BLADE AIR MOBILITY, INC. Management’s Discussion and Analysis of Financial Position and Operating Results (Form 10-K)

0
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."
Unless otherwise stated, all dollar amounts presented below are stated in
thousands, except for per share amounts.
Merger and Organization
On May 7, 2021 (the "Closing Date"), privately held Blade Urban Air Mobility,
Inc., a Delaware corporation, ("Old Blade") consummated the previously announced
transactions contemplated by the Agreement and Plan of Merger (the "Merger
Agreement"), dated December 14, 2020, by and among Experience Investment Corp.
("EIC"), Experience Merger Sub, Inc., a wholly owned subsidiary of EIC ("Merger
Sub"), and Old Blade. The Merger Agreement provided for the acquisition of Old
Blade by EIC pursuant to the merger of Merger Sub with and into EIC (the
"Merger"), with Old Blade continuing as the surviving entity and a wholly owned
subsidiary of EIC. On the Closing Date, and in connection with the closing of
the business combination (the "Closing"), EIC changed its name to Blade Air
Mobility, Inc. Unless the context indicates otherwise, the discussion of the
Company and its financial condition and results of operations is with respect to
Blade following the Closing Date and with respect to Old Blade prior to the
Closing Date. See Note 3 to the consolidated financial statements for additional
information.
Acquisitions

On September 15, 2021, the Company completed its acquisition of 100% of Trinity
Air Medical, Inc. ("Trinity") shares. Trinity is an asset-light, multi-modal
organ transport business working with transplant centers and organ procurement
organizations in 16 states. The results of Trinity from the acquisition date to
September 30, 2021 are included in the MediMobility Organ Transport and Jet line
of business. See Note 4 to the consolidated financial statements for additional
information.
Business Overview
Blade is a technology-powered, global air mobility platform. We provide
consumers with a cost-effective and time-efficient alternative to ground
transportation for congested routes, predominantly within the Northeastern
United States, through our helicopter, amphibious seaplane, and fixed-wing
transportation services. Our platform utilizes a technology-powered, asset-light
business model, which was developed to be scalable and profitable using
conventional helicopters today while enabling a seamless transition to Electric
Vertical Aircraft ("EVA"), once they are certified for public use. Blade
currently operates in three key lines of business:
•Short Distance - Consisting primarily of flights: (i) between 60 and 100 miles
in distance, largely servicing commuters for prices between $595 and $795 per
seat and (ii) between all New York area airports and dedicated Blade terminals
in Manhattan's heliports for $195 per seat (or $95 per seat with the purchase of
an annual Airport Pass for $795).
•MediMobility Organ Transport and Jet - Consisting of transportation of human
organs for transplant, non-medical jet charter and limited, by-the-seat, jet
flights between New York and both Miami and Aspen.
•Other - Consists principally of revenues from brand partners for exposure to
Blade fliers and certain ground transportation services.
Blade's first international joint venture launched helicopter services in late
2019 in India, flying between Mumbai, Pune, and Shirdi.
                                       32
--------------------------------------------------------------------------------
  Table of Contents
Our Business Model
Blade leverages an asset-light business model: we neither own nor operate
aircraft. Pilots, maintenance, hangar, insurance, and fuel are all costs borne
by our network of operators, which provide aircraft to Blade at fixed hourly
rates. This enables our operator partners to focus on training pilots,
maintaining aircraft and flying, while we schedule flights based on demand
analysis and maintain the relationship with the flier from booking through
flight arrival. Blade takes the economic risk of aggregating fliers to optimize
flight profitability, providing predictable margins for our operators.
We typically pre-negotiate fixed hourly rates and flight times with our aircraft
operators, paying only for flights actually flown, creating a predictable and
flexible cost structure. Our costs are variable based on how many flights we
offer, so if demand recedes, we are able to adjust our supply requirements
accordingly by using fewer operators and reducing our by-the-seat flights.
Depending on the maturity of the routes an operator is servicing, Blade will
sometimes provide an annual guaranteed number of flight hours to the aircraft
operators.

Blade's proprietary "customer-to-cockpit" technology stack enables us to manage
hundreds of fliers across numerous simultaneous flights, coordinating multiple
operators flying between terminals across our route network. We believe that
this technology, which provides us with enhanced logistics capabilities and
information from our fliers signaling their interest in new routes, will enable
us to continue to scale our business. This technology stack was built with
future growth in mind and is designed to allow our platform to be easily scaled
to accommodate, among other things, rapid increases in flier volume, new routes,
new operators, broader flight schedules, next-generation verticraft and
ancillary services (e.g., last/first-mile ground connections, trip cancellation
insurance, baggage delivery) through our mobile apps, website and cloud-based
tools.

Our asset-light business model was developed to be scalable and profitable using
conventional helicopters today while enabling a seamless transition to EVA, once
they are certified for public use. We intend to leverage the lower operating
costs of EVA versus helicopters to reduce the consumer's price for our flights.
Additionally, we expect the reduced noise footprint and zero carbon emission
characteristics of EVA to allow for the development of new, vertical landing
infrastructure ("vertiports") in our existing and new markets. In the interim,
we operate as a carbon neutral business by purchasing offsets to contract the
carbon emissions generated by our urban air mobility services.
Key Business Metric
We collect, measure, and evaluate operating and financial data of our business
to evaluate our performance, measure our progress, and make strategic decisions.
The following table reflects the key operating metric we use to evaluate our
business:
                                             For the Years Ended
                                                September 30,
                                  2021                  2020             2019
Seats flown - all flights       27,665                17,346            32,845


We define "Seats flown - all flights" as the total number of seats purchased by
paying passengers on all flights, whether sold by-the-seat or within a charter
arrangement. Our long-term strategy is primarily focused on growth in
by-the-seat products, and we believe that "Seats flown - all flights" is an
important indicator of our progress in executing on this growth strategy. This
metric is not always directly correlated with revenue given the significant
variability in the price we charge per seat flown across our various products
and routes. For products and routes sold by-the-seat, we fly significantly more
passengers at a low price per seat; growth in these areas is captured by "Seats
flown - all flights," but not necessarily in revenue, which is heavily
influenced by our MediMobility Organ Transport and Jet product line where we
typically fly fewer or sometimes no passengers over long distances at a high
price. We believe the "Seats flown - all flights" metric is useful to investors
in understanding the overall scale of our business and trends in the number of
passengers paying to use our service.
                                       33
--------------------------------------------------------------------------------
  Table of Contents
Factors Affecting our Performance
Ability to attract and retain fliers in our Short Distance business
Our success depends in part on our ability to cost-effectively attract new
fliers, retain existing fliers and increase utilization of our services by
current fliers. We plan to continue making significant investments and
implementing strategic initiatives in order to attract new fliers, such as flier
acquisition campaigns and the launching of new scheduled routes. These
investments and initiatives may not be effective in generating sales growth or
profits. Moreover, if fliers do not perceive our urban air mobility services to
be reliable, safe, and cost-effective, or if we fail to offer new and relevant
services and features on our platform, we may not be able to attract or retain
fliers or increase their utilization of our platform.
Ability to attract and retain customers in our MediMobility Organ Transport and
Jet business

Our MediMobility Organ Transport business primarily serves transplant centers
and Organ Procurement Organizations ("OPOs" and, together, "MediMobility
Customers"). Transportation for the hearts, lungs and livers that make up the
vast majority of this business line 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, be it jet, turboprop or
helicopter, is the primary metric by which MediMobility Customers evaluate our
performance. We utilize the same fixed wing aircraft and aircraft operators for
our retail jet charter customers, who are also primarily concerned with
availability and pricing, but typically book with much more advance notice.

Historically, the combination of Blade's retail jet charter and MediMobility
demand, has been enough to incentivize operators to provide dedicated jet
aircraft and crews for the our MediMobility Organ Transport and Jet business
line. However, there is no guarantee that will continue to be able to secure
dedicated aircraft at favorable rates, particularly given recent significant
increases in demand for private jet aircraft in the United States. Recent
increased demand for private jets has led to increased charter costs and more
limited availability in the spot jet charter market, but has not limited Blade's
ability to maintain or increase our access to dedicated jet aircraft at fixed
prices.
Expansion into New Geographic Markets
Our growth plan is focused on dense urban areas, primarily those with existing
air transportation infrastructure in the Northeast and on the West Coast, that
are facing increasing ground congestion. In these areas, Blade's urban air
mobility services can provide the most time savings for our fliers, and given
the short distances involved, costs for our services can be comparable to
luxury, private car services. In addition, EVA may be commercially viable sooner
in these markets given that battery technology constraints may limit the range
of early models. Large urban markets with existing heliport infrastructure
should be able to accommodate EVA while other cities may need several years to
permit and build such infrastructure. In addition to these domestic target
markets, we will continue to explore international markets through joint
ventures, as in India. The number of potential fliers using our urban air
mobility services in any of these markets cannot be predicted with any degree of
certainty, and we cannot provide assurance that we will be able to operate in a
profitable manner in any of our current or targeted future markets.
Growth of our business will require significant investments in our
infrastructure, technology, and marketing and sales efforts. Historically, cash
flow from operations has not been sufficient to support these needs. If our
business does not generate the level of available cash flow required to support
these investments, our results of operations will be negatively affected.
Further, our ability to effectively manage growth and expansion of our
operations will also require us to enhance our operational systems, internal
controls and infrastructure, human resources policies, and reporting systems.
These enhancements will require significant capital expenditures and allocation
of valuable management and employee resources.
Development, approval and acceptance of EVA for passenger travel
We intend to leverage the expected lower operating costs of EVA versus
helicopters to reduce the consumer's price for our flights. Additionally, we
expect the reduced noise footprint and zero carbon emission characteristics of
EVA to allow for the development of new, vertiports in our existing and new
markets. However, manufacturers, individual operators that will purchase EVA,
and pilots must receive requisite approvals from federal transportation
authorities before EVA can fly passengers. No EVA aircraft are currently
certified by the FAA for commercial operations in the United States, and there
is no assurance that research and development will result in government
certified aircraft that are market-viable or commercially successful in a timely
manner, or at all.
                                       34
--------------------------------------------------------------------------------
  Table of Contents
We believe that Blade is well positioned to introduce EVA into commercial
service, once available, for a number of reasons. We believe our existing
short-distance routes are compatible with EVA, which are expected initially to
have a limited range, and our existing terminal space will accommodate EVA.
Blade's unit economics are designed to be profitable using either helicopters or
EVA, even if early EVA do not deliver significant cost savings relative to
helicopters. Moreover, Blade's asset-light business model and technology
platform are operator and aircraft agnostic, enabling a seamless transition to
EVA.
Seasonality
Historically, we experienced seasonality with flight volume peaking during the
quarters ended June 30 and September 30 of each fiscal year due to the busy
summer travel season, with lower volume during the first and second fiscal
quarters. In calendar year 2020, we experienced less seasonality as a result of
the COVID-19 pandemic and related restrictions, which altered typical travel
patterns. In 2021, we have seen a recovery in demand for summer travel,
resulting in a return to more typical seasonality. Blade's Short Distance
expansion strategy is focused on routes with significantly less seasonality,
such as intercity transfers, airport, and year-round commuter routes. We also
continue to expand our MediMobility business, which sees consistent year-round
demand, both organically and through acquisition. Thus, we expect that
seasonality in revenue will decrease as our business grows and our revenue mix
shifts to these new, year-round routes.
Key Components of the Company's Results of Operations
Revenue
Blade generates revenue through the sale of air travel services. Our fliers
primarily purchase and manage reservations using our self-service mobile and web
applications, but some choose to call, email, or text our dedicated team of
Flier Relations professionals. Fliers pay via credit card transactions, wire,
check, customer credits, and gift cards, and generally, we collect payments in
advance of performing the related services. We also collect fees from add-ons,
such as trip insurance and ground transportation services, and changes to
non-refundable seats sold. Our MediMobility Organ Transport customers receive
terms and make payments to us after we perform the related service. Most of our
accounts receivable consist of amounts due from MediMobility Organ Transport
customers. Additionally, our joint venture agreement for operations in India
entitles us to receive quarterly royalty payments.
Cost of Revenue
Cost of revenue consists principally of flight costs paid to operators of
aircraft and landing fees.
Software Development
Costs incurred for the development of the Company's internal use software are
expensed as incurred.
General and Administrative
General and administrative expenses principally include personnel costs,
stock-based compensation, facility fees, credit card processing fees, and
professional fees. We expect that general and administrative expenses will
increase for the foreseeable future as we expand our service offerings to
additional cities and increase flight volumes on existing routes. We expect to
incur additional expenses as a result of operating as a public company,
including expenses related to compliance with reporting obligations under the
rules and regulations of the SEC, rules and regulations applicable to companies
listed on a national securities exchange, and higher expenses for director and
officer insurance, investor relations, and professional services.
Selling and Marketing
Selling and marketing expenses consist primarily of advertising costs, staff
salaries and stock-based compensation, marketing expenses, and promotion costs.
We expect that selling and marketing expenses will increase for the foreseeable
future as they represent a key component of our initiatives to expand into new
markets. The trend and timing of our brand marketing expenses will depend in
part on the timing of our expansion into new markets and other marketing
campaigns.
                                       35
--------------------------------------------------------------------------------
  Table of Contents
Results of Operations
The following table presents our consolidated statements of operations for the
periods indicated:
                                                                                             For the Years Ended
                                                                                                September 30,
                                                      2021                                           2020                                           2019
                                                             % of Revenue                                   % of Revenue                                   % of Revenue
                                                                           ($ in thousands, except for share and per share amounts)
Revenue                             $     50,526                      100  %       $     23,434                      100  %       $     31,196                      100  %

Operating expenses
Cost of revenue                           39,721                       79  %             21,107                       90  %             26,497                       85  %
Software development                       1,514                        3  %                861                        4  %                751                        2  %
General and administrative                29,922                       59  %              9,292                       40  %             10,476                       34  %
Selling and marketing                      3,462                        7  %              2,533                       11  %              5,013                       16  %
Total operating expenses                  74,619                      148  %             33,793                      144  %             42,737                      137  %

Loss from operations                     (24,093)                                       (10,359)                                       (11,541)

Other non-operating (expense)
income
Change in fair value of warrant
liabilities                              (18,331)                                             -                                              -
Recapitalization costs attributable
to warrant liabilities                    (1,731)                                             -                                              -
Interest income, net                         460                                            199                                            703

Total other non-operating (expense)
income                                   (19,602)                                           199                                            703

Loss before income taxes                 (43,695)                                       (10,160)                                       (10,838)

Income tax benefit                        (3,643)                                             -                                              -

Net loss                            $    (40,052)                                  $    (10,160)                                  $    (10,838)

Weighted average shares
outstanding, basic and diluted        42,883,615                                     25,210,559                                     25,135,632
Net loss per share, basic and
diluted                             $      (0.93)                                  $      (0.40)                                  $      (0.43)


                                       36
--------------------------------------------------------------------------------
  Table of Contents
Comparison of the Years Ended September 30, 2021, 2020 and 2019

Income

The turnover broken down by product line is as follows:

                                                   For the Years Ended
                                                      September 30,
                                             2021          2020          2019
                                                      (in thousands)
Product Line(1):
Short Distance                            $ 22,253      $  9,466      $ 26,040
MediMobility Organ Transport and Jet        26,346        13,476         5,071
Other                                        1,927           492            85
Total Revenue                             $ 50,526      $ 23,434      $ 31,196


__________
(1) Prior period amounts have been updated to conform to current period
presentation.
2021 to 2020 Annual Comparison
Revenue increased by $27.1 million or 116%, from $23.4 million in 2020 to $50.5
million in 2021. The increase in revenue was driven by increases across all
product lines as Short Distance demand began to recover following the relaxation
of COVID-19 lockdowns while MediMobility Organ Transport and Jet revenues
continued to exhibit strong growth.
Short Distance aviation services increased by $12.8 million in 2021, an increase
of 135%. Growth in Short Distance was driven by a recovery in demand for the
Company's commuter and airport transfer products following the relaxation of
COVID-19 lockdowns.
MediMobility Organ Transport and Jet increased by $12.9 million in 2021, an
increase of 96%. Our MediMobility Organ Transport and Jet charter businesses
were not adversely impacted by the pandemic and continued to show strong growth.
In MediMobility Organ Transport, growth was driven by our successful effort to
add additional hospital customers and the inclusion of Trinity's revenue for the
period from September 16, 2021 to September 30, 2021. The inclusion of Trinity
contributed growth of 5% in 2021. In Jet charter, growth was driven by the
successful acquisition of additional fliers and more frequent trips from fliers
who preferred to avoid commercial airline travel during the pandemic.
Other revenue increased from $0.5 million to $1.9 million, an increase of 292%,
driven primarily by the introduction of our Essential Ground Connect car service
in the middle of prior year and higher revenue from brand partners.
2020 to 2019 Annual Comparison
Revenue decreased by $7.8 million, or 25%, from $31.2 million in 2019 to $23.4
million in 2020. The decline in revenue was driven principally by lower revenues
from short distance aviation services, from $26.0 million in 2019 to $9.5
million in 2020, a reduction of $16.5 million or 64%. Short distance revenues
were negatively impacted by a significant reduction in demand for commercial
airline travel, driven by the COVID-19 pandemic, which resulted in our decision
to pause our New York airport transfer services. In addition, the closure of
offices in New York City led to a reduction in demand for our commuter services
in the typically high-demand summer season.

The revenue decline in short distance was partially offset by significant
increases in MediMobility Organ Transport and Jet revenues which were $13.5
million in 2020 as compared to $5.0 million in 2019, an increase of $8.5 million
or 166%. Our MediMobility and jet charter businesses were not adversely impacted
by the pandemic and continued to show strong growth. In MediMobility, growth was
driven by our successful effort to add additional hospital customers, the
continued need for organ transplants during the pandemic and the limited
operating results for MediMobility in 2019, given our Q4
                                       37

————————————————– ——————————

2019 Table of Contents service launch. In jet charter, growth was driven by the successful acquisition of additional travelers and more frequent trips from travelers who preferred to avoid commercial air travel during the pandemic.

Other revenue increased from $0.1 million to $0.5 million driven primarily by
the introduction of our Essential Ground Connect ground transportation service
and increased sales of commuter passes.

Cost of Revenue
2021 to 2020 Annual Comparison
Cost of revenue increased by $18.6 million or 88%, from $21.1 million during
2020 to $39.7 million in 2021, driven by increased flight volume. Cost of
revenue decreased as a percentage of revenues from 90% to 79%, driven by higher
average utilization in our by-the-seat routes as well as increased Short
Distance revenues as a percentage of overall sales. Our direct operator costs
for MediMobility Organ Transport and Jet are generally higher than the direct
operator costs for our Short Distance flights. Thus, the shift in revenue mix
led to an overall decrease in our cost of revenue as a percentage of total
revenues.
2020 to 2019 Annual Comparison
Cost of revenue decreased by $5.4 million, or 20%, from $26.5 million during
2019 to $21.1 million in 2020. The decrease in cost of revenue was attributed
primarily to the decline in short distance flight volume, which was driven by
the COVID-19 pandemic. Generally, our direct costs payable to operators on a per
flight per route basis remained consistent with 2019 for our by-the-seat routes.
From 2019 to 2020, Short Distance revenue decreased as a percentage of our total
sales. Our direct operator costs for MediMobility Organ Transport and Jet are
generally higher than the direct operator costs for our Short Distance flights.
Thus, the shift in revenue mix led to an overall increase in our cost of revenue
as a percentage of total revenues.

Software Development
2021 to 2020 Annual Comparison
Software development costs increased by $0.7 million, or 76% due to an increase
in stock-based compensation expense of $0.5 million and staff costs of $0.2
million.
2020 to 2019 Annual Comparison
Software development costs increased by $0.1 million, or 13%, from $0.8 million
in 2019 to $0.9 million in 2020, principally due to hiring additional software
development engineers and consultants in the period.

General and Administrative
2021 to 2020 Annual Comparison
General and administrative expense increased by $20.6 million, or 222%, from
$9.3 million during 2020 to $29.9 million in 2021. The increase is attributable
to: a $8.4 million increase in stock-based compensation expense; a $7.3 million
increase in professional fees (primarily consulting, accounting and legal), of
which $6.0 million are attributable to the Company's transition from a private
to public company, while the remainder are attributable to ongoing business
operations and fees in connection with M&A activity; an increase in insurance
expense of $2.9 million ($2.7 million is due to D&O insurance since going
public); a $2.0 million increase due to staff, office and credit card processing
fees, in line with the higher level of activity as well as new roles created in
connection with the Company becoming public. Additionally, the Company has
eliminated cost controls introduced during the pandemic given continued revenue
growth and the recovery in overall travel demand.
                                       38
--------------------------------------------------------------------------------
  Table of Contents
2020 to 2019 Annual Comparison
General and administrative expense decreased by $1.2 million, or 11%, from $10.5
million during 2019 to $9.3 million in 2020, principally on account of headcount
reductions implemented in the spring of 2020 to reduce fixed costs in response
to the COVID-19 pandemic's impact on operations.

Selling and Marketing
2021 to 2020 Annual Comparison
Selling and marketing expense increased by $1.0 million, or 37%, from $2.5
million during 2020 to $3.5 million in 2021. The increase is attributable to
higher marketing activity to support the Company's revenue growth.
2020 to 2019 Annual Comparison
Selling and marketing expense decreased by $2.5 million, or 49%, from $5.0
million during 2019 to $2.5 million in 2020. The decrease in selling and
marketing expense was attributed primarily to significant reductions in
marketing and advertising related to scaling down our short distance flight
services in response to COVID-19 restrictions on travel and workplace closures.
Other non-operating (expense) income
2021 to 2020 Annual Comparison
Other non-operating (expense) income consisted of $18.3 million of non-cash
expense due to fair value revaluation of warrant liabilities, representing the
change in fair value between the date of the merger to September 30, 2021. We
also expensed recapitalization costs of $1.7 million attributable to warrant
liabilities due to our reverse recapitalization on May 7, 2021. We earn interest
income on our money market and short-term investments. Net interest income
increased by $0.3 million to $0.5 million in 2021 as a result of higher invested
assets in the current year compared to the prior year.
2020 to 2019 Annual Comparison
Other non-operating (expense) income consists of interest income and interest
expense. We earn interest income on our money market investments. Interest
income decreased by $0.5 million, or 72%, from $0.7 million during 2019 to $0.2
million during 2020.
Quarterly Disaggregated Revenue

The following table sets forth our unaudited quarterly disaggregated revenue by
product line for each of the twelve quarters in the period ended September 30,
2021. These unaudited quarterly disaggregated revenue by product line have been
prepared on the same basis as our audited consolidated financial statements
included elsewhere in this Annual Report on Form 10-K.

                                                                           Three Months Ended
                                               September 30,           June 30,           March 31,           December 31,
                                                   2021                  2021               2021                  2020
                                                                             (in thousands)
Product Line:
Short Distance                               $       13,353          $   5,721          $    1,049          $       2,130
MediMobility Organ Transport and Jet                  6,593              6,500               7,729                  5,524
Other                                                   370                730                 495                    332
Total Revenue                                $       20,316          $  12,951          $    9,273          $       7,986


                                       39

————————————————– ——————————

  Table of Contents

                                                                           Three Months Ended
                                             September 30,          June 30,                                   December 31,
                                                  2020                2020             March 31, 2020              2019
                                                                             (in thousands)
Product Line:
Short Distance                               $     3,699          $      629          $        1,787          $     3,351
MediMobility Organ Transport and Jet               4,387               2,636                   4,588                1,865
Other                                                233                 173                      79                    7
Total Revenue                                $     8,319          $    3,438          $        6,454          $     5,223



                                                                           Three Months Ended
                                             September 30,          June 30,                                   December 31,
                                                  2019                2019             March 31, 2019              2018
                                                                             (in thousands)
Product Line:
Short Distance                               $    14,916          $   

6 610 $ 1,785 $ 2,729
MediMobility organ transport and Jet

                 895                 848                   2,209                1,119
Other                                                 10                  48                      14                   13
Total Revenue                                $    15,821          $    7,506          $        4,008          $     3,861


Liquidity and Capital Resources
Sources of liquidity
Since inception and until May 2021, Old Blade financed its operations primarily
from sales of convertible preferred stock. On May 7, 2021 the Company raised
$333.3 million in net proceeds upon the consummation of the merger with EIC and
the sale of common stock through a PIPE. As of September 30, 2021 and 2020, we
had cash and cash equivalents of $7.0 million and $12.2 million, respectively,
and restricted cash of $0.6 million and $0.1 million, respectively. In addition,
as of September 30, 2021 we had $297.2 million of short-term investments in a
traded mutual fund which could be liquidated with a one day notice. We
anticipate that our available cash and cash equivalents and short-term
investments will be sufficient to meet our current operational needs for at
least the next 12 months from the date of filing this Annual Report. Our future
capital requirements will depend on many factors including the pace of our
expansion into new markets, our ability to attract and retain fliers, capital
expenditures, acquisitions, as well as the timing of regulatory approval and
market adoption of EVAs for urban air mobility.
On April 8, 2020, we entered into an unsecured note evidencing our PPP Loan in
the principal amount of $1.2 million. Proceeds from our PPP Loan were used for
payroll costs, costs related to certain group health care benefits, rent
payments, utility payments and interest payments on other debt obligations that
were incurred before February 15, 2021. On May 7, 2021, we repaid the PPP Loan
in full. See Note 7 to the consolidated financial statements for additional
information.
Liquidity Requirements
As of September 30, 2021, we had net working capital of $304.9 million,
including cash and cash equivalents of $7.0 million. We had net losses of $40.1
million (with $27.9 million non-cash costs related to warrants valuation and
stock-based compensation), $10.2 million and $10.8 million for the years ended
September 30, 2021, 2020 and 2019, respectively.
We expect to continue to incur net losses in the short term, as we continue to
execute our strategic initiatives. 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.
                                       40
--------------------------------------------------------------------------------
  Table of Contents
Cash Flows
The following table summarizes our cash flows for the periods indicated:

                                                                    For the Years Ended
                                                                       September 30,
                                                         2021               2020               2019
                                                                       (in thousands)
Net cash used in operating activities                $ (15,615)         $ (10,818)         $ (10,302)
Net cash used in investing activities                 (321,338)              (377)            (1,054)
Net cash provided by financing activities              332,259              1,180                116
Net decrease in cash, cash equivalents and
restricted cash                                      $  (4,694)         $ 

(10,015) $ (11,240)


Cash Used in Operating Activities
For the year ended September 30, 2021, net cash used in operating activities was
$15.6 million, primarily driven by a net loss of $40.1 million, offset by
non-cash items consisting of change in fair value of warrant liabilities of
$18.3 million, stock-based compensation of $9.6 million and depreciation and
amortization of $0.5 million. The changes in operating assets and liabilities
are primarily driven by an increase of $4.3 million in prepaid expenses (of
which $3.8 million is attributable to prepaid insurance premiums), an increase
of $0.4 million of accounts receivable and an increase of $0.1 million of
non-current assets. Those increases were partially offset by an increase of $2.0
million in accounts payable and accrued expenses and an increase of $0.7 million
of deferred revenue.
For the year ended September 30, 2020, net cash used in operating activities was
$10.8 million, primarily driven by a net loss of $10.2 million, adjusted for
non-cash items consisting of $0.5 million of depreciation and amortization and
$0.5 million of stock-based compensation. The changes in operating assets and
liabilities consist principally of increases of $0.3 million in prepaid expenses
and other current assets, $0.6 million in accounts receivable, and a decrease of
$1.4 million in accounts payable and accrued expenses, offset by an increase of
$0.6 million in deferred revenue.

For the year ended September 30, 2019, net cash used in operating activities was
$10.3 million, primarily driven by a net loss of $10.8 million, adjusted for
non-cash items consisting of $0.5 million of depreciation and amortization and
$0.3 million of stock-based compensation. The changes in operating assets and
liabilities consist principally of an increase of $0.3 million in prepaid
expenses and other current assets, an increase of $0.2 million in accounts
receivable and a decrease of $0.4 million in accounts payable and accrued
expenses, offset by an increase of $0.7 million in deferred revenue.
Cash Used In Investing Activities
For the year ended September 30, 2021, net cash used in investing activities was
$321.3 million, driven by a $308.8 million purchase of short-term investments,
$23.1 million in consideration paid for Trinity, $0.3 million in purchases of
property and equipment, and a $0.5 million purchase of a domain name, partially
offset by $11.3 million of proceeds from sale of short-term investments.
For the year ended September 30, 2020, net cash used in investing activities was
$0.4 million, driven by purchases of property and equipment.

For the year ended September 30, 2019, net cash used in investing activities was
$1.0 million, primarily driven by $0.6 million of purchases of property and
equipment, a $0.2 million investment in our joint venture in India, and $0.3
million for the purchase of a customer list.
Cash Provided by Financing Activities
For the year ended September 30, 2021, net cash provided by financing activities
was $332.3 million, reflecting primarily cash received of $213.7 million from
the Merger with EIC and cash received of $119.6 million from the issuance of
common stock under our PIPE financing, partially offset by the $1.2 million
repayment of the PPP Loan.
                                       41
--------------------------------------------------------------------------------
  Table of Contents
For the year ended September 30, 2020, net cash provided by financing activities
was $1.2 million, reflecting proceeds of $1.2 million from the PPP Loan.

For the year ended September 30, 2019, net cash provided by financing activities
was $0.1 million, reflecting proceeds from the exercise of common stock options.
Off-Balance Sheet Arrangements
As of September 30, 2021, we were not a party to any off-balance sheet
arrangements, as defined in Regulation S-K, that have or are reasonably likely
to have a current or future material effect on our financial condition, results
of operations, or cash flows.
Contractual Obligations and Commitments

Other than operating lease obligations and contractual obligations to aircraft
operators as disclosed in Note 7 and Note 12, respectively, of the Company's
consolidated financial statements included in this Annual Report on Form 10-K,
we had no material contractual obligations as of September 30, 2021.
Critical Accounting Policies and Significant Judgments and 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.
For information on the Company's significant accounting policies refer to Note 2
to the Company's Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
The financial statements required by this Item are included in Item 15 of this
report and are presented beginning on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our principal executive
officer and principal financial officer evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")).
Based on their evaluation of our disclosure controls and procedures, our
principal executive officer and principal financial officer concluded that our
disclosure controls and procedures were not effective as of September 30, 2021,
to ensure that information required to be disclosed by the Company in the
reports that we file or submit under the Exchange Act is (a) recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms and (b) accumulated and communicated to management,
including our principal executive officer and principal financial officer, as
appropriate to allow for timely decisions regarding required disclosure.
                                       42

————————————————– ——————————

Contents

Management has concluded that the Company's disclosure controls and procedures
were not effective as of September 30, 2021 due to the material weaknesses in
our internal control over financial reporting as described below.
Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Exchange Act Rule 13a-15(f) and
15d-15(f). Internal control over financial reporting is a process used to
provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of our financial statements for external purposes
in accordance with generally accepted accounting principles in the United
States. Internal control over financial reporting includes policies and
procedures that pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of our financial statements in accordance with generally
accepted accounting principles in the United States, and that our receipts and
expenditures are being made only in accordance with the authorization of our
Board of Directors and management; and provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on our financial statements.

Under the supervision and with the participation of our management, including
our Chief Executive Officer (our principal executive officer) and Chief
Financial Officer (our principal financial officer), we performed an assessment
of the Company's significant processes and key controls based on the framework
in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework). Our evaluation of
internal controls over financial reporting did not include the internal controls
of Trinity Air Medical, Inc., which was acquired on September 15, 2021 and is
included in our 2021 consolidated financial statements and constituted
approximately 4.5% of total assets as of September 30, 2021 and 1.5% and 0.1% of
sales and net earnings, respectively, for the year then ended.

A material weakness is defined within the Public Company Accounting Oversight
Board's Auditing Standard No. 5 as a deficiency or a combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the Company's annual or
interim financial statements will not be prevented or detected on a timely
basis.
Management concluded that the Company's internal controls over financial
reporting were not effective as of September 30, 2021. We determined that our
internal control over financial reporting had the following material weakness -
the Company has not developed a formal framework that enables management to
assess the effectiveness of internal controls over financial reporting,
specifically lacking evidential matter to support:

•Management's evaluation of whether the internal controls are designed to
prevent or detect material misstatements or omissions;
•Management's conclusion that controls tests were appropriately planned and
performed to adequately assess the operating effectiveness of the controls; and
•That the results of the control tests were appropriately considered.

These deficiencies impact on the Company's financial reporting such that there
is a reasonable possibility that a material misstatement of the Company's annual
or interim financial statements will not be prevented or detected on a timely
basis and represents a material weakness in the Company's internal control over
financial reporting.

Because disclosure controls and procedures include those components of internal
control over financial reporting that provide reasonable assurances that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles,
management also determined that its disclosure controls and procedures were not
effective as a result of the above-mentioned material weaknesses in its internal
control over financial reporting.

Despite material weaknesses, management has concluded that the consolidated financial statements included elsewhere in this Annual Report on Form 10-K fairly present, in all material respects, our financial condition, results of operations and cash flows in accordance with GAAP. .

This annual report does not include an attestation report from the Company’s registered public accounting firm regarding internal control over financial reporting. The management report has not been certified by the Company’s head office.

                                       43
--------------------------------------------------------------------------------
  Table     of Contents
public accounting firm pursuant to the rules of the Securities and Exchange
Commission that permit the Company to provide only management's report in this
Annual Report.

Management remediation plans

The Company is remediating these material weaknesses as efficiently and
effectively as possible, with the hiring of a Director of Internal Controls to
assist in the overall evaluation and documentation of the design and operating
effectiveness of our internal controls over financial reporting.

These plans are subject to ongoing review by senior management and Audit
Committee oversight. As we continue to evaluate and work to improve our internal
control over financial reporting, management may implement additional measures
to address the material weaknesses or modify the remediation plan described
above and will continue to review and make necessary changes to the overall
design of our internal controls over financial reporting. The Company expects to
complete the required remedial action during 2022.

Fixed previously identified hardware weaknesses

The following significant weaknesses previously disclosed as of June 30, 2021 have been remedied from September 30, 2021:

• The lack of segregation of duties in our accounting procedures and approval of significant transactions, due in part to the lack of sufficient staff in the accounting and finance function; and • The need to increase our information and application technology controls, including, but not limited to, the addition of formally documented controls over logical system access and management of code changes. .

The Company addressed these significant weaknesses by taking the following actions:

•Hiring additional finance and accounting personnel, including both a Chief
Accounting Officer and Corporate Controller, to bolster the accounting
capabilities and capacity and to establish and maintain internal control over
financial reporting;

• Implementation of additional closing procedures to strengthen its process and shorten its financial reporting closing cycle;

•Designing and implementing controls to formalize roles and review
responsibilities to align with the accounting staff's skills and experience and
to allow for appropriate segregation of duties in our accounting procedures and
approval of significant transactions; and

• Design and implement general IT controls, including controls over the provisioning and monitoring of user access rights and privileges and change management processes and procedures.

Changes in internal control over financial reporting

On May 7, 2021, the Company consummated its Merger by and among EIC, Merger Sub,
and Old Blade. The historical consolidated financial statements of Old Blade
became the historical consolidated financial statements of the registrant. We
are engaged in the process of design and implementation of our internal control
over financial reporting in a manner commensurate with the scale of our
operations subsequent to the Merger.
Other than the specific remediation steps discussed above, there were no other
changes in our internal control over financial reporting, as such term is
defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities
Exchange Act of 1934, that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting for the period
covered by this Annual Report.
Limitations on Internal Control over Financial Reporting

An internal control system over financial reporting has inherent limitations and
may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial
                                       44

————————————————– ——————————

  Table     of Contents
statement preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. However, these inherent
limitations are known features of the financial reporting process. Therefore, it
is possible to design into the process safeguards to reduce, though not
eliminate, this risk.
Item 9B. Other Information

© Edgar online, source Previews

Share.

Comments are closed.