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YoY shift: Bearish
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.62pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.81pp
Lean -
Net-tone change vs last year's 10-K.
MD&A
-0.42pp
Lean -
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
disruptions+21
incidents+11
expose+9
adversely+8
claims+7
Positive rising
satisfy+3
achieve+2
efficiency+2
efficiencies+2
advantages+2
Risk Factors (Item 1A)
17,920 words
Item 1A. Risk Factors
Our operations and financial results are subject to various risks and uncertainties which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common and capital stock. You should carefully consider the risks described below as well as the other information contained in this Annual Report. The risks and uncertainties in this Annual Report are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock and warrants.
Risks Related to Our Business and Growth Strategy
We have incurred significant losses since inception and may continue to incur net losses from continuing operations in the future, and we may not be able to achieve or maintain profitability.
We have incurred significant losses since inception and may continue to incur in the future. Our net from continuing operations may be larger than anticipated, and we may not when expected, or at all. Even if we do, we may not be to maintain or increase . Further, in the second half of 2025, we our Passenger business and began focusing on providing medical logistics and clinical services to transplant centers, Organ Procurement Organizations (“OPOs”) and hospital customers (collectively, “Medical Customers”). As a result, our ability to generate revenue sufficient to will depend on numerous factors, many of which are outside of our control, including our ability to secure new Medical Customers and expand our offerings with current customers, sufficient utilization of our assets and personnel, and effectively integrate acquisitions.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
discontinued+14
loss+8
divestiture+7
closing+4
critical+2
Positive rising
achievement+5
efficient+3
attractive+3
advancements+2
enabled+2
MD&A (Item 7)
8,421 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with other sections of this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K.
In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. For important information regarding these forward-looking statements, please see the discussion above under the caption “Note Regarding Forward-Looking Statements.”
Overview
Strata Critical Medical, Inc. (f/k/a Blade Air Mobility, Inc.) (“Strata” or the “Company”) is a time-critical logistics and medical services provider to the United States healthcare industry. The Company operates one of the nation’s largest air transport and surgical services networks for transplant hospitals and organ procurement organizations, offering an integrated “one call” solution for donor organ recovery. Strata’s core services include air and ground logistics, surgical organ recovery, organ placement and normothermic regional perfusion for the transplant industry, as well as perfusion staffing and equipment solutions for cardiovascular surgery centers, offered under the Trinity Medical Solutions (“Trinity”) and Keystone brands.
Strata’s mission is to increase the number of organs that are transplanted while leveraging the Company’s expertise and resources to provide other medical and logistics services to a broader customer base. Strata’s goals are closely aligned with those of all participants in the transplant ecosystem, including transplant centers, regulators, Organ Procurement Organizations (“OPOs”) and other service providers. We believe that, by working with Strata, industry participants can save money, save more lives and operate more .
We may continue to incur net losses for the foreseeable future as we focus on growing our services in the United States. The timing and amount of our operating and capital expenditures will depend on many factors, including:
• the amount of net revenue generated by sales of our services;
• our decision to purchase additional aircraft and/or vehicles;
• our launch of new services and/or products;
• the costs and expenses of expanding our operations;
• the costs incurred in our efforts to develop our brands and improve awareness;
• the costs associated with finalizing the divestment of the Passenger business and the integration of acquisitions;
• the costs, timing and outcomes of any future litigation or investigations; and
• the level of our selling, general and administrative expenses.
Because of the numerous risks and uncertainties associated with our expansion and our operations as a standalone medical business, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability.
Any inability to realize the anticipated benefits of the sale of the Passenger business or acquisition of Keystone could negatively impact our stock price and our business and financial results.
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On August 29, 2025, the Company completed the sale of its Passenger business to Joby Aero, Inc. (“Joby Buyer”) on September 16, 2025, the Company completed the acquisition of Keystone. We completed these transactions with the expectation that they could result in various benefits to us, but such anticipated benefits are subject to a number of uncertainties, including our ability to timely realize cost efficiencies and accretive benefits and our ability to successfully integrate Keystone and retain its key employees and clients following the acquisition. Failure to achieve these anticipated benefits could result in decreases in the amount of expected revenues and diversion of management’s time and energy, which could in turn materially adversely affect our stock price, business and financial results. In addition, while the Company will be entitled to up to $35.0 million in contingent consideration from the Joby Buyer upon the satisfaction of certain employee retention and financial performance targets, there can be no assurance that we will receive such contingent consideration. Any contingent consideration that we receive may be paid in cash or shares of Joby Aviation at the election of the Joby Buyer and, as a result, the value of any contingent consideration we receive may be subject to risks associated with Joby Aviation’s business and common stock over which we have no control.
Furthermore, the sale of the Passenger business has resulted in our business becoming less diversified. As a result, we are more vulnerable to changing market conditions that impact our Medical Customers, including changes in hospital budgets, transplant volumes, or regulatory requirements. In addition, the diversification of our revenues, costs and cash flows has diminished as a standalone company, such that our results of operations, cash flows, working capital and financing requirements may be subject to increased volatility and our ability to fund capital expenditures may be diminished.
If we experience harm to our reputation and brand, our business, financial condition, and results of operations could be adversely affected.
Continuing to increase the strength of our reputation and brand for reliable, experience-driven, and cost-effective transplant logistics and clinical services is critical to our ability to attract and retain qualified, third-party aircraft operators and suppliers and to maintain trusted relationships with our Medical Customers.
The successful development and maintenance of our reputation and brand will depend on a number of factors, many of which are outside our control. Negative perception of our company may harm our reputation and brand, including as a result of:
• complaints or negative publicity about us, our third-party aircraft operators, or other third parties involved in our operations, even if factually incorrect or based on isolated incidents;
• inappropriate and/or unauthorized use of the Company’s communication channels could cause brand damage;
• changes to our flight operations, safety and security, privacy or other policies that customers, partners or others perceive as overly restrictive, unclear, or inconsistent with their values;
• illegal, negligent, reckless, or otherwise inappropriate behavior by our third-party aircraft operators, clinical personnel or other third parties involved in the operation of our business or by our management team or other employees;
• actual or perceived disruptions or defects in our IT or software systems, such as data security incidents, platform outages, payment processing disruptions, or other incidents that impact the availability, reliability, or security of our offerings;
• litigation involving, or investigations, audits or enforcement actions by regulators into, our operations or those of our third-party aircraft operators or other service providers;
• a failure to operate our business in a way that is consistent with our values;
• negative responses by third-party aircraft operators to new mobility offerings;
• perceptions regarding our compliance culture or our treatment of employees, contractors, or third-party aircraft operators;
• actual or perceived failures, delays or disruptions in our operations, including failures to deliver human organs or medical teams to transplant centers on a timely basis or failure to appropriately transport organs and maintain control of organs for transplantation;
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• mistakes, delays or inconsistency in our evaluation of organ offers for customers of our Trinity Organ Placement Services (TOPS); or
• any of the foregoing events affecting our competitors or the broader transplant logistics, aviation or healthcare services industries, to the extent such resulting negative perception affects the public’s perception of us or our industry as a whole.
In addition, changes we may make to enhance and improve our offerings and balance the needs and interests of our third-party aircraft operators and customers may be viewed positively from one group’s perspective (such as customers) but negatively from another’s perspective (such as third-party aircraft operators), or may not be viewed positively by either third-party aircraft operators or customers. If we fail to balance the interests of third-party aircraft operators and customers or make changes that they view negatively, third-party aircraft operators and customers may stop using our platform or use our platform less frequently, any of which could adversely affect our reputation, brand, business, financial condition, and results of operations.
We provide clinical services to our customers and perfusion staffing services to hospitals and health systems. We may be subject to negative publicity and reputational damage related to the provision of such services, as well as litigation, claims, investigations, and other proceedings, which could result in actions including substantial judgments, settlement costs, uninsured or underinsured liabilities, and other adverse consequences.
We rely significantly on our ability to attract, develop, and retain professionals who possess the skills, experience and, as required, licensure, necessary to perform organ recovery services and perfusion staffing services. Our professionals are involved in clinical services such as surgical recovery, which involves the retrieval of organs from donors, and normothermic regional perfusion services, which operate in heavily regulated environments. The requirements and protocols for such services are complex and may vary amongst our customers. If there is a negative outcome in a particular case, or if a particular case raises ethical questions or concerns, even if our staff were not directly involved in the case, we may be subject to negative publicity, reputational harm, investigations, litigation, claims, and governmental actions that could have an adverse effect on our operations, financial results, and reputation.
Public or professional debate regarding organ recovery techniques, perfusion practices, or evolving clinical protocols may subject our services to heightened scrutiny by regulators, medical societies, or the media. Changes in accepted clinical standards or adverse publicity relating to the broader transplant ecosystem, even if not directly related to our services, could reduce customer confidence or lead to increased regulatory oversight.
The market for qualified perfusionists, surgical recovery personnel, and other specialized clinical professionals remains highly competitive, and shortages of experienced clinicians, increased turnover, credentialing delays, or workforce fatigue could adversely affect our ability to provide services at scale. In addition, evolving hospital privileging requirements, state licensure rules, or customer-specific credentialing standards may limit our ability to deploy personnel efficiently across different jurisdictions or customers, which could increase costs, reduce operational flexibility, or result in service disruptions.
Any failure to offer high-quality customer support may harm our relationships with Medical Customers and could adversely affect our reputation, brand, business, financial condition, and results of operations.
We strive to create and maintain high levels of customer satisfaction through the support provided by our Medical Logistics Coordinators. The reliability and effectiveness of our offerings, including our ability to provide high-quality customer support, helps us attract and retain customers. Transplant centers depend on our logistics coordinators to monitor and coordinate between multiple operators of air and ground transportation, surgical teams procuring organs, OPOs providing support at the donor site, and the transplant centers that will ultimately perform the transplant on the recipient. Our ability to provide effective and timely support is largely dependent on our ability to attract and retain skilled employees who can support our customers and are sufficiently knowledgeable about our services and operations. As we continue to grow our business and improve our platform, we may face challenges related to providing quality support at scale. Any actual or perceived failure to provide high-quality customer support, or any failure to appropriately track organs or maintain proper custody and control of organs intended for transplantation could adversely affect our reputation, brand, business, financial condition, and results of operations.
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Our reliance on contractual relationships with certain transplant centers, hospitals, Organ Procurement Organizations and other strategic alliances could adversely affect our business, financial condition and results of operations.
We rely significantly on contractual relationships with certain transplant centers, hospitals, OPOs and other strategic partners and alliances for a substantial portion of our medical logistics and clinical services business. These relationships are important to our ability to expand into new markets and deepen our presence in existing markets. Our growth depends in part on our ability to successfully compete for and maintain these relationships, including through requests for proposals and other procurement processes, and many of our contracts may be subject to termination, non-renewal, pricing pressure or changes in scope.
Our medical logistics and clinical services business is highly dependent on the volume of human organs procured for transplant by our Medical Customers. If our Medical Customers cannot procure human organs for transplant or if the transplant industry experiences a shortage of human organs, whether due to changes in public health trends, donor eligibility criteria, regulatory or policy changes, or other factors, we may experience reduced demand for our services, revenue volatility and challenges in achieving or maintaining profitability. The transplant ecosystem in the United States is relatively concentrated among a limited number of transplant centers and OPOs, and our relationships within this ecosystem may expose us to heightened customer concentration and ecosystem risk. The loss of one or more significant Medical Customers, changes in procurement or allocation practices, or shifts in relationships among transplant centers, hospitals or OPOs could have a disproportionate impact on our operations, revenue and growth prospects. Reduced transplant challenges could also impair our ability to effectively utilize third-party aircraft and ground operators and could negatively affect our operating margins.
Additionally, advances in new organ preservation technology, changes in clinical practice, or the development of alternative treatments, including the emergence of animal-derived, synthetic, or lab-grown organs, could reduce the need for rapid, dedicated air transportation of human organs or alter the mix of services required by our Medical Customers. Any such developments could reduce demand for our services, require changes to our business model or place downward pressure on pricing, any of which could materially adversely affect our business, results of operations and financial condition.
Our growth may depend on the adoption and effective utilization of integrated clinical and logistics workflows by our Medical Customers, and failure to achieve such adoption could adversely affect our business, financial condition, and results of operations.
Our strategy includes expanding offerings that integrate clinical services, logistics coordination, and technology-enabled workflows designed to support transplant centers, OPOs, and hospitals. The successful adoption and utilization of these integrated solutions by our Medical Customers may depend on factors outside of our control, including customers’ willingness to modify existing clinical practices, adopt new technologies, integrate our systems into their workflows, and allocate resources toward training and implementation.
Medical Customers may be slow to adopt new solutions due to regulatory considerations, internal governance processes, budgetary constraints, competing technologies, or concerns regarding clinical outcomes, data security, or operational disruption. Even where customers initially adopt our solutions, they may not use them as extensively as anticipated, may fail to achieve expected efficiencies, or may discontinue use if competing offerings, preservation technologies, or alternative workflows become available.
In addition, the clinical environment in which transplant services are delivered is highly complex and involves multiple stakeholders, including surgeons, perfusionists, coordinators, and regulatory bodies. If our integrated offerings are perceived as difficult to implement, do not integrate effectively with customer systems, or fail to demonstrate measurable clinical or operational value, our ability to grow adoption among existing and prospective Medical Customers could be adversely affected.
Any failure to achieve widespread adoption or effective utilization of our integrated clinical and logistics offerings, including technology-enabled placement or coordination services, could reduce demand for our services, limit our ability to realize anticipated efficiencies or revenue growth, and materially adversely affect our business, financial condition, and results of operations.
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The organ transportation and clinical services markets in which we operate are highly competitive, and increased competition could adversely affect our business, financial condition and results of operations.
The markets in which we operate are highly competitive and continue to evolve rapidly. We compete with a range of providers, including organ transportation and logistics companies, aviation operators, healthcare service providers, transplant logistics coordinators, and manufacturers of organ preservation technologies. Some competitors may have greater financial resources, longer operating histories, broader geographic reach, proprietary technologies, or more established relationships with transplant centers, OPOs, hospitals, or healthcare systems than we do.
Increasingly, we compete with companies that offer integrated logistics and clinical service models, proprietary preservation technologies, or differentiated device ecosystems. While we now offer a broader suite of clinical services, including surgical organ recovery, Normothermic Regional Perfusion (“NRP”), and perfusion staffing following the Keystone acquisition, competitors may benefit from proprietary preservation platforms, vertically integrated device offerings, or alternative business models that may be perceived by customers as providing clinical or operational advantages. In addition, some competitors may bundle preservation devices, logistics coordination, and clinical services into a single offering, which may create pricing, contracting or technological advantages that could place pressure on our margins or customer relationships.
Competition may result in reduced pricing, lower margins, loss of customers, increased marketing and operating costs, or reduced demand for our services. In addition, consolidation among competitors, strategic partnerships, or the entrance of new market participants, including healthcare providers, aviation operators, technology companies, or device manufacturers, could intensify competitive pressures. If we are unable to compete effectively on the basis of safety, reliability, clinical capabilities, pricing, or customer relationships, our business, financial condition, and results of operations could be materially adversely affected.
Our business depends on the availability of organ donors and viable donor organs, which are influenced by factors beyond our control, and any decrease in the availability or utilization of viable donor organs could have a material adverse effect on demand for our services and results of operations.
The success of our medical logistics and transport operations relies on the continued availability of organ donors and viable donor organs for transplant. The supply of donor organs, as well as the volume of organs ultimately recovered and transplanted, is influenced by numerous factors outside our control, including changes in organ donation rates, advancements in medical practices and preservation technologies, legislative, regulatory or policy changes affecting organ procurement and allocation, and shifts in public attitudes toward organ donation.
Additionally, broader public health and societal factors, such as pandemics or other public health crises, changes in accident or mortality rates, or modifications to donor eligibility criteria, may impact the availability of donor organs or the timing and logistics associated with organ recovery and transplant. Changes in oversight, performance standards or allocation policies applicable to OPOs or transplant centers could also impact transplant volumes or operational workflows.
If the availability or utilization of viable organs declines or if legislative, regulatory or policy changes limit the efficiency or scope of organ procurement or transportation, demand for our services could decrease, volumes could become more volatile, and our ability to efficiently deploy transportation and clinical resources could be adversely affected. Any of the foregoing could negatively impact our business, results of operations, financial condition and growth prospects.
Reimbursement and funding for medical transport services may be insufficient, adversely affecting our revenue and profitability.
Our ability to generate revenue from our medical logistics and transport services depends, in significant part, on our customers’ ability to secure adequate reimbursement or funding from government programs, private insurers, and other third-party payers to cover the costs associated with organ procurement and transplantation. Although we do not bill government programs or insurers directly, transplant centers, hospitals and OPOs may rely on reimbursement or other funding sources to cover the costs associated with organ transport. If our customers are unable to secure sufficient reimbursement or funding for transplant-related services, demand for our services could be reduced and our business could be adversely affected. In the U.S., reimbursement and funding for these services may be influenced by Medicare, Medicaid, private insurers, and other payers, each of which has substantial discretion in determining coverage, payment levels, and what services are considered “reasonable and necessary.” A lack of adequate reimbursement or funding, or changes in
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payer policies, could limit our customers’ willingness or ability to use our services, particularly if they determine that alternative transportation options or operational approaches are more economical. In markets where reimbursement or funding for organ transport services is unavailable or limited, hospitals and transplant centers may seek more cost-effective alternatives, reducing our potential revenue.
Even if existing reimbursement and funding arrangements from government programs and third-party payers currently make our services or related products cost-effective for hospitals, these arrangements are subject to change. Ongoing efforts by governments, insurance companies, and other payers to contain or reduce healthcare costs could result in legislative or regulatory reforms that significantly reduce or eliminate reimbursement for the services we provide, including organ transport or any related devices.
If hospitals, transplant centers or OPOs in the U.S. are unable to obtain sufficient reimbursement or funding for our services, they may lack the economic incentives to continue using them. Additionally, if hospitals or surgeons determine that the benefits of our services do not justify the cost, our business could be adversely affected, which could negatively impact our financial condition and growth prospects.
The transport of organs involves numerous risks and delivery failures could expose us to liability and have a material adverse effect on our business, financial condition, results of operations, and reputation.
Our medical logistics and transport operations depend on precise timing and coordination to ensure the viability of organs for transplantation. Organs have strict ischemic time limits, meaning any delays—whether due to weather conditions, air traffic control restrictions, aircraft availability, maintenance issues, logistical inefficiencies or other operational challenges, whether foreseeable or not foreseeable—could compromise organ quality or render organs unsuitable for transplantation. Even relatively minor deviations from planned timelines can significantly reduce the chances of a successful transplant, potentially leading to adverse patient outcomes, liability exposure and reputational damage.
In addition to timing-related risks, improper handling of organs, temperature deviations, failure to maintain required storage or monitoring conditions, or breakdowns in communication or coordination during transport could further adversely impact organ viability. Equipment malfunctions, software or systems failures, or human error may also contribute to such risks. Any such incidents could result in liability claims, regulatory scrutiny, harm to our reputation, and financial repercussions.
Although we employ rigorous operational protocols designed to mitigate these risks, including route redundancies, temperature-controlled storage solutions, monitoring systems, and close coordination with medical teams and third-party transportation providers, organ transport remains inherently complex and unpredictable. Failures in organ delivery may damage our relationships with hospitals, OPOs, and transplant centers, erode trust in our services, and reduce demand for our offerings, any of which could materially adversely affect our business, financial condition, results of operations, and reputation.
Because our services involve the coordination of clinical activities with aviation and ground transportation operations, incidents may implicate multiple regulatory and liability frameworks, including healthcare standards of care, aviation safety regulations, and contractual obligations to customers. The interaction between these regimes could increase the complexity, duration, and cost of investigations, insurance claims, or litigation arising from a single event and may expose us to risks that are greater than those faced by companies operating solely within either the healthcare or aviation industries.
Risks associated with our ground transportation operations could adversely affect our business and financial results.
In addition to aviation logistics, we provide and coordinate ground transportation services using a combination of owned vehicles and third-party providers. Ground transportation operations involve inherent risks, including vehicle accidents, driver error, adverse weather conditions, equipment failure, regulatory compliance challenges, and operational delays. Because many organ transport missions are time-sensitive, disruptions to ground transportation may negatively impact transplant outcomes, customer relationships and our reputation.
Our ground operations may also expose us to additional regulatory requirements at the federal, state and local level, including licensing requirements, emergency transport regulations, vehicle safety standards and labor-related obligations.
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Compliance with these requirements may increase operational complexity and costs, and failure to comply could result in fines, penalties, loss of licenses or reputational harm.
As we expand our ground transportation footprint, including through owned vehicles or acquisitions, we may incur increased insurance costs, maintenance expenses, staffing requirements or liability exposure. Any significant incident, accident or operational disruption involving ground transportation could result in litigation, regulatory scrutiny, reputational damage or increased operating costs, which could materially adversely affect our business, financial condition and results of operations.
Advancements in technology could make ground or commercial air transport of organs more viable, reducing the need for our private air transportation services.
Our business depends in part on the demand for private air transportation of organs for transplant. However, advancements in medical preservation technology, new medical devices or other technological developments or improvements in commercial air logistics could, over time, reduce the need for our services. Innovations such as enhanced organ preservation techniques, longer viability windows for donor organs, or dedicated organ transport networks using commercial carriers could shift demand away from private air transport. If these or other technological developments decrease the reliance on our medical transport services, our business, financial condition, and growth prospects could be adversely affected.
Operation of aircraft involves a degree of inherent risk. We could sufferlosses and adverse publicity stemming from any accident involving small aircraft, helicopters, or charter flights and, in particular, from any accident involving our third-party aircraft operators.
The operation of aircraft is subject to various inherent risks, and demand for air transportation has been, and may in the future be, impacted by accidents or other safety issues in the aviation industry, regardless of whether such accidents or issues involve our flights, our third-party aircraft operators, aircraft flown by our third-party aircraft operators or Strata-owned aircraft. Air transportation hazards, such as adverse weather conditions, mechanical failures, operational disruptions, or other safety issues, may result in injury or loss of life and may negatively affect customer confidence in particular aircraft types, transportation providers or the broader air transportation services industry. Public reporting of safety incidents by governmental authorities such as the Department of Transportation and the National Transportation Safety Board may categorize accidents in ways that do not reflect the specific circumstances of our operations, which could nonetheless adversely affect perceptions of the safety of our services.
Safety and reliability are key considerations for our Medical Customers when selecting air transportation providers. Any failure by us or our third-party operators to maintain safety and reliability standards acceptable to our customers may adversely impact our ability to retain current customers or attract new customers. We may also face adverse publicity stemming from any public incident involving our company, our people, our brand, or aircraft utilized in our operations, including aircraft owned or operated by third-party operators. Such an incident could involve actual or allegedmisconduct, operational failures, or regulatory enforcement actions, and could lead to reputational harm, reduced demand for our services, and increased scrutiny from regulators or customers.
In addition, accidents or safety-related investigations involving aircraft used in our operations, including aircraft owned by third parties, aircraft bearing our branding, or aircraft types commonly utilized by our third-party operators, could expose us to litigation, liability claims, and financial losses. Although we maintain insurance coverage, such insurance may be unavailable, inadequate, or subject to exclusions or disputes, and may not fully cover potential liabilities. If one or more of our third-party aircraft operators were to experience an accident, regulatory grounding, or other safety-related interruption, we may be required to cancel or delay flights until alternative aircraft or personnel can be secured, which could adversely affect our operations, reputation, financial condition, and results of operations.
We are subject to risks associated with climate change, including regulatory developments and the potential increased impacts of severe weather events on our operations and infrastructure.
Climate change-related regulatory developments may adversely affect our business and financial results by requiring us, or the third parties on which we rely, to reduce emissions, incur additional operating costs, make capital investments to modernize aircraft or other aspects of our operations, or comply with enhanced disclosure and reporting obligations. Such developments could increase the cost of aviation fuel, aircraft ownership or operation, or transportation services provided
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by third-party operators. As we evaluate future fleet or infrastructure investments, evolving emissions standards or sustainability regulations may increase costs, require operational changes, or impose additional compliance burdens.
The potential physical effects of climate change, such as increased frequency and severity of storms, floods, fires, fog, mist, freezing conditions, sea-level rise, and other extreme weather events, could disrupt our operations, infrastructure, and financial results. Operational impacts, such as flight delays, cancellations, or reduced aircraft availability, could result in lost revenue, increased costs, and reduced customer confidence. In addition, certain of our operational locations are susceptible to the impacts of storm-related flooding, sea-level rise or other climate-related risks, which could lead to infrastructure damage, service disruptions, or additional capital expenditures to enhance resiliency. Although we seek to monitor and manage climate-related risks, we cannot accurately predict the timing, scope or materiality of any potential losses, regulatory impacts, or costs associated with climate change, and any such developments could materially adversely affect our business, financial condition, and results of operations.
Terrorist attacks, geopolitical conflict or security events may adversely affect our business, financial condition and results of operations.
Terrorist attacks, geopolitical conflict, security incidents, or perception of such events could adversely affect our business, reputation, brand, and operations. The aviation and transportation industries remain high-profile targets for security threats, and disruptions arising from such events, whether or not directly involving our operations, may reduce customer confidence, increase regulatory scrutiny, or limit the availability or efficiency of air transportation services on which we rely.
Security incidents may arise from external threats, geopolitical instability, or other acts of violence, including events occurring in public areas outside our control. Such incidents could result in increased security costs, airspace restrictions, changes to approved flight routes, delays or cancellations of flights, or disruption to transportation infrastructure. Because our services often involve time-sensitive organ transport, any such disruptions could adversely affect our operations, customer relationships, and financial performance.
In addition, geopolitical tensions or security-related developments may lead to changes in aviation regulations, heightened compliance requirements, or limitations on aircraft operations. Any of these events, whether actual or perceived, could result in reputational harm, increased operating costs, operational delays, or reduced demand for our services, any of which could materially adversely affect our business, financial condition and results of operations.
Our business is dependent on the availability of aircraft fuel. Continued disruptions in the supply or cost of aircraft fuel could adversely affect our operations, financial conditions, and results of operations.
Our ability to provide air transportation services depends in part on the availability and cost of aircraft fuel to the third-party aircraft operators and, where applicable, aircraft we utilize. Although aircraft operators currently have access to adequate fuel supplies, we cannot predict future fuel availability or pricing. Disruptions in fuel supply or significant increases in fuel costs may increase operating expenses for our third-party operators, reduce aircraft availability, or limit the ability to perform scheduled flights, which could adversely affect our business.
Aircraft fuel supply and pricing are influenced by numerous factors outside of our control, including natural disasters affecting refining or distribution infrastructure, geopolitical conflicts, economic sanctions, changes in governmental policies or tariffs, environmental regulations, transportation or storage constraints, and broader volatility in global energy markets. Any of these factors could result in fuel shortages, distribution disruptions, or increased costs for aircraft operations.
If aircraft fuel becomes less available or materially more expensive, our third-party aircraft operators may experience operational disruptions, impose higher transportation costs, or reduce flight capacity. Such developments could lead to increased operating expenses, pricing pressure, reduced margins, delays or cancellations of organ transport missions, and reduced demand for our services, any of which could materially adversely affect our business, financial condition, results of operations, and liquidity.
We may require substantial additional funding to finance our operations, but adequate additional financing may not be available when we need it, on acceptable terms, or at all.
In the future, we may need to raise additional capital through public or private financing or other arrangements to fund our operations, support growth initiatives, pursue acquisitions, invest in infrastructure or transportation capabilities, or respond to competitive or market developments. Such financing may not be available on acceptable terms, or at all, and our failure
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to obtain adequate funding when needed could materially adversely affect our business, financial condition, and results of operations.
Unfavorable economic conditions, including inflation, rising interest rates, economic instability, or volatility in global financial markets, have in the past disrupted capital markets and may continue to limit our ability to access capital on favorable terms. If we raise funds through the issuance of equity securities, our existing stockholders may be materially diluted. Any debt financing, if available, may include restrictive covenants, higher interest costs, or other terms that could limit our operational flexibility, constrain strategic decisions, or adversely affect our profitability. If we are unable to obtain sufficient financing when required, we may be forced to delay or scale back growth initiatives, limit investments in our operations, or forego strategic opportunities, which could adversely affect our competitive position and long-term prospects.
Restrictive covenants in our Credit Agreement may restrict our ability to pursue our business strategies and we may incur substantial additional indebtedness in the future.
In January 2026, we entered into a credit agreement (the “Credit Agreement”) that provides for secured, asset-based revolving credit loans in an aggregate principal amount of up to $30.0 million that may, upon certain conditions, be increased by up to an aggregate of $20.0 million. The operating and financial restrictions and covenants in our Credit Agreement may materially adversely affect our ability to finance future operations or capital needs or to engage in other business activities. Such restrictions and covenants limit our ability, among other things to: incur additional indebtedness, create liens on certain assets to secure debt, undertake certain mergers and other fundamental changes, make certain investments and guarantees, enter into certain asset sales and sale-leasebacks, enter into speculative derivative contracts, pay dividends on our common stock or make other restricted payments, repurchase shares, make certain debt prepayments, and enter into certain affiliate transactions.
A breach of any of these covenants could result in a default under our Credit Agreement. Under the Credit Agreement, upon an event of default, the lenders may, among other rights, terminate their lending commitments, accelerate the Company’s obligations, require cash collateralization of letter of credit exposure, and exercise certain remedies with respect to collateral.
Our future operating results may not be sufficient to enable compliance with the financial performance covenants in our Credit Agreement, and we may not have sufficient assets to repay amounts outstanding under our Credit Agreement. In addition, in the event of an acceleration of our debt upon a default, we may not have or be able to obtain sufficient funds to make any accelerated payments.
Notwithstanding the covenants in our Credit Agreement, we may be able to incur substantial additional debt in the future. This additional debt could make it difficult for us to satisfy our debt obligations resulting in possible defaults on and acceleration of such indebtedness. We may be required to dedicate a substantial portion of our cash flow from operations to debt payments, reducing cash available to fund operations, capital expenditures, business opportunities, acquisitions and other purposes. If we incur additional debt above the levels currently in effect, including through the expansion provided under our current Credit Agreement, the risks associated with our leverage, including those described above, would increase.
Furthermore, the terms of any future indebtedness we may incur could have further additional restrictive covenants. We may not be able to maintain compliance with these covenants in the future, and in the event that we are not able to maintain compliance, we cannot assure you that we will be able to obtain waivers from the lenders or amend the covenants.
As part of our growth strategy, we may pursue future acquisitions, partnerships, or strategic transactions that could disrupt our business and adversely affect our financial condition and results of operations.
We have explored, and intend to continue to explore, potential strategic acquisitions of assets and businesses, as well as partnerships, joint ventures, aircraft-related investments, or other strategic arrangements intended to support the expansion of our medical logistics and clinical services operations. Such transactions involve numerous risks and uncertainties. We may not be successful in identifying suitable acquisition targets or strategic partners, negotiating acceptable terms, obtaining required financing or regulatory approvals, or successfully integrating acquired assets or businesses into our operations.
The integration of acquisitions or strategic investments may present operational, financial, and managerial challenges, including difficulties retaining customers or key personnel, aligning operational processes and systems, or achieving
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anticipated synergies. Although we seek to carefully evaluate acquisition opportunities, we may incur impairment charges related to goodwill or intangible assets associated with acquired businesses. For example, in 2024 the Company recognized an impairment charge related to certain air transportation rights, which illustrates the potential risks associated with acquisition-related investments.
Furthermore, acquisitions or strategic transactions may divert management’s attention from our core business, increase operating expenses, or may introduce unforeseen liabilities or conflicts with our existing operations. To the extent financed with debt, such transactions may increase our leverage and impose restrictive covenants; to the extent financed through equity issuances, such transactions could dilute our current investors. We cannot ensure that any acquisition, partnership, or joint venture we make will be successful or will not have a material adverse effect on our business, financial condition, and results of operations.
We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.
If our operations continue to grow as planned, of which there can be no assurance, we will need to expand our operational capabilities, increase the number of third-party aircraft operators and service providers with whom we work, and hire and retain additional personnel to support our medical logistics and clinical service offerings. Our continued growth could place increased demands on our management, operational systems, and infrastructure, and we could experience challenges in recruiting, training, and managing a larger workforce or coordinating an expanding network of partners and service providers.
Rapid growth or operational expansion may increase complexity across our business, including in areas such as logistics coordination, regulatory compliance, technology systems, and customer support. If we fail to effectively manage this growth, we could experience operational inefficiencies, reduced service quality, reputational harm, or increased costs, any of which could adversely affect our financial and operational performance.
In addition, we expect to incur significant expenses as we seek to expand our capabilities, including costs associated with personnel, facilities, infrastructure, and operational support. If our revenue growth does not keep pace with these investments, our margins and profitability could be adversely affected. The expansion of our operations may also require additional administrative or operational space and increased fixed costs. Our inability to effectively manage growth or control related expenses could materially adversely affect our business, financial condition, and results of operations.
Our insurance, or that of our third-party aircraft operators, may become too difficult or expensive for us or them to obtain. Increases in insurance costs or reductions in insurance coverage may materially and adversely impact our results of operations and financial position.
Hazards are inherent in the aviation industry and may result in loss of life and property, potentially exposing us to substantial liability claims arising from the operation of aircraft. Although the safe operation of aircraft is the responsibility of our third-party aircraft operators, incidents involving aircraft used in connection with our services could expose us to reputational harm, contractual disputes, regulatory scrutiny or liability claims. Our third-party aircraft operators maintain aviation-related insurance covering flight operations, while we maintain general liability aviation premises insurance, non-owned aircraft liability coverage and various non-aviation insurance policies, including directors’ and officers’ liability insurance, general liability insurance, property insurance, employment practices liability insurance, cyber insurance, and workers’ compensation insurance.
A limited number of insurance underwriters provide coverage for us and our third-party aircraft operators. The number and severity of aviation incidents, changes in underwriting standards, and broader economic or industry conditions may result in reduced availability of coverage or increases in premiums above the rate of inflation. Insurance markets for aviation, ground operations and healthcare-related services have historically experienced periods of significant premium volatility, reduced underwriting capacity, increased deductibles, and more restrictive coverage terms, any of which could materially increase our operating costs or require us to operate with reduced coverage levels. Additionally, under the terms of our aircraft operating agreements, our third-party aircraft operators have agreed to indemnify us against liability arising from aircraft operations and to maintain specified insurance coverage. However, there can be no assurance that such indemnification rights will not be challenged or that an aircraft operator will have sufficient assets or insurance coverage to fulfill its indemnity obligations.
We maintain insurance that we believe is consistent with industry practice; however, there can be no assurance that our current level of coverage, or that of our third-party operators, will be sufficient to cover potential claims or that present levels of coverage will be available in the future at reasonable cost. If required insurance coverage becomes unavailable,
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we may be unable to satisfy regulatory requirements or contractual obligations. Further, our insurance costs may increase as we expand our medical logistics and clinical services, increase operational activity, add owned aircraft to our fleet, integrate acquisitions or expand into new markets. If we decide to purchase additional aircraft or operate aircraft, there could be additional insurance costs related to aviation hull, aviation liability, aviation premises, hangar, product, and/or war risk insurance coverages. There is no assurance that insurance carriers would be able to provide us with sufficient insurance coverage or affordable premiums.
If the costs of maintaining adequate insurance coverage increase significantly for us or our third-party operators, our operating results could be materially adversely affected and we may have to increase prices charged to our customers, which could reduce demand for our services and harm our business. Likewise, if any of our current insurance coverage becomes unavailable or economically impractical, we could be required to operate our business with reduced insurance protection and may be responsible for paying claims or judgments against us directly, which could adversely affect our results of operations or financial condition.
We are highly dependent on our senior management team and other highly skilled personnel. If we are not successful in attracting or retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
Our success depends, in significant part, on the continued services of our senior management team and on our ability to attract, motivate, develop, and retain a sufficient number of other highly skilled personnel, including logistics coordinators, clinical professionals, finance, marketing, sales, technology, legal, operational and support personnel. We believe that the breadth and depth of our senior management team’s experience across multiple industries will be instrumental to our success. The loss of any one or more members of our senior management team, for any reason, including resignation or retirement, could impair our ability to execute our business strategy and have a material adverse effect on our business, financial condition, and results of operations.
In connection with the divestiture of our Passenger business, certain members of our former senior leadership team and other employees transitioned to the buyer, Joby Aviation. The loss of these individuals, including executives with historical knowledge of our operations, strategy, customer relationships and proprietary processes, may create operational disruption, institutional knowledge gaps, or increased competition. In addition, the transition of personnel to a third party operating in adjacent or evolving markets could increase the risk that our strategic initiatives, operational practices or commercial insights become known to others in the industry, notwithstanding the existence of confidentiality or restrictive covenant obligations. Any inability to successfully transition responsibilities, retain remaining key personnel or recruit qualified replacements could adversely affect our business, financial condition and results of operations.
Employment-related claims or workforce litigation could result in significant costs and operational disruption.
As our workforce grows and evolves, we may become subject to employment-related claims, including wage-and-hour disputes, worker classification claims, discrimination or harassmentallegations, or other employment-related litigation. Companies operating in healthcare staffing, aviation logistics and transportation industries have increasingly faced class action and collective actions relating to compensation practices, scheduling, overtime and contractor classification. Even claims that lack merit may result in significant legal costs, management distraction, reputational harm and potential settlement expenses.
We may also be subject to regulatory investigations or audits relating to employment practices. Adverse outcomes in employment-related proceedings could require us to pay damages, penalties or settlement amounts, modify compensation practices or implement additional compliance programs. Any such developments could increase our operating costs, disrupt operations or materially adversely affect our business, financial condition and results of operations.
Our company culture has contributed to our success, and if we cannot maintain this culture as we grow, our business could be harmed.
We believe that our company culture, which promotes accountability, attention to detail, communication, and support for others, has contributed to our success. As we continue to grow and evolve as a medical logistics and clinical services organization, we face a number of challenges that may affect our ability to sustain our corporate culture, including:
• failure to identify, attract, reward, and retain people in leadership positions in our organization who share and further our culture, values, and mission;
• the increasing size, geographic diversity, and operational complexity of our workforce and partner network;
• competitive pressures to move in directions that may divert us from our mission, vision, and values;
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• the continued challenges of operating in a rapidly-evolving and highly-regulated industry;
• the increasing need to develop expertise in new areas of business that affect us;
• negative perception of our treatment of employees or our response to employee sentiment related to political or social causes or actions of management; and
• the integration of new personnel and businesses from acquisitions.
If we are not able to maintain our culture as we grow and evolve, our ability to execute our business strategy, deliver high-quality services and retain key personnel could be adversely affected, which could in turn harm our business, financial condition, and results of operations.
Our financial results may fluctuate from quarter to quarter, which makes our results difficult to predict and may cause our results to fall short of expectations.
Our financial results may fluctuate from quarter to quarter due to a number of factors, including, but not limited to, the unpredictable demands of our Medical Customers, variability in organ availability and transplant activity, the timing and volume of transport missions and clinical services, and changes in the availability or cost of third-party aircraft operators, clinical personnel or other service providers. Our revenue may fluctuate significantly from period to period, and our future quarterly and annual expenses as a percentage of our revenue may be significantly different from those we have recorded in the past due to changes in operational scale, staffing needs, regulatory compliance costs or integration activities. Our financial results in some quarters may fall below expectations. Comparing our financial results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance.
We may purchase additional aircraft in the future.
Purchasing additional aircraft could change aspects of our business model and include a significant capital investment that could affect our financial condition and cost structures and cause operational disruptions. Although we intend to continue to service the majority of our demand utilizing aircraft that are owned and operated by third parties, purchasing aircraft represents an evolution of our historically “asset-light” business model and could expose us to risks associated with aircraft ownership or operation. The value of our aircraft we acquire could fluctuate due to changes in supply and demand, regulatory actions, safety concerns, or market conditions, and we may be required to recognize if the fair value of such assets declines.
Additionally, ownership of aircraft may result in substantial maintenance and operating costs. Maintaining a fleet of aircraft requires regular inspections, maintenance, and compliance with regulatory requirements, which may cause operational disruption or increase expenses. During routine inspections or maintenance activities, we may identify corrosion, structural issues or other conditions that are more extensive or costly to remediate than anticipated, and in certain cases the cost to repair such issues may not be economically justified based on the facts and circumstances known at the time. For example, during 2025 we recorded an impairment charge of approximately $1.7 million related to an aircraft’s airframe following the identification of a corrosion issue that management concluded, based on available information at the time, would not be economical to remediate. Our inability to perform or to contract timely maintenance and repairs can result in our aircraft being underutilized which could have an adverse impact on our business, financial condition and results of operations. On occasion, airframe manufacturers and/or regulatory authorities may require modifications or impose operational restrictions affecting particular aircraft types, which could result in grounding of aircraft, increased costs or service disruptions. Furthermore, our operations in remote locations, where delivery of components and parts or transportation of maintenance personnel could take a significant period of time, could further delay maintenance activities or the availability of parts and personnel.
Ownership of aircraft is subject to various legal, financial and reputational risks stemming from catastrophicdisasters, crashes, mechanical failures and collisions, which may result in loss of life, personal injury and/or damage to property and equipment. If any of these events were to occur, we could experience loss of revenue, termination of customer contracts, higher insurance rates, litigation, regulatory investigations and enforcement actions (including potential grounding of our fleet and suspension or revocation of our operating authorities) and damage to our reputation and customer relationships. Even if an aircraft involved in an incident is operated by a third-party operator or fully insured, negative public perception could reduce customer confidence in our services and adversely affect our business, financial condition and results of operations.
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If we choose to operate some aircraft directly in the future, versus utilizing a third-party, we would be subject to additional risks.
If we elect to operate aircraft directly, rather than relying solely on third-party aircraft operators, our risk profile and operational responsibilities could change materially. We have limited historical experience operating aircraft directly, and we may not successfully identify or manage all costs, regulatory obligations or operational requirements associated with direct aircraft operations, which could result in increased expenses, compliance risks or operational disruptions.
Direct operation of aircraft would subject us to additional risks, including increased regulatory oversight, operational complexity and potential liability exposure. Aircraft operations involve inherent risks such as mechanical failures, collisions, severe weather events and other incidents that may result in loss of life, personal injury, property damage or harm to medical cargo. If we operate aircraft directly, we could face increased exposure to litigation, regulatory investigations, enforcement actions, loss of revenue, termination of customer relationships or reputational harm arising from such incidents.
Operating aircraft directly may also require additional insurance coverage and could expose us to liabilities not currently borne under our third-party operator model. There can be no assurance that insurance coverage would be adequate or available on commercially reasonable terms. Even if fully insured, any aircraft accident or incident involving aircraft operated by us, or affecting the broader aviation industry, could negatively impact public perception of our safety and reliability and reduce customer confidence in our services.
We are especially vulnerable to delays, cancellations, or flight rescheduling, as we rely on maintaining efficient aircraft utilization to manage direct costs associated with third-party operators.
Our success depends in part on maintaining efficient aircraft utilization, which helps manage the costs associated with third-party aircraft operators and supports overall operating margins. Utilization may be affected by delays caused by a variety of factors, many of which are beyond our control, including adverse weather conditions, air traffic congestion, security requirements, unscheduled maintenance, the timing and coordination of surgical teams and donor logistics, and other operational disruptions. Reduced aircraft utilization may limit our ability to achieve or maintain profitability and may lead to customer dissatisfaction.
While historically we have maintained aircraft utilization levels sufficient to support our operating model, we may be unable to sustain or improve utilization as our business grows and evolves. The risk of delays, cancellations and flight rescheduling may increase as we expand our medical logistics footprint, enter new geographic areas, integrate acquisitions or support a greater volume of time-sensitive missions. Any sustained decrease in utilization could increase operating costs, reduce efficiency and adversely affect our business, financial condition and results of operations.
The provision of healthcare services is a heavily regulated industry and our medical logistics and clinical services may be impacted by regulatory changes, legislative reforms, and civil or criminal enforcement actions.
Our business operates within a highly regulated healthcare and transplant ecosystem, and changes in federal or state healthcare laws, regulations, reimbursement policies or enforcement priorities could adversely affect our operations, financial condition and results of operations. The U.S. federal and state governments continue to propose and implement legislation and regulatory changes that may impact the availability, cost and reimbursement of organ procurement, medical logistics and related services. Ongoing healthcare reform efforts, particularly those affecting organ procurement organizations (“OPOs”), transplant centers and organ allocation policies, may materially affect our business.
For example, CMS has revised Medicare conditions of participation and payment policies affecting transplant centers and OPOs, and federal agencies have undertaken initiatives to modernize oversight of the Organ Procurement and Transplantation Network, including increased regulatory scrutiny and potential structural reforms. Reports, investigations or future regulatory actions relating to organ procurement and allocation practices may lead to changes in industry practices, increased compliance obligations or additional oversight of participants in the transplant ecosystem. Any reduction in reimbursement rates, limitations on coverage or regulatory changes affecting our customers could indirectly impact demand for our services or increase compliance costs.
Although we are not directly reimbursed by Medicare for our services, our customers, including healthcare providers and OPOs, often rely on government program reimbursement. As a result, we may be subject to federal and state healthcare laws and regulations, including the federal Anti-Kickback Statute, the Stark Law, the FalseClaims Act (“FCA”) and other fraud, waste and abuse laws. These laws govern financial arrangements and business practices involving entities that participate in or generate business reimbursed by federal healthcare programs. Enforcement authorities have broad
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discretion in interpreting and applying these laws, and violations may result in significant civil or criminalpenalties, exclusion from federal healthcare programs, reputational harm or other adverse consequences.
The FCA and similar laws impose liability for knowingly presenting or causing to be presented false or fraudulentclaims for payment or approval and may be enforced by government agencies or through private whistleblower actions. We may be subject to audits, reviews, investigations or enforcement actions relating to our arrangements or practices and evolving regulatory interpretations or heightened scrutiny of healthcare industry relationships could require us to modify our operations, increase compliance costs or expose us to potential liability. Any failure, or perceived failure, to comply with applicable laws and regulations could materially and adversely affect our business, financial condition and results of operations.
Due to the effects of discontinued operations for the Passenger business, our historical financial results may not be comparable to current or future results.
The consolidated statements of operations included in this Annual Report on Form 10-K present the results of the Passenger business as discontinued operations for all periods presented. As a result, our financial results for prior periods may not be directly comparable to the consolidated statements of operations included in this Annual Report on Form 10-K or to those that will be included in future periodic reports. The classification of the Passenger business as discontinued operations reflects the divestiture of activities previously included in our Passenger segment, and certain historical results presented in prior filings were not prepared on this basis.
Because our historical financial statements included in prior periodic reports did not reflect discontinued operations presentation, comparisons of operating results across periods may be difficult and could lead to misinterpretation of trends in our business or financial performance. In addition, certain financial metrics, cash flow presentations and operating results may differ significantly from historical disclosures. Investors should exercise caution when evaluating period-to-period performance or relying on past results as an indicator of future performance. See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Risks Related to Our Dependence on Third-Party Providers
We rely on our third-party contractors to provide and operate aircraft. If such third-party contractors do not perform adequately or terminate their relationships with us, our costs may increase and our business, financial condition, and results of operations could be adversely affected.
We primarily rely on third-party contractors to own and operate aircraft used in connection with our services. Our third-party contractors provide pilots, maintenance, hangar, insurance, and fuel, and are responsible for the safe operation of our aircraft. Because we do not directly control many aspects of their operations, including staffing, maintenance practices, regulatory compliance and safety procedures, our ability to ensure consistent service quality and availability is dependent on the performance and reliability of these third parties. Should we experience complications with any of these third-party contractors or their aircraft, including capacity constraints, regulatory actions, financial difficulties or operational disruptions, we may need to delay, reschedule or cancel flights or otherwise modify our services. We face the risk that any of our contractors may not fulfill their contracts and deliver their services on a timely basis, or at all. We have experienced, and may in the future experience, operational complications with our contractors. The ability of our contractors to effectively satisfy our requirements could also be impacted by factors outside of our control, including any such contractor’s financial difficulty or damage to their operations caused by fire, terrorist attack, natural disaster and public health threats. The failure of any contractors to perform to our expectations could result in delayed or canceled flights and harm our business. Our reliance on contractors and our limited ability to control any operational difficulties with our third-party contractors could have a material adverse effect on our business, financial condition, and results of operations.
If our third-party aircraft operators are unable to match our growth in demand or we are unable to add additional third-party aircraft operators to our network to meet demand, our costs may increase and our business, financial condition, and results of operations could be adversely affected.
We are dependent on a finite number of certificated third-party aircraft operators to provide aircraft used in connection with our services. If competitors establish cooperative or strategic relationships with third-party aircraft operators in the markets we serve, offer to pay third-party aircraft operators more attractive rates or guarantee a higher volume of flights than we offer, we could face increased competition for aircraft availability. As competition in the aviation services market grows, operators may seek exclusive contractual arrangements, higher rates or volume commitments, which could increase our
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costs or limit our access to aircraft. If our third-party aircraft operators are unable or unwilling to expand capacity or are only able to do so at significantly increased expense, or otherwise do not have capacity or desire to support our growth, or we are unable to add new operators on reasonable terms, or at all, our business and results of operations could be adversely affected.
Transportation for the hearts, lungs and livers, which represent a significant portion of our medical logistics activities, is often requested only hours before departure. Our ability to successfully fulfill these time-sensitive requests depends on access to dedicated aircraft and crews and is the primary metric by which Medical Customers evaluate our performance. Historically, broader demand across our Passenger and Medical businesses supported operator incentives to provide dedicated capacity; however, following the divestiture of the Passenger business, there can be no assurance that operators will continue to allocate aircraft and personnel to our services at historical levels or pricing. If we are unable to secure sufficient dedicated capacity from third-party operators, we may incur increased costs, experience service disruptions or be required to consider acquiring or operating aircraft directly, which would introduce additional risks.
If we encounter problems with any of our third-party aircraft operators or third-party service providers, such as workforce disruptions or operational interruptions, our operations could be adversely affected by a resulting decline in revenue or negative public perception about our services.
Because we rely extensively on third-party aircraft operators and other service providers, disruptions affecting their businesses may adversely impact our operations. Such disruptions may arise from adverse economic conditions, financial distress, labor shortages or the inability of third parties to recruit or retain skilled personnel, including pilots, mechanics and other aviation or operational staff. Certain third-party operators provide significant capacity that we may be unable to replace on short notice if they fail to perform their obligations or cease operations, which could result in service disruptions or increased costs.
Labor actions, workforce shortages or other operational disruptions affecting third-party operators, airport personnel or aviation service providers could materially affect our ability to deliver services. Any significant disruption to our operations arising from workforce issues or other third-party challenges could result in delayed or disrupted missions, customer dissatisfaction, reputational harm and adverse effects on our business, financial condition and results of operations.
In addition, we rely on third-party contractors to provide facilities, infrastructure and operational support services necessary for our business. Our ability to control the efficiency and timeliness of these services is limited, and we may experience operational disruptions if such providers encounter financial hardship, cease operations or otherwise fail to perform. If we are unable to replace critical service providers on favorable terms, or at all, our operations, results of operations and financial condition could be materially adversely affected.
Illegal, improper, or otherwise inappropriate operation of Strata-owned or Strata-branded aircraft by our third-party aircraft operators, regardless of whether they are operating aircraft on our behalf, could harm our reputation, business, brand, financial condition, and results of operations.
Some of our third-party aircraft operators operate Strata-owned and Strata-branded aircraft on a non-exclusive basis, enabling them to utilize Strata-branded aircraft for flight operations unrelated to our services. As a result, activities involving owned or branded aircraft that are outside of our operational control may nonetheless be associated with our brand. If our third-party aircraft operators were to operate Strata-owned or Strata-branded aircraft, regardless of whether such aircraft is flying on our behalf, in an illegal, improper, or otherwise inappropriate manner, such as violating local noise-abatement regulations or ignoring suggested noise-abatement flight paths and procedures, we could experience significant reputational harm. While we have implemented various measures intended to anticipate, identify, and address the risk of these types of activities, these measures may not adequately address or prevent all illegal, improper, or otherwise inappropriate activity by our third-party aircraft operators while flying Strata-owned or Strata-branded aircraft. Further, any negative publicity related to the foregoing, whether or not such incident occurred while flying on our behalf, could adversely affect our reputation, brand perception, or relationships with customers or regulators. Such events could also increase the risk of litigation or regulatory action or reduce demand for our services, any of which could materially adversely affect our business, financial condition and results of operations.
We rely on third-party web service providers to support our technology systems, and any disruption of or interference with our use of these services could adversely affect our business, financial condition, and results of operations.
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The continuous and reliable performance of our technology systems, including logistics coordination tools, data tracking capabilities and customer-facing interfaces, is critical to our operations. We currently host key elements of our technology infrastructure with a third-party cloud services provider. Although we engage reputable vendors, we do not control the facilities or systems used by these providers, which may be vulnerable to natural disasters, cybersecurity incidents, human error, power outages or other disruptions. Changes to our cloud provider’s service levels or performance could adversely affect our ability to meet customer and operational requirements.
While we believe we have implemented reasonable backup and disaster recovery measures, we have experienced, and expect to continue to experience, interruptions, delays and service outages due to infrastructure changes, software errors, hosting disruptions or capacity constraints. Because our services often involve time-sensitive coordination and data management, sustained or repeated disruptions could impair our ability to manage logistics effectively, reduce customer confidence and expose us to reputational or operational risks. As we expand our service offerings and support higher volumes of mission activity, maintaining system performance may become more challenging.
Any negative publicity, customer dissatisfaction or operational disruption arising from technology outages or performance issues could harm our reputation and brand, reduce customer reliance on our services and materially adversely affect our business, financial condition and results of operations.
Risks Related to Intellectual Property, Cybersecurity, Information Technology and Data Management Practices
System failures, defects, errors, or vulnerabilities in our website, applications, backend systems, or other technology systems or those of third-party technology providers could harm our reputation and brand and adversely impact our business, financial condition, and results of operations.
Our technology systems, including logistics coordination tools, data tracking systems, customer-facing applications and backend infrastructure, as well as those of third parties upon which we rely, may experience service interruptions, outages, or degradation because of hardware and software defects or malfunctions, human error, or malfeasance by third parties or our employees, contractors, or service providers, earthquakes, hurricanes, floods, fires, natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, cyberattacks, or other events. Our insurance coverage may not be sufficient, and we may not have sufficient remedies available to us against third-party service providers, to cover all of our losses that may result from such interruptions, outages, or degradation.
The software underlying our platform is highly complex and may contain undetectederrors or vulnerabilities, some of which may only be discovered after the code has been released. Any such errors or vulnerabilities could result in negative publicity, a loss of users or loss of revenue, access or other performance issues, security incidents, or other liabilities. Such vulnerabilities could also prevent customers from using our services, which would adversely affect our aircraft utilization rates, or disrupt communications with our operators (e.g., flight schedules or passenger manifests), which could affect our on-time performance. For example, we have previously experienced a limited system error that temporarily exposed certain user profile information. Although we quickly corrected the error without material adverse impact to our business, similar or more seriouserrors could occur in the future. We may need to expend significant financial and development resources to analyze, correct, eliminate, or work around errors or defects or to address and eliminate vulnerabilities. Any failure to timely and effectively resolve any such errors, defects, or vulnerabilities could adversely affect our business, financial condition, and results of operations as well as negatively impact our reputation or brand.
In addition, our technology platform plays an increasingly important role in coordinating time-sensitive clinical logistics, including the evaluation of organ offers, communication with transplant centers and organ procurement organizations, and real-time coordination of transportation resources. Any failure, delay, design flaw, data integrity issue, or unintended consequence associated with these coordination tools could disrupt clinical workflows, contribute to delays in organ placement or transport, or otherwise negatively affect transplant outcomes. Because our services are often integrated into the clinical decision-making and operational processes of our customers, disruptions or errors in our technology systems may expose us to increased liability, reputational harm, or loss of customer confidence.
We have experienced and expect to continue to experience interruptions, delays or reductions in system performance from time to time. Because our services often involve time-sensitive coordination and tracking of organ transport logistics, prolonged or repeated disruptions could impair our ability to manage operations effectively, reduce customer confidence
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and harm our reputation. To the extent that any system failure results in customer harm, including the inability to request services or monitor transport activities, customers may seek contractual remedies or other recourse against us, and responding to such claims could be costly and time-consuming.
We rely on our information technology systems to manage numerous aspects of our business. A cyber-based attack of these systems could disrupt our ability to deliver services to our customers and could lead to increased overhead costs, decreased sales, and harm to our reputation.
We rely on information technology networks and systems to operate and manage our business, including systems used to coordinate organ transport missions, manage clinical logistics, track operational data and facilitate communications across our organization and with customers, suppliers, partners and other third parties. Our information technology networks and systems process, transmit and store personal, financial, and health-related information, as well as proprietary business information. While we believe we take reasonable steps to secure these information technology networks and systems, and the data processed, transmitted, and stored thereon, such networks, systems, and data may be susceptible to cyberattacks, viruses, malware, or other unauthorized access or damage (including by environmental, malicious, or negligent acts), which could result in unauthorized access to, or the release and public exposure of, our proprietary information or sensitive customer information. In addition, cyberattacks, viruses, malware, or other damage or unauthorized access to our information technology networks and systems, could result in damage, disruptions, or shutdowns to our technology systems or operations. The increased use of artificial intelligence and generative AI tools may create additional risk relating to data handling, confidentiality and system securities, including the potential for confidential information to be improperly entered into third-party tools in violation of internal policies. We may need to allocate additional resources to implement appropriate governance and controls relating to artificial intelligence, develop proprietary datasets or enhance system protections, which may be costly. Any of the foregoing could cause substantial harm to our business, require us to make notifications to our customers, governmental authorities, or the media, and could result in litigation, investigations or inquiries by regulatory authorities, or subject us to penalties, fines, and other losses relating to the investigation and remediation of such an attack or other unauthorized access or damage to our information technology systems and networks.
If we fail to adequately protect our proprietary intellectual property rights, our competitive position could be impaired and we may lose market share, generate reduced revenue, and incur costlylitigation to protect our rights.
Our success depends, in part, on our ability to protect our proprietary intellectual property rights, including certain technologies we utilize in coordinating medical logistics, clinical workflow, organ tracking and transportation operations. To date, we have relied primarily on trade secrets and trademarks to protect our proprietary technology. Our software is also subject to certain protection under copyright law, though we currently do not maintain registered copyrights for certain software. We routinely enter into non-disclosure agreements with our employees, consultants, third-party aircraft operators, and other relevant persons and take other measures to protect our intellectual property rights, such as limiting access to our trade secrets and other confidential information. We intend to continue to rely on these and other means, including patent protection, in the future. However, the steps we take to protect our intellectual property may be inadequate, and unauthorized parties may attempt to copy aspects of our intellectual property or obtain and use information that we regard as proprietary, including through employee mobility, third-party service provider access or other inadvertent disclosures, which could cause us to lose market share, harm our ability to compete, and result in reduced revenue. Moreover, our non- disclosure agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our products, and there can be no assurance that our competitors or third parties will comply with the terms of these agreements, or that we will be able to successfully enforce such agreements or obtain sufficient remedies if they are breached. There can be no assurance that the intellectual property rights we own or license will provide competitive advantages or will not be challenged or circumvented by our competitors.
Further, obtaining and maintaining patent, copyright, and trademark protection can be costly, and 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 inadvertentlylose protection for failing to comply with all procedural, documentary, payment, and similar obligations during the patent prosecution process. 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 use of our intellectual property, or be required to expend significant resources to monitor and protect our intellectual property rights,
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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, financial condition, and results of operations could be adversely affected.
We use open-source software in connection with our platform, which may pose risks to our intellectual property.
We use open-source software in connection with our platform , including our medical logistics coordination, organ tracking and operational systems, and plan to continue using open-source software in the future. Some licenses governing the use of open-source software contain requirements that we make available source code for modifications or derivative works we create based upon the open-source software. If we combine or link our proprietary source code with open-source software in certain ways, we may be required, under the terms of the applicable open-source licenses, to make our proprietary source code available to third parties. Although we monitor our use of open-source software, we cannot provide assurance that all open-source components are identified, reviewed or properly integrated prior to deployment, that our developers have not incorporated open-source software into our systems that we are unaware of, or that they will not do so in the future. Additionally, the terms of open-source licenses have not been extensively interpreted by United States or international courts, and so there is a risk that open-source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on us or our proprietary software. If an author or other third party that distributes such open-source software were to allege that we had not complied with the conditions of an open-source license, we could incur significant legal costs defending ourselves against such allegations or remediating any alleged non-compliance with open-source licenses. Any such remediation efforts could require significant additional resources, and we may not be able to successfully complete any such remediation. Further, in addition to risks related to license requirements, use of certain open-source software can lead to greater risks than use of third-party commercial software, as open-source licensors generally do not provide warranties, and the open-source software may contain security vulnerabilities. Vulnerabilities in open-source components could also affect the availability or reliability of systems used to coordinate time-sensitive medical logistics operations, which could adversely affect our business, financial condition and results of operations.
Legal and Regulatory Risks Related to Our Business
Our business is subject to a wide variety of extensive and evolving laws and regulations, which may result in increases in our costs, disruptions to our operations, limits on our operating flexibility, and competitive disadvantages.
We are subject to a wide variety of laws and regulations relating to various aspects of our business, employment and labor, health care, tax, privacy and data security, health and safety, and environmental matters. Laws and regulations at the federal, state, and local levels frequently change, especially in rapidly evolving industries and regulatory frameworks, and we cannot always reasonably predict the impact from, or the ultimate cost of compliance with, current or future legal or regulatory changes. We monitor these developments and devote a significant amount of management’s time and external resources towards compliance. Moreover, changes in law, the imposition of new or additional regulations or the enactment of any new or more stringent legislation that impacts our business could require us to change the way we operate or limit our ability to expand into certain jurisdictions, which could have a material adverse effect on our business, financial condition, and operating results. Because we support time-sensitive transplant logistics and clinical services, we are also subject to oversight by healthcare regulators and transplant-related regulatory frameworks, which may evolve and impose additional compliance obligations.
Government shutdowns, staffing shortages, or operational disruptions affecting agencies such as the FAA, CMS, HRSA, or other regulatory bodies could delay approvals, inspections, or other regulatory actions necessary for our operations. Such disruptions may also result in reduced air traffic control capacity, delays in aircraft certifications or authorizations, or limitations on our ability to introduce new aircraft, services, or routes in a timely manner.
Our results of operations and the manner in which we conduct business may be affected by changes in law and future actions taken by governmental agencies, including:
• changes in law that affect the services that can be offered by us in particular markets and at particular airports;
• restrictions on competitive practices (for example, court orders or agency regulations, that would curtail our ability to respond to a competitor); and
• restrictions on airport operations, such as limitations on the use of airports, airspace, or aircraft routes.
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Each additional regulation or other form of regulatory oversight increases costs and adds greater complexity to operations. There can be no assurance that the increased costs or greater complexity associated with our compliance with new rules, anticipated rules or other forms of regulatory oversight will not have a material adverse effect on us.
Any significant reduction in air traffic capacity at, or within the airspace serving, key airports in the United States could have a material adverse effect on our business, results of operations and financial condition. Weaknesses in the National Airspace System and the Air Traffic Control system, such as outdated procedures or technologies, staffing shortages, automation failures, or regulatory responses to aviation incidents, may result in short-term capacity constraints, delays, airspace restrictions, route closures, or other operational disruptions. Such conditions could negatively affect our ability to provide reliable services, increase operating costs, and adversely affect customer satisfaction.
Failure to comply with legal and regulatory requirements, such as obtaining and maintaining licenses, certificates, authorizations, and permits critical for the operation of our business, may result in civil penalties or private lawsuits, or the suspension or revocation of licenses, certificates, authorizations, or permits, which would prevent us from operating our business. Even when we believe we are in complete compliance, a regulatory agency may determine that we are not, which could result in enforcement actions, increased compliance costs, reputational harm, or other adverse consequences.
We could be subject to litigation or regulatory investigations, which may be expensive and could divert management attention.
Our business is exposed to various litigation and regulatory risks. Publicly traded companies, particularly those operating in regulated industries, may be subject from time to time to securities litigation, stockholder demands or derivative actions, including demands under Section 220 of the Delaware General Corporation Law seeking access to corporate books and records. We have been, and may in the future, be subject to such matters, as well as other regulatory inquiries or proceedings. In addition, we have in the past, and may in the future become, involved in legal actions and claims in the ordinary course of business, including matters relating to commercial disputes, employment practices, workplace-related claims, wage and hour matters, employee benefits, discrimination or harassmentallegations, personal injury, or other operational issues. Because we operate in regulated aviation and healthcare-related industries, we may also be subject to investigations, audits or enforcement actions by governmental or regulatory authorities. For additional information about litigation matters, see the section in this Annual Report entitled “Business-Litigation”.
The existence of litigation, claims, investigations and proceedings may harm our reputation, limit our ability to conduct our business in the affected areas and adversely affect the trading prices of our stock and/or other securities. The outcome of any claims, investigations and proceedings is inherently uncertain, and in any event defendingagainst these claims could result in substantial costs and divert our management’s attention and resources from other business concerns, which could significantly impact our business. Any adverse determination in any such litigation or any amounts paid to settle any such actual or threatenedlitigation could require that we make significant payments, incur legal and other costs, limit our ability to conduct business or require us to change the manner in which we operate. Furthermore, prolonged or complex investigations, even if they do not result in regulatory or other proceedings or adverse findings, may result in significant costs that may not be covered by insurance and may divert employee resources from core business activities.
Failure to comply with laws and regulations relating to privacy, data protection, cybersecurity, healthcare information, and consumer protection, or the expansion of current laws and regulations or the enactment of new laws or regulations in these areas, could adversely affect our business and our financial condition.
We are subject to a wide variety of laws in the United States related to privacy, data protection, cybersecurity, healthcare information, and consumer protection that are often complex and subject to varying interpretations. As a result, these laws may change or develop over time through judicial decisions or as new guidance or interpretations are provided by regulatory and governing bodies, and such changes or developments may be contrary to our existing practices. This may cause us to expend resources on updating, changing, or eliminating some of our privacy and data protection practices.
Laws and regulations relating to privacy and data protection are continually evolving and subject to potentially differing interpretations. These requirements may not be harmonized, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, or may conflict with other rules or our practices. As a result, our practices may not have complied or may not comply in the future with all such laws, regulations, requirements, and obligations. The failure to comply with such data protection and privacy regulations can result in fines, penalties, and the enforcement of any non-compliance, which could significantly impact our business operations. Because our operations involve coordination of
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transplant logistics and clinical services, we may process sensitive operational, clinical or health-related information, which may be subject to heightened regulatory scrutiny or contractual obligations.
The California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (CCPA), and similar state privacy laws impose data privacy rights and operational requirements on companies doing business with residents of those states. Compliance with these obligations depends in part on how regulators interpret and apply them. Many other states have passed, proposed, or are considering privacy laws similar to, and in some respects, more stringent than, the CCPA. This patchwork of privacy laws heightens the cost of compliance, the risks of noncompliance, and the potential for enforcement actions by state attorneys general, regulators, and private plaintiffs.
We have in the past been, and could in the future be, subject to data breaches or other security incidents. A significant data breach or any failure, or perceived failure, by us to comply with applicable privacy or data security laws or contractual obligations could adversely affect our reputation, brand, and business and may result in claims, investigations, proceedings, or actions against us by governmental entities, litigation, including class actions, fines, penalties, or other liabilities, or require us to change our operations or cease using certain data sets. Depending on the nature of the information compromised, we may also have obligations to notify customers, users, business partners, law enforcement, governmental authorities, payment companies, consumer reporting agencies, or the media about the incident and may be required to expend additional resources in connection with investigating and remediating such an incident. In the event of a future breach or incident, we could be required to expend significant resources to respond to or prevent further breaches or incidents.
Additionally, defendingagainstclaims or litigation based on any actual or perceived privacy or security breach or incident, regardless of merit, could be costly. We cannot be certain that our insurance coverage will be adequate for such liabilities, that insurance will continue to be available to us on commercially reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claimsagainst us that exceed available insurance coverage, or changes in our insurance policies, including premium increases or the imposition of large deductibles or coinsurance requirements, could adversely affect our reputation, brand, business, financial condition and results of operations.
Failure to comply with applicable healthcare, privacy, security and data protection laws and regulations could result in a material breach of contract with one or more of our Medical Customers, subject us to enforcement actions and adversely affect our business and our financial condition.
The cost of compliance with applicable privacy, data protection and healthcare security laws and regulations is high and is likely to increase as we continue to develop new service offerings, including our Trinity Organ Placement Services (“TOPS”). Any failure or perceived failure by us to comply with applicable data privacy and security laws or regulations, our internal policies and procedures, or our contractual obligations governing the processing of personal or health-related information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could adversely affect our operations, financial performance and business.
HIPAA privacy and security regulations extensively regulate the use and disclosure of protected health information (“PHI”) and require covered entities and business associates to implement administrative, physical and technical safeguards to protect such information. We may act as a business associate to healthcare providers or other covered entities and may receive or process PHI in connection with our clinical logistics and related services. If we are unable to properly protect the privacy and security of PHI entrusted to us, we could be found to have breached our contractual obligations with customers and/or be subject to investigation by the U.S. Department of Health and Human Services Office for Civil Rights (“OCR”). We may also be required to notify government authorities, affected individuals, the media, or other third parties in connection with a security incident or breach involving PHI or other personally identifiable information.
If OCR determines that we have failed to comply with applicable HIPAA privacy or security standards, we could face civil or criminalpenalties. OCR has increased enforcement activity in recent years and has authority to impose monetary penalties or require resolution agreements and corrective action plans that impose ongoing compliance obligations. Enforcement activity can result in financial liability, reputational harm, and significant diversion of internal resources. In addition to federal enforcement, state attorneys general may bring civil actions under HIPAA or similar state laws seeking injunctions or damages in response to violations that threaten the privacy of state residents.
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Although we have developed and continue to enhance policies, processes and a compliance program infrastructure designed to support compliance with applicable laws, regulations and contractual requirements, we cannot provide assurance regarding how these laws and regulations will be interpreted, enforced or applied to our service offerings. In addition, the Federal Trade Commission (“FTC”) has pursued enforcement actions relating to data privacy and security practices, including under the FTC Act and the FTC Health Breach Notification Rule, which could subject us to additional regulatory scrutiny, penalties or obligations if we fail to comply with applicable requirements.
Environmental regulation and liabilities, including new or developing laws and regulations, may increase our costs of operations and adversely affect us.
Environmental laws and regulations applicable to aviation operations, fuel usage, emissions, noise, and sustainability reporting continue to evolve at the federal, state, local and international levels. Increased regulatory focus from governmental authorities, investors and other stakeholders on climate change, carbon emissions, energy use and related disclosures may result in new requirements or increased costs affecting our business and the operations of our third-party aircraft operators.
Regulatory initiatives aimed at reducing greenhouse gas emissions from aviation, including fuel standards, carbon pricing mechanisms, sustainable aviation fuel initiatives or other environmental mandates, could increase the operating costs of aircraft operators, which may be passed through to us and our customers. Such developments could also affect aircraft availability, route planning, airport access or operational flexibility, potentially increasing the cost of providing time-sensitive medical logistics services.
In addition, expanding expectations for mandatory or voluntary environmental reporting and sustainability disclosures may increase the scope, complexity and cost of compliance for us. These evolving rules, regulations and stakeholder expectations may require additional investment in systems, data collection and reporting processes, and may result in increased management time and attention devoted to environmental compliance and disclosure matters. Any of the foregoing could adversely affect our operating results, financial condition or competitive position.
Risks Related to Ownership of Our Securities and Being a Public Company
We have in the past and may in the future identify material weaknesses in our internal control over financial reporting.
In order to maintain effective internal control over financial reporting, we must perform system and process evaluations, document our controls and perform testing of our key controls over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. In the past, we have identified material weaknesses in our internal control over financial reporting that we believe have been remediated. However, if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting in the future that are deemed to be material weaknesses, our investors could lose confidence in our reported financial information, we may be required to restate previously issued financial statements, the market price of our stock may decline and we could be subject to lawsuits, sanctions or investigations by regulatory authorities, which could require significant financial and management resources and otherwise could have a material adverse effect on our business, financial condition or results of operations.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we are subject to the reporting requirements of the Exchange Act, SOX, and the rules and listing standards of Nasdaq. Compliance with these requirements has increased, and may continue to increase, our legal, accounting, and financial compliance costs, has made certain activities more difficult, time-consuming, and costly, and has placed significant demands on our personnel, systems, and resources.
SOX requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In particular, Section 404 of SOX (“Section 404”) requires us to perform system and process evaluations and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal control over financial reporting. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business, results of operations and financial condition and could cause a decline in the trading price of our common stock.
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If we fail to maintain effective internal control over financial reporting and disclosure controls and procedures, we may be unable to provide financial information and required SEC reports that a U.S. publicly traded company is required to provide in a timely and reliable fashion. Such delays or deficiencies could result in regulatory penalties, harm our reputation, limit our ability to access financing in the public or private capital markets, and impede our ability to implement our growth strategy. In addition, such delays or deficiencies could result in our failure to satisfy the continued listing requirements of Nasdaq.
Our Warrants are accounted for as derivative liabilities and are recorded at fair value with changes in fair value for each period reported in earnings, which may have an adverse effect on the market price of our common stock.
We account for both the Public Warrants and the Private Placement Warrants as a warrant liability. At each reporting period, the accounting treatment of the Warrants is re-evaluated for proper accounting treatment as a liability or equity, and the fair value of the warrant liability is remeasured. Changes in the fair value of the warrant liability are recorded as other income (expense) in our consolidated statement of operations. The value of the warrant liability is primarily determined by the warrants’ market price, which is driven mainly by the share price of our common stock. Changes in the warrants’ market price may have a material impact on the estimated fair value of the embedded derivative liability. As a result, our consolidated financial statements and results of operations will fluctuate quarterly, based on the share price of our common stock. If our stock price is volatile, we expect that we will recognize non-cash gains or losses on our Warrants or any other similar derivative instruments each reporting period and that the amount of such gains or losses could be material. The impact of changes in fair value on earnings may have an adverse effect on the market price of our common stock. See Note 2 , 15 and 16 to the consolidated financial statements for additional information.
The market price of our securities may change significantly, and you could lose all or part of your investment as a result.
The trading price of our common stock and Warrants has been, and may continue to be, volatile. The market price of our securities may fluctuate significantly in response to a variety of factors, many of which are beyond our control, including changes in overall market conditions, investor perception of our business and growth strategy, developments in the organ transportation and medical logistics industries, regulatory or legislative developments, and general economic or geopolitical conditions. Market volatility may occur regardless of our actual operating performance.
In addition, the market price of our securities may be influenced by factors specific to us, including changes in our business strategy, quarterly variations in our financial results, the accounting treatment of our Warrants, analyst coverage, and the level of public float and trading volume in our securities. Low trading volume or a limited public float may increase price volatility and make it more difficult for investors to sell shares or Warrants at desired prices.
As a result of these and other factors, investors may experience significant fluctuations in the value of their investment and could lose all or part of their investment.
There is no guarantee that the Warrants will ever be in the money, and they may expire worthless.
The exercise price for our Warrants is $11.50 per share. There can be no assurance that the market price of our common stock will exceed the exercise price of the Warrants prior to their expiration, and, as a result, the Warrants may expire worthless. The terms of our Warrants may be amended in a manner that may be adverse to the holders. The Warrant Agreement between Equiniti Trust Company, LLC, as warrant agent, and us provides that the terms of the Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding Warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the Warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding Warrants approve of such amendment. Our ability to amend the terms of the Warrants with the consent of at least 50% of the then outstanding Warrants is unlimited. Examples of such amendments could be amendments to, among other things, increase the exercise price of the Warrants, shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a Warrant.
We may redeem unexpired Warrants held by former EIC stockholders prior to their exercise at a time that is disadvantageous to those stockholders, thereby making such Warrants worthless.
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We have the ability to redeem outstanding Warrants at any time prior to their expiration, at a price of $0.01 per Warrant, provided that the last reported sales price of our common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the Warrant holders. If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Warrants could force holders to: (1) exercise their Warrants and pay the related exercise price at a time when it may be disadvantageous for them to do so; (2) sell their Warrants at the then-current market price when they might otherwise wish to hold them; or (3) accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, is likely to be substantially less than the market value of your Warrants. None of the Private Placement Warrants will be redeemable by us for cash so long as they are held by the Sponsor (Experience Sponsor LLC) or its permitted transferees.
In addition, we may redeem Warrants (including Private Placement Warrants) for a number of shares of our common stock determined based on the redemption date and the fair market value of our common stock. Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the Warrants are “out-of-the-money”, in which case holders would lose any potential embedded value from a subsequent increase in the value of our common stock had the Warrants remained outstanding.
We do not expect to declare any dividends in the foreseeable future.
We intend to retain future earnings, if any, for future operations and expansion and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount, and payment of any future dividends on shares of our common stock will be at the sole discretion of our Board. Our Board may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our Board may deem relevant. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.
We may issue additional shares of common stock or other equity securities without your approval, which would dilute your ownership interest in us and may depress the market price of our common stock.
We may issue additional shares of common stock or other equity securities in the future without stockholder approval in certain circumstances, including in connection with acquisitions, strategic investments, financing transactions, the repayment or exchange of outstanding indebtedness, or equity compensation awards to our directors, officers, employees, or other service providers. In addition, the exercise of outstanding Warrants would result in dilution to existing stockholders. The issuance of additional common stock or other equity securities, or the perception that such issuances may occur, could have one or more of the following effects:
• our existing stockholders’ proportionate ownership interest in us may decrease;
• the amount of cash available per share, including for payment of dividends in the future, may decrease;
• the relative voting strength of each previously outstanding share of common stock may be diminished; and
• the market price of our common stock may decline.
Provisions in our charter and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our common stock and could entrench management.
Our Certificate of Incorporation and Bylaws contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include, among other things, the ability of our Board to designate the terms of and issue new series of preferred shares without stockholder approval, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These anti-takeover defenses and applicable provisions of Delaware law could discourage, delay, or prevent a transaction involving a change in control of the Company, including transactions that some or all of our stockholders may believe would be beneficial. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take corporate actions other than those you desire. As a result, these provisions could limit the price that investors might be willing to pay for our common stock.
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Our Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings and the federal district courts as the sole and exclusive forum for other types of actions and proceedings, in each case, that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with the Company or our directors, officers, or other employees.
Our Certificate of Incorporation provides that, unless we consent to the selection of an alternative forum, any (i) derivative action or proceeding brought on behalf of the Company; (ii) action asserting a claim of breach of a fiduciary duty owed by, or any other wrongdoing by, any current or former director, officer, or other employee or stockholder of the Company; (iii) action asserting a claim against the Company arising pursuant to any provision of the DGCL, our Certificate of Incorporation or our Bylaws; (iv) action to interpret, apply, enforce, or determine the validity of any provisions of our Certificate of Incorporation or Bylaws; or (v) action asserting a claim against the Company or any director or officer of the Company governed by the internal affairs doctrine, shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware. Subject to the foregoing, our Certificate of Incorporation further provides that the federal district courts of the United States are the exclusive forum for the resolution of any action, suit, or proceeding asserting a cause of action under the Securities Act. The exclusive forum provision does not apply to suits brought to enforce any liability or duty created by the Exchange Act. Any person or entity purchasing or otherwise acquiring an interest in any shares of our capital stock shall be deemed to have notice of and to have consented to the forum provisions in our Certificate of Incorporation. These choice-of-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that he, she, or it believes to be favorable for disputes with the Company or our directors, officers, or other employees or stockholders, which may discourage such lawsuits. We note that there is uncertainty as to whether a court would enforce these provisions and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Alternatively, if a court were to find these provisions of our Certificate of Incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially adversely affect our business, financial condition, and results of operations and result in a diversion of the time and resources of our management and our Board.
Future sales, or the perception of future sales, by us or our stockholders in the public market could cause the market price for the common stock to decline.
The sale of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
Pursuant to an Investor Rights Agreement, certain stockholders have the right, subject to certain conditions, to require us to register the sale of their shares of common stock under the Securities Act. By exercising their registration rights and selling a large number of shares, these stockholders could cause the prevailing market price of our common stock to decline.
If these stockholders exercise their registration rights, the trading price of shares of our common stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of shares of common stock or other securities.
In addition, the shares of common stock reserved for future issuance under our 2021 Omnibus Incentive Plan will become eligible for sale in the public market once those shares are issued, subject to any applicable vesting requirements, lockup agreements and other restrictions imposed by law. As of December 31, 2025, approximately 10,263,172 shares of our common stock were reserved for future issuance under our 2021 Omnibus Incentive Plan (assuming the achievement of the target performance level for all outstanding equity awards subject to performance-based vesting conditions).
successfully
efficiently
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Beginning with the fourth quarter of 2025, following the integration of Keystone, Strata operates across two segments: Logistic and Clinical (see Note 11, to the consolidated financial statements included in this Annual Report on form 10-K for further information on reportable segments), both offering services related to organ transplant and the broader healthcare industry. All of Strata’s services are provided to transplant centers, organ procurement organizations, hospitals or other businesses that pay the Company directly. Strata provides:
Logistics Segment
Strata’s Logistics segment is marketed under the Trinity brand name and includes the following:
• Air Logistics – Air transportation of human organs for transplant as well as related staff, equipment, blood samples, and tissue samples. Service is typically provided on fixed wing aircraft operating specifically for each individual organ. Strata also offers on-board couriers for commercial flights and “next flight out” shipping coordination.
• Ground Logistics – Ground transportation of human organs for transplant as well as related staff, equipment, blood samples, and tissue samples.
• Organ Placement – Administrative services related to the acceptance of potential donor organs for recipients and support coordinating with the transplant process.
Clinical Segment
Strata’s Clinical segment is marketed under the Keystone brand name and includes the following:
Transplant Clinical
• Organ Recovery – Surgical procurement of donor organs.
• Normothermic Regional Perfusion (“NRP”) – In situ perfusion of donor organs with oxygenated blood to improve clinical outcomes and enable functional assessment prior to recovery.
• Preservation - Operation of devices utilized to preserve organs prior to being transplanted into a recipient.
Other Clinical Services
• Cardiac Care – Cardiac perfusion, blood management & autotransfusion and disposables. Services are typically provided under contract with hospitals to support open-heart surgery procedures.
• Other – Extracorporeal Membrane Oxygenation (“ECMO”) services, perfusion temporary staffing and equipment rental offered to healthcare providers.
Outlined below are recent material transactions impacting this Annual Report on Form 10-K.
Sale of Passenger business
On August 29, 2025, the Company completed the previously disclosed sale of its Passenger business to Joby Aero, Inc. (“Joby Buyer”), pursuant to an Equity Purchase Agreement, dated August 1, 2025 (the “Joby Purchase Agreement”). The Passenger business acquired by the Joby Buyer pursuant to the Joby Purchase Agreement consisted of the Company’s business of offering, selling, promoting, marketing, planning, booking, brokering, coordinating and arranging the transportation of passengers on aircraft operated by other entities and related ground transportation services. The purchase price received by the Company upon the consummation of the transactions contemplated by the Joby Purchase Agreement was approximately $76.0 million based on the closing price per share of $14.27 of Joby Aviation Inc’s (“Joby Aviation”) common stock as of August 28, 2025), after giving effect to certain pre-closing adjustments and indemnity holdbacks pursuant to the terms of the Joby Purchase Agreement, consisting of 5,325,585 shares of Joby Aviation’s common stock, par value $0.0001 per share (the “Buyer Shares”). The Company subsequently sold the Buyer Shares received in connection with closing for net proceeds of $70.2 million. The Company may receive up to an additional $35.0 million in consideration upon the satisfaction of certain financial performance and employee retention targets described in the Joby Purchase Agreement during the 12 and 18 months, respectively, following the closing of this transaction, payable in cash or Buyer Shares at Joby Buyer’s election, as well as the release of up to $10.0 million in indemnity holdbacks. The number of Buyer Shares issued to the Company, if any, shall be based on the average of the daily volume-weighted average sales price per Buyer Share on the New York Stock Exchange for each of the ten consecutive trading days ending on and including the first trading day preceding the applicable measurement dates described in the Joby Purchase Agreement.
The sale qualified as a discontinued operation under ASC 205-20. The Passenger business acquired by Joby Buyer included all operations previously reported within the Passenger segment, as well as certain assets and activities previously
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reported within unallocated corporate expenses and software development, including certain costs related to software development personnel, the Company’s former CEO and headquarter lease.
The assets and liabilities of the Passenger business as of December 31, 2024 were retrospectively classified as held for sale and presented as discontinued operations. The results of operations for the years ended December 31, 2025 and 2024 reflect the financial results of the Passenger business, including activity through August 29, 2025, the transaction date, as discontinued operations. The cash flows and comprehensive income of the Passenger business have not been separately presented and are included in the consolidated statements of cash flows and consolidated statements of comprehensive loss, respectively, for all periods presented. Unless otherwise indicated, the information in the notes to the consolidated financial statements refer only to Strata's continuing operations and do not include discussion of balances or activity of the Passenger business.
Acquisition of Keystone Perfusion Services, LLC .
On September 16, 2025, the Company completed the acquisition of Keystone Perfusion Services, LLC (“Keystone”), an organ recovery and normothermic regional perfusion service provider to the transplant industry, pursuant to a Purchase and Sale Agreement, dated September 16, 2025 (the “Keystone Purchase Agreement”), for the following upfront payments: cash $111.3 million (comprised of $67.0 million paid directly to the seller and $44.3 million directed by the seller to other parties on the close date) and 3,434,609 shares (where 1,717,303 are held in escrow). The purchase consideration price is subject to final adjustment, upward or downward by up to $12.4 million, based on Keystone’s actual 2025 Adjusted EBITDA performance, with the adjustment to be determined by March 2026. In addition, total potential earn-out payments of up to $23.0 million in the aggregate for the three-year period from 2026 through 2028 may be made contingent upon Keystone’s achievement of gross profit targets (as defined in the Keystone Purchase Agreement). See Note 4 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Our Business Model
Logistics Services
We typically provide logistics services to transplant centers, organ procurement organizations and other businesses on a contractual basis including provisions stipulating that Strata will be the “first call” for any transportation needs.
Pricing is based on a fixed price per flight hour flown with a fuel cost surcharge above a set benchmark. Ancillary costs such as landing fees and de-icing are passed through to the end customer.
Strata leverages an asset-light air logistics business model: we primarily utilize aircraft that are owned and/or operated by third parties on Strata’s behalf. In these arrangements, pilots, maintenance, hangar, insurance, and fuel are all costs borne by our network of operators, which provide aircraft flight time to Strata at fixed hourly rates. This enables our operator partners to focus on training pilots, maintaining aircraft and flying, while we maintain the relationship with our customer from booking through flight arrival.
When utilizing third-party aircraft and/or aircraft operators, we typically pre-negotiate fixed hourly rates and flight times, paying only for flights actually flown, creating a predictable and flexible cost structure. Strata provides guaranteed flight commitments to some of our third-party operators through capacity purchase agreements (“CPAs”), which enable Strata to ensure dedicated access to such aircraft with enhanced crew availability, lower costs and, in many cases, the ability to unlock more favorable rates when flying more than the minimum number of hours we guarantee to the operator. Additionally, a significant portion of trips are flown by safety-vetted operators to whom we make no commitments, providing us with additional flexible capacity for high demand periods.
Over the course of 2024, we acquired ten fixed wing aircraft that are dedicated to the Logistics segment. We made the decision to invest in a limited number of owned aircraft based in high-volume geographies as we believe direct asset ownership will enable (i) improved economies of scale; (ii) increased uptime, enabling more reliable service and higher asset utilization; and (iii) the ability to compete for certain contracts where asset ownership is preferred or required. All of these aircraft are operated and maintained by third-party service providers under Strata’s oversight. We prioritize the use of owned aircraft and dedicated aircraft under CPAs, which provide better economies of scale. We size our owned fleet and our commitments under CPAs significantly below our expected demand, enabling us to maximize utilization on those aircraft while fulfilling incremental demand through our network of non-dedicated operators.
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We provide ground logistics using a combination of owned vehicles, which are allocated to hub positioned near our customers across the United States, and third-party providers.
We utilize a combination of company employees and contractors as couriers to facilitate the transportation of organs, typically kidneys, aboard scheduled commercial flights. For next flight out (NFO) services, where kidneys are placed in the cargo hold of a commercial flight, we coordinate with third-party providers on behalf of our customer.
Organ placement services are provided on a contractual basis with a fixed monthly fee based on the size of the customer’s program.
Clinical Services
We employ perfusionists and transplant surgeons that are primarily dedicated to a specific customer in a particular geography. We own perfusion equipment which is often provided as part of our services or offered through a traditional leasing arrangement.
Our clinical work for OPOs typically consists of surgical recovery, NRP services and related equipment provided on a contractual basis with a combination of retainer and per case fees.
For transplant centers, surgical recovery and NRP services are typically provided on an ad hoc basis with pricing on a per case basis. We leverage surgeons, perfusionists and equipment in place to support our OPO customers to provide more efficient options to transplant centers, utilizing locally available resources wherever possible to avoid incremental logistics costs.
For cardiac care hospitals, we typically provide perfusion staffing, often combined with perfusion equipment, on a contractual basis with a combination of retainer and per case fees.
Technology
We also utilize proprietary technology to manage staffing, training and chain of custody, as well as help customers streamline organ evaluation, procurement and logistics. Our technology enhances the efficiency and cost-effectiveness of our service offerings, further strengthening our position in the organ transportation industry.
Factors Affecting our Performance
Availability of Donor Organs
The majority of our business is directly tied to the volume of heart, liver and lung transplants performed in the United States, which is driven primarily by the supply of donor organs that become available.
In recent years, the supply of donor organs has increased consistently, driven primarily by (i) increased utilization of Donation after Circulatory Death, which has expanded the pool of eligible donors; (ii) advancements in technology, including machine and regional perfusion; and (iii) regulatory changes enabling more efficient allocation of organs to recipients with higher need. However, there is no guarantee that this growth will continue, for example, recent months have shown a flattening in the number of deceased organ donors in America.
The supply of donor organs is subject to numerous factors outside our control, including changes in organ donation rates, advancements in medical technology, legislative, regulatory or policy changes affecting organ procurement and allocation, and shifts in public attitudes toward organ donation. Additionally, unforeseen events such as pandemics, public health crises, or changes in accident rates may impact the availability of donor organs. If the supply of viable organs declines or if legislative, regulatory or policy changes limit our ability to efficiently transport them, our medical transport business could be adversely affected, which could negatively impact our financial condition and growth prospects.
Ability to Attract and Retain Customers
We primarily serve transplant centers, organ procurement organizations and hospitals. Logistics support for the hearts, lungs and livers transplantations that make up the vast majority of our business is typically requested only hours before the required departure time. Our ability to successfully fulfill these requests with consistent pricing on the requested aircraft type is the primary metric by which our customers evaluate our logistics performance.
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The organ logistics marketplace is highly competitive and we compete primarily on our ability to provide reliable, end-to-end air and ground transportation at competitive pricing. Increasingly, we compete directly with manufacturers of organ preservation equipment that also offer transportation or with providers that offer additional services, such as surgical organ recovery, that our customers find valuable.
We have responded to customer demand by introducing new services through our acquisition of Keystone, which launched our Clinical segment and enabled us to provide surgical recovery, NRP and other related services as part of an end-to-end offering. We have also added new offerings organically, such as our TOPS organ placement offering, whereby we assist customers in evaluating the suitability of potential donor organs for transplant. However, customers may still demand services or technology that we cannot provide, which could have a material adverse effect on our business, results of operations, and financial condition.
The market for our clinical service offerings, including surgical organ recovery, organ placement, and perfusion, both for transplant and for cardiac care hospitals, is also highly competitive. We compete in our Clinical segment primarily on our ability to provide high-quality, reliable service integrating electronic recordkeeping to demonstrate compliance with best practices.
Specifically for our transplant-related services, we also compete on our ability to integrate offerings from our Logistics and Clinical segments, resulting in more streamlined communication and efficient transportation, saving time and money for our customers. Some of our competitors offer many of the same services we provide in an integrated “one call” offering, but we believe that our offering is more comprehensive in terms of both the variety of services we provide and the breadth of third-party devices that we support.
Ability to Secure Aircraft Capacity
Historically, our ability to aggregate significant demand for flights has been enough to incentivize operators to provide aircraft and crews for our use. However, there is no guarantee that we will continue to be able to secure dedicated aircraft at favorable rates, particularly given significant increases in demand for private jet aircraft in the United States in recent years. Periods of increased demand for private jets have historically led to increased charter costs and more limited availability in the spot jet charter market. Although this has not limited our ability to maintain or increase our access to dedicated jet aircraft at fixed prices in recent periods, there is no guarantee this will continue in the future.
To manage this risk, we enter into long-term capacity purchase agreements with aircraft owners and operators and have purchased a number of jet aircraft, all of which are 100% dedicated to Strata’s needs.
Ability to Hire, Train and Retain Clinicians
Our surgical recovery, NRP, organ placement and cardiac care offerings depend on our ability to hire, train and retain clinicians, particularly perfusionists and organ recovery surgeons.
Historically, our ability to aggregate demand across transplant centers and cardiac care hospitals has made us an attractive employer for clinicians and enabled us to optimize our staffing model to offer both competitive pricing to customers and attractive pay to our employees. However, given the significant growth in these fields as well as increasing competition, there is no guarantee this will continue.
Impact of Inflation to our Business
We generally pay a fixed hourly rate to our third-party operators based on flight hours flown. These rates are susceptible to inflation and are typically renegotiated on a yearly basis, though some multi-year contracts have fixed rate increases. Some contracts with operators allow for pass-through of fuel price increases above a set threshold. For our owned aircraft, we are more directly exposed to inflation of aircraft operating expenses, including pilot salaries, fuel, insurance, parts and maintenance.
Given significant growth in organ transplant volumes and an increasing percentage of organs that are recovered by commercial surgeons and undergo NRP, demand for clinicians skilled in these procedures is high resulting in inflation in salaries and fees paid to these practitioners.
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We have historically passed through cost inflation to customers and most logistics contracts with customers automatically pass through any fuel surcharges, but there is no guarantee this will continue in the future.
Seasonality
Our Logistics trip volumes and Clinical case volumes are correlated with the overall supply of donor hearts, livers and lungs in the United States, which can be volatile due to a variety of factors. Over the last several years, industry transplant volumes exhibited modest seasonal softness in the calendar third quarter, though our own case and flight volumes have not always followed this industry trend.
Key Components of the Company’s Results of Operations
Revenue
Services are typically purchased through our coordinators and are paid for principally via checks and wires. Logistics services are typically provided and billed on a fee-for-service basis, while Clinical services are provided and billed on both a fee-for-service and retainer basis. Payments are generally collected after the performance of the related service in accordance with the client’s payment terms. Fee-for-service revenue is recognized when the service is completed, while retainer revenue is recognized over the retainer contractual term.
Cost of Revenue
Cost of revenue consists of costs of operating our aircraft fleet, including pilots’ salaries, flight costs paid to operators of aircraft and vehicles, depreciation of aircraft, vehicles and medical devices, staff costs directly supporting Logistics and Clinical services, and costs of disposable medical products.
Selling, General and Administrative
Selling, general and administrative (“SG&A”) expenses consist primarily of: staff costs for employees in the commercial, technology, executive, marketing and administrative functions; sales commissions; stock-based compensation; professional and consulting fees; insurance; facilities; information technology and software development costs; promotional expenses; pilot training costs; impairment of assets; and other general corporate overhead costs. SG&A expenses are expensed as incurred..
Amortization of Intangible Assets
Amortization of intangible assets consists of amortization of customer lists, trademarks, technology acquired in business combinations and capitalized software development costs. Amortization expense is recognized on a straight-line basis over their estimated useful lives.
Discontinued Operations
On August 29, 2025, we completed the sale of our Passenger business to the Joby Buyer pursuant to the Joby Purchase Agreement. We determined that the sale of the Passenger business represented a strategic shift that will have a major effect on our operations and financial results. Accordingly, the sale is classified as discontinued operations.
We present discontinued operations when a disposal of a component or group of components represents a strategic shift that will have a major effect on our operations and financial results. The results from discontinued operations of the Passenger business prior to and through its sale are presented as net income (loss) from discontinued operations, net of income taxes, in the consolidated statements of operations and comprehensive loss for all periods presented. The assets and liabilities of the Passenger business have been classified as discontinued operations and segregated for all periods presented in the consolidated balance sheets. See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
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Results of Operations
The following table presents our consolidated statements of operations for the periods indicated:
Year Ended December 31,
% of Revenue
% of Revenue
(in thousands, except share and per share data)
Revenue
Cost of revenue
Gross Profit
Operating expenses
Selling, general and administrative
Amortization of intangible assets
Total operating expenses
Operating loss from continuing operations
Other non-operating income (loss)
Interest income
Change in fair value of warrant liabilities
Change in fair value of assets and other liabilities
Realized loss from sales of short-term investments
Total other non-operating income
Loss from continuing operations before income taxes
Income tax expense (benefit) from continuing operations
Net loss from continuing operations
Net income (loss) from discontinued operations
Net income (loss)
Basic and diluted earnings (loss) per share
Continuing operations
Discontinued operations
Total basic and diluted earnings (loss) per share
Weighted-average number of shares outstanding, basic and diluted
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Comparison of Years Ended December 31, 2025 and 2024
Revenue
Disaggregated revenue by segment was as follows:
Year Ended December 31,
% Change
(in thousands, except percentages)
Logistics
Logistics
Clinical
Transplant clinical
Other clinical
Total Clinical
Total revenue
(1) Percentage not meaningful.
For the years ended December 31, 2025 and 2024, revenue increased by $50.3 million or 34.3%, from $146.8 million in 2024 to $197.1 million in 2025.
Logistics revenue increased by $30.0 million, or 20.4% from $146.8 million in 2024 to $176.8 million in 2025, driven by growth in flight hours, ground transportation and revenue per trip. The increase in flight hours was attributable to both existing and new clients, with several major new contracted clients commencing operations in the second quarter of the year 2025.
Clinical revenue was $20.3 million in 2025, reflecting the acquisition of Keystone in mid-September 2025. There was no clinical revenue in 2024. Clinical revenue in 2025 was comprised of transplant clinical revenue of $9.0 million and other clinical revenue of $11.4 million.
Gross Profit and Gross Margin
Year Ended December 31,
Change
(in thousands, except percentages)
Gross profit:
Logistics
Clinical
Total gross profit
Gross margin:
Logistics
Clinical
Total gross margin
(1) Percentage not meaningful.
For the years ended December 31, 2025 and 2024, Logistics gross profit increased by $7.1 million, or 23.8%, from $29.6 million in 2024 to $36.6 million in 2025, attributable to the 20.4% increase in revenue and an increase in gross margin from 20% to 21% attributable primarily to operational leverage in ground services with the expansion of ground hubs. For the year ended December 31, 2025, Clinical gross profit of $4.5 million was attributable to the acquisition of Keystone in mid-September 2025.
Total gross margin increased from 20% in 2024 to 21% in 2025, attributable primarily to the acquisition of Keystone in mid-September 2025, which operates at a higher average gross margin, as well as an improvement in Logistics gross margin, as discussed above.
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Selling, General and Administrative
Year Ended December 31,
% Change
(in thousands, except percentages)
General and administrative staff and related costs
Selling and marketing including staff costs
Software development including staff costs
Professional fees
Facilities and insurance
Stock-based compensation
Depreciation and impairment of property and equipment
Total selling, general and administrative
Percentage of revenue
For the years ended December 31, 2025 and 2024, total selling, general and administrative expense increased by $10.0 million, or 19.7%, from $50.9 million in 2024 to $60.9 million in 2025.
The primary drivers of the increase were: (i) a $1.8 million increase in general and administrative staff and related costs attributable to the acquisition of Keystone in mid-September and increases commensurate with the growth in Logistics revenue; (ii) an $0.8 million increase in selling and marketing attributable to new hires as well as sales commissions commensurate with the revenue growth; (iii) a $6.6 million increase in professional fees, driven by a $4.7 million year-over-year increase related to settlement costs and legal fees associated with the Drulias lawsuit settled and paid in December 2025 (as discussed in “—Legal and Environmental” within Note 14 to the consolidated financial statements included in this Annual Report on Form 10-K), as well as M&A transaction costs related to the acquisition of Keystone; and (iv) an increase in depreciation and impairment of property and equipment in 2025 attributable to an impairment of aircraft’s airframe for $1.7 million; partially offset by a $1.5 million decrease in stock-based compensation attributable to forfeiture of awards previously granted to the former CEO prior to his transfer to the Joby Buyer.
Amortization of intangible assets
Year Ended December 31,
% Change
(in thousands, except percentages)
Amortization of intangible assets
Percentage of revenue
For the years ended December 31, 2025 and 2024, amortization of intangible assets increased by $1.3 million, or 107.0%, from $1.3 million in 2024 to $2.6 million in 2025, primarily attributable to (i) $1.1 million in amortization of intangibles generated from the acquisition of Keystone in mid-September 2025 and (ii) a $0.2 million increase due to higher amortization of capitalized software costs, as more development projects were completed and entered the amortization phase during 2025.
Other Non-Operating Income
Year Ended December 31,
% Change
(in thousands, except percentages)
Interest income
Change in fair value of warrant liabilities
Change in fair value of assets and other liabilities
Realized loss from sales of short-term investments
Total other non-operating income
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For the year ended December 31, 2025, total other non-operating income consisted of: (i) $4.2 million interest income, attributable to our short-term investments and our money market funds in the current year period (lower interest income is attributable to lower invested balances compared to the prior year period); (ii) $4.3 million non-cash income due to fair value revaluation of warrant liabilities as the value of the warrant liabilities fluctuates with the warrants’ market price; (iii) $(1.0) million non-cash expense attributable to fair value remeasurement of contingent consideration (related to the Passenger divestiture and Keystone acquisition) and equity consideration held in escrow (related to the Keystone acquisition); and a (iv) $(5.2) million realized loss on the sale of securities received as consideration in the Passenger business divestiture. Fair value for these assets and liabilities, where applicable, is remeasured each reporting period.
For the year ended December 31, 2024, total other non-operating income consisted of: (i) $7.2 million interest income, attributable to short-term investments and money market funds; and a (ii) $0.9 million non-cash expense due to fair value revaluation of warrant liabilities as the value of the warrant liabilities fluctuates with the warrants’ market price.
Income (loss) from discontinued operations, net of tax
Year Ended December 31,
% Change
(in thousands, except percentages)
Net income (loss) from discontinued operations
(1) Percentage not meaningful.
For the year ended December 31, 2025, total net income from discontinued operations was $61.4 million and primarily consisted of: gain on disposal of discontinued operations of $57.0 million and operating income of $5.0 million attributable to revenue of $76.6 million from air transportation for passengers in the United States and Europe. This was offset by tax expense of $0.4 million, primarily due to limitations on the utilization of U.S. federal, state, and local net operating losses, including the U.S. federal limitation of post-2017 net operating losses to 80% of taxable income.
For the year ended December 31, 2024, total net loss from discontinued operations was $(11.1) million and primarily consisted of operating loss before tax of $(11.4) million attributable to revenue of $101.9 million from air transportation for passengers in the United States, Canada and Europe.
Operating income (loss) before tax from discontinued operations improved from $(11.4) million in 2024 to $5.0 million in 2025, driven primarily by a $5.8 million impairment charge associated with Blade Canada during the prior year period coupled with a reduction in associated amortization costs, a significant improvement in the profitability of the European operations following restructuring in October 2024, and a reduction in selling and marketing expense.
Adjusted EBITDA
The following table presents our consolidated results on a continuing operations basis for Adjusted EBITDA:
Year Ended December 31,
% Change
(in thousands, except percentages)
Adjusted EBITDA (1)
(1) See section titled “Reconciliations of Non-GAAP Financial Measures” for more information and a reconciliation to the most directly comparable GAAP financial measure.
Comparison of the Years Ended December 31, 2025 and 2024
Adjusted EBITDA from continuing operations improved by $10.3 million for the year ended December 31, 2025 from $3.8 million in 2024 to $14.1 million in 2025. The improvement is attributable to a $13.9 million increase in gross profit excluding depreciation, partially offset by a $3.6 million increase in fixed costs, commensurate with the growth in revenue and with the addition of fixed costs related to Keystone, which was acquired in mid-September 2025.
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA is a non-GAAP measure that has been derived from amounts calculated in accordance with GAAP, although it is not itself a GAAP measure. Strata believes that Adjusted EBITDA viewed in addition to and not in lieu of our reported U.S. GAAP results, provide useful information to investors by providing a more focused measure of operating results, enhancing the
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overall understanding of past financial performance and future prospects, and allowing for greatertransparency with respect to a key metric used by management in its financial and operational decision making. The non-GAAP measure presented herein may not be comparable to similarly titled measures presented by other companies. Adjusted EBITDA is defined and reconciled to the nearest GAAP financial measure below.
Adjusted EBITDA
Adjusted EBITDA is defined as net loss from continuing operations adjusted to exclude: (1) depreciation and amortization; (2) stock-based compensation; (3) change in fair value of warrant liabilities and other assets and liabilities; (4) interest income (5) income tax; (6) realized gains and losses on short-term investments; (7) impairment of intangible assets or property and equipment; and (8) certain other non-recurring items (shown below) that management does not believe are indicative of the Company’s ongoing operating performance and would impact the comparability of results between periods.
Year Ended December 31,
(in thousands, except percentages)
Net loss from continuing operations
Add (deduct):
Depreciation and amortization
Stock-based compensation
Change in fair value of warrant liabilities
Change in fair value of assets and other liabilities
Realized loss from sales of short-term investments (1)
Interest income
Legal expenses and regulatory advocacy fees (2)
Impairment of property and equipment
M&A transaction costs and integration of the acquired company (3)
Reorganization and rebranding costs related to the sale of the Passenger business (4)
Corporate staff costs included in the sold Passenger business (5)
Other (6)
Adjusted EBITDA
Revenue
Adjusted EBITDA as a percentage of revenue
(1) Consists of realized loss on the sale of securities of Joby Aviation received as consideration in the Passenger business divestiture.
(2) Includes settlement costs and legal fees related to the Drulias class action lawsuit which the parties entered into a Stipulation of Settlement to fully resolve the matter in December 2025 (see “— Legal and Environmental” within Note 14 to the consolidated financial statements included in this Annual Report on Form 10-K). We consider this matter to be non-recurring and not representative of the legal and regulatory advocacy costs typically incurred in the ordinary course of business.
(3) Consists of M&A transaction costs, including legal fees and professional fees related to financial, legal, and tax due diligence; and costs of integrating Keystone into a public company environment, including SOX compliance, preparation of standalone audited financial statements and pro forma financial information required for significant acquisitions (as defined by the SEC), enterprise resource planning migration, and software development costs to enhance Keystone’s internally developed software to meet internal control standards.
(4) Consists of costs incurred in the process of decommissioning the Blade brand and introducing the Strata brand, including consultant fees, fleet rebranding, software application costs, as well as accounting fees associated with the carve-out and additional SEC filings required following the sale of the Passenger business.
(5) Represents corporate staff costs related to employees who transferred to Joby Aviation following the sale of the Passenger business on August 29, 2025. This adjustment is intended to enhance period-to-period comparability by excluding from all periods, costs associated with transferred employees whose corporate functions were not replaced. Under U.S. GAAP (ASC 205-20), these costs were required to remain in continuing operations prior to the divestiture because they were not directly attributable to discontinued operations.
(6) For the year ended December 31, 2024, consists of SOX readiness costs of $399 and executive severance costs of $140.
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Liquidity and Capital Resources
Sources of Liquidity
As of December 31, 2025 and 2024 , we had total liquidity of $61.2 million and $124.8 million, respectively, consisting of cash and cash equivalents of $31.0 million and $16.1 million, respectively, and short-term investments of $30.3 million and $108.8 million, respectively. In addition, as of December 31, 2025 and 2024, we had restricted cash of $0.3 million and $0.3 million, respectively. As of December 31, 2025, $30.3 million of short-term investments consisted of securities that are traded in highly liquid markets. The Company had net income of $41.3 million for the year ended December 31, 2025 . During the year ended December 31, 2025 , we realized net proceeds of $70.2 million from the sale of Buyer Shares received from the sale of the Passenger business.
With $61.2 million of total liquid funds as of December 31, 2025, we anticipate that we have sufficient funds to meet our current operational needs for at least the next 12 months from the date this Annual Report is filed. Although we have not historically sought external sources of financing to help fund our operational needs, in January 2026 we entered into a revolving credit facility (the “ABL Facility”) backed by our accounts receivable, that provides additional liquidity and financial flexibility. This facility provides for borrowings of up to $30.0 million and includes an accordion feature permitting increases of up to an additional $20.0 million, subject to lender consent and other conditions. We may also, in the future, seek to take advantage of market opportunities to obtain additional financing on terms we deem attractive. The ABL Facility matures on January 30, 2029.
Borrowings under the ABL Facility bear interest, at the Company’s election, at either (i) an adjusted term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin of 2.00% or (ii) a floating SOFR-based rate plus an applicable margin of 2.00%. The Company is also required to pay a commitment fee of 0.25% per annum on the unused portion of the facility. For further information on the ABL Facility, refer to Note 18 – “Subsequent Events” in the consolidated financial statements included in this Annual Report on Form 10-K.
Liquidity Requirements
As of December 31, 2025 , the Company had net working capital of $106.4 million, cash and cash equivalents of $31.0 million and short-term investments of $30.3 million.
In the course of our business, we have certain contractual relationships with third-party aircraft operators pursuant to which we may be contingently required to make payments in the future. As of December 31, 2025 , we had commitments to purchase flights from various aircraft operators with aggregate minimum flight purchase guarantees under CPAs of $2.6 million for the year ending December 31, 2026. See “—Capacity Purchase Agreements” within Note 14 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information. Additionally, the Company has operating lease obligations related to real estate and vehicles with expected annual minimum lease payments of $0.6 million in each of 2026 and 2027. In January 2026, the Company entered into an agreement to purchase an additional aircraft for a purchase price of $3.8 million, of which a $0.2 million deposit was paid during the year ended December 31, 2025.
We may be required to make earn-out payments in connection with the acquisition of Keystone Perfusion Services, LLC, and may be entitled to receive earn-out proceeds in connection with the Passenger business divestiture. The fair value of the related contingent consideration assets and liabilities is reflected in the consolidated balance sheets. See Notes 4 and 5, respectively, to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Based on our current liquidity, we believe that no additional capital will be needed to execute our current business plan over the next 12 months. Our longer-term liquidity requirement will depend on many factors including the pace of our expansion into new markets, our ability to attract and retain customers for our existing services, capital expenditures and acquisitions.
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Cash Flows
The cash flows of the discontinued Passenger business have not been separately presented and are included in the consolidated statements of cash flows and the discussions below for all periods presented.
For 2025, Passenger cash flows are reflected from January 1 through the August 29, 2025 divestiture date, after which the related assets and liabilities were derecognized. Cash flows of Keystone are included beginning on the September 16, 2025 acquisition date. As a result, period-over-period changes may not be directly comparable and should be evaluated in light of the divestiture and acquisition.
The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
(in thousands)
Net cash used in operating activities
Net cash (used in) / provided by investing activities
Net cash used in financing activities
Effect of foreign exchange rate changes on cash balances
Net increase (decrease) in cash and cash equivalents and restricted cash
Cash Used In Operating Activities
For the year ended December 31, 2025, net cash used in operating activities was $48.9 million, driven by net income of $41.3 million, adjusted for net non-cash items of $29.5 million; transaction costs paid related to the sale of the Passenger business of $7.4 million; $44.3 million Keystone acquisition consideration for the settlement of seller-assumed liabilities (which were directed to third parties and therefore classified within operating activities and not within investing activities); and net cash used of $9.1 million from changes in working capital assets and liabilities. The $9.1 million net cash used from changes in working capital was primarily driven by: an increase of $12.0 million in accounts receivable (attributable to revenue growth and $2.1 million attributable to Passenger business activity prior to the sale); an increase of $1.7 million in prepaid and other current assets driven by timing of operator prepayments; partially offset by an increase of $2.4 million in accounts payable and accrued liabilities of $1.5 million attributable to Passenger business activity prior to the sale and $0.9 million increase in cost of revenue; an increase of $1.7 million in deferred revenue attributable to Passenger business activity prior to the sale and representing client prepayments; and a decrease of $0.7 million in other non-current assets.
For the year ended December 31, 2024, net cash used in operating activities was $2.5 million, driven by a net loss of $27.3 million, net non-cash items of $27.9 million and net $3.0 million of cash used by changes in our working capital assets and liabilities. The net cash used of $3.0 million from changes in our working capital assets and liabilities was primarily driven by a decrease in accounts payable and accrued expenses of $8.3 million, due to the cash payment for the Trinity contingent consideration compensation in the first quarter, an increase in accounts receivable of $1.0 million (attributable to revenue growth) and a decrease in deferred revenue of $0.1 million; partially offset by a decrease in prepaid expenses and other current assets of $6.4 million (driven by the utilization of $9.3 million of prepaid deposits under CPAs with M&N Equipment, LLC as part of the purchase of seven aircraft partially offset by new prepayments made to operators in connection with new CPAs).
Cash Provided by Investing Activities
For the year ended December 31, 2025, net cash provided by investing activities was $69.8 million, driven by $70.2 million of proceeds from the sale of Buyer Shares received in connection with the sale of the Passenger business and $226.2 million of proceeds from maturities of held-to-maturity investments; partially offset by $146.3 million in purchases of held-to-maturity investments, $66.5 million in cash consideration paid in connection with the Keystone acquisition, $9.7 million in purchases of property and equipment, consisting primarily of a spare engine, aircraft capitalized maintenance costs, and vehicles for ground logistics, $1.4 million in capitalized software development costs, and $2.8 million in cash transferred with the sale of the Passenger business, including post-close net working capital adjustment payment.
For the year ended December 31, 2024, net cash used in investing activities was $1.0 million, driven by $143.3 million in purchases of held-to-maturity investments, $30.9 million in purchases of property and equipment, consisting primarily of $27.1 million in the acquisition of ten aircraft and related capitalized maintenance costs to support the Logistics segment, with the remainder related to furniture and fixtures for new office space in Arizona and vehicles used in generating revenue
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by the Logistics segment, $2.2 million in consideration paid for the acquisition of CJK and $2.1 million in capitalized software development costs, partially offset by $177.5 million of proceeds from maturities of held-to-maturity investments.
Cash Used In Financing Activities
For the year ended December 31, 2025, net cash used in financing activities was $8.9 million, driven by $9.1 million in cash paid for payroll tax payments on behalf of employees in exchange for shares withheld by the Company; partially offset by $0.2 million of proceeds from the exercise of stock options.
For the year ended December 31, 2024, net cash used in financing activities was $5.8 million, reflecting $5.7 million in cash paid for payroll tax payments on behalf of employees in exchange for shares withheld by the Company and $0.2 million in repurchases and retirement of common stock under a share repurchase program (expired on March 31, 2025); partially offset by $0.2 million of proceeds from the exercise of stock options.
Critical Accounting Estimates
This discussion and analysis of the Company’s financial condition and results of operations is based on the Company’s consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. In accordance with U.S. GAAP, the Company bases its estimates on historical experience and on various other assumptions the Company believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
We believe that of our significant accounting policies, which are described in the notes to the consolidated financial statements, the following accounting policies involve a greater degree of judgments, estimates and assumptions. Accordingly, these are the policies that we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. For information on the Company’s significant accounting policies and estimates refer to Note 2 “Summary of Significant Accounting Policies” and the “Use of Estimates” section of Note 1 “Business and Basis of Presentation” in the consolidated financial statements included in this Annual Report on Form 10-K.
Stock-based compensation
Performance-based restricted stock units (“PSUs”) are granted under our 2021 Omnibus Incentive Plan with vesting contingent upon the achievement of predetermined financial performance metrics over multi-year performance periods, generally three to four years. Performance metrics may include Adjusted EBITDA, Free Cash Flow and/or revenue, and certain awards are subject to a relative total shareholder return (“TSR”) modifier. The number of shares ultimately earned generally ranges from 50% to 200% of target based on performance and is subject to continued service through the vesting date. For awards with a TSR modifier, the number of PSUs otherwise earned may be adjusted to 80%, 100% or 120% based on our TSR ranking relative to a peer group; for purposes of estimating expected payouts, we assumed a 100% modifier, which we believe is not material to our stock-based compensation expense.
We recognize compensation expense for PSUs based on the grant-date fair value and our estimate of the expected level and timing of achievement of the applicable performance targets. We reassess expected payout levels each reporting period and recognize changes in estimates on a cumulative catch-up basis. Changes in assumptions regarding the likelihood or timing of achieving performance targets could result in material adjustments to stock-based compensation expense.
Business Combinations and Valuation of Assets and Liabilities
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make
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significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, customer list and trademark, based on expected revenue growth rates and profitability margins, customer attrition rates, royalty rates for similar brand licenses, and discount rates.
Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects our amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas goodwill is not amortized. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
For further information on the Company’s acquisitions, refer to Note 4 – “Acquisitions” in the consolidated financial statements included in this Annual Report on Form 10-K.
Contingent Consideration
In connection with the acquisition of Keystone in September 2025, the Company agreed to pay additional consideration to the sellers contingent upon the achievement of certain post-acquisition financial performance targets. The contingent consideration arrangements include earn-out payments that are primarily based on specified EBITDA and gross profit metrics over defined measurement periods. The estimated fair value of the contingent consideration is recorded as a liability on the acquisition date and is remeasured to fair value at each reporting date, with changes in fair value recognized in earnings.
The fair value of the contingent consideration is estimated using an option-pricing model, which requires management to apply significant judgment and assumptions, including projected financial performance of the acquired business, the expected variability in future results, the probability of achieving the earn-out targets, the expected timing of payments, and an appropriate market-based discount rate. These assumptions are inherently uncertain, and changes in assumptions, particularly projected performance and volatility, could result in changes to the estimated fair value.
The Company also holds an earn-out receivable related to the sale of its Passenger business, which is contingent upon the achievement of specified EBITDA targets by the buyer and the retention of the Blade CEO with the Buyer. The earn-out receivable is measured at fair value using an option-based valuation approach. While its valuation requires judgment, it is based on a shorter-term, achieved performance framework and does not involve the same level of estimation uncertainty as contingent consideration liabilities associated with business combinations.
For further information on contingent consideration and earn-out arrangements, refer to Note 4 – “Acquisitions” and Note 5 – “Discontinued Operations” in the consolidated financial statements included in this Annual Report on Form 10-K.
