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Item 1A. Risk Factors

2023-03-07 compared with 2022-03-15 · 82 added, 122 removed, 352 unchanged (37% of the section changed)

ITEM 1A RISK FACTORS

You should carefully consider the risks and uncertainties described below and the other information in the Annual Report on Form 10-K before making an investment in our common stock.

You should carefully consider the risks and uncertainties described below and the other information in this Annual Report before making an investment in our common stock.

Our business, financial condition, results of operations, or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common stock could decline and you could lose all or part of your investment.

This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties.

This Annual Report also contains forward-looking statements that involve risks and uncertainties.

See “Special Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below.

Risks Related to AerSale’s Business and Industry

The coronavirus (COVID-19) pandemic has had a material adverse impact on our business, operating results, financial condition, and liquidity, and the duration and extent of the pandemic could prolong or increase the adverse impact.

The COVID-19 pandemic has caused significant volatility in financial and other markets, which has raised the prospect of an extended global recession.

The commercial aviation industry, including our operations, has been particularly and adversely impacted by the COVID-19 pandemic.

Public health problems resulting from COVID-19 and precautionary measures instituted by governments and businesses to mitigate its spread, including travel restrictions, quarantines, shelter in place directives, and shutting down of non-essential businesses has and continues to contribute to a general slowdown in the global economy, and if it continues for an extended period of time, it could have a material adverse impact to the businesses of our customers, suppliers and distribution partners, and could disrupt our operations.

Changes in our operations in response to the COVID-19 pandemic or employee illnesses resulting from the pandemic may result in inefficiencies or delays, including in sales and product development efforts and our manufacturing and supply chain, as well as additional costs related to business continuity initiatives, that cannot be fully mitigated through succession planning, employees working remotely, or teleconferencing technologies.

The spread of COVID-19 along with related travel restrictions and operational issues has caused a decrease in the demand for air travel and has resulted in lower demand from civil aviation customers for our products.

Passenger airline traffic has declined significantly since March 2020, and we expect to continue to see reduced demand in our non-cargo commercial businesses.

Moreover, if the COVID-19 pandemic continues to result in decreased worldwide commercial activity, it could eventually adversely affect the demand for airline cargo services.

Reduced numbers of aircraft flying or flight hours negatively impacts the demand for many of our products and services, and any prolonged reduction could materially and adversely affect our business, operating results, financial condition, and liquidity.

While the full extent and impact of the COVID-19 pandemic cannot

be reasonably estimated with certainty at this time, COVID-19 has had a significant impact on our business and the businesses of our customers and suppliers, as well as our results of operations and financial condition, and an extended period of economic disruption could have a material adverse impact on our business, results of operations, access to sources of liquidity and overall financial condition.

In addition, the ongoing COVID-19 pandemic continues to be a rapidly evolving situation mainly due to the recent surge in COVID-19 variants.

In November 2021, a new Omicron variant of COVID-19 was detected in multiple countries, including the United States.

Public health officials and medical professionals have warned that COVID-19 cases may spike, particularly if vaccination rates do not quickly increase or if additional potent disease variants emerge.

It is unclear how long the resurgence due to the recent variants will last or the extent to which they will contribute to an increase in cases, and what safety measures governments will impose in response to such potential resurgences.

If cases rise, mask mandates, social-distancing, travel restrictions and stay-at-home orders could be reinstated.

Even before the increases in cases due to the Delta and Omicron variants, many individuals remained cautious about resuming activities.

The long-term impact of the new variants cannot be predicted at this time, and could depend on numerous factors, including vaccination rates among the population, the effectiveness of COVID-19 vaccines against these variants and the response by governmental bodies and regulators.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19 pandemic on our business.

An extended period of economic disruption could have a material adverse impact on our business, results of operations, access to sources of liquidity and overall financial condition.

Moreover, a prolonged epidemic or pandemic, or the threat thereof, could result in worker absences, lower productivity, voluntary closure of our offices and facilities, travel restrictions for our employees and other disruptions to our business.

The ongoing COVID-19 pandemic, including associated variants, has had a material adverse impact, and could in the future have a material adverse impact, on our business, operating results, financial condition, and liquidity.

The COVID-19 pandemic, including associated variants, continues to negatively affect the commercial aviation industry, including our business and operations.

The COVID-19 pandemic and the measures instituted by governments, and businesses to mitigate its spread, including travel restrictions, quarantines, shelter in place directives, and shutting down of non-essential businesses led to significant declines in demand for air travel in 2020 and 2021, and, therefore, resulted in lower demand from civil aviation customers for our products.

Although there have been signs of ongoing recovery in the overall demand for commercial air travel, some commercial aviation segments have recovered less quickly than others, and it remains uncertain when commercial flight activity will return to and/or exceed pre-pandemic levels.

Moreover, a resurgence of the COVID-19 pandemic (including through any new variant strains of the underlying virus), a new health epidemic or similar outbreak or other negative developments associated with the pandemic or outbreak could hinder or reverse the commercial flight activity recovery and lead to decreased worldwide commercial activity, which could eventually adversely affect the demand for airline cargo services.

Reduced flight activity negatively impacts the demand for many of our products and services, and any prolonged reduction could materially and adversely affect our business, operating results, financial condition, and access to sources of liquidity.

While COVID-19 has had a significant impact on our business and the businesses of our customers and suppliers, as well as our results of operations and financial condition, the extent to which COVID-19 or any other pandemics, epidemics and similar outbreaks, especially of infectious diseases, may impact our business, results of operations and financial condition depends on future developments, including (i) the duration, spread, severity, or any recurrence of the COVID-19 pandemic (including COVID-19 variants);

(ii) the effectiveness, availability, and usage of vaccines;

(iii) the impact of government mandates, directives, orders, regulations, and other governmental actions;

(iv) the extent of the impact of the COVID-19 pandemic or similar outbreak on overall demand for air travel and our related business plans and decisions;

(v) the impact of the COVID-19 pandemic or similar outbreak on the our ability to retain key employees;

and (vi) the impact of the COVID-19 pandemic or similar outbreak on our access to capital, all of which cannot be predicted with certainty.

Moreover, prolonged pandemics, epidemics and similar outbreaks, or the threat thereof, could result in worker absences, lower productivity, voluntary closure of our offices and facilities, travel restrictions for our employees and other disruptions to our business.

Any of these could have a material adverse effect on our business, financial condition or results of operations.

We have taken a number of actions in response to the decreased demand for certain products and services as a result of COVID-19, including reducing all non-essential spending.

Certain of our facilities have experienced temporary disruptions as a result of the COVID-19 pandemic, and we cannot predict whether any of our facilities will experience more significant disruptions in the future.

We have also taken steps to improve our liquidity, including seeking financial assistance under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

Certain of our subsidiaries received $16.4 million from the U.S.

Treasury Department (“Treasury”) through the Payroll Support Program (“PSP1”) under the CARES Act, of which $12.7 million was received prior to December 31, 2020 and the remaining amount was received during the first quarter of 2021.

As part of the Payroll Support Extension Law (“PSP Extension Law”), we entered into an agreement with the U.S.

Department of the Treasury (“PSP2”) on March 4, 2021 and received relief funds of $5.5 million during 2021.

Pursuant to the American Rescue Plan Act of 2021 (“ARP”), we entered into an agreement (“PSP3”) with the U.S.

Department of the Treasury on April 16, 2021 and received relief funds of an additional $5.5 million during 2021.

In connection with the financial assistance we have received under the Payroll Support Program, we are required to comply with certain provisions of the CARES Act, including the requirement that funds provided pursuant to the Payroll Support Program be used exclusively for the continuation of payment of employee wages, salaries and benefits.

In addition, we are subject to provisions prohibiting the repurchase of our securities and the payment of dividends through September 30, 2022, as well as limitations on the payment of certain employee compensation through April 1, 2023.

These restrictions may affect our operations and if we do not comply with these provisions, we may be required to reimburse up to 100% of any previously received relief funds.

In particular, limitations on compensation may adversely impact our ability to attract and retain senior management or attract other key employees during this critical time.

As of December 31, 2021, we were in compliance with all of these provisions.

In addition, we cannot predict the impact that COVID-19 will have on our customers, suppliers, vendors, and other business partners, and each of their financial conditions;

however, any material effect on these parties could adversely impact us.

The impact of COVID-19 may also exacerbate other risks discussed in this “Risk Factors” section, any of which could have a material effect on us.

We cannot predict the impact that COVID-19 or any other pandemics, epidemics and similar outbreaks, especially of infectious diseases, will have on our customers, suppliers, vendors, and other business partners, and each of their financial conditions;

however, any material effect on these parties could adversely impact us, and may also exacerbate other risks discussed in this “Risk Factors” section, any of which could have a material effect on us.

Supply chain disruptions could have adverse effects on our ability to provide certain services

We source parts and components for our business from various suppliers around the world.

Disruptions to our supply chain and business operations, or to our suppliers’ or customers’ supply chains and business operations, could have adverse effects on our ability to provide aftermarket support and services.

Global supply chain and labor markets are continuing to experience high levels of disruption, causing significant materials and parts shortages, as well as delivery delays, labor shortages, distribution issues, energy cost increases and price increases.

Current geopolitical conditions, including sanctions and other trade restrictive actions and strained intercountry relations, are contributing to these issues.

These issues could lead to significant supplier performance failures and delays.

Disruptions to our supply chain and business operations, or to our suppliers’ supply chains and business operations, could have adverse effects on our ability to provide aftermarket support and services to our customers.

We are affected by factors that adversely impact the commercial aviation industry.

As a provider of products and services to the commercial aviation industry, we are generally affected by overall economic conditions of that industry.

The commercial aviation industry is historically cyclical and has been negatively affected in the past by geopolitical events, high fuel and oil prices, lack of capital, and weak economic conditions.

As a result of these and other events, from time to time certain of our customers have filed for bankruptcy protection or ceased operation.

The commercial aviation industry is historically cyclical and has been negatively affected in the past by geopolitical events, such as terrorism, high fuel and oil prices, labor issues, lack of capital, and weak economic conditions.

As a result of these and other events, from time to time certain of our customers have filed for

bankruptcy protection or ceased operation.

The impact of instability in the global financial markets has led, and may in the future lead, airlines to reduce domestic or international capacity.

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Reduced demand from customers caused by weak economic conditions, including tight credit conditions and customer bankruptcies, may adversely impact our financial condition or results of operations.

A slowdown in the global economy, or a return to a recession, would negatively impact the commercial aviation industry, and may have a material adverse effect on our business, financial condition, liquidity and results of operations.

A slowdown in the global economy, or a recession, would negatively impact the commercial aviation industry, and may have a material adverse effect on our business, financial condition, liquidity and results of operations.

Our ability to profitably manage mid-life Flight Equipment through the end of its life-cycles depends in part on our ability to successfully source acquisition opportunities of used Flight Equipment on favorable terms to provide feedstock for the sale of USM parts.

Our inability to acquire Flight Equipment could adversely affect our financial condition or results of operations.

Our business, financial condition, results of operations, and growth rates may be adversely affected by these and other events that impact the aviation industry, including the following:

● deterioration in the financial condition of our existing and potential customers;

● reductions in demand for used Flight Equipment;

Our business, financial condition, results of operations, and growth rates may be adversely affected by these and other events that impact the aviation industry, including those mentioned elsewhere in this report and the following:

● increased in-house maintenance by airlines;

● lack of new and/or USM parts in the marketplace;

● climate change, environmental catastrophes and government regulations implemented to address them;

● the COVID-19 pandemic;

● acts of terrorism;

● future outbreaks of infectious diseases such as the novel coronavirus;

● climate change, environmental catastrophes and government regulations implemented to address them and;

● acts of God.

Our operating results vary, and comparisons to results for preceding periods may not be meaningful.

Due to a number of factors, our operating results may fluctuate, including for the following reasons:

● the COVID-19 pandemic;

Due to a number of factors, our operating results may fluctuate, including, among others, for the following reasons:

● the timing and number of purchases and sales of Flight Equipment;

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We anticipate that fluctuations from period to period will continue in the future.

As a result, we believe that comparisons to results for preceding periods may not be meaningful, and that results of prior periods should not be relied upon as an indication of our future performance.

As a result, we

believe that comparisons to results for preceding periods may not be meaningful, and that results of prior periods should not be relied upon as an indication of our future performance.

Market values for our aviation products fluctuate, and we may be unable to recover our costs incurred with respect to engines, rotable components and other aircraft parts.

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As a result, the relevant asset may be off-lease and not generating revenue for a prolonged period.

In addition, we will incur direct costs associated with repossessing our Flight Equipment, which may include legal and similar costs, costs of transporting, storing and insuring the Flight Equipment, and costs associated with necessary maintenance and recordkeeping to make the Flight Equipment

available for re-lease or sale.

During this time, we will not realize revenue from the Flight Equipment being repossessed and will continue to be obligated to pay any debt financing related to the Flight Equipment.

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In addition, certain airlines operate new fleet types and/or newer generation aircraft and we may not have contractual arrangements to service these aircraft, nor technicians trained and certified to perform the required airframe maintenance, repair, and overhaul activities on such aircraft.

If either the number of aircraft operating or the level of outsourcing of maintenance activities for the aircraft models for which we are authorized to service declines, we may not be able to execute our operational and financial plans at our MRO facilities, which may adversely impact our financial condition or results of operations.

If either the number of aircraft operating or the level of outsourcing of maintenance activities for the aircraft models for which we are authorized to

service declines, we may not be able to execute our operational and financial plans at our MRO facilities, which may adversely impact our financial condition or results of operations.

Our operations would be adversely affected by a shortage of skilled personnel or work stoppages.

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Our competitors include aircraft manufacturers, aircraft component and parts manufacturers, airline and aircraft service companies, other companies MRO services, other aircraft spare parts distributors and redistributors.

Certain of our competitors may have substantially greater financial and other resources than we have

and others may price their products and services below our selling prices.

Certain of our competitors may have substantially greater financial and other resources than we have and others may price their products and services below our selling prices.

These competitive markets also create pressure on our ability to hire and retain qualified technicians and other skilled labor needs.

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● uncertainties arising from foreign local business practices and cultural considerations;

● changes in United States policies on trade relations and trade policy, including implementation of or changes in trade sanctions, tariffs, and embargoes.

● changes in United States policies on trade relations and trade policy, including implementation of or changes in trade sanctions (such as those imposed on Russia), tariffs, and embargoes.

Following a national referendum and enactment of legislation by the government of the United Kingdom, the United Kingdom formally withdrew from the European Union and ratified a trade and cooperation agreement governing its future relationship with the European Union.

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Also, any inadequacies in our systems and policies could result in payments being withheld, penalties and reduced future business, and may adversely affect our results of operations and financial condition.

Further consolidation in the aerospace industry could adversely affect our business and financial results.

The aerospace and defense industry is experiencing significant consolidation, including our customers, competitors and suppliers.

Consolidation among our customers may result in delays in the awarding of new contracts and losses of existing business.

Consolidation among our competitors may result in larger competitors with greater resources and market share, which could adversely affect our ability to compete successfully.

Consolidation among our suppliers may result in fewer sources of supply and increased cost to us.

Our business could be negatively affected by cyber or other security threats or other disruptions.

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Our systems and technologies, or those of third parties on which we rely, could fail or become unreliable due to equipment failures, software viruses, cyber threats, ransomware attacks, terrorist acts, natural disasters, power failures or other causes.

Cyber security threats are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to our sensitive information, business e-mail compromises, ransomware attacks, and other electronic security breaches, including at our customers, suppliers, subcontractors, and joint venture partners, that could lead to disruptions in mission critical systems, unauthorized release of confidential or otherwise protected information, and corruption of data.

As a result of the ongoing COVID-19 pandemic, certain functional areas of our workforce may function in a remote work environment, which could heighten the risk of these potential vulnerabilities.

Cybersecurity threats are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to our sensitive information, business e-mail compromises, ransomware attacks, and other electronic security breaches, including at our customers, suppliers, subcontractors, and joint venture partners, that could lead to disruptions in mission critical systems, unauthorized release of confidential or otherwise protected information, and corruption of data.

As a result of the ongoing COVID-19 pandemic, certain functional areas of our workforce may continue to function in a remote work environment, which could heighten the risk of these potential vulnerabilities.

The procedures and controls we utilize to monitor and mitigate these threats may not be sufficient to prevent security threats from materializing.

If any of these events were to materialize, the costs related to cyber or other security threats or disruptions may not be fully insured or indemnified, and may adversely affect our results of operations and financial condition or disruption of our ability to make financial reports and other public disclosures required of public companies.

Moreover, expenditures incurred in implementing and maintaining cyber security and other procedures and controls may adversely affect our results of operations and financial condition.

Moreover, expenditures incurred in implementing and maintaining cybersecurity and other procedures and controls may adversely affect our results of operations and financial condition.

We may need to make significant capital expenditures to keep pace with technological developments in our industry.

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Our loss of a contract with an OEM customer and the related license rights to use an OEM’s intellectual property or tooling, may adversely affect our results of operations and financial condition.

We could become involved in intellectual property litigation, which could have a material and adverse impact on our profitability.

We and other companies in our industry possess certain proprietary rights relating to designs, engineering, manufacturing processes and MRO procedures.

In the event that we believe that a third party is infringing upon our proprietary rights, we may bring an action to enforce such rights.

In addition, third parties may claim infringement by us with respect to their proprietary rights and may initiate legal proceedings against us in the future.

The expense and time of bringing an action to enforce such rights or defending against infringement claims can be significant, which may adversely affect our results of operations and financial condition.

Intellectual property litigation involves complex legal and factual questions which makes the outcome of any such proceedings subject to considerable uncertainty.

Not only can such litigation divert management’s attention, but it can also expose us to damages and potential injunctive relief which, if granted, may preclude us from making, using or selling particular products or technology.

Uncertainties resulting from our participation in intellectual property litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

There could also be public announcements of the results of hearings, motions or interim proceedings or developments that could be perceived negatively by analysts or investors and the value of such intellectual property could be diminished.

Accordingly, the market price of our common stock may decline.

Uncertainties resulting from the initiation and continuation of intellectual property litigation or other proceedings could have a material adverse effect of our business, financial condition and results of operation.

Our operations depend on our facilities, which are subject to physical and other risks that could disrupt production.

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However, we cannot ensure that it will prevent all such misconduct committed by our employees, agents, subcontractors, suppliers, business partners or others working on our behalf or with us, and this risk of improper conduct may increase as we expand globally.

In the ordinary course of business we may form and/or become a member of joint ventures.

In the future, we may form and/or become a member of joint ventures.

We may be unable to prevent misconduct or other violations of applicable laws by these joint ventures (including their officers, directors and employees) or our partners.

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We are subject to certain limitations on employee compensation, payment of dividends and stock buy backs pursuant to the CARES Act.

In connection with the financial assistance we have received and may in the future receive through the Payroll Support Program, and loan program under the CARES Act pursuant to the CARES Act, we are subject to certain limitations, including:

(i) limitations on the payment of certain employee compensation through April 1, 2023, (ii) prohibitions on paying dividends to our stockholders through September 30, 2022;

accordingly no dividend has been paid or will be paid by the Company, and (iii) limitations on the Company or its affiliates from purchasing an equity security that is listed on a national securities exchange of the Company or any parent company through September 30, 2022 .

These restrictions will materially affect our operations, and we may not be successful in managing these impacts for the duration of the restrictions.

In particular, limitations on compensation may adversely impact our ability to attract and retain senior management, or attract other key employees during this critical time.

In connection with the financial assistance we received through the Payroll Support Program, and loan program under the CARES Act pursuant to the CARES Act, we are subject to certain limitations on the payment of certain employee compensation through April 1, 2023.

We believe that our future success will depend in large part on our ability to retain or attract highly qualified management, technical and other personnel.

Limitations on compensation may adversely impact our ability to attract and retain senior management, or attract other key employees during the duration of these restrictions.

Our business might suffer if we were to lose the services of certain key employees.

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Because our key employees have knowledge of our industry and customers, and would be difficult to replace, loss of any of these employees may adversely affect our results of operations and financial condition.

We could become involved in intellectual property litigation, which could have a material and adverse impact on our profitability.

We and other companies in our industry possess certain proprietary rights relating to designs, engineering, manufacturing processes and MRO procedures.

In the event that we believe that a third party is infringing upon our proprietary rights, we may bring an action to enforce such rights.

In addition, third parties may claim infringement by us with respect to their proprietary rights and may initiate legal proceedings against us in the future.

Intellectual property litigation involves complex legal and factual questions which makes the outcome of any such proceedings subject to considerable uncertainty.

Uncertainties resulting from our participation in intellectual property litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

Accordingly, the market price of our common stock may decline.

Uncertainties resulting from the initiation and continuation of

intellectual property litigation or other proceedings could have a material adverse effect of our business, financial condition and results of operation.

If our subcontractors or suppliers fail to perform their contractual obligations, our contract profitability and our ability to win new contracts may be adversely affected.

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Our ability to manage our business and to execute our business strategy is dependent, in part, on the continued availability of debt and equity capital.

Our Amended and Restated Credit Agreement (as defined below) matures on March 12, 2024.

Access to the debt and equity capital markets may be limited by various factors, including the condition of overall credit markets, general economic factors, state of the aviation industry, our financial performance, and credit ratings.

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Furthermore, changes in income tax laws and regulations, or their interpretation, could result in higher or lower income tax rates assessed or changes in the taxability of certain sales or the deductibility of certain expenses, thereby affecting our income tax expense and profitability.

Further consolidation in the aerospace industry could adversely affect our business and financial results.

The aerospace and defense industry is experiencing significant consolidation, including our customers, competitors and suppliers.

Consolidation among our customers may result in delays in the awarding of new contracts and losses of existing business.

Consolidation among our competitors may result in larger competitors with greater resources and market share, which could adversely affect our ability to compete successfully.

Consolidation among our suppliers may result in fewer sources of supply and increased cost to us.

Our financial results of operations could be adversely affected by impairment of our goodwill or other intangible assets.

When we acquire a business, we record goodwill equal to the excess of the amount we pay for the business, including liabilities assumed, over the fair value of the tangible and identifiable intangible assets of the business we acquire.

Goodwill and other intangible assets that have indefinite useful lives must be evaluated at least annually for impairment.

The specific guidance for testing goodwill and other non-amortized intangible assets for impairment requires management to make certain estimates and assumptions when allocating goodwill to reporting units and determining the fair value of reporting unit net assets and liabilities, including, among other things, an assessment of market conditions, projected cash flows, investment rates, cost of capital and growth rates, which could significantly impact the reported value of goodwill

and other intangible assets.

Goodwill and other intangible assets that have indefinite useful lives must be evaluated for impairment at least annually, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Changes in our estimates and assumptions could adversely impact projected cash flows and the fair value of reporting units.

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If at any time we determine an impairment has occurred, we are required to reflect the reduction in value as an expense within operating income, resulting in a reduction of earnings and a corresponding reduction in our net asset value in the period such impairment is identified.

As part of management's annual evaluation, the quantitative analysis resulted in a conclusion that the fair value of our reporting units exceeded their carrying values;

As part of management's annual evaluation, the qualitative and quantitative analyses resulted in a conclusion that the fair value of our reporting units exceeded their carrying values;

therefore, goodwill and other indefinite lived intangibles were not impaired.

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The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR.

At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates as the transition away from the LIBOR benchmarks is anticipated in coming years.

Accordingly, the outcome of these reforms is uncertain, and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cause LIBOR to cease to exist.

Although SOFR has been endorsed by the Alternative Reference Rates Committee as its preferred replacement for the London Interbank Offered Rate (“LIBOR”), it remains uncertain how markets will respond to SOFR or other alternative reference rates as the transition away from the LIBOR benchmarks is imminent.

The consequences of these developments cannot be entirely predicted, but could cause potential increases in interest rates on our floating debt rate.

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Any revocation or suspension of our material licenses, certificates, authorizations, or approvals by the FAA or equivalent regulatory agencies in other countries, may adversely impact our financial condition or results of operations.

Users of Flight Equipment are regulated by general civil aviation authorities, including the FAA in the United States and similar governmental authorities in other countries, which regulate the maintenance of engines and issue

airworthiness directives.

Airworthiness directives typically set forth special maintenance actions or modifications with respect to certain engine and aircraft types or series of specific engines that must be implemented for the engine or aircraft to remain in service.

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The FCPA and these other laws generally prohibit us and our employees and intermediaries from authorizing, promising, offering, or providing, directly or indirectly, improper or prohibited payments, or anything else of value, to government officials or other persons to obtain or retain business or gain some other business advantage.

We and certain of our customers operate in a number of jurisdictions that pose a high risk of potential FCPA violations, and we participate in collaborations and relationships with third parties whose corrupt or illegal activities could potentially subject us to liability under the FCPA

or local anti-corruption laws, even if we do not explicitly authorize or have actual knowledge of such activities.

In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.

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If we are not in compliance with the FCPA and other anticorruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity.

Likewise, any investigation of any potential violations of the FCPA, other anti-corruption laws or Trade Control laws by the United States or other authorities could also have an adverse impact on our reputation, our business, financial condition and results of operations.

Likewise, any investigation of any potential violations of the FCPA, other anti-corruption laws or Trade Control laws by the United States or other authorities could

also have an adverse impact on our reputation, our business, financial condition and results of operations.

Efforts to ensure that our business arrangements with third parties will comply with applicable aviation and aerospace laws and regulations will involve substantial costs.

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Some historical and current legal proceedings and future legal proceedings may purport to be brought as class actions on behalf of similarly situated parties including with respect to employment-related matters.

We discuss legal proceedings in the “Commitments, Contingencies and Uncertainties” footnote to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We discuss legal proceedings in Note R – Commitments and Contingencies within our consolidated financial statements included elsewhere in this Annual Report (the “Consolidated Financial Statements”).

Some or all of our expenditures to defend, settle or litigate these matters may not be covered by insurance or could impact our cost and ability to obtain insurance in the future.

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These liens and lien holders could impair our ability to repossess and re-lease, or sell our Flight Equipment.

customers do not discharge these liens, we may find it necessary to pay the claims secured by such liens to repossess the Flight Equipment subject to such third-party liens.

If our customers do not discharge these liens, we may find it necessary to pay the claims secured by such liens to repossess the Flight Equipment subject to such third-party liens.

In certain countries, an engine affixed to an aircraft may become an accession to the aircraft and we may not be able to exercise our ownership rights over the engine.

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If an aircraft is security for the owner’s obligations to a third-party, the security interest in the aircraft may supersede our rights as owner of the engine.

This legal principle could limit our ability to repossess a leased engine in the event of a lessee’s bankruptcy or lease default while the aircraft with the engine installed remains in such a jurisdiction.

This legal principle could limit our ability to repossess a leased engine in the event of a lessee’s bankruptcy

or lease default while the aircraft with the engine installed remains in such a jurisdiction.

We may suffer a loss if we are not able to repossess engines leased to lessees in these jurisdictions.

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The cost to comply with new and potential environmental laws and regulations could be substantial for the Company.

In October 2016, the International Civil Aviation Organization (“ICAO”) passed a resolution adopting the Carbon Offsetting and Reduction Scheme for International Aviation ("CORSIA"), which is a global, market-based emissions offset program to encourage carbon-neutral growth beyond 2020.

CORISA is scheduled to be implemented through multiple phases beginning in 2021.

ICAO continues to develop details regarding implementation, but we believe compliance with CORSIA will increase operating costs for us and our customers.

In October 2016, ICAO passed a resolution adopting the Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”), which is a global, market-based emissions offset program to encourage carbon-neutral growth beyond 2020.

CORSIA is scheduled to be implemented through multiple phases beginning in 2021.

continues to develop details regarding implementation, but we believe compliance with CORSIA will increase operating costs for us and our customers.

Risk Factors Related to our Common Stock

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● you may not be able to liquidate your investment in shares of common stock;

● you may not be able to resell your shares of common stock at or above the price attributed to them in the Business Combination;

● the market price of shares of common stock may experience significant price volatility;

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The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business.

If no or few analysts commence coverage of us, the trading price of our stock could be negatively affected.

Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our common stock could decline.

If our analysts do not continue to cover us, or if no additional analysts commence coverage of us, the trading price of our stock could be negatively affected.

Even with analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our common stock could decline.

If one or more of these analysts cease to cover our common stock, we could lose visibility in the market for our stock, which in turn could cause our common stock price to decline.

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Certain shares of our common stock are freely tradable without restriction under the Securities Act, except for any shares of our common stock that may be held or acquired by our directors, executive officers, and other affiliates, as that term is defined in the Securities Act, which are be restricted securities under the Securities Act.

Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from

registration is available.

Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available.

Certain of our stockholders and members of our management have rights, subject to certain conditions, to require us to file registration statements covering shares of our common stock or to include shares in registration statements that we may file for ourselves or other stockholders.

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We intend to retain any future earnings to fund operations, to service debt and other obligations, and to use for other corporate needs.

Further, our credit facilities and the CARES Act limit our ability to pay cash dividends.

Further, our credit facility and the CARES Act limit our ability to pay cash dividends.

As an “emerging growth company,” we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our common stock less attractive to investors.

10 unchanged sentences

Section 404 requires management to establish and maintain a system of internal control over financial reporting.

Annual reports on Form 10-K filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), must contain a report from management assessing the effectiveness of our internal control over financial reporting.

Annual reports on Form 10-K filed under the Exchange Act must contain a report from management assessing the effectiveness of our internal control over financial reporting.

Ensuring we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely basis is a time-consuming effort that needs to be re-evaluated frequently.

Failure on our part to have effective internal financial and accounting controls would cause our financial reporting to be

unreliable, could have a material adverse effect on our business, operating results, and financial condition, and could cause the trading price of our common stock to fall.

Our management has limited experience in operating a public company.

Our executive officers have limited experience in the management of a publicly traded company.

Our management team may not successfully or effectively manage a public company that is subject to significant regulatory oversight and reporting obligations under federal securities laws.

Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to our management and our growth.

We may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States.

The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected.

It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company which will increase our operating costs in future periods.

Failure on our part to have effective internal financial and accounting controls would cause our financial reporting to be unreliable, could have a material adverse effect on our business, operating results, and financial condition, and could cause the trading price of our common stock to fall.

If any of our customers were to become insolvent or experience substantial financial difficulties, our business, financial condition and results of operations may be adversely affected.

2 unchanged sentences

Our results of operations could be materially negatively affected by economic conditions generally, both in the United States and elsewhere around the world.

Concerns over inflation, energy costs, geopolitical issues, including tensions between Russia and Ukraine and Western countries, the availability and cost of credit, and the U.S.

Concerns over inflation, rising interest rates, energy costs, geopolitical

issues, including the conflict between Russia and Ukraine, and tensions in Western countries, the availability and cost of credit, and the U.S.

financial markets have in the past contributed to, and may continue in the future contribute to, increased volatility and diminished expectations for the economy and the markets.

3 unchanged sentences

ITEM 1B UNRESOLVED STAFF COMMENTS

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors