Note 7. Financing Arrangements

The Company is subject to customary affirmative covenants and negative covenants on all of the above notes payable. As of June 30, 2026, the Company was in compliance with all covenants in the loan agreements.

Asset-Backed Financing Transaction

On June 30, 2026, the Company and the Purchasers entered into the Secured Debentures Purchase Agreement pursuant to which the Purchasers purchased the Secured Debentures, with an aggregate face amount of $21.6 million, issued by Southern Airways Pacific, LLC and Southern Airways Express, each a subsidiary of the Company (individually and collectively, as the context requires, the “Subsidiaries”).

An initial tranche of the Secured Debentures, with an aggregate principal amount of approximately $7 million, was issued on June 30, 2026 and was used to finance a portion of the purchase price of certain Cessna Grand Caravan aircraft, and the remaining balance of the Secured Debentures in an amount equal to approximately $14 million will be issued upon the satisfaction of certain closing conditions and will be used for general working capital. The Secured Debentures are secured by the purchased aircraft and certain other aircraft assets of the Subsidiaries. Net proceeds from the initial Secured Debentures were $5.8 million after funding debt issuance costs.

The Secured Debentures shall accrue interest at 13.5% per annum payable monthly in arrears in cash on the last day of each month, mature on June 30, 2031, be issued with an original issue discount of $0.6 million, provide for monthly amortization payments of $0.2 million beginning on June 30, 2027 and on the last day of each month thereafter and permit prepayment at par without any prepayment premium, repayment premium, make-whole or penalty.

In addition, the Company issued the Purchasers tranche A warrants to purchase an aggregate of 710,294 shares of common stock at an exercise price of $1.2555 and tranche B warrants to purchase an aggregate of 617,647 shares of common stock at an exercise price of $1.6740. Each of the tranche A warrants and tranche B warrants (collectively, the “Warrants”) is immediately exercisable and has a term of five years.

Fair Value of Convertible Instruments

The Company has elected the fair value option for the convertible notes, which requires them to be remeasured to fair value each reporting period with changes in fair value recorded in Changes in fair value of financial instruments carried at fair value, net, on the Condensed Consolidated Statements of Operations, except for change in fair value that results from a change in the instrument specific credit risk which is presented separately within other comprehensive income. The fair value estimate includes significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

High Trail Convertible Note

On November 12, 2025, the Company closed a $74.0 million aggregate principal amount of senior secured convertible notes (as amended, the “High Trail Convertible Note”) in a private placement with High Trail Capital (the “Holder”). The High Trail Convertible Note will be the senior secured obligation of the Company, guaranteed by certain of the Company’s subsidiaries. The High Trail Convertible Note was sold at 87.8% of its principal amount, with the Company receiving $65.0 million of proceeds before expenses. The High Trail Convertible Note will not accrue interest except in the event of an event of default, which will accrue interest at a rate of 15% per annum. The High Trail Convertible Note will mature on October 31, 2028, unless earlier converted, redeemed or repurchased. Repayment of any principal amount remaining outstanding at maturity will be required to be made at 105% of such principal amount.

The High Trail Convertible Note may be converted at an initial conversion price of approximately $3.98 per share of the Company’s common stock, representing an aggregate of 18,574,297 shares of the Company’s common stock that could be converted under the High Trail Convertible Note.

Subject to specified conditions, the Company may force the Holder to convert the High Trail Convertible Note at any time if the last reported sale price per share of the Company’s common stock equals or exceeds 150% of the then current conversion price on each of the immediately preceding 20 consecutive trading days, in amounts (i) not less than the lesser of (x) $10,000,000 and (y) the remaining outstanding principal amount of the High Trail Convertible Note, but (ii) not greater than 2.5 times the average dollar daily trading volume during the related 20 trading day measurement period.

The Holder will have the option to require the Company to partially redeem the High Trail Convertible Note on the first and fifteenth day of each month beginning March 1, 2026 in an amount equal to the greater of (a) 5.0% of the aggregate dollar trading volume of the Company’s common stock, (b) an amount equal to (i) $2,000,000, minus (ii) the cumulative sum of the amounts by which the principal amounts partially redeemed have exceeded $2,000,000 for all prior redemption periods, less any amounts that have previously been applied by the Company pursuant to this clause (ii) to reduce partial redemption amounts, if any, and (c) $750,000. The Holder may elect to receive shares in an amount determined by applying the conversion rate to the redemption payment otherwise due. Any such partial redemption payment (whether in cash or in shares) shall reduce the principal amount by such paid amount divided by one hundred five percent (105%). The maximum number of shares issuable under the High Trail Convertible Note (if the entire High Trail Convertible Note were redeemed on this basis) would be 19,503,012. During the six months ended June 30, 2026, the Company made partial redemption payments totaling $22.0 million.

Further, on March 1, 2026, the Holder of the High Trail Convertible Note had the right to require the Company to redeem a principal amount of the High Trail Convertible Note equal to up to 50% of the gross proceeds from any equity financings (including from our equity line of credit or any future at-the-market program) since issuance of the High Trail Convertible Note, provided that in no event will such amount exceed $6,000,000. The Holder exercised such right in March 2026 up to the maximum amount of $6,000,000.

The Company is subject to comprehensive negative and affirmative covenants, including, inter alia, restrictions on its ability to incur indebtedness, create liens, make investments, declare or pay cash dividends or repurchase equity, and transfer or sell material assets, in each case subject to certain enumerated exceptions. The Company was previously required to maintain a minimum liquidity of $10,000,000 in cash and cash equivalents in controlled accounts, a limitation which was removed during the three months ended June 30, 2026 on the condition that the release of such funds was used to repay principal under the High Trail Convertible Note at par. The Company also must obtain prior written consent from a majority of holders of the High Trail Convertible Note before issuing additional debt or securities that would cause a default under the Note or restrict the Company’s ability to pay the principal amount thereon. In addition, the Company must maintain a required reserve of authorized and unissued common stock calculated pursuant to a specified formula set forth in the High Trail Convertible Note, and deliver and maintain a letter of credit to backstop the High Trail Convertible Note. The Company must also maintain at least $30,000,000 in available capacity under either an equity line of credit or an “at-the-market” offering within the meaning of Rule 415(a)(4) of the Securities Act pursuant to which the Company may issue and sell shares of common stock from time to time. This requirement will be met through continued access to the SPA with GEM (see Note 8, Share Purchase Agreement and GEM Mandatory Convertible Security). Additional affirmative covenants require the Company to maintain its business within existing lines, preserve its corporate existence, properties and intellectual property rights, maintain adequate insurance and ensure affiliate transactions are on arm’s length terms.

The High Trail Convertible Note is partially backstopped by a letter of credit issued by HSBC Bank USA, N.A. and arranged by Park Lane, a related party, and in connection therewith, the Company has entered into an amended reimbursement agreements with Park Lane (see Note 16, Related Party Balances and Transactions).

In March 2026, the Company and the Holder entered into an agreement, by which the Company issued 3,510,638 shares of its common stock (the “HT Shares”) to the Holder valued at $6.6 million as of the closing price on the day before issuance (the “Issuance Price”), in satisfaction of $6 million in cash payments due pursuant to the terms of the High Trail Convertible Note (see Note 12, Redeemable Common Stock and Shareholders’ Deficit). The Company has agreed to provide additional cash payments based on the average daily volume-weighted average price of the Company’s common stock (the “Average VWAP”) in the following circumstances: (i) if the Average VWAP falls below the Issuance Price during the 45 trading days following the day after the issuance (the Average VWAP during such period, the “Initial Adjustment Price”); and (ii) if the Average VWAP falls below the lesser of the Issuance Price and the Initial Adjustment Price during the 45 trading days after the effectiveness of the registration statement with respect to the HT Shares (together, the “Make Whole Provision”). In addition, if there are delays or interruptions in the effectiveness of the registration statement the Company will be subject to liquidated damages and the Holder will have the right to put some or all of the HT Shares back to the Company at the Issuance Price. The registration statement for the HT Shares was declared effective by the SEC on March 26, 2026.

The Company has recorded transaction costs associated with the issuance of the HT Shares totaling $1.6 million during the six months ended June 30, 2026, which are comprised of $0.6 million for the premium paid over the principal redemption amount and the initial fair value of the Make Whole Provision and the put right associated with the HT Shares. Such instruments are accounted for as derivative instruments which will be remeasured to fair value at each reporting period with changes in fair value recorded in Changes

in fair value of financial instruments carried at fair value, net on the Condensed Consolidated Statements of Operations (see Note 9, Fair Value Measurements).

During the three months ended June 30, 2026, the Company satisfied all outstanding obligations pertaining to the HT Shares and the Make Whole Provision through the payment of $2.4 million. As a result the value of the derivative liability associated with the Make Whole Provision has been reduced to zero as of June 30, 2026 and the issued value of the HT Shares has been recorded to Shareholders’ Deficit.

On June 30, 2026, the Company entered into an Omnibus Amendment and Exchange Agreement (the “Exchange Agreement”) with High Trail Capital, pursuant to which the Company and High Trail Capital agreed to exchange the High Trail Convertible Note. Pursuant to the Exchange Agreement, the High Trail Convertible Note, would be exchanged for (i) a new Senior Secured Convertible Note due 2027, with an aggregate principal amount of $16.9 million (the “New Convertible Note”) and (ii) a new Senior Secured Term Note due 2028, with an aggregate principal amount of $30.0 million (the “New Term Note” and collectively, the "New Notes").

The Exchange Agreement, and the entry into the New Convertible Note and New Term Note, closed on July 1, 2026 (see Note 19, Subsequent Events).

LamVen Note

During the year ended December 31, 2025, LamVen LLC (“LamVen”) transferred $49.9 million of the outstanding principal due under the LamVen Note (see Note 16, Related Party Balances and Transactions) to a non-affiliated third party under terms identical to the original LamVen Note (the “New Convertible Note”). Subsequent to these transfers, during 2025, the holder of the New Convertible Note converted $48.0 million of the principal amount, inclusive of then accrued interest, to 14,025,167 shares of the Company’s common stock. As a result, as of December 31, 2025, LamVen retained a principal balance of $0.1 million (the “New LamVen Note”), with $1.9 million outstanding under the New Convertible Note.

During January 2026, the holder of the New Convertible Note converted the remaining $1.9 million of the principal amount, inclusive of then accrued interest, to 967,018 shares of the Company’s common stock.

PFG Convertible Note Purchase Agreement

On June 21, 2023, the Company entered into a convertible note purchase agreement (the “Convertible Note Purchase Agreement”) with Partners for Growth V.L.P. (“PFG”) for a senior unsecured convertible promissory note for an aggregate principal amount of $8.0 million.

On November 14, 2024, the Company amended the Convertible Note Purchase Agreement, which had an outstanding principal amount of $8.0 million upon amendment.

The Convertible Note Purchase Agreement accrues interest at the greater of (i) SOFR (subject to a 1.00% floor) plus 5.00% and (ii) 9.75%. In the event the Company raises capital in certain equity offerings, a portion of the net cash proceeds from such equity offerings is required to be applied to repay the obligations under the Convertible Note Purchase Agreement, subject to certain limitations. The maturity of the Convertible Note Purchase Agreement is December 31, 2028, which may be accelerated upon the occurrence of certain events of default.

PFG has the right to convert, at its option, the amounts outstanding under the Convertible Note Purchase Agreement into common stock of the Company, at a conversion price of $42.00 per share.

During the six months ended June 30, 2026, the Company made principal payments of $1.0 million against the Convertible Note Purchase Agreement. The obligations under the Convertible Note Purchase Agreement are guaranteed by certain of the Company’s subsidiaries, and subject to a security interest on assets of the Company and the subsidiary guarantors, subject to certain exceptions.

As of June 30, 2026, the Company was in compliance with all covenants under the Convertible Note Purchase Agreement.

Fair Value of SAFE-T Notes

The Company’s SAFE-T notes are carried at fair value, with fair value determined using Level 3 inputs. The Company determined that the SAFE-T instruments should be classified as liabilities based on evaluating the characteristics of the instruments, which contained both debt and equity-like features. The SAFE-T instrument matured in July 2019, but the holder has elected not to effect an equity conversion of the instrument. Subsequent changes in the fair value of the SAFE-T notes are recorded as part of changes in fair value of financial instruments carried at fair value, net within the Condensed Consolidated Statements of Operations. As of June 30, 2026 and December 31, 2025, the value of the SAFE-T notes was $3 thousand and $5 thousand, respectively.