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 OnMay 7, 2021 (the "Closing Date"), privately heldBlade Urban Air Mobility, Inc. , aDelaware corporation, ("Old Blade") consummated the previously announced transactions contemplated by the Agreement and Plan of Merger (the "Merger Agreement"), datedDecember 14, 2020 , by and amongExperience 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 toBlade 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 OnSeptember 15, 2021 , the Company completed its acquisition of 100% ofTrinity 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 toSeptember 30, 2021 are included in theMediMobility 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 theNortheastern 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 allNew York area airports and dedicated Blade terminals inManhattan's heliports for$195 per seat (or$95 per seat with the purchase of an annualAirport 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 betweenNew York and bothMiami andAspen . •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 inIndia , flying betweenMumbai ,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 ourMediMobility 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 ourMediMobility Organ Transport and Jet business OurMediMobility 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 ourMediMobility 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 inthe 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 theWest 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 inIndia . 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 theFAA for commercial operations inthe 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 endedJune 30 andSeptember 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. OurMediMobility 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 fromMediMobility Organ Transport customers. Additionally, our joint venture agreement for operations inIndia 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 theSEC , 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 EndedSeptember 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 forMediMobility 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 forMediMobility 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 toSeptember 30, 2021 . We also expensed recapitalization costs of$1.7 million attributable to warrant liabilities due to our reverse recapitalization onMay 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$0.2 million during 2020. Quarterly Disaggregated Revenue The following table sets forth our unaudited quarterly disaggregated revenue by product line for each of the twelve quarters in the period endedSeptember 30, 2021 . These unaudited quarterly disaggregated revenue by product line have been prepared on the same basis as our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Three Months Ended September 30, June 30, March 31, December 31, 2021 2021 2021 2020 (in thousands) Product Line: Short Distance$ 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
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 untilMay 2021 , Old Blade financed its operations primarily from sales of convertible preferred stock. OnMay 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 ofSeptember 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 ofSeptember 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. OnApril 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 beforeFebruary 15, 2021 . OnMay 7, 2021 , we repaid the PPP Loan in full. See Note 7 to the consolidated financial statements for additional information. Liquidity Requirements As ofSeptember 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$10.8 million for the years endedSeptember 30, 2021 , 2020 and 2019, respectively. We expect to continue to incur net losses in the short term, as we continue to execute our strategic initiatives. Based on our current liquidity, we believe that no additional capital will be needed to execute our current business plan over the next 12 months. 40 -------------------------------------------------------------------------------- Table of Contents Cash Flows The following table summarizes our cash flows for the periods indicated: For the Years Ended September 30, 2021 2020 2019 (in thousands) Net cash used in operating activities$ (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)
Cash Used in Operating Activities For the year endedSeptember 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 endedSeptember 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 endedSeptember 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 endedSeptember 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 endedSeptember 30, 2020 , net cash used in investing activities was$0.4 million , driven by purchases of property and equipment. For the year endedSeptember 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 inIndia , and$0.3 million for the purchase of a customer list. Cash Provided by Financing Activities For the year endedSeptember 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 endedSeptember 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 endedSeptember 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 ofSeptember 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 ofSeptember 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 inthe United States of America , orU.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 withU.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 ofSeptember 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 theSEC'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 ofSeptember 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 inthe 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 inthe 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 theCommittee of Sponsoring Organizations of theTreadway Commission (2013 framework). Our evaluation of internal controls over financial reporting did not include the internal controls ofTrinity Air Medical, Inc. , which was acquired onSeptember 15, 2021 and is included in our 2021 consolidated financial statements and constituted approximately 4.5% of total assets as ofSeptember 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 thePublic 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 ofSeptember 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 theSecurities 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
• 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
OnMay 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
