certain reduced reporting and other requirements that are otherwise applicable generally to public companies. Pursuant to these reduced disclosure requirements, emerging growth companies are not required to, among other things, comply with the auditor attestation requirements of Section 404 of SOX, provide certain disclosures regarding executive compensation, holding stockholder advisory votes on executive compensation, or obtaining stockholder approval of any golden parachute payments not previously approved. In addition, emerging growth companies have longer phase-in periods for the adoption of new or revised financial accounting. We will cease to be an emerging growth company upon the earliest of (i) the last day of the fiscal year in which we have $1.235 billion or more in annual revenues; (ii) the date on which we become a “large accelerated filer” (the fiscal year-end on which the total market value of our common equity securities held by non-affiliates is $700 million or more as of June 30); (iii) the date on which we issue more than $1.0 billion of non-convertible debt securities over a three-year period; or (iv) the last day of the fiscal year following the fifth anniversary of the first sale of Class A common stock in our IPO. We may take advantage of all of the reduced reporting requirements and exemptions until we are no longer an emerging growth company.
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We have elected to take advantage of the extended transition period to comply with new or revised accounting standards under Section 107 of the JOBS Act. Electing to use the phase-in periods permitted by this election may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the longer phase-in periods under Section 107 of the JOBS Act and who will comply with new or revised financial accounting standards. We cannot predict if investors will find our Class A common stock less attractive if we rely on these exemptions. If some investors find the Class A common stock less attractive as a result, there may be a less active trading market for the Class A common stock and the price of the Class A common stock may be more volatile. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies.
Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management or members of our Board, even if beneficial to our stockholders.
In addition to certain provisions of the Delaware General Corporation Law (as amended, the “DGCL”) that apply to us, our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws contain provisions that could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders. Among other things, these provisions:
• will allow our Board to authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include supermajority voting, special approval, dividend or other rights or preferences superior to the rights of other stockholders;
• provide for a classified board with staggered three-year terms;
• prohibit stockholders from acting by written consent at any time when the outstanding shares of Class B common stock represent less than 35% in voting power of shares of common stock;
• provide that, at any time when the outstanding shares of Class B common stock represent less than 35% in voting power of shares of common stock entitled to vote generally in the election of directors, directors, other than the GE Director, may only be removed for cause and only by the affirmative vote of holders of at least 66 2/3% in voting power of all the then-outstanding shares of common stock entitled to vote thereon, voting together as a single class;
• provide that, at any time when the outstanding shares of Class B common stock represent less than 50% in voting power of shares of common stock, the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of common stock will be required to amend provisions of our Amended and Restated Certificate of Incorporation relating to the management of our business, our Board of Directors, stockholder action by written consent, calling special meetings of stockholders, competition and corporate opportunities, Section 203 of the DGCL, forum selection and the liability of our directors, or to amend, alter, rescind or repeal our Amended and Restated Bylaws; and
• establish advance notice requirements for nominations for elections to our Board or for proposing matters that can be acted upon by stockholders at stockholder meetings.
These and other provisions of our corporate governance documents and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our Board or initiate actions that are opposed by our then-current Board, including actions to delay or impede a merger, tender offer or proxy contest involving the Company. We have opted out of Section 203 of the DGCL. The existence of these provisions could negatively affect the price of the Class A common stock and limit opportunities for you to realize value in a corporate transaction.
We may be subject to securities litigation, activist investors and short-selling campaigns, which are expensive and could divert management attention.
The market price of our Class A common stock has been and may continue to be volatile. Companies that have experienced volatility in the market price of their stock have, in the past, been subject to securities class action litigation, activist investor campaigns, and short-selling. We may be the target of these types of activities in the future, any for which could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm our business.
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Our Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware (the “Delaware Court of Chancery”) as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to bring a claim in a different judicial forum for disputes with us or our directors, officers, employees or agents.
Our Amended and Restated Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum, to the fullest extent permitted by law, for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a duty (including any fiduciary duty) by, or other wrongdoing by, any of our current or former director, officer, employee, agent or stockholder to us or to our stockholders, (iii) any action asserting a claim against us or any of our current or former director, officer, employee, agent, or stockholder arising out of or relating to any provision of the DGCL, our Amended and Restated Certificate of Incorporation or our Amended and Restated Bylaws (as either may be amended and/or restated from time to time), (iv) any action to interpret, apply, enforce or determine the validity of our Amended and Restated Certificate of Incorporation or our Amended and Restated Bylaws, (v) any action asserting a claim against us or any of our current or former director, officer, employee, agent or stockholder governed by the internal affairs doctrine, or (vi) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL shall be the Delaware Court of Chancery (or, if and only if the Delaware Court of Chancery lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) and any appellate court therefrom (the “Delaware Forum Provision”). Notwithstanding the foregoing, our Amended and Restated Certificate of Incorporation provides that the Delaware Forum Provision will not apply to any action or proceeding asserting a claim under the Securities Act. Further, our Amended and Restated Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act against us or any of our director, officer, employee or agent (the “Federal Forum Provision”).
The Delaware Forum Provision and the Federal Forum Provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the Delaware Forum Provision or the Federal Forum Provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations. Any person or entity purchasing or otherwise acquiring any interest in our shares of capital stock shall be deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision, but will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
There can be no assurance that we will be able to comply with the continued listing standards of the NYSE. If we are unable to comply with its continued listing requirements, the NYSE may delist the Class A common stock from trading on its exchange, which could limit investors’ ability to transact in the Class A common stock and subject us to additional trading restrictions.
We cannot assure you that our Class A common stock will continue to be listed on the NYSE. We will be required to demonstrate compliance with the NYSE’s continued listing requirements in order to maintain the listing of the Class A common stock on the NYSE. If the NYSE delists the Class A common stock from trading on its exchange and we are not able to list the Class A common stock on another national securities exchange, the Class A common stock could be quoted on an over-the-counter market. If this were to occur, we could face significant adverse consequences, including:
• a limited availability of market quotations for our securities;
• reduced liquidity for the Class A common stock;
• a determination that the Class A common stock is a “penny stock,” which would require brokers trading in the Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for the Class A common stock;
• a limited amount of news and analyst coverage; and
• a decreased ability to issue additional securities or obtain additional financing in the future.
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If we are deemed to be an investment company under the Investment Company Act of 1940, our results of operations could be harmed.
Under the Investment Company Act of 1940, as amended (the “Investment Company Act”), absent an applicable exemption, a company generally will be deemed to be an “investment company” if (a) it is in the business of investing, reinvesting, owning, holding or trading in securities and (b) it owns or proposes to acquire “investment securities” having a value exceeding 40% of its total assets (other than U.S. government securities and cash items) on an unconsolidated basis (such second prong, the “40% Test”). We do not believe that we or any of our subsidiaries are an “investment company” for purposes of the Investment Company Act, including in part, because neither we nor any of our subsidiaries are in the business of investing, reinvesting, owning, holding or trading in securities, as required under Section 3(a)(1)(C) of the Investment Company Act, and because we could qualify for the safe harbor from “investment company” status provided in Rule 3a-8 under the Investment Company Act.
We are engaged primarily in developing an all-electric, conventional and vertical takeoff and landing electric aircraft, and our historical development, the activity of our officers and directors, the nature of our present assets, the sources of our present income, and the public perception of the nature of our business all support the conclusion that we are an operating company and not an investment company. Further, we could qualify for the nonexclusive safe harbor from the definition of “investment company” provided in Rule 3a-8 under the Investment Company Act, which applies to certain research and development companies. We currently conduct, and intend to continue to conduct, our operations so that neither we, nor any of our subsidiaries, is required to register as an “investment company” under the Investment Company Act. If we were obligated to register as an “investment company,” we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things, limitations on capital structure, restrictions on specified investments, prohibitions on transactions with affiliates and compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would increase our operating and compliance costs, could make it impractical for us to continue our business as contemplated, and could have a material adverse effect on our business.
General Risk Factors
Our business may be adversely affected by the current global political and macroeconomic challenges, including the tariffs, effects of inflation, volatile interest rates or an economic downturn or recession.
Current global political and macroeconomic conditions and the effects thereof, including inflation, volatile interest rates, changes in trade agreements or regulations, tariffs, uncertainty with respect to the federal budget and federal debt ceiling and potential government shutdowns related thereto, actual or perceived instability in the global banking sector, the war in Ukraine and conflicts in the Middle East, supply chain issues, and any economic downturn or recession in certain regions or worldwide have, and may continue to, adversely affect our business, results of operations, financial condition and prospects. 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, certain components, manufacturing, and shipping as well as weakening exchange rates and other similar effects. As a result, we may experience cost increases. Although we take measures to mitigate the effects of macroeconomic challenges, if these measures are not effective, our business, results of operations, liquidity, financial condition, and prospects could be materially adversely affected. Even if such measures are effective, there could be a delay between the adverse effects of macroeconomic conditions and the timing of when those beneficial actions impact our business, results of operations, financial condition, and/or prospects.
We have been, and may in the future be, adversely affected by public health threats, the duration and economic, governmental and social impact of which is difficult to predict, which could significantly harm our business, results of operations, financial condition and prospects.
We face various risks related to public health issues, including epidemics, pandemics, and other outbreaks that could harm our operations and financial results. For example, COVID-19 created a disruption in the manufacturing, delivery, and overall supply chain of aircraft manufacturers and suppliers. The extent to which the health epidemics or pandemics can impact our business, results of operations, financial condition and prospects will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of such health epidemics or pandemics, their severity, the actions taken by governments and others in response to such health epidemics and pandemics and how quickly and to what extent normal economic and operating activities can resume. Even after health epidemics or pandemics have subsided, we may continue to experience an adverse impact to our business because of such public health threats, including ongoing supply chain shortages.
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