What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-07 compared with 2022-03-15 · 259 added, 277 removed, 781 unchanged (41% of the section changed)

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Change in accounting principle

As discussed in Note B to the financial statements, the Company has changed its method of accounting for leases on January 1, 2022, due to the adoption of ASC 842, “Leases”.

Basis for opinion

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We have served as the Company’s auditor since 2017

Fort Lauderdale, Florida

Miami, Florida

March 7, 2023

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Advance vendor payments

Due from related party

Deposits, prepaid expenses, and other current assets

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Aircraft, airframes, engines, and parts, net

Operating lease right-of-use assets

Deferred income taxes

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Deferred customer incentives and other assets, net

Due from related party

Other intangible assets, net

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Lessee and customer purchase deposits

Current operating lease liabilities

Deferred revenue

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Long-term lease deposits

Long-term operating lease liabilities

Maintenance deposit payments and other liabilities

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Authorized 200,000,000 shares;

issued and outstanding 51,673,099 and 41,046,216 shares

issued and outstanding 51,189,461 and 51,673,099 shares as of December 31, 2022 and 2021, respectively

Additional paid-in capital

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Payroll support program proceeds

Transaction costs (recovered) incurred

Transaction costs recovered

Income from operations

Other income (expenses):

Interest expense, net

Interest income (expense), net

Other income, net

1 unchanged sentence

Change in fair value of warrant liability

Total other expenses

Total other income (expenses)

Income before income tax provision

Income tax expense

Dividends attributable to preferred stockholders

Net income (loss) attributable to AerSale Corporation common stockholders

Earnings (Loss) per share - basic

Earnings (Loss) per share - diluted

Earnings per share - basic

Earnings per share - diluted

The accompanying notes are an integral part of these consolidated financial statements.

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(in thousands, except share and per share data)

Treasury Stock,

stockholders’

Balance at December 31, 2018

Cumulative effect of adjustment upon adoption of ASC 606 on January 1, 2019

Treasury Stock

Balance at December 31, 2019

Effect of reverse merger, net of closing costs of $ 10,742

Stock-based compensation

Share-based compensation

Balance at December 31, 2020

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Shares issued upon exercise of warrants

Shares issued for cashless redemption of public warrants

Stock-based compensation

Shares tendered for cashless redemption of public warrants

Share-based compensation

Balance at December 31, 2021

Shares issued upon exercise of warrants

Shares issued under the 2020 Employee Stock Purchase Plan

Shares issued under the 2020 Equity Incentive Plan

Shares surrendered for tax withholdings on equity awards

Purchase of treasury stock

Retirement of treasury stock

( 1,500,000 )

Share-based compensation

Balance at December 31, 2022

The accompanying notes are an integral part of these consolidated financial statements.

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Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization

Amortization of debt issuance costs

Amortization of operating lease assets

Inventory reserve

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Change in fair value of warrant liability

Stock-based compensation

Unrealized loss on investment

Changes in operating assets and liabilities, net of acquisition:

Share-based compensation

Loss on related party investment

Gain on legal settlement

Changes in operating assets and liabilities:

Accounts receivable

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Other liabilities

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities:

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Proceeds from sale of assets

Proceeds from legal settlement, net

Acquisition of aircraft and engines held for lease, including capitalized cost

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Repayments of Revolving Credit Facility

Purchase of treasury stock

Cash paid for employee taxes on withholding shares

Taxes paid related to net share settlement of equity awards

Proceeds from exercise of warrants

Proceeds from the issuance of Employee Stock Purchase Plan shares

Proceeds from Merger

Net cash provided by (used in) financing activities

Cash flows from discontinued operations:

Net cash provided by operating activities

Net cash provided by discontinued operations

Increase (decrease) in cash and cash equivalents

Net cash (used in) provided by financing activities

Increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

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Supplemental disclosure of cash activities

Income taxes paid

Interest paid

Supplemental disclosure of noncash investing activities

Reclassification of aircraft and aircraft engines inventory to (from) equipment held for lease, net

Reclassification of aircraft and aircraft engines inventory (from) to aircraft and engine held for lease, net

Reclassification of customer purchase deposits to sale of assets

Reclassification of amounts due from related party to investments

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(f/k/a AerSale Corp.), a Delaware corporation (“AerSale Aviation”), Monocle Merger Sub 1 Inc., a Delaware corporation (“Merger Sub 1”), Monocle Merger Sub 2 LLC, a Delaware limited liability company (“Merger Sub 2”), and Leonard Green & Partners, L.P., a Delaware limited partnership, solely in its capacity as the initial Holder Representative (as defined in the Merger Agreement).

The transactions contemplated by the Merger Agreement are referred to herein as the “Merger” or the “Business Combination” and in connection therewith, Monocle merged with and into us, whereby we survived the merger and became the successor issuer to Monocle by operation of Rule 12g-3 under the Exchange Act.

Upon the consummation of the Merger:

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Description of the Business

The Company is a worldwide provider of aftermarket commercial aircraft, engines, and their parts to airlines, leasing companies, manufacturers of original equipment, government and defense contractors, and repair and overhaul service providers.

The Company is a worldwide provider of aftermarket commercial aircraft and engines (“Flight Equipment”) and their parts to airlines, leasing companies, manufacturers of original equipment, government and defense contractors, and repair and overhaul service providers.

We focus on mid-life assets and monetize them through our Asset Management Solutions segment.

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Beyond providing asset management services on our own Flight Equipment, we additionally provide asset management services to third-party clients complementing their infrastructure to optimize their Flight Equipment investments.

While our offering to customers includes leasing of mid-life aircraft and engines, this service is offered in the context of a broader strategy to extract the maximum value from those assets.

While our offering to customers includes leasing of mid-life Flight Equipment, this service is offered in the context of a broader strategy to extract the maximum value from those assets.

Frequently, we will offer a lease of an asset for the time period before its next scheduled overhaul (“green time”) on a short term or “spot” lease, with the intent of disassembling the asset at the conclusion of the lease.

In turn, the vast majority of assets that we acquire are ultimately disassembled into parts once the remaining green time has been utilized.

The Company also operates six Federal Aviation Administration (“FAA”) Title 14 Code of Federal Regulations Part 145 Certified Repair Facilities (the MROs) located in Miami, Florida, Goodyear, Arizona, Memphis, Tennessee, as well as in Roswell and Albuquerque, New Mexico.

Through its TechOps segment, the Company also operates six Federal Aviation Administration (“FAA”) Title 14 Code of Federal Regulations Part 145 Certified Repair Facilities (the MROs) located in Miami, Florida, Goodyear, Arizona, Memphis, Tennessee, as well as in Roswell and Albuquerque, New Mexico.

These facilities provide the Company flexibility and control to quickly prepare Company aircraft, engines, and inventory for market, as their selective refurbishment is frequently required to meet customers’ unique demand.

In addition to maintaining the Company’s fleet of aircraft, the MROs provide external customer support for maintaining their aircraft with general maintenance, preservation, lease return work, repair services, and long-term storage programs.

On January 7, 2020 the Company acquired all of the outstanding shares of Aircraft Component Technologies, Inc.

(“ACT”), a Florida corporation located in Miami, Florida, for $ 17.0 million in cash.

The results of ACT operations have been included in the consolidated financial statements since the acquisition date.

See Note T for further details.

On June 10, 2019, the Company acquired a USM distributor and certified repair facility, Qwest Air Parts, LLC (“Qwest”), a Florida limited liability company located in Memphis, Tennessee, for $ 26.1 million in cash.

The results of Qwest operations have been included in the consolidated financial statements since the acquisition date.

See Note T for further details.

Leveraging its robust engineering team, TechOps also provide highly specialized technical support to our MRO facilities, as well as developing advanced technical repairs, modifications and products marketed as Engineering Solutions.

This business unit includes the design, manufacture, and installation of new products, systems, and services that can enhance aircraft performance, safety, and service life.

NOTE B -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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The accompanying consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries.

As discussed in more detail in Note R, the Company also consolidates variable interest entities when required under accounting principles generally accepted in the United States (“U.S.

As discussed in more detail in Note S, the Company also consolidates variable interest entities when required under accounting principles generally accepted in the United States (“U.S.

All significant intercompany balances and transactions are eliminated upon consolidation.

The Merger has been accounted for as a reverse recapitalization (“Reverse Recapitalization”) in accordance with U.S.

This determination was principally based on AerSale Aviation’s business comprising the ongoing operations of the Company following the Merger, with its senior management continuing to comprise the management of the Company and its stockholders having majority of the voting power of the Company.

The Merger was accounted for as a reverse recapitalization (“Reverse Recapitalization”) in accordance with U.S.

For accounting purposes, Monocle is considered the “acquired” company and AerSale Aviation is considered the “acquirer.” Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of AerSale Aviation issuing stock for the net assets of Monocle, accompanied by a recapitalization.

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The shares and corresponding capital amounts and earnings per share available to common stockholders, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio in the Merger.

Revision of Prior Period Financial Statements

During the quarter ended March 31, 2021, the Company identified and corrected immaterial errors that affected certain of its previously issued consolidated financial statements.

These errors related to the misapplication of U.S.

GAAP in connection with the classification of the Company’s private warrants as equity.

The Securities and Exchange Commission (“SEC”) released a Public Statement on April 12, 2021 noting that when certain features common to warrants in SPAC transactions are included in a warrant, the warrant “should be classified as a liability measured at fair value, with changes in fair value each period reported in earnings.” Following review of the SEC’s statement, the Company concluded that our private warrants do not meet the conditions to be classified as equity and instead, the private warrants meet the definition of a derivative under Accounting Standards Codification (“ASC”) 815 “Derivatives and Hedging.” This requires the Company to record the private warrants as a liability measured at fair value on the Company’s Consolidated Balance Sheets with the changes in fair value each period reported in earnings.

As a result, the Company is revising its December 31, 2020 financial statements by recognizing the private warrants as a liability upon the consummation of the Business Combination on December 22, 2020 in the amount of $ 1.2 million with a corresponding reduction to additional paid-in capital and retained earnings of $ 0.8 million and $ 0.4 million, respectively.

Additionally, the Company is revising its basic and diluted earnings per share for the year ended December 31, 2020 to $ 7.85 and $ 7.39 , respectively.

Emerging Growth Company

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The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s financial statement with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

This may make comparison of the Company’s financial statement with another public company that is neither an emerging growth company nor an emerging growth company that has opted

out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Variable Interest Entities (“VIE”)

An entity is referred to as a VIE if it meets the criteria outlined in Accounting Standards Codification (“ASC”) Topic 810, Consolidation.

As explained in Note R, the Company had previously determined that AerLine Holdings, Inc.

An entity is referred to as a VIE if it meets the criteria outlined in ASC Topic 810, Consolidation.

As explained in Note S, the Company had previously determined that AerLine Holdings, Inc.

(“AerLine”) was a VIE that the Company was required to consolidate.

Effective August 31, 2018, the Company determined that AerLine ceased to meet the criteria for VIE consolidation under U.S.

GAAP and therefore has deconsolidated the VIE.

GAAP and therefore deconsolidated the VIE.

Prior to August 31, 2018, transactions between the Company and AerLine and its subsidiaries were eliminated upon consolidation.

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dollars as evidenced by the cash flows in or out from revenues, operating expenses, investing, and financings.

Only general office expenses and payroll transactions are denominated in local currency.

Only general office expenses and payroll transactions are denominated in local currency of our foreign subsidiaries.

Accounts Receivable

Accounts receivable include amounts receivable from customers for aircraft and engine parts sales, aircraft and engine basic and supplemental rents, and aircraft services.

Contingent rents, also referred to as supplemental rent, and consumption of consignment inventory related to aircraft and engine parts that were earned or consumed, but unbilled, are also included in accounts receivable and totaled $ 0.8 and $ 0.6 million at December 31, 2021 and 2020, respectively.

Contingent rents, also referred to as supplemental rent, and consumption of consignment inventory related to aircraft and engine parts that were earned or consumed, but unbilled, are also included in accounts receivable and totaled $ 0.6 million and $ 0.8 million at December 31, 2022 and 2021, respectively.

The Company sells to a variety of customers worldwide.

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At that time, the Company recorded an impairment to the asset of $ 2.5 million to adjust the carrying amount to the estimated residual value of $ 1.1 million.

An insurance claim was filed and the insurance company is negotiating the final settlement owed to the Company.

The Company has recorded an insurance receivable of $ 2.5 million, offsetting the impairment loss, which has been recorded in accounts receivable.

The Company filed an insurance claim and recorded an insurance receivable of $ 2.5 million, offsetting the impairment loss, which was recorded in accounts receivable in the Company’s Consolidated Balance Sheet as of December 31, 2021.

In accordance with U.S.

GAAP, the probable amount of the insurance recovery, limited to the amount of the loss recognized, was recorded as the insurance receivable.

The Company believes that recovery of this insurance receivable is probable and is working with the insurer on settling the claim by negotiating the final settlement to the Company.

Effective November 30, 2022, a final settlement

was reached and insurance proceeds net of expenses of $ 4.2 million were received, of which $ 1.7 million was classified as other income on the Consolidated Statement of Operations.

Inventory, which consists of complete aircraft and engines held for sale, as well as related parts, is valued at the Lower of Cost or Market (“LCM”) value.

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The Company periodically evaluates its complete aircraft and engines in inventory and Flight Equipment held for lease to determine if events or market circumstances indicate that the assets’ most likely disposition has changed.

Should conditions prevail at the time of the Company’s Consolidated Balance Sheets that would suggest a more likely use as an asset held for lease rather than sale or disassembly for parts inventory or vice versa, it will be reclassified at its then-current book value between inventory and Flight Equipment held for lease.

This transaction is a noncash item and if it occurs, is reflected in the schedule of supplemental cash flows.

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Flight Equipment held for lease is stated at cost, less accumulated depreciation.

Certain internal and external professional fees, major improvements, modifications, and maintenance incurred in connection with the acquisition of Flight Equipment that are required to get the Flight Equipment ready for initial service are capitalized and depreciated over the remaining life of the Flight Equipment, and are reported in the investing section of the Consolidated Statements of Cash Flows.

Certain internal and external professional fees, major improvements, modifications, and maintenance incurred in connection with the acquisition of

Flight Equipment that are required to get the Flight Equipment ready for initial service are capitalized and depreciated over the remaining life of the Flight Equipment, and are reported in the investing activities section of the Consolidated Statements of Cash Flows.

Subsequent to placing Flight Equipment into service, the cost of maintenance and improvements to Flight Equipment is normally expensed unless the improvements materially increase the long-term value of the Flight Equipment or extend the useful life of the Flight Equipment.

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Aircraft airframe components are depreciated over the assets’ useful life using the straight-line method to the estimated residual value based on the total remaining life before disassembly or outright scrap metal value.

Aircraft airframe useful lives range from 2 to 10 years .

Aircraft useful lives range from 0 to 7 years .

Engines are depreciated using the straight-line method to the estimated residual value based on the total life remaining before disassembly.

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For purposes of reviewing impairment and the recoverability of goodwill, we must make various assumptions regarding estimated future cash flows and other factors in determining the fair values of the reporting unit, including market multiples, discount rates, etc.

The Company performed a qualitative impairment analysis as of October 1, 2021 on the goodwill for the Asset Management Solutions and TechOps segments, and updated through December 31, 2021, concluding that the fair value of each reporting unit exceeded their carrying values, and thus no impairment was recorded.

As a result of the COVID-19 pandemic and its impact on the aviation industry, AerSale performed a qualitative impairment analysis as of June 30, 2020.

The Company also performed a quantitative impairment analysis as of October 1, 2020 on the goodwill for the Asset Management Solutions and TechOps segments, and concluded the fair value of each reporting unit exceeded their carrying values, and thus no impairment charges were recorded.

The Company performed a qualitative impairment analysis as of October 1, 2022 and 2021 on the goodwill for the Asset Management Solutions and TechOps segments, and updated through December 31, 2022 and 2021, respectively, concluding that the fair value of each reporting unit exceeded their carrying values, and thus no impairment was recorded.

Customer Relationships and Other Intangible Assets

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Other intangible assets are reviewed for impairment if any event or change in circumstance indicates that an impairment may have occurred.

As a result of COVID-19 pandemic, the Company performed a quantitative impairment analysis on the definite-lived intangible assets as of June 30, 2020 and concluded there was no impairment.

The Company annually reviews the estimated lives and methods used to amortize other intangible assets.

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Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary.

As a result of COVID-19 pandemic, t he Company performed an impairment analysis on the property, plant and equipment as of June 30, 2020 and concluded there was no impairment.

Obligations and Instruments Potentially Settled in the Company’s Common Stock

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The Company has determined that it is appropriate to recognize spare parts sales at a point in time (i.e., the date the parts are shipped) in accordance with ASC 606.

Additionally, there is no impact to the timing and amounts of revenue recognized for spare parts sales related to the implementation of ASC 606.

Products — Whole Asset Sales

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The Company and customer enter into an agreement which outlines the place and date of sale, purchase price, condition of the whole asset, bill of sale, and the assignment of rights and warranties from the Company to the customer.

Company believes the whole asset holds standalone value to the customer as it is not dependent on any other services for functionality purposes and therefore is distinct within the context of the contract and as described in ASC 606-10.

Accordingly, the Company has identified the transfer of the whole asset as the performance obligation.

The Company has identified the transfer of the whole asset as the performance obligation.

The transaction price is set at a fixed dollar amount per fixed quantity (number of whole assets) and is explicitly stated in each contract.

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Additionally, the Company’s leases provide for supplemental rent, which is calculated based on actual hours or cycles of utilization and, for certain components, based on the amount of time until maintenance of that component is required.

In certain leases, the Company records supplemental rent paid by the lessees as maintenance deposit payment liabilities in recognition of the Company’s contractual commitment to reimburse qualifying maintenance.

In certain leases, the Company records supplemental rent paid by the lessees as maintenance deposit payments and other liabilities in recognition of the Company’s contractual commitment to reimburse qualifying maintenance.

Reimbursements to the lessees upon receipt of evidence of qualifying maintenance work are charged against the existing maintenance deposit payments liabilities.

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At contract inception, we evaluate if the contract should be accounted for as a single performance obligation or if the contract contains multiple performance obligations.

In some cases, our service contract with the customer is considered one performance obligation as it includes factors such as the good or service being provided is significantly integrated with other promises in the contract, the service provided significantly modifies or customizes the other good or service or the goods or services are highly interdependent or interrelated with each other.

service or the goods or services are highly interdependent or interrelated with each other.

If the contract has more than one performance obligation, the Company determines the standalone price of each distinct good or service underlying each performance obligation and allocates the transaction price based on their relative standalone selling prices.

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Variable consideration that can be reasonably estimated based on current assumptions and historical information is included in the transaction price at the inception of the contract but limited to the amount that is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

Variable consideration that cannot be reasonably estimated is recorded when known.

For most service contracts, our performance obligations are satisfied over time as work progresses or at a point in time based on transfer of control of products and services to our customers.

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Differences may occur between the judgments and estimates made by management and actual program results.

Under most of our MRO contracts, if the contract is

terminated for convenience, we are entitled to payment for items delivered and fair compensation for work performed, the costs of settling and paying other claims, and a reasonable profit on the costs incurred or committed.

Under most of our MRO contracts, if the contract is terminated for convenience, we are entitled to payment for items delivered and fair compensation for work performed, the costs of settling and paying other claims, and a reasonable profit on the costs incurred or committed.

Changes in estimates and assumptions related to our arrangements accounted for using the input method based on labor hours are recorded using the cumulative catchup method of accounting.

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Our reported sales on our Consolidated Statements of Operations are net of any sales or related non income taxes.

We also utilize the “as invoiced” practical expedient in certain cases where performance obligations are satisfied over time and the invoiced amount corresponds directly with the value we are providing to the customer.

Maintenance and Repair Costs

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Upon the lessee’s presentation of invoices evidencing the completion of qualifying maintenance, the Company will reimburse the lessee for the cost of the maintenance, up to the amount of the maintenance reserve payments that have been received by the Company.

Unless otherwise provided in the contract, the Company records such maintenance reserve payments paid by the lessees as maintenance deposit payment liabilities in the accompanying Consolidated Balance Sheets to record the Company’s contractual commitment to reimburse such qualifying maintenance.

Reimbursements to the lessees upon receipt of evidence for qualifying maintenance work are charged against the existing maintenance deposit payment liabilities.

For other lease contracts (primarily engine lease contracts) where the terms of the lease are designed specifically to allow the Company to directly manage the occurrence, timing, and associated cost of qualifying maintenance work on the Flight Equipment, maintenance reserve payments collected during the lease are recognized as lease revenue in the period earned.

Unless otherwise provided in the contract, the Company records such maintenance reserve payments paid by the lessees as maintenance deposit payments and other liabilities in the accompanying Consolidated Balance Sheets to record the Company’s contractual commitment to reimburse such qualifying maintenance.

Reimbursements to the lessees upon receipt of evidence for qualifying maintenance work are charged against the existing maintenance deposit payments and other liabilities.

Any amounts of maintenance reserve payments remaining at the end of a lease contract are recognized as lease revenue or applied against outstanding accounts receivable at lease termination.

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For awards with performance and service conditions, we begin recording share-based compensation when achieving the performance criteria is probable and we recognize the costs using the accelerated attribution method.

The estimated number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company’s current estimates, such amount will be recorded as a cumulative

adjustment in the period estimates are revised.

Changes in the Company’s estimates and assumptions may cause us to realize material changes in share-based compensation expense in the future.

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For any share-based awards where performance-based vesting criteria is no longer considered probable, previously recognized compensation cost would be reversed.

The Company applies ASU 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting,” which generally expands the scope of ASC 718, Compensation – Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in ASC 505-50, Equity-Based Payments to Non-employees, which previously included the accounting for nonemployee awards.

The Company applies Accounting Standards Update (“ASU”) 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting,” which generally expands the scope of ASC 718, Compensation – Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in ASC 505-50, Equity-Based Payments to Non-employees, which previously included the accounting for nonemployee awards.

The Company’s policy is to present taxes collected from customers and remitted to governmental authorities on a net basis.

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The VIE was not included in the consolidated tax return of the Company.

See Note M for more information about income taxes.

Reclassification

The Company reclassified $ 13.2 million of contract assets from accounts receivable to deposits, prepaid expenses, and other current assets in the Consolidated Balance Sheet as of December 31, 2021.

This reclassification had no impact on net income or cash flows from operating activities.

New Accounting Pronouncements Adopted

On May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2014-09, “Revenue from Contracts with Customers (Topic 606)”, which provides guidance for revenue recognition.

This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets.

This ASU supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, “Revenue Recognition”, and most industry specific guidance.

adopted this ASU on January 1, 2019 using the modified retrospective method.

Refer to Note D for the impact of this change.

This ASU does not apply to revenues from leasing activity, which will fall under “Leases (Topic 842)”, noted below.

On December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

On December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”) as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards.

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The Company adopted ASU 2019-12 on its consolidated financial statements in 2020.

In 2021, the Financial Accounting Standards Board issued ASU No.

In 2021, the FASB issued ASU No.

2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance.” This ASU will require certain disclosures about the significant terms and conditions of material government assistance agreements in order to provide more consistent information to users of the financial statements.

Disclosures by Business Entities about Government Assistance.

This ASU will require certain disclosures about the significant terms and conditions of material government assistance agreements in order to provide more consistent information to users of the financial statements.

This standard is effective for annual reporting periods beginning after December 15, 2021, and early adoption is permitted.

We determined that our material government assistance agreements are the payroll support program agreements under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and the program extensions, and we adopted the new standard in 2021.

See Note B where we reflect the requirements of this new standard as it relates to the payroll support program.

See “CARES Act” below in this Note B where we reflect the requirements of this new standard as it relates to the payroll support program.

On January 7, 2021, the FASB issued ASU No.

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These amendments do not apply to any contract modifications made after December 31, 2022, any new hedging relationships entered into after December 31, 2022, or to existing hedging relationships evaluated for effectiveness existing as of December 31, 2022, that apply certain optional practical expedients.

This standard was effective immediately and may be applied (i) on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or (ii) on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued.

of the issuance of a final update, up to the date that financial statements are available to be issued.

The Company had no material LIBOR-related contract modifications during the year ended December 31, 2022.

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This guidance is applicable to all business combinations occurring after the effective date and has been early adopted by the Company.

New Accounting Pronouncements Not Yet Adopted

On February 2016, FASB issued Leases (Topic 842), which generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet.

In July 2018, FASB issued ASU No.

2018-10, “Codification Improvements to Topic 842, Leases,” and ASU No.

2018-10, Codification Improvements to Topic 842:

Leases, and ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements.” Topic 842 will be effective for the Company for the annual period beginning on January 1, 2022, the impact of which will be recorded retroactively at the beginning of the period of adoption through a cumulative-

effect adjustment.

We plan to elect the practical expedients, which permits us to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired leases and (iii) indirect costs for any existing leases.

Targeted Improvements.

Topic 842 became effective for the Company for the annual period beginning on January 1, 2022, the impact was recorded retroactively at the beginning of the period of adoption through a cumulative-effect adjustment.

We elected the practical expedients, which permits us to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired leases and (iii) indirect costs for any existing leases.

In addition, we have elected the practical expedients to not separate lease and non-lease components for both lessee and lessor relationships and to not apply the recognition requirements to leases with terms of less than 12 months.

The preliminary impact of our adoption, assuming no changes in our leasing arrangements, is estimated to result in the recognition of operating lease right of use assets of approximately $13.8 million and lease liabilities of approximately $14.9 million on January 1, 2022.

We are continuing our assessment, which may identify additional impacts that Topic 842 could have on our financial statements.

On June 2016, the FASB issued ASU No.

2016-13 (“ASU 2016-13”), “Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.” In November 2018, FASB issued ASU No.

2018-19, “Codification Improvements to Topic 326, Financial Instruments — Credit Losses,” which amends the scope and transition requirements of ASU 2016-13.

ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount.

ASU 2016-13 will become effective for the Company beginning January 1, 2023, with early adoption permitted, on a modified retrospective approach.

We are currently evaluating the impact this guidance will have on our consolidated financial statements and related disclosures.

Upon adoption of ASC 842 on January 1, 2022, we recognized operating lease right of use (ROU) assets of $ 13.2 million and operating lease liabilities of $ 13.4 million on our Consolidated Balance Sheet.

The adoption of ASC 842 did not have a material impact on the Consolidated Statements of Operations or Cash Flows.

On May 3, 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

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This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange.

This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

This standard was effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Under this standard, issuers should apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard.

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If an issuer elects to early adopt the new standard in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period.

The Company is evaluating this new standard, but does not expect it to have a material impact on the Company's financial statements or disclosures.

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

The standard was adopted and applied prospectively by the Company as of January 1, 2022, but the adoption and application did not have an impact on the Company's financial statements and disclosures, including interim periods.

New Accounting Pronouncements Not Yet Adopted

On June 2016, the FASB issued ASU No.

2016-13 (“ASU 2016-13”), Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

In November 2018, FASB issued ASU No.

2018-19, Codification Improvements to Topic 326:

Financial Instruments — Credit Losses, which amends the scope and transition requirements of ASU 2016-13.

ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

ASU 2016-13 will become effective for the Company beginning January 1, 2023, with early adoption permitted, on a modified retrospective approach.

We are currently evaluating the impact this guidance will have on our consolidated financial statements and related disclosures.

In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Topic 405-50):

Disclosure of Supplier Finance Program Obligations.

This ASU requires that a buyer in a supplier finance program disclose

sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude.

This ASU is expected to improve financial reporting by requiring new disclosures about the programs, thereby allowing financial statement users to better consider the effect of the programs on an entity’s working capital, liquidity, and cash flows.

This ASU is effective for fiscal years beginning after December 15, 2022, except for the amendment on roll forward information which is effective for fiscal years beginning after December 15, 2023.

The Company is evaluating the effect of adopting this new accounting guidance but does not expect it to have a material impact on the Company's financial statements or disclosures.

There have been no other accounting pronouncements issued but not yet adopted by us which are expected to have a material impact on our consolidated financial statements.

The Company sought financial assistance under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

Certain of the Company’s subsidiaries have received $ 16.4 million from the U.S.

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Department of the Treasury on April 16, 2021 and received relief funds of an additional $ 5.5 million, bringing the total to $ 14.7 million during 2021.

In connection with the financial assistance the Company has received under the Payroll Support Program, it is 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;

the requirement against involuntary terminations and furloughs and reductions in employee pay rates and benefits from the signing date of the Payroll Support Program agreement through September 30, 2021.

The agreement requires the Company to issue a recall to any employee who was terminated or furloughed between October 1, 2020 and March 4, 2021 and enable such employee to return to employment.

In addition, the Company is subject to provisions prohibiting the repurchase of common stock and the payment of common stock dividends through September 30, 2022, as well as limitations on the payment of certain employee compensation through April 1, 2023.

These restrictions may affect the

Company’s operations and if the Company does not comply with these provisions, it 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.

No relief funds were received during 2022.

In connection with the financial assistance the Company has received under the Payroll Support Program, it was required to comply with certain provisions of the CARES Act, some of which have expired as of December 31, 2022, 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;

and the requirement against involuntary terminations and furloughs and reductions in employee pay rates and benefits from the signing date of the Payroll Support Program agreement through September 30, 2021.

The agreement required the Company to issue a recall to any employee who was terminated or furloughed between October 1, 2020 and March 4, 2021 and enable such employee to return to employment.

In addition, the Company is actively limited on the payment of certain employee compensation through April 1, 2023.

These restrictions may affect the Company’s operations and if the Company does not comply with these provisions, it may be required to reimburse up to 100% of any previously received relief funds.

As of December 31, 2022, we have been in compliance with all of the provisions of the CARES Act.

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Impact of Coronavirus (COVID-19)

COVID-19 has been declared a global health pandemic by the World Health Organization.

COVID-19 has impacted nearly all regions of the world, which has driven the implementation of significant, government-imposed measures to prevent or reduce its spread, including travel restrictions, the closing of borders, “shelter in place” orders and business closure.

As a result, commercial airlines have experienced a decline in demand for air travel.

The reduced number of aircraft in service and corresponding flying hours negatively impacts the demand for certain of AerSale’s services, and prolonged reduction could materially and adversely affect AerSale’s business, operating results, financial condition, and liquidity.

An extended pandemic, or the threat thereof, could result in employee absenteeism leading to lower productivity in AerSale’s service locations, temporary closure of AerSale’s offices and facilities, travel restrictions for AerSale’s workforce and other voluntary actions that may result in business disruptions.

Since the first quarter of 2020, there has been a worldwide impact from the COVID-19 pandemic, causing significant volatility in financial and other markets.

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

The extent to which COVID-19 or any other pandemics, epidemics and similar outbreaks, especially of infectious diseases, may impact our results depends on future developments that cannot be predicted with certainty, including the resurgence of COVID-19 and its variants.

The spread of COVID 19 and any other pandemics along with related travel restrictions and operational issues may also have a long-lasting impact in the demand for air travel and result in lower demand from civil aviation customers for our products.

If the COVID 19 pandemic or similar outbreaks lead to 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.

Use of Estimates

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Actual results could differ from those estimates.

Significant items subject to such estimates and assumptions include the useful lives of property and equipment, useful lives and residual values of Flight Equipment held for lease, allowances for doubtful accounts and sales returns, the income tax provision, impairment of long-lived assets, valuation of inventory, valuation and useful lives of intangibles, goodwill and contingencies.

Significant items subject to such estimates and assumptions include the useful lives of property and equipment, useful lives and residual values of Flight Equipment held for lease, allowances for doubtful accounts and sales returns, the income tax provision, impairment of long-lived assets, valuation of inventory, and valuation and useful lives of intangibles, goodwill and contingencies.

Risks and Uncertainties

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The Company conducts business in certain foreign countries, some of which are politically unstable or subject to military or civil conflicts.

business practices, cultural considerations, restriction on fund transfers, and exposure to U.S.

Consequently, the Company is subject to a variety of risks such as civil strife, political risk, import and export regulations, compliance with foreign laws, treaties, regulations, uncertainties arising from foreign local business practices, difficulty in repossessing Flight Equipment when a lessee defaults, cultural considerations, restriction on fund transfers, and exposure to U.S.

Foreign Corrupt Practices Act and other anti-bribery laws.

The Company periodically reviews the carrying values of trade receivables, inventory, goodwill, intangible assets, long-lived assets, the recoverable value of deferred tax assets, and the sufficiency of accruals and provisions, substantially all of which are sensitive to the above risks and uncertainties.

Moreover, COVID-19 or other 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.

The Company periodically reviews the carrying values of accounts receivable, inventory, goodwill, intangible assets, and long-lived assets;

the recoverable value of deferred income tax assets, and the sufficiency of accruals and provisions, substantially all of which are sensitive to the above risks and uncertainties.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk principally consist of cash and cash equivalents and trade receivables.

Financial instruments that potentially subject the Company to credit risk principally consist of cash and cash equivalents and accounts receivable.

During the year ended December 31, 2022, one customer accounted for 19 % of total revenue, which was related to nonrecurring transactions that were collected during the year.

During the year ended December 31, 2021, one customer accounted for 14 % of total revenue, which was related to a nonrecurring transaction that was collected during the year.

No such concentration existed for the year ended December 31, 2020.

During the year ended December 31, 2019, a separate customer accounted for 17 % of total revenue, which was collected during the year.

No customer made up more than 10% of our trade receivable balance as of December 31, 2022 and 2021.

The Company maintains cash and cash equivalents with high-quality financial institutions, which at times exceed the Federal Deposit Insurance Corporation insurance limits.

The Company maintains cash and cash equivalent balances with high-quality financial institutions, which at times exceed the Federal Deposit Insurance Corporation insurance limits.

While the Company monitors daily the cash balances in its operating accounts and adjusts the balances as appropriate, these balances could be impacted if one or more of the financial institutions with which the Company deposits fails or is subject to other adverse conditions in the financial or credit markets.

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NOTE D - Revenue

We adopted ASC 606 on January 1, 2019 using the modified retrospective method.

We elected to use the practical expedient allowing for the application of ASC 606 only to contracts that were not completed as of January 1, 2019 and the portfolio approach was used to assess the impact of ASC 606 on contracts with similar characteristics.

We recognized the cumulative effect of initially applying ASC 606 as an increase of $ 0.7 million to the opening balance of retained earnings as of January 1, 2019.

The timing of revenue recognition, customer billings, and cash collections results in a contract asset or contract liability at the end of each reporting period.

Contract assets consist of unbilled receivables or costs incurred where revenue recognized over time exceeds the amounts billed to customers.

We record a receivable when revenue is recognized prior to invoicing and we have an unconditional right to consideration (only the passage of time is required before payment of that consideration is due) and a contract asset when the right to payment is conditional upon our future performance.

Contract liabilities include advance payments and billings in excess of revenue recognized.

Certain customers make advance payments prior to the satisfaction of our performance obligations on the contract.

Certain customers make advance payments prior to our satisfaction of our performance obligations on the contract.

These amounts are recorded as contract liabilities until such performance obligations are satisfied.

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Contract assets

Contract assets are reported within accounts receivable on our Consolidated Balance Sheets.

Contract assets are reported within deposits, prepaid expenses, and other current assets on our Consolidated Balance Sheets.

Changes in contract assets primarily results from the timing difference between our performance of services.

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The Company determined the fair value of assets acquired and liabilities assumed using a variety of methods.

An income approach based on discounted cash flows was used to determine the values of our trademarks, certifications, customer relationships and FAA certificates.

An income approach based on discounted cash flows was used to determine the values of our trademarks, customer relationships and FAA certifications.

The assumptions we used to estimate the fair value of our reporting units are based on historical performance, as well as forecasts used in our current business plan and require considerable management judgment.

The Company’s goodwill and intangible assets as defined by ASC 350 are related to its subsidiaries, AerSale Component Solutions (d/b/a AerSale Landing Gear Solutions) (“ALGS”), Avborne Component Solutions (d/b/a AerSale Component Solutions) (“ACS”), and Aircraft Composite Technologies (“ACT”), which are included in the TechOps segment, as well as Qwest, which is included under the Asset Management Solutions segment.

which are included in the TechOps segment, as well as Qwest, which is included under the Asset Management Solutions segment.

Goodwill and other intangibles consisted of the following (in thousands):

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Total intangible assets with indefinite lives

The Company performed its annual quantitative impairment analysis as of July 1, 2021 on the indefinite lived intangible assets and concluded there was no impairments.

The Company performed a qualitative impairment analysis as of October 1, 2021 on the goodwill for the Asset Management Solutions and TechOps segment, and concluded there was no impairment.

As a result of the COVID-19 pandemic and its impact on the aviation industry, AerSale performed a qualitative impairment analysis as of June 30, 2020 on the goodwill at the reporting unit level for the Asset Management Solutions and TechOps segments and concluded there was no impairment.

Additionally, the Company performed a quantitative impairment analysis as of October 1, 2020 and concluded there was no impairment.

The Company performed its annual quantitative impairment analysis as of July 1, 2022 and 2021 on the indefinite lived intangible assets and concluded there were no impairments.

The Company performed a qualitative impairment analysis as of October 1, 2022 and 2021 on the goodwill for the Asset Management Solutions and TechOps segment, and concluded there was no impairment.

Intangible assets with definite useful lives are amortized on a straight-line basis over their estimated useful lives.

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Less accumulated depreciation

The Company recorded an impairment of leased assets in the amount of $ 3.0 million for the year ended December 31, 2020 and is included in cost of leasing in the Consolidated Statements of Operations.

The Company recorded an impairment of leased assets in the amount of $ 0.9 million, $ 0 and $ 3.0 million for the years ended December 31, 2022, 2021 and 2020, respectively, and is included in cost of leasing in the Consolidated Statements of Operations.

Total depreciation expense included in cost of leasing in the Consolidated Statements of Operations is as follows (in thousands):

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Contingent rental fees

The Company’s current operating lease agreements for Flight Equipment on lease expire over the next month to three years .

The Company’s current operating lease agreements for Flight Equipment on lease expire over the next month to two years .

The amounts in the following table are based upon the assumption that Flight Equipment under operating leases will remain on lease for the length of time specified by the respective lease agreements.

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The Company would measure the fair value of certain assets and liabilities on a nonrecurring basis, when U.S.

GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable.

GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying

amounts of assets may not be recoverable.

Assets subject to these measurements include intangible assets acquired in business combinations.

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Warrants to purchase a total of 623,834 and 835,014 shares of the Company’s common stock were outstanding as of December 31, 2022 and 2021, respectively.

750,000 warrants were issued to founders in a private placement (the “Private Warrants”), subject to a twelve-month lock-up period from the date of the Merger, and 17,250,000 warrants were public warrants (the “Public Warrants”) that were exercisable immediately following the Closing.

750,000 warrants were issued to founders in a private placement (the “Private Warrants”), and 17,250,000 warrants were public warrants (the “Public Warrants”) that were exercisable immediately following the Closing.

Each of the Company’s Public Warrants entitled the registered holder to purchase one share of the Company’s common stock at a price of $ 11.50 per share.

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Each of the Private Warrants entitles the registered holder to purchase one share of the Company’s common stock at a price of $ 11.50 per share, subject to adjustment.

The Private Warrants will expire at 5:00 p.m., New York City time, on the fifth anniversary of the completion of the Merger, or earlier upon redemption or liquidation, as applicable.

During 2022, a private warrant holder initiated a cashless exercise of 126,166 warrants for the purchase of shares of common stock at an exercise price of $ 11.50 per share (remaining term on exercised warrants at December 31, 2022 was 3.0 years) and we issued 47,867 shares of common stock based on the fair value at the date of exercise of $ 18.5306 per share.

The remaining Private Warrants will expire at 5:00 p.m., New York City time, on December 22, 2025, or earlier upon redemption or liquidation, as applicable.

The Private Warrants include provisions that affect the settlement amount.

Such variables are outside of those used to determine the fair value of a fixed-for-fixed instrument, and as such, the Private Warrants do not meet the criteria for equity treatment

under guidance contained in ASC Topic 815, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock.” The Company classifies the Private Warrants as a liability at their fair value subject to re-measurement at each balance sheet date and adjusted at each reporting period until exercised or expired, and any change in fair value is recognized in the Company's Consolidated Statements of Operations.

The fair value of the Private Warrants was determined using the market price of the Public Warrants adjusted for their lack of liquidity.

Such variables are outside of those used to determine the fair value of a fixed-for-fixed instrument, and as such, the Private Warrants do not meet the criteria for equity treatment under guidance contained in ASC Topic 815, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock.” The Company classifies the Private Warrants as a liability at their fair value subject to re-measurement at each balance sheet date and adjusted at each reporting period until exercised or expired, and any change in fair value is recognized in the Company's Consolidated Statements of Operations.

The fair value of the Private Warrants as of December 31, 2021 was determined using the market price of the Company’s public warrants adjusted for their lack of liquidity.

Effective December 29, 2021 all public warrants were redeemed on a cashless basis and ceased trading on Nasdaq.

As a result, the Black-Scholes option pricing model was adopted to determine the fair value of the Private Warrants.

The following table represents the assumptions for the Black-Scholes option-pricing model used in determining the fair value of the Private Warrants as of December 31, 2022:

December 31, 2022

Risk-free interest rate

Expected volatility of common stock

Dividend yield

Expected option term in years

The significant assumptions utilized in the Black-Scholes calculation consist of interest rate for U.S.

Treasury Bonds, as published by the U.S.

Federal Reserve, and expected volatility estimated using historical daily volatility of guideline public companies.

NOTE L - FINANCING ARRANGEMENTS

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$ 150.0 million Wells Fargo Senior Secured Revolving Credit Facility

On April 11, 2011, AerSale, Inc.

and other subsidiary borrowers signatory (collectively, “the Borrowers”) entered into a secured credit agreement (“Revolving Credit Agreement”) with Wells Fargo Bank, N.A.

as administrative agent and lender, and the other lenders signatory thereto from time to time (collectively, “the Lenders”).

On July 20, 2018, the Revolving Credit Agreement was restated and amended (as amended to date, the “Amended and Restated Credit Agreement”) to, among other things, provide a $ 110.0 million aggregate amount of revolver commitments subject to borrowing base limitations and extend, subject to certain conditions, the maturity date to July 20, 2021.

Previous amendments predominantly accomplished maturity term extensions as well as modification to the syndicate of banks.

On July 20, 2018, AerSale Inc.

and other subsidiary borrowers signatory thereto entered in a secured amended and restated Revolving Credit Agreement (as amended to date, the “Amended and Restated Credit Agreement”).

The Amended and Restated Credit Agreement provides for a $ 110.0 million aggregate amount of revolver commitments subject to borrowing base limitations and a maturity date of July 20, 2021.

On March 12, 2021, the Amended and Restated Credit Agreement was amended to, among other things, provide a $ 150.0 million aggregate amount of revolver commitments subject to borrowing base limitations and extend, subject to certain conditions, the maturity date to March 12, 2024.

Previous amendments predominantly accomplished maturity term extensions as well as modification to the syndicate of banks.

The Amended and Restated Credit Agreement includes a $ 10 million sub facility for letters of credit and for borrowings on same-day notice referred to as “swingline loans”.

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The commitments under the Amended and Restated Credit Agreement terminate on March 12, 2024, at which time all outstanding amounts on the Amended and Restated Credit Agreement will be due and payable.

As of December 31, 2021, there was no outstanding balance under the Amended and Restated Credit Agreement and the Company had $ 113.9 million of availability.

As of December 31, 2022 and 2021, there was no outstanding balance under the Amended and Restated Credit Agreement and at December 31, 2022 the Company had $ 106.8 million of availability.

As of December 31, 2021, there was no outstanding balance under the Amended and Restated Credit Agreement and the Company had $ 113.9 million of availability.

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The interest rate as of December 31, 2022 and 2021 was 9.50 % and 5.25 %, respectively.

In addition, a commitment fee applies to the unused portion of the commitments under the Amended and Restated Credit Agreement.

The Borrowers’ ability to borrow on the Amended and Restated Credit Agreement is subject to ongoing compliance by the Company and the Borrowers with various customary affirmative and negative covenants.

The Company’s ability to borrow on the Amended and Restated Credit Agreement is subject to ongoing compliance by the Company and the borrowers with various customary affirmative and negative covenants.

The Amended and Restated Credit Agreement requires the Company and borrowers to meet certain financial and nonfinancial covenants.

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Permanent differences

Foreign taxes

Change in valuation allowance

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Inventory basis differences

Deferred rent

Maintenance deposit payments

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Accrued expenses

Section 174 capitalization

Lease obligations

Total deferred tax assets

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Section 481(a) adjustments

Intangible assets

Deferred insurance proceeds

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The deferred tax assets are adjusted by a valuation allowance if, based on the weight of available evidence, it is more likely than not that a portion or all the deferred assets will not be realized.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets.

After considering all of the evidence, both positive and negative, it was determined that it is more likely than not, that the benefit from an outside basis difference of

an investment acquired during the year will not be realized.

The Company has evaluated the positive

and negative evidence bearing upon its ability to realize the deferred tax assets.

After considering all of the evidence, both positive and negative, it was determined that it is more likely than not, that the benefit from an outside basis difference of an investment acquired in 2021 will not be realized.

Accordingly, the Company has recorded a valuation allowance of $ 1.3 million on the deferred tax assets related to the outside basis difference as of December 31, 2022.

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The following table provides a reconciliation of the computation for basic and diluted earnings per share for the years ended December 31, (in thousands, except share and per share data):

Dividends attributable to preferred stockholders

Income (loss) attributable to common shareholders for EPS

Weighted-average number of shares outstanding - basic

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Weighted-average number of shares outstanding - diluted

Earnings (loss) per share - basic:

Earnings (loss) per share - diluted:

Earnings per share - basic:

Earnings per share - diluted:

Shares/units excluded from earnings per share - dilutive:

Additional shares from assumed exercise of Private Warrants

NOTE O - STOCKHOLDERS’ EQUITY

The Consolidated Statements of Stockholders’ Equity reflect the Reverse Recapitalization as defined in Note A as of December 22, 2020.

The Consolidated Statements of Stockholders’ Equity reflect the Reverse Recapitalization as defined in Note B as of December 22, 2020.

As AerSale Aviation was deemed the accounting acquirer in the Reverse Recapitalization with Monocle, all periods prior to the consummation date reflect the balances and activity of AerSale Aviation.

The common stock and per share amounts in the Consolidated Statements of Stockholders’ Equity as of December 31, 2019 and 2018, and the Consolidated Statements of Operations for the period ended December 31, 2019, from the previously reported audited consolidated financial statements of AerSale Aviation, were retroactively adjusted using the recapitalization exchange ratio of 74.0 %.

The common stock and per share amounts in the Consolidated Statements of Stockholders’ Equity as of December 31, 2019, from the previously reported audited consolidated financial statements of AerSale Aviation, were retroactively adjusted using the recapitalization exchange ratio of 74.0 %.

8.65 % Cumulative Preferred Shares

The preferred stock was issued at a purchase price of $ 1,000 per share and ranks senior to common stock.

The preferred stock has an initial liquidation preference equal to its $ 1,000 per share purchase price, and accrues dividends at an annual rate of 8.65 %.

In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the Company, the holders of the preferred stock will be entitled to receive, out of assets available for distribution to our stockholders and before any distribution of assets to our common stockholders, an amount equal to the then-current liquidation preference, which includes accrued and unpaid dividends.

For the year ended December 31, 2019 accrued dividends were $ 34.6 million.

Effective July 31, 2020 and October 31, 2019, all holders of the issued and outstanding 8.65 % cumulative preferred shares agreed to waive $ 73.2 million and $ 150.2 million of liquidation preference, respectively.

As of December 31, 2019, cumulative, the aggregate liquidation preference was $ 293.8 million.

The preferred stock was issued at a purchase price of $ 1,000 per share and ranked senior to common stock.

The preferred stock had an initial liquidation preference equal to its $ 1,000 per share purchase price, and accrued dividends at an annual rate of 8.65 %.

Upon the consummation of the Merger, the liquidation preference of the preferred stock was triggered.

All outstanding principal of $ 200 million and cumulative unpaid dividends of $ 21.2 million were settled in cash of $ 13.1 million with the remaining balance converted to the Company’s common stock at $ 10.00 per share.

Prior to the Merger, holders of AerSale Aviation’s common stock were entitled to one vote per share, and to receive dividends and, upon liquidation or dissolution, were entitled to receive all assets available for distribution to stockholders.

The holders had no preemptive or other subscription rights and there were no redemption or sinking fund provisions with respect to such shares.

Common stock was subordinated to the preferred stock with respect to dividend rights and rights upon liquidation, winding up, and dissolution of the Company.

Upon the consummation of the Merger, holders of AerSale Aviation’s common stock received shares of the Company’s common stock at $ 10.00 per share as merger consideration.

The Company’s common stock consist of $ 0.0001 par value, 200,000,000 shares authorized, of which 51,189,461 and 51,673,099 shares were issued and outstanding as of December 31, 2022 and 2021, respectively.

Effective November 8, 2022, the Board of Directors approved the repurchase, directly from the selling stockholders, 1,500,000 shares of the Company’s common stock, par value $ 0.0001 per share, at a price of $ 14.8025 per share for a total of $ 22,203,750 .

Stock Appreciation Rights (“SARs”)

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Earn-Out Shares

Upon consummation of the Merger, the pre-closing holders of AerSale Aviation’s common stock and the holders of in-the-money SARs received a contingent right to receive up to 3,000,000 additional shares of the Company’s common

Additionally, certain pre-closing holders of AerSale Aviation’s common stock received a contingent right to receive 746,876 shares of the Company’s common stock, in the aggregate (the ‘‘Earn-out Shares’’), subject to the following:

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Prior to the fifth anniversary of the Merger, if the closing price per share of the Company’s common stock is greater than $ 15.00 for any period of 20 trading days out of 30 consecutive trading days, the holders will be entitled to receive all of the remaining Earn-out Shares not yet issued in the aggregate.

Notwithstanding the foregoing, if a liquidity event;

generally consisting of a merger, reorganization or consolidation that results in any person or group owning more than 50 % of the voting power of the Company, the sale of all or substantially all of Company’s assets or a stockholder approved plan of complete liquidation or dissolution (“Liquidity Event”), is consummated prior to the fifth anniversary of the Merger, all Earn-out Shares that have not yet been issued shall be issued, subject to the following:

If the Liquidity Event consideration is greater than $ 13.50 per share, all of the Minimum Target Earn-out Shares will be deemed issued and outstanding;

If the Liquidity Event consideration is greater than $ 15.00 per share, all of the remaining Earn-out Shares not yet issued will be deemed issued and outstanding.

Effective February 8, 2021, the contingency event related to the Minimum Target Earn-out Shares was met and 1,855,634 shares were issued.

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The remaining shares pursuant to the contingent rights were withheld to cover employee taxes.

We determined the Earn-out Shares to be classified as equity under ASC Topic 815, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock” as the contingent right is indexed to the Company’s stock and accordingly, the accrual of the Earn-Out shares as of December 31, 2021 and 2020 had no impact on our consolidated financial statements.

We determined the Earn-out Shares to be classified as equity under ASC Topic 815, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock” as the contingent right is indexed to the Company’s stock and accordingly, the accrual of the Earn-Out shares had no impact on our consolidated financial statements.

Unvested Founder Shares

Upon the Merger, certain pre-closing holders of AerSale Corporation’s common stock agreed to defer the vesting of an aggregate of 700,000 shares (the “Unvested Founder Shares”), half of which will vest at such time as the Minimum Target (as defined in the Merger Agreement) and the other half of which will vest at the Maximum Target (as defined in the Merger Agreement).

The Unvested Founder Shares will also vest upon the occurrence of a Liquidity Event on or prior to the fifth anniversary of the date of the Amended and Restated Founder Shares Agreement, solely to the extent the Liquidity Event Consideration (as defined in the Merger Agreement) is greater than $ 13.50 , in which case half of the Unvested Founder Shares which will vest, or $ 15.00 , in which case the other half of the Unvested Founder Shares will also vest.

Pursuant to the Amended and Restated Founder Shares Agreement, the holders of the Unvested Founder Shares have retained the right to vote such Unvested Founder Shares prior to vesting.

Unvested Founder Shares that have not vested on or prior to the fifth anniversary of the Closing Date will be forfeited.

The Unvested Founder Shares will also vest upon the occurrence of a Liquidity Event on or prior to the fifth anniversary of the date of the Amended and Restated Founder Shares Agreement, solely to the extent the Liquidity Event Consideration (as defined in the Merger Agreement) is greater than (i) $ 13.50 , in which case half of the Unvested Founder Shares which will vest, or (ii) $ 15.00 , in which case the other half of the Unvested Founder Shares will also vest.

Effective February 8, 2021, the contingency event related to the Minimum Target was met and half of the Unvested Founder Shares vested.

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Public Warrants

On November 29, 2021, the Company provided notice to holders of all of our 16,442,886 outstanding Public Warrants to purchase shares of our common stock that were issued under the warrant agreement as part of the units sold

in our initial public offering, that we would be redeeming all of the Public Warrants for a redemption price of $ 0.01 per Public Warrant on December 29, 2021 (the “Redemption”).

In accordance with Section 3.3.1(b) of the warrant agreement, following delivery of notice of the Redemption, all of our Public Warrants could only be exercised on a cashless basis in lieu of being redeemed.

On November 29, 2021, the Company provided notice to the then holders of all of our 16,442,886 outstanding Public Warrants to purchase shares of our common stock that were issued under the warrant agreement as part of the units sold in our initial public offering, that we would be redeeming all of the Public Warrants for a redemption price of $ 0.01 per Public Warrant on December 29, 2021 (the “Redemption”).

In accordance with the warrant agreement, following delivery of notice of the Redemption, all of our Public Warrants could only be exercised on a cashless basis in lieu of being redeemed.

On December 29, 2021, we completed the Redemption and the Public Warrants ceased trading on Nasdaq.

A total of 16,357,872 Public Warrants were exercised on a cashless basis in lieu of being redeemed, resulting in net issuances of 6,079,966 shares of our common stock under such Public Warrants.

The remaining 85,014 unredeemed Public Warrants were redeemed for a redemption price of $ 0.01 per Public Warrant effective January 2022.

The Private Warrants that are still held by the initial holders or their permitted transferees were not subject to the Redemption.

Subsequent to December 31, 2021, a total of 85,014 unredeemed Public Warrants were redeemed for a redemption price of $ 0.01 per Public Warrant.

2020 Equity Incentive Plan

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Outstanding December 31, 2022

(1) Includes 531,667 performance units that vested at the 200 % vesting target effective December 22, 2022, for which 167,007 shares of common stock underlying vested RSUs were withheld to cover tax obligations.

The shares withheld are again available for issuance under the plan.

The Company’s restricted stock units include 1,073,736 performance-based awards that have vesting provisions subject to both time vesting and the achievement of certain performance milestones at 100 % and 200 % vesting targets, while the remaining 300,647 awards vest over a period ranging from one to three years .

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The probability of restricted share awards granted with future performance conditions is evaluated at each reporting period and compensation expense is adjusted based on the probability assessment.

For the year ended December 31, 2021, the Company recognized share-based compensation expense for the performance-based awards of $ 12.1 million, given that the achievement of the performance milestones at the 200% vesting target have been deemed probable for accounting purposes.

For the years ended December 31, 2022 and 2021, the Company recognized share-based compensation expense for certain performance-based awards of $ 14.2 million and $ 12.1 million, respectively, given that the achievement of the performance milestones at the 200 % vesting target have been deemed probable for accounting purposes.

2020 Employee Stock Purchase Plan

The Company also maintains a 2020 Employee Stock Purchase Plan (the “ESPP”) and has registered 500,000 shares of common stock issuable under the ESPP.

The Company has not issued shares pursuant to the ESPP as of December 31, 2021.

Subsequent to December 31, 2021, the Company issued 11,988 shares pursuant to the ESPP.

For the year ended December 31, 2022 the Company issued 46,726 shares pursuant to the ESPP and 453,274 shares remain available for future issuance.

NOTE P - BUSINESS SEGMENTS

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and product sales of internally developed engineered solutions and other serviceable products.

The Asset Management Solutions segment provides short-term and long-term leasing solutions of aircraft and jet engines to passenger and cargo operators worldwide.

Assets considered to be at or near the end of their useful lives, supplied by our leasing portfolio or acquisitions, are analyzed for return maximization to assess whether they will be traded as whole assets or disassembled and sold as individual spare parts and components.

The Asset Management Solutions segment provides short-term and long-term leasing solutions of Flight Equipment to passenger and cargo operators worldwide.

Assets considered to be at or near the end of their useful lives,

supplied by our leasing portfolio or acquisitions, are analyzed for return maximization to assess whether they will be traded as whole assets or disassembled and sold as individual spare parts and components.

The TechOps segment consists of aftermarket support and services businesses that provide maintenance support for aircraft and aircraft components, and sale of engineered solutions.

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The accounting policies for the segments are the same as those described in Note B.

Gross Profit is calculated by subtracting cost of sales from sales.

Gross Profit is calculated by subtracting cost of sales from revenues.

The assets and certain expenses related to corporate activities are not allocated to the segments.

Our reportable segments are aligned principally around the differences in products and services.

The segment reporting excludes the allocation of selling, general and administrative expenses, interest expense and income tax expense.

The segment reporting excludes the allocation of selling, general and administrative expenses, interest expense, interest income, other income, net, unrealized loss on investment, change in fair value of warrant liability, and income tax expense.

Selected financial information for each segment is as follows (in thousands):

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Product sales

Whole asset sales

Year Ended December 31,

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Product sales

Whole asset sales

Asset Management Solutions

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Transaction costs

Interest expense, net

Interest income (expense), net

Other income, net

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Change in fair value of warrant liability

Income tax expense

Income before income tax provision

The following table presents revenues based on the customers’ geographic location and long-lived assets located in the United States, our country of domicile, for the years ended December 31, (in thousands):

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Total long-lived assets

For the year ended December 31, 2022, the Company had one customer from which revenues generated exceeded 10 % of total sales.

Total sales to this customer amounted to $ 77.2 million, which was included in the Asset Management Solutions segment.

As of December 31, 2021, the Company had one customer from which revenues generated exceeded 10 % of total sales.

Total sales to this customer amounted to $ 46.2 million, which was included in the Asset Management Solutions segment.

No such concentrations existed for the year ended December 31, 2020.

Intersegment sales includes amounts invoiced by a segment for work performed for another segment.

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Total intersegment revenues

NOTE Q - COMMITMENTS AND CONTINGENCIES

NOTE Q - LEASES

The Company leases facilities, offices, and equipment.

The Company evaluates whether a contractual arrangement that provides it with control over the use of an asset is a lease.

The ROU asset and related lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the term of the lease.

The implicit rate of our lease arrangements is not readily determinable nor is it disclosed by our lessors;

therefore, the Company uses its incremental borrowing rate based on information available at the lease commencement date to discount the lease payments.

The Company classifies a lease as operating or finance using the classification criteria set forth in ASC Topic 842.

Some of our leases are non-cancellable and may include renewal or termination options.

Renewal or termination options that are reasonably certain to be exercised are included in the determination of the term of a lease.

The Company’s lease agreements typically do not contain any significant residual value guarantees or restrictive covenants, and may include variable lease payments related to escalation clauses based on consumer price index rates, as well as maintenance and other services.

Variable lease payments that depend on an index or rate are included in the determination of ROU asset and lease liabilities using the index or rate at the lease commencement date, whereas variable lease payments that do not depend on an index or rate are recorded as lease expense in the period incurred.

Lease costs are recognized over the term of the lease on a straight-line basis unless another systematic basis is more representative of the pattern in which the Company expects to consume the asset’s future economic benefits.

ROU assets are evaluated for impairment in a manner consistent with the treatment of other long-lived assets.

The Company made an accounting policy election to not recognize lease assets or liabilities for leases with a term of 12 months or less.

The components of lease expense for the year ended December 31, 2022 is as follows (in thousands):

Year Ended December 31,

Operating lease cost

Short-term lease cost

Variable lease cost

Expense charged to operations under the operating lease agreements for prior years were as follows (in thousands):

Our operating leases expire at various dates through 2033.

Maturities of our operating lease payments as of December 31, 2022 are as follows (in thousands):

Year ending December 31:

Total undiscounted payments

imputed interest

Present value of minimum lease payments

Operating lease liabilities - current

Operating lease liabilities - non-current

Future minimum lease payments under non-cancelable operating leases (with initial lease terms in excess of one year) as of December 31, 2021 (in thousands):

Year ending December 31:

Total minimum lease payments

Our weighted-average remaining lease term and weighted-average discount rate are as follows:

Remaining lease term (years)

Discount Rate

Supplemental cash flow information related to leases were as follows (in thousands):

Year Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities

Operating lease liabilities arising from obtaining ROU assets

NOTE R - COMMITMENTS AND CONTINGENCIES

Management Compensation

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Although the adequacy of existing insurance coverage of the outcome of any legal proceedings cannot be predicted with certainty, based on the current information available, the Company does not believe the ultimate liability associated with known claims or litigation, if any, in which the Company is involved will materially affect the Company’s consolidated financial condition or results of operations.

Lease Commitments

The Company leases office space, warehouses, hangars, computers, and equipment in connection with its operations under various operating leases, many of which contain escalation clauses.

Future minimum lease payments under non-cancelable operating leases (with initial lease terms in excess of one year) as of December 31, 2021 are (in thousands):

Year ending December 31:

Total minimum lease payments

Expense charged to operations under the operating lease agreements was as follows (in thousands):

Year ended December 31,

Operating lease expense is recognized on a straight-line basis over the term of the lease, including any option periods, as appropriate.

The same lease term is used for lease classification, the amortization period of related leasehold improvements, and the estimation of future lease commitments.

NOTE R - RELATED-PARTY TRANSACTIONS

Prior to the Merger, the Company, in the normal course of its operations, engaged in transactions with certain of its stockholders or their affiliates.

On a monthly basis, AerSale Aviation paid its majority stockholder a fee in exchange for advisory, investment banking, management, consulting, and financial planning services provided on an ongoing basis.

Total management fees paid to or accrued for the majority stockholder for the year ended December 31, 2019 totaled $ 0.6 million.

Management fees for the majority stockholder was suspended in 2020, as such, no management fees were incurred in 2020 or 2021.

The Company determined that AerLine Holdings, Inc.

("AerLine") was a VIE that the Company was required to consolidate as it was deemed the primary and sole beneficiary.

NOTE S - RELATED-PARTY TRANSACTIONS

The Company determined that AerLine was a VIE that the Company was required to consolidate as it was deemed the primary and sole beneficiary.

Effective August 31, 2018, AerLine sold the customer relationships of its operating company, XTRA Airways, in consideration for a 9.99 % interest in the buyer (“Buyer”), at which point AerLine ceased to meet the consolidation criteria as a VIE under U.S.

GAAP and ceased operations.

separate transaction where the Buyer was acquired, the 9.99% interest held by AerLine in the Buyer rolled over to a larger holding company (“Investee”) in exchange for 3.85% of its membership interest.

In 2018, a portion of the balances due to the Company from AerLine was forgiven in exchange for the right to all proceeds received from AerLine related to the sale of its interest.

The primary interest held by AerLine is the equity interest in the Investee.

In a separate transaction where the Buyer was acquired, the 9.99 % interest held by AerLine in the Buyer rolled over to a larger holding company (“Investee”) in exchange for 3.85 % of its membership interest.

In 2018, a portion of the balances due to the Company from AerLine was forgiven in exchange for the right to all proceeds received from AerLine related to its sale to the investee.

The primary interest held by AerLine was the equity interest in the Investee.

On November 10, 2021, AerLine transferred its ownership interest to the Company in settlement of amounts owed to the Company.

As a result, the $5.4 million balance due from AerLine was reclassified to Investment on the Company’s Consolidated Balance Sheet.

There were no amounts due from AerLine as of December 31, 2021, and $ 5.9 million was due as of December, 31, 2020.

The balance due from AerLine as of December 31, 2020, was presented in the Consolidated Balance Sheet as due from related party, of which $ 0.5 million is presented as a current asset, while $ 5.4 million was presented as a long term asset.

As a result, the $ 5.4 million balance due from AerLine was reclassified to Investment on the Company’s Consolidated Balance Sheet as of December 31, 2021.

Based on the deterioration of the Investee’s financial condition noted by the Company in the fourth quarter of 2021, the Company recognized an unrealized loss on the investment of $ 5.4 million during the three-month period ended December 31, 2021.

This loss is reflected on the Consolidated Statement of Operations in the unrealized loss on investment line.

NOTE S - BENEFIT PLANS

This loss is reflected on the Consolidated Statement of Operations in unrealized loss on investment for the year ended December 31, 2021.

NOTE T - BENEFIT PLANS

The Company sponsors an employee retirement savings plan that qualifies under Section 401(k) of the Internal Revenue Code.

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Nondiscretionary contributions

NOTE T - BUSINESS COMBINATIONS

NOTE U - BUSINESS COMBINATIONS

Reverse Merger

As described in Note A - Organization and Principles of Consolidation and Basis of Presentation above, the Company consummated the Merger dated December 22, 2020 with AerSale Aviation and in connection therewith, Monocle merged with and into the Company, whereby the Company survived the Merger and became the successor issuer to Monocle by operation of Rule 12g-3 under the Securities Exchange Act of 1934, as amended.

As described in Note B - Principles of Consolidation and Basis of Presentation above, the Company consummated the Merger dated December 22, 2020 with AerSale Aviation and in connection therewith, Monocle merged with and into

the Company, whereby the Company survived the Merger and became the successor issuer to Monocle by operation of Rule 12g-3 under the Securities Exchange Act of 1934, as amended.

The Company directly acquired AerSale Aviation for aggregate consideration of $ 317.2 million, consisting of approximately $ 13.1 million in cash and 30,410,540 shares of Company Common Stock at $ 10.00 per share.

As additional consideration, the pre-Merger holders of AerSale Aviation common stock and the holders of in-the-money SARs received a contingent right to receive up to 3,746,876 additional shares of the Company’s Common Stock, which were issued in 2021.

The Merger has been accounted for as a Reverse Recapitalization in accordance with U.S.

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The purpose of the acquisition was to improve the Company’s profitability by enhancing service in its TechOps segment.

The results of ACT operations have

been included in the consolidated financial statements since the acquisition date.

The results of ACT operations have been included in the consolidated financial statements since the acquisition date.

All assets and liabilities of ACT were recorded at their fair market value, and to the extent that the purchase cost exceeded the fair market value of the net assets, that excess was recorded as goodwill, all of which is deductible for federal income tax purposes.

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ACT’s revenues and income from operations from January 7, 2020 through December 31, 2020 were $ 6.5 and $ 0.7 million, respectively.

The purchase price for ACT was allocated as follows (in thousands):

Accounts receivable

Deposits, prepaid expenses, and other current assets

Property and equipment

Other intangible assets

Accounts payable

Accrued expenses

Total purchase price

The intangible assets included above consist of the following (in thousands):

Trademark and trade name (indefinite lived)

FAA part 145 certificate (indefinite lived)

Useful Life In

Customer relationships

Qwest Acquisition

On June 10, 2019, the Company acquired all of the outstanding shares of a used serviceable material distributor and certified repair facility, Qwest Air Parts, Inc.

(“Qwest”), a Florida corporation located in Memphis, Tennessee, for $ 26.1 million.

The purpose of the acquisition was to improve the Company’s profitability by enhancing service in its Asset Management Solutions segment.

The results of Qwest operations have been included in the Company’s consolidated financial statements since the acquisition date.

All assets and liabilities of Qwest were revalued to their fair market value, and to the extent that the purchase cost exceeded the fair market value of the net assets, that excess was classified as goodwill.

The goodwill is attributable to the general reputation of the business and the collective experience of Quest’s management and employees.

The goodwill is not expected to be deductible for federal tax purposes.

Qwest’s revenues and income from operations from June 10, 2019 through December 31, 2019 were $ 10.4 and $ 1.8 million, respectively.

business mainly operates as part of the Company’s Asset Management Solutions segment.

The purchase price for Qwest was allocated as follows (in thousands):

Acquisition Date

Accounts receivable

Deposits, prepaid expenses, and other current assets

Property and equipment

Other intangible assets

Accounts payable

Accrued expenses

Deferred tax liability

Total purchase price

The intangible assets included above consist of the following (in thousands):

FAA part 145 certificate (indefinite-lived)

Useful Life In

Customer relationships

The following unaudited pro forma information presents our Consolidated Statements of Operations as if ACT and Qwest had been included in our consolidated results since January 1, 2019 (in thousands, except per share data):

Net income from continuing operations

Net revenue (loss) attributable to AerSale Corporation common shareholders

Earnings (loss) per share attributable to AerSale Corporation - basic

Earnings (loss) per share attributable to AerSale Corporation - diluted

The unaudited pro forma financial information is presented for informational purposes only, and may not necessarily reflect the Company’s future results of operations or what the results of operations would have been had the Company owned and operated ACT and Qwest as of January 1, 2019.

The pre-acquisition results of ACT did not have a material impact on the Consolidated Statements of Operations for the year ended December 31, 2020.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data