What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-11 compared with 2024-03-08 · 313 added, 289 removed, 693 unchanged (46% of the section changed)

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Board of Directors and Stockholders

AerSale Corporation

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of AerSale Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of AerSale Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 10, 2025 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of used serviceable material (“USM”) inventory cost from dismantled aircraft and engines

As described further in Note B to the consolidated financial statements, for aircraft and engine parts that originate from dismantled aircraft and engines (“USM dismantled inventory”), cost is determined using a ratio calculated based on the relationship of the cost of the dismantled aircraft or engine at the time of purchase to the total estimated sales value of the dismantled aircraft or engine at the time of purchase.

The Company evaluates this ratio periodically, and if necessary, updates sales value estimates and makes prospective adjustments to this ratio on a product line basis.

identified with an estimated sales value lower than the carrying value is reduced to the estimated net realizable value at the time of the review.

We identified the assessment of the USM dismantled inventory cost as a critical audit matter.

The principal considerations for our determination that the assessment of the USM dismantled inventory cost, is a critical audit matter are the magnitude of the USM dismantled inventory balance and that certain inputs and assumptions used in determining the USM dismantled inventory cost are subject to significant management judgment.

These inputs and assumptions include the future sale and repair cost estimates and the ratio applied to the sale price net of repair cost at the time of sale.

The assessment of these inputs required a high degree of auditor judgment in evaluating the future demand for various product lines and repair cost of the USM dismantled inventory and the ratio to be applied to the sale price net of repair cost at the time of sale.

Our audit procedures related to testing the USM dismantled inventory cost, included the following, among others.

● We tested the design and operating effectiveness of controls relating to the Company’s USM inventory costing process.

● We tested future sale and repair estimates by examining historical sales and repair cost data as well as incorporating current market information.

● We evaluated the reasonableness of the ratio applied to the sale price net of repair cost of each individual airframe and/or engine part to determine its allocated cost by comparing the selected ratio to supporting documentation.

● We conducted sensitivity analysis around the inventory costing assumptions applied.

Assessment of goodwill impairment within the Asset Management Solutions (“AMS”) and Aircraft Composite Technologies (“ACT”) reporting units

As described in Note B and F to the consolidated financial statements, goodwill related to the Asset Management Solutions (“AMS”) and Aircraft Composite Technologies (“ACT”) reporting units was $13.4 million and $6.0 million, respectively, as of December 31, 2024.

Goodwill is tested at least annually for impairment, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its fair value exceeds the carrying value.

A quantitative assessment involves determining the fair value of each reporting unit using market participant assumptions.

We identified the assessment of the impairment of goodwill, within the AMS and ACT reporting units as a critical audit matter.

The principal considerations for our determination that the assessment of the impairment of goodwill, within the AMS and ACT reporting units, is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the AMS and ACT reporting units;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to future revenues and certain operating expenses, operating margins, terminal growth rates, and discount rates;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Our audit procedures related to goodwill impairment within the AMS and ACT reporting units, included the following, among others.

● We tested the design and operating effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s AMS and ACT reporting units.

● We tested management’s process for developing the fair value estimates.

● We tested the completeness and accuracy of underlying data used in the discounted cash flow models.

● We evaluated the reasonableness of the significant assumptions used by management related to future revenues and certain operating expenses, operating margins, terminal growth rates, and discount rates.

The evaluation management’s assumptions related to future revenues and certain operating expenses, operating margins, and terminal growth rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the AMS and ACT

reporting units;

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

● Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of the discount rate and terminal growth rate assumptions.

● We conducted sensitivity analysis around the discount and revenue growth assumptions applied.

/s/ GRANT THORNTON LLP

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Cash and cash equivalents

Accounts receivable, net of allowance for credit losses of $ 978 and $ 1,074 as of December 31, 2023 and December 31, 2022

Accounts receivable, net of allowance for credit losses of $ 1,173 and $ 978 as of December 31, 2024 and December 31, 2023, respectively

Income tax receivable

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Deferred financing costs, net

Deferred customer incentives and other assets, net

Other intangible assets, net

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Deferred revenue

Deferred insurance proceeds

Total current liabilities

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Selling, general and administrative expenses

Payroll support program proceeds

(Loss) income from operations

Other income (expenses):

Interest income (expense), net

Income (loss) from operations

Other income (expense):

Interest (expense) income, net

Other income, net

Unrealized loss on investment

Change in fair value of warrant liability

Total other income (expenses)

(Loss) income before income tax provision

Income tax benefit (expense)

Net (loss) income

(Loss) earnings per share:

Total other (expense) income, net

Income (loss) before income tax provision

Income tax (expense) benefit

Net income (loss)

Earnings (loss) per share:

Weighted average shares outstanding:

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Balance at December 31, 2021

Issuance of Earn-Out shares

Shares issued upon exercise of warrants

Shares tendered for cashless redemption of public warrants

Share-based compensation

Balance at December 31, 2021

Shares issued upon exercise of warrants

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( 1,500,000 )

Share-based compensation

Balance at December 31, 2022

Share based compensation

Shares issued under the 2020 Employee Stock Purchase Plan

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Shares surrendered for tax withholdings on equity awards

Balance at December 31, 2023

Share-based compensation

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

Balance at December 31, 2024

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Cash flows from operating activities:

Net (loss) income

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

Net income (loss)

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

Depreciation and amortization

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Impairment of aircraft held for lease

Provision for credit losses

Provision for doubtful accounts

Deferred income taxes

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Share-based compensation

Loss on related party investment

Gain on legal settlement

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Deposits, prepaid expenses, and other current assets

Deferred customer incentives and other assets

Advance vendor payments

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Lessee and customer purchase deposits

Deferred insurance proceeds

Other liabilities

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

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Purchase of property and equipment

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Proceeds from long-term debt

Proceeds from Revolving Credit Agreement

Repayments of Revolving Credit Agreement

Repayments of long-term debt

Proceeds from revolving credit facility

Repayments of revolving credit facility

Payments of debt issuance costs

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

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Supplemental disclosure of cash activities

Income tax payments, net

Income tax (refunds) payments, net

Interest paid

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Reclassification of customer purchase deposits to sale of assets

Reclassification of amounts due from related party to investments

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

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Monocle Acquisition Corporation (“Monocle”) was initially formed on August 20, 2018 for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses.

On December 22, 2020, (the “Closing Date”), Monocle consummated the previously announced business combination pursuant to that certain Amended and Restated Agreement and Plan of Merger, dated September 8, 2020 (the “Merger Agreement”) by and among Monocle, AerSale Corporation (f/k/a Monocle Holdings Inc.), a Delaware corporation (the “Company”), AerSale Aviation, Inc.

On December 22, 2020 (the “Closing Date”), Monocle consummated the previously announced business combination pursuant to that certain Amended and Restated Agreement and Plan of Merger, dated September 8, 2020 (the “Merger Agreement”) by and among Monocle, AerSale Corporation (f/k/a Monocle Holdings Inc.), a Delaware corporation (the “Company” or “we”), AerSale Aviation, Inc.

(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).

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In connection with the closing of the Business Combination (the “Closing”), AerSale Aviation changed its name from “AerSale Corp.” to “AerSale Aviation, Inc.” and the Company changed its name from “Monocle Holdings Inc.” to “AerSale Corporation.” Immediately following the Merger, the Company contributed all of its ownership in Monocle to AerSale Aviation which continued as a wholly owned subsidiary of the Company.

The Company’s corporate headquarters are based in Miami, Florida, with additional offices, hangars, and warehouses globally.

The Company’s corporate headquarters is based in Doral, Florida, with additional offices, hangars, and warehouses located globally.

Description of the Business

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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.

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 Engineered 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.

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

Engineered Solutions 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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All significant intercompany balances and transactions are eliminated upon consolidation.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable.

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.

Cash and Cash Equivalents

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The primary economic environment in which the entities generate or expend cash is in U.S.

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

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

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

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A rollforward of the allowance for credit losses is as follows (in thousands):

Year ended December 31,

Balance at beginning of year

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

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, net 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.

Inventory, which consists of complete Flight Equipment held for sale, as well as related parts, is valued at the Lower of Cost or Net Realizable Value (“NRV”) value.

For purchases of whole aircraft and engines for sale or lease, cost is determined using the specific identification method whereby total cost is the cost paid, including certain capitalizable asset acquisition costs, to acquire such assets as a whole.

Additionally, the Company purchases certain whole aircraft and engines to disassemble and supply its engine and airframe parts inventory.

For aircraft and engine parts that originate from such dismantled aircraft and engines, cost is determined using a ratio calculated based on the relationship of the cost of the dismantled aircraft or engine at the time of purchase to the total estimated sales value of the dismantled aircraft or engine at the time of purchase.

Additionally, the Company purchases certain whole Flight Equipment to disassemble and supply its engine and airframe parts inventory.

For aircraft and engine parts that originate from such dismantled Flight Equipment, cost is determined using a ratio calculated based on the relationship of the cost of the dismantled aircraft or engine at the time of purchase to the total estimated sales value of the dismantled aircraft or engine at the time of purchase.

At the time of sale, this ratio is applied to the sale price of each individual airframe and/or engine part to determine its allocated cost.

At the time of sale, the sum of an individual part’s allocated cost and actual repair or overhaul costs incurred represent the total cost for such part.

Our allocation of inventory between short term and long term reflects the inventory’s operating cycle, which is longer than one year due to teardown and repair lead times.

Inventory expected to be monetized within 18 months as well as work-in-process and inventory used in MROs are reported under current assets on the Consolidated Balance Sheets.

Inventory not expected to be sold within the operating cycle is classified as noncurrent inventory on the Consolidated Balance Sheets.

The Company evaluates this ratio periodically, and if necessary, updates sales value estimates and makes prospective adjustments to this ratio on a product line basis.

Any amounts identified with an estimated sales value lower than the carrying value is reduced to the estimated sales value at the time of the review.

The Company recorded additional inventory reserves due to this LCM valuation, which is reflected as a component of cost of products in the Consolidated Statements of Operations.

Any amounts identified with an estimated sales value lower than the carrying value is reduced to the estimated net realizable value at the time of the review.

The Company recorded additional inventory reserves due to this NRV valuation, which is reflected as a component of cost of products in the Consolidated Statements of Operations.

These additional inventory reserves were as follows (in thousands):

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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 fixed asset - aircraft and engines held for lease, net.

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

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Such inventory may be held for periods beyond one year.

The Company recorded inventory scrap losses which are reflected as a component of cost of products in the accompanying Consolidated Statements of Operations.

The Company recorded

inventory scrap losses which are reflected as a component of cost of products in the accompanying Consolidated Statements of Operations.

These scrap losses are as follows (in thousands):

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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 useful lives range from 0 to 7 years .

Aircraft current useful life is 7 years.

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

To arrive at the total engine life remaining before disassembly, the remaining life of the engine’s life-limited parts, the estimated utilization, and condition, as well as the aircraft fleet supported by the engine model are considered.

Upon completion of its estimated service life as a leased asset, Flight Equipment is reclassified to inventory at its carrying value.

Upon completion of its service life as a leased asset, Flight Equipment is reclassified to inventory at its carrying value.

The Company discontinues the depreciation of Flight Equipment when it is held as inventory for ultimate parts sales.

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Repairs and maintenance expenditures are expensed as incurred, unless such expenses extend the useful life of the asset, in which case they are capitalized.

Equity investments with readily determinable fair values are measured at fair value.

Equity investments without readily determinable fair values are measured at cost and adjusted for impairments or observable price changes.

We perform a qualitative assessment on an annual basis and recognize an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value.

Impairment charges are presented under “unrealized loss on investment” within the Consolidated Statements of Operations.

In accordance with Accounting Standards Codification (“ASC”) 350, “Intangibles — Goodwill and Other,” goodwill is tested at least annually for impairment, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its fair value exceeds the carrying value.

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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 quantitative impairment analysis as of October 1, 2023 and a qualitative impairment analysis as of October 1, 2022 on the goodwill for the Asset Management Solutions and TechOps segments (see Note P – Business Segments for a discussion about our business segments), and updated through December 31, 2023 and 2022, respectively, concluding that the fair value of each reporting unit exceeded their carrying values, and thus no impairment was recorded.

In the first quarter of 2024, the Company identified a triggering event that may indicate the fair value of one or more of the Company’s reporting units more likely than not did not exceed their carrying values.

The triggering event was due to the significant decline in the market price of the Company’s common stock.

As a result and due to the lack of recovery of the Company’s stock price during the year ended December 31, 2024, the Company performed a quantitative goodwill impairment test for the Asset Management Solutions and ACT reporting units for each of the quarters ended March 31, 2024, June 30, 2024, September 30, 2024, and December 31, 2024, and determined that the fair values exceeded the carrying values for each reporting unit of as the end of each quarter tested.

As such, the quantitative tests did not result in a goodwill impairment for the Company’s reporting units.

The Company performed a quantitative impairment analysis as of October 1, 2023 on the goodwill for the Asset Management Solutions and TechOps segments (see Note P – Business Segments for a discussion about our business segments), and updated through December 31, 2023, concluding that the fair value of each reporting unit exceeded its carrying value, and thus no impairment was recorded.

Other Intangible Assets

Intangibles arising from business combinations, including customer relationships and FAA certificates are initially recorded at fair market value.

Intangibles arising from business combinations, including customer relationships, FAA certificates, and AerAware flight manuals, are initially recorded at fair market value.

Customer relationships are amortized over ten years .

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Our annual assessment date for indefinite lived intangible assets is July 1st.

The Company performed a quantitative impairment analysis as of July 1, 2023 and 2022 on the indefinite lived intangible assets and concluded there were no impairments.

The Company performed a qualitative impairment analysis as of July 1, 2024, and a quantitative impairment analysis as of July 1, 2023 on the indefinite lived intangible assets and concluded there were no impairments, respectively.

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

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

In connection with any obligations and instruments potentially to be settled in the Company’s stock, including the Company's earn-out shares, the Company accounts for the instruments in accordance with ASC Topic 815, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock.” This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s stock.

In connection with any obligations and instruments potentially to be settled in the Company’s stock, the Company accounts for the instruments in accordance with ASC Topic 815, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock (“ASC 815”).

ASC 815 addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s stock.

Under this pronouncement, contracts are initially classified as equity or as either assets or liabilities, depending on the situation.

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Products Revenue — Used Serviceable Material (“USM”) Sales

Revenues from sales of USM are measured based on consideration specified in a contract with a customer, and excludes any sales commissions and taxes collected and remitted to government agencies.

Revenue from sales of USM is measured based on consideration specified in a contract with a customer, and excludes any sales commissions and taxes collected and remitted to government agencies.

We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer.

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Products Revenue — Whole Asset Sales

Revenues from whole asset sales are measured based on consideration specified in the contract with the customer.

Revenue from whole asset sales is measured based on consideration specified in the contract with the customer.

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.

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

Whole asset sales

revenue is based on a set price for a set number of assets, which is allocated to the performance obligation discussed above, in its entirety.

The Company has determined the date of transfer to the customer is the date the customer obtains control over the asset, resulting in the recognition of revenue.

Whole asset sales revenue is based on a set price for a set number of assets, which is allocated to the performance obligation discussed above, in its entirety.

The Company has determined the date of transfer to the customer is the date the customer obtains control over the asset and would cause the revenue recognition.

Payment is required in full upon customers’ acceptance of the whole asset on the date of the transfer, unless the Company extends credit terms to customers it deems creditworthy.

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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.

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

In leases where the Company is responsible for performing certain repairs or replacement of aircraft components or engines, supplemental rent is recorded as revenue in the period earned.

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Services Revenue

Services revenue is recognized as performance obligations are fulfilled and the benefits are transferred to the customer.

Revenue for services is recognized as performance obligations are fulfilled and the benefits are transferred to the customer.

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.

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Revenue is recognized based on the relationship of actual costs incurred to date to the estimated total cost at completion of the performance obligation.

We are required to make certain judgments and estimates, including estimated revenue and cost of sales, as well as inflation and the overall profitability of the arrangement.

We are required to make certain judgments and estimates, including estimated revenue and costs, as well as inflation and the overall profitability of the arrangement.

Key assumptions involved include future labor costs and efficiencies, overhead costs and ultimate timing of product delivery.

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, 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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Shipping and handling fees and costs incurred associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales in our consolidated statements of operations, and are not considered a performance obligation to our customers.

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

Our reported revenue on our consolidated statements of operations is net of any sales or related non-income taxes.

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 payments and other liabilities in the accompanying Consolidated Balance Sheets to record the Company’s contractual commitment to reimburse such qualifying maintenance.

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.

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Share Based Compensation

The Company accounts for share-based compensation to employees in accordance with ASC 718, “Compensation—Stock Compensation.” Under ASC 718, the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and, for those awards subject only to service conditions, the Company recognizes the costs on a straight-line basis over the requisite service period for the entire award the employee is required to provide service in exchange for the award, which generally is the vesting period.

The Company accounts for share-based compensation to employees in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”).

Under ASC 718, the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and, for those awards subject only to service conditions, the Company recognizes the costs on a straight-line basis over the requisite service period for the entire award the employee is required to provide service in exchange for the award, which generally is the vesting period.

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.

Our policy is to recognize forfeitures as they occur.

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.

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In the period that achievement of the performance-based criteria is deemed probable, US GAAP requires the immediate recognition of all previously unrecognized compensation since the original grant date.

As a result, compensation expense recorded in the period that achievement is deemed probable could include a substantial amount of previously

unrecorded compensation expense related to the prior periods.

As a result, compensation expense recorded in the period that achievement is deemed probable could include a substantial amount of previously unrecorded compensation expense related to the prior periods.

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 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 applies Accounting Standards Update (“ASU”) 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which generally expands the scope of ASC 718 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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Earnings Per Share

Basic (loss) earnings per share is computed by dividing net (loss) earnings attributable to the Company’s common stockholders by the weighted average number of common shares outstanding during the periods.

Diluted (loss) earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock and is calculated using the treasury stock method for stock options and unvested shares.

Basic earnings (loss) per share is computed by dividing net earnings (loss) attributable to the Company’s common stockholders by the weighted average number of common shares outstanding during the periods.

Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were

exercised or converted into common stock and is calculated using the treasury stock method for stock options and unvested shares.

Deferred insurance proceeds

In April 2024, one of the Company’s leased secondary parts warehouses in Roswell, New Mexico, was destroyed by a fire.

Inside the warehouse were various aircraft parts typically sold by the Company as USM.

The Company carries insurance covering these parts, with a limit of $ 100 million and a $ 10,000 deductible.

The Company filed a claim for the replacement value of the inventory that was destroyed or rendered not sellable by the fire in the amount of $ 67.6 million.

The cost basis of the destroyed inventory was $ 6.0 million.

During the year ended December 31, 2024, the Company collected interim funding from the insurance companies associated with this claim in the amount of $ 30.9 million and collected $ 3.7 million subsequent to the balance sheet date.

The Company has deferred the recognition of a gain on insurance proceeds collected under this claim in excess of the loss amount until a full settlement of the claim is reached with our insurers.

The deferred gain in the amount of $ 24.9 million as of December 31, 2024 is presented under deferred insurance proceeds in the Consolidated Balance Sheets.

Income taxes are accounted for under the asset and liability method.

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The Company records interest and penalties related to unrecognized tax benefits in the income tax provision.

Revision of Prior Period Financial Statements

Certain balances in the Consolidated Balance Sheet as of December 31, 2023 and the Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022 have been reclassified to conform to the presentation in the consolidated financial statements as of and for the year ended December 31, 2024, primarily including the reclassification of deposits for Flight Equipment purchases from deposits, prepaid expenses, and other current assets to advance vendor payments.

Such reclassification did not impact net income (loss), stockholders’ equity or total cash flows from operating activities, and did not have a material impact on the consolidated financial statements.

New Accounting Pronouncements Adopted

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

2021-01, Reference Rate Reform (Topic 848).

This new standard provides optional temporary guidance for entities transitioning away from London Interbank Offered Rate (“LIBOR”) to new reference interest rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions with Topic 848.

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.

To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

Based on our review of our key material contracts through December 31, 2023, ASU 2021-01 does not have a material impact to our consolidated financial statements.

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.

2018-11, Leases (Topic 842):

Targeted Improvements.

Topic 842 became effective for the Company for the annual period beginning on January 1, 2022, and 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.

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):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

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 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.

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.

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.

2018-19 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 became effective for the Company beginning January 1, 2023, and was adopted on a modified retrospective approach.

This ASU did not have a material impact on our consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, the amendments in the ASU are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

The amendments in ASU 2023-07 are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss.

In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements.

The purpose of the amendments is to enable “investors to better understand an entity’s overall performance” and assess “potential future cash flows.” The amendments in ASU 2023-07 are effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Management is currently evaluating the impact of this guidance on our financial statements.

The amendments in ASU 2023-07 were adopted by the Company as of January 1, 2024 and retrospectively applied.

Refer to Note P – Business Segments, for disclosures resulting from the adoption of ASU 2023-07.

The Company’s results of operations, cash flows, and financial condition were not impacted by the adoption of this ASU.

New Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

This guidance is required to be adopted by us in the first quarter of 2025.

We are currently evaluating the impact of this guidance on our consolidated financial statements and disclosure.

In November 2024, the FASB issued ASU 2024-03, Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires public entities to disclose, in a tabular presentation, the following expense items (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, (5) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities or other types of depletion expenses, as well as other types of expenses when applicable.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted.

We are currently evaluating the impact of this guidance on our consolidated financial statements and disclosure.

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 CARES Act.

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

Treasury Department (“Treasury”) through the Payroll Support Program (“PSP1”) under the

CARES Act, of which $ 12.7 million was received prior to December 31, 2020 and the remaining amount was received during the first quarter of 2021.

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

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

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

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

No relief funds were received during 2023.

In connection with the financial assistance the Company received under the Payroll Support Program, it was required to comply with certain provisions of the CARES Act, all of which have expired as of December 31, 2023, 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 was limited on the payment of certain employee compensation through April 1, 2023.

Since inception, we have been in compliance with all of the provisions of the CARES Act.

NOTE C - SIGNIFICANT RISKS AND UNCERTAINTIES

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The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

Actual results could differ from those estimates.

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The Company is impacted by the general economic conditions of the commercial aviation industry.

A decrease in passenger and/or air cargo traffic worldwide could result in strains on the Company’s lessees and cause them to default under their leases with the Company, which could negatively impact cash flows and results of operations.

The value of Flight Equipment held for operating leases is subject to fluctuations in the values of commercial aircraft and engines worldwide.

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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.

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 the FCPA and other anti-bribery laws.

Consequently, the Company is subject to a variety of risks such as civil strife, political instability, import and export regulations, compliance with foreign laws, treaties, regulations, uncertainties arising from foreign local

less developed business practices, difficulty in repossessing Flight Equipment when a lessee defaults, cultural considerations, restriction on fund transfers, and exposure to the FCPA and other anti-bribery laws.

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

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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, 2024, one customer accounted for 15 % of total revenue.

During the year ended December 31, 2023, two customers accounted for 25 % of total revenue.

During the years ended December 31, 2022 and 2021, one customer accounted for 19 % and 14 % of total revenue, respectively, which was related to nonrecurring transactions with different customers that was collected during the respective years.

One customer made up 20 % of our trade receivable balance as of December 31, 2023.

During the year ended December 31, 2022, one customer accounted for 19 % of total revenue.

No customer made up more than 10% of our trade receivable balance as of December 31, 2024.

One customer made up 20 % of our trade receivable balance as of December 31, 2023.

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

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however, no assurance can be provided that access to invested cash and cash equivalents will not be impacted by adverse conditions in the financial and credit markets.

Subsequent Events

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the consolidated financial statements were issued.

NOTE D - REVENUE

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Contract assets and contract liabilities are determined on a contract by contract basis.

The contract assets are as follows (in thousands):

Contract assets are as follows (in thousands):

December 31, 2024

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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.

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

Contract liabilities are reported as deferred revenue on our Consolidated Balance Sheets and amounted to $ 3.0 million as of December 31, 2023, of which $ 2.7 million was related to contract liabilities for services to be performed.

For the year ended December 31, 2023, we recognized as revenue the entire opening balance of our contract liabilities as the timing between customer payments and our performance of the services is a short period of time and generally no longer than six months.

For the year ended December 31, 2024, the Company recognized as revenue the entire opening balance of our contract liabilities included in the deferred revenue beginning balance for services performed as the timing between customer payments and our performance of the services is generally no longer than six months .

Disaggregation of Revenue

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Asset Management

Total Revenues

Total Revenue

Whole asset sales

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Total products

Total revenues

Total revenue

Year ended December 31,

Asset Management

Total Revenues

Total Revenue

Whole asset sales

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Total products

Total revenues

Total revenue

Year ended December 31,

Asset Management

Total Revenues

Total Revenue

Whole asset sales

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Total products

Total revenues

Total revenue

NOTE E-INVENTORY

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December 31, 2023

Used serviceable materials

Work-in-process

MRO and engineered solutions

Less short term

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Total intangible assets with indefinite lives

The Company performed its annual quantitative impairment analysis as of July 1, 2023 and 2022 on the indefinite lived intangible assets and concluded there were no impairments.

In the first quarter of 2024, the Company identified a triggering event indicating the fair value of one or more of the Company’s reporting units more likely than not did not exceed their carrying values.

The triggering event was due to the significant decline in the market price of the Company’s common stock.

As a result and due to the lack of recovery of the Company’s stock price during the year ended December 31, 2024, the Company performed a quantitative goodwill

impairment test for the Asset Management Solutions and ACT reporting units for each of the quarters ended March 31, 2024, June 30, 2024, September 30, 2024, and December 31, 2024, and determined that the fair values exceeded the carrying values for each reporting unit of as the end of each quarter tested.

As such, the quantitative tests did not result in a goodwill impairment for the Company’s reporting units.

In addition, the Company performed a qualitative assessment as of July 1, 2024 of other intangible assets with indefinite lives and concluded it was unlikely that they were impaired.

The Company performed a quantitative impairment analysis as of October 1, 2023 on the goodwill for the Asset Management Solutions and TechOps segment, and concluded there was no impairment.

The Company performed a qualitative impairment analysis as of July 1, 2024, and a quantitative impairment analysis as of July 1, 2023 on the intangible assets with indefinite lives and concluded there were no impairments, respectively.

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

Intangible assets with definite lives are as follows (in thousands):

Net book value of intangible assets with definite lives are as follows (in thousands):

December 31, 2024

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Customer relationships

Total intangible assets with definite lives

AerAware Flight manuals

Total intangible assets with definite lives, net

Amortization expense was as follows (in thousands):

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Amortization expense

The estimated aggregate amount of amortization expense for intangible assets in each fiscal year from 2024 through 2028 is $ 2.1 million.

Accumulated amortization amounted to $ 9.3 and $ 7.2 million as of December 31, 2023 and December 31, 2022, respectively.

The estimated aggregate amount of amortization expense for intangible assets as follows (in thousands):

Year ending December 31:

Total Estimated Aggregate Amortization Expense

Accumulated amortization amounted to $ 11.5 million and $ 9.3 million as of December 31, 2024 and December 31, 2023, respectively.

There has been no goodwill activity for the years ended December 31, 2024 and 2023.

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Less accumulated depreciation

Depreciation expense, which includes amortization of equipment under capital lease, was as follows (in thousands):

Depreciation expense was as follows (in thousands):

Year ended December 31,

Depreciation expense

NOTE H - AIRCRAFT AND ENGINES HELD FOR LEASE AND LEASE RENTAL

NOTE H - AIRCRAFT AND ENGINES HELD FOR LEASE AND LEASE, NET

Aircraft and engines held for operating leases, net, consists of the following (in thousands):

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Depreciation expense

Contingent rental fees recognized as revenues related to supplemental rent were as follows (in thousands):

Contingent rental fees recognized as revenue related to supplemental rent were as follows (in thousands):

Year ended December 31,

Contingent rental fees

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

The minimum future lease rentals contracted to be received under these existing operating leases of Flight Equipment at December 31, 2023 are $ 5.1 million, all expected to be received in 2024.

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

The minimum future lease rentals contracted to be received under these existing operating leases of Flight Equipment at December 31, 2024 are as follows (in thousands):

Year ending December 31:

Total minimum lease payments

These amounts 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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● Cost approach–Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

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

The Company measures 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.

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

The Company’s financial instruments, other than cash, consist principally of accounts receivable and accounts payable.

The Company’s financial instruments, other than cash and cash equivalents, consist principally of accounts receivable and accounts payable.

The fair value of such approximates the carrying value of these financial instruments because of their short-term nature.

Borrowings under the Revolving Credit Agreement (as defined in Note L – Financing Arrangements) approximate fair value due to the variable interest rate on the facility and the recent amendment during the year.

Borrowings under the Revolving Credit Agreement (as defined in Note L – Financing Arrangements) approximate fair value due to the variable interest rate on the facility.

The Company’s borrowings under the Revolving Credit Agreement are carried at historical cost and adjusted for principal payments.

Borrowings under the Equipment Loan (as defined in Note L – Financing Arrangements) approximate fair value due to the variable interest rate on the loan and its origination during the year ended December 31, 2023.

Borrowings under the CIBC Equipment Loan (as defined in Note L – Financing Arrangements) approximate fair value due to the variable interest rate on the loan and its origination during the year ended December 31, 2024.

The Company’s borrowings under the Equipment Loan are carried at historical cost and adjusted for principal payments.

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NOTE K - WARRANT LIABILITY

Warrants to purchase a total of 623,834 shares of the Company’s common stock were outstanding as of December 31, 2023 and 2022, respectively.

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.

On November 29, 2021, the Company provided notice to holders of all of the Public Warrants that the Company would be redeeming all of the Public Warrants for a redemption price of $ 0.01 per Public Warrant, and on December 29, 2021, such redemption was completed and the Public Warrants ceased trading on Nasdaq.

As of December 31, 2024 and 2023, warrants to purchase a total of 623,834 shares of the Company’s common stock were outstanding (the “Private Warrants”).

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.

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, 2023 was 2.0 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.

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 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 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 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 Black-Scholes option pricing model.

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, 2024 and 2023:

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Expected volatility of common stock

Dividend yield

Expected option term in years

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Outstanding debt obligations as of December 31, 2024 and 2023 consisted of the following (in thousands):

$ 180.0 million Wells Fargo Senior Secured Revolving Credit Facility

$ 180.0 million Wells Fargo Senior Secured Revolving Credit Agreement

$ 10.0 million CIBC Property and Equipment Revolving Term Loan

$ 10.0 million Synovus Property and Equipment Revolving Term Loan

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Total long-term portion

At December 31, 2023 and 2022, total deferred financing costs were $ 1.5 and $ 0.5 million, respectively.

At December 31, 2024 and 2023, total deferred financing costs were $ 1.3 million and $ 1.5 million, respectively.

Amortized debt issuance costs are recorded in interest expense through maturity of the related debt using the straight-line method, which approximates the effective interest method.

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and other subsidiary borrowers entered in a secured amended and restated Revolving Credit Agreement (as amended, the “Revolving Credit Agreement”).

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

The Revolving Credit Agreement initially provided for a $ 110.0 million aggregate amount of revolver commitments subject to borrowing base.

The Revolving Credit Agreement included a $ 10.0 million sub facility for letters of credit and for borrowings on same-day notice referred to as “swingline loans”.

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On July 25, 2023, the Revolving Credit Agreement was amended to increase the maximum commitments thereunder to $ 180.0 million aggregate amount, expandable to $ 200.0 million, subject to conditions and the availability of lender commitments and borrowing base limitations, and the maturity date was extended to July 24, 2028.

As of December 31, 2023, the outstanding balance under the Revolving Credit Agreement was $ 29.0 million and at December 31, 2023 the Company had $ 131.0 million of availability, subject to borrowing base limitations.

As of December 31, 2022, there was no outstanding balance under the Revolving Credit Agreement.

As of December 31, 2024, the Company had $ 138.1 million of availability, subject to borrowing base limitations.

The obligations of AerSale, Inc.

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The interest rate applicable to loans outstanding on the Revolving Credit Agreement is a floating rate of interest per annum of SOFR plus a margin of 2.75 %.

The interest rate as of December 31, 2023 was 7.69 %.

The interest rate applicable to loans outstanding on the Revolving Credit Agreement prior to March 9, 2023, was a floating rate of interest per annum of LIBOR plus a margin of 3.5 %.

The interest rate as of December 31, 2022 was 9.50 %.

The applicable interest rate as of December 31, 2024 and 2023, was 7.52 % and 7.69 %, respectively.

Interest expense on the Revolving Credit Agreement was as follows (in thousands):

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Interest expense

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

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

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

The Revolving Credit Agreement requires the Company to meet certain financial and nonfinancial covenants.

The Company was in compliance with these covenants as of December 31, 2024 and 2023.

$ 10.0 million Synovus Property and Equipment Revolving Term Loan

On June 30, 2023, the Company entered into a Property and Equipment Revolving Term Loan (“Equipment Loan”) with a total advance commitment of $ 10.0 million for the purpose of financing capital expenditures on property and equipment.

Once the total advance commitment is reached or commencing on June 30, 2024, whichever comes first, this facility will become a term loan with a maturity date of June 30, 2027.

This loan is collateralized by the property and equipment it finances and requires interest only payment until converted to a term loan, at which point, principal and interest payments will be required.

The Equipment Loan bears interest at a rate per annum equal to one-month SOFR plus 3.50 %, which will be adjusted monthly.

On June 30, 2023, the Company entered into a property and equipment revolving term loan (“Synovus Equipment Loan”) with a total advance commitment of $ 10.0 million for the purpose of financing capital expenditures on property and equipment.

This facility became a term loan during quarter ended June 30, 2024, with a maturity date of June 30, 2027.

This loan is collateralized by the property and equipment it finances and requires principal and interest payments.

The Synovus Equipment Loan bears interest at a rate per annum equal to 7.96 %.

As of December 31, 2024, there was no outstanding balance on the Synovus Equipment Loan.

The Synovus Equipment Loan bore interest at a rate per annum equal to one-month SOFR plus 3.50 %, which was adjusted monthly.

The effective rate on this facility was 8.84 % as of December 31, 2023.

Interest expense on the Equipment Loan was $ 0.2 million for the year ended December 31, 2024, compared to $ 0.4 million for the year ended December 31, 2023.

The Synovus Equipment Loan is subject to ongoing compliance by the Company in the form of various customary affirmative and negative covenants, as well as certain financial covenants.

The Company was in compliance with these covenants as of December 31, 2023.

$ 10.0 million CIBC Property and Equipment Revolving Term Loan

On November 22, 2024, the Company entered into a property and equipment revolving term loan (the “CIBC Equipment Loan”) with a total advance commitment of $ 10.0 million for the purpose of financing capital expenditures on property and equipment.

Advances made by the lender are convertible into term loans at the option of the lender at a rate of SOFR plus 3.0 % and have a maturity date of thirty-six ( 36 ) months from the term loan conversion date.

Advances under this loan are collateralized by the property and equipment it finances and require interest only payment until converted to a term loan, at which point, principal and interest payments are required.

As of December 31, 2024, borrowings under this facility were converted to a term loan maturing on December 23, 2027.

The effective rate on this facility as of December 31, 2024 was 7.37 %.

Interest expense on the Equipment Loan for the year ended December 31, 2023 was $ 0.4 million.

For the year ended December 31, 2024, there was no interest expense on the CIBC Equipment Loan.

Maturities of the Equipment Loan as of December 31, 2024 are as follows (in thousands):

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federal statutory income tax rate of 21.0 % for the years ended December 31, 2024, 2023 and 2022 due to the following (in thousands):

Year ended December 31,

Provision for income tax at the federal statutory rate

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Deferred tax assets and liabilities reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of December 31, 2023 and 2022 are as follows (in thousands):

effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of December 31, 2024 and 2023 are as follows (in thousands):

Year ended December 31,

Deferred tax assets:

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Stock-based compensation

Outside basis difference

Business interest expense - 163(j) limitation

Accrued expenses

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Total deferred tax liabilities

Valuation Allowances

Deferred income taxes, net

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 in 2022 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, 2023.

After considering all of the evidence, both positive and negative, it was determined more likely than not that the Company's net deferred tax asset in the U.S.

jurisdiction will be realizable as of December 31, 2024.

At December 31, 2024 and December 31, 2023, the Company had net operating losses available for carry-forward for Federal income tax purposes of approximately $ 13.8 million and $ 7.8 million, respectively.

These net operating loss carryforwards acquired prior to 2024 will expire on various dates through 2034.

Utilization of the net operating loss carryforwards as of December 31, 2023 are subject to annual limitation under Sec.

Utilization of the net operating loss carryforwards as of December 31, 2024 are subject to annual limitations under Sec.

382 of the Internal Revenue Code.

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ASC 740, Income Taxes, provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.

ASC 740 also provides guidance on measurement, derecognition,

classification, interest and penalties, accounting in interim periods, and disclosure and transition.

ASC 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, and disclosure and transition.

As of December 31, 2024 and 2023, there was no reserve for uncertain tax positions.

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The computation of basic and diluted earnings per share (“EPS”) is based on the weighted average number of common shares outstanding during each period.

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):

Net (loss) income

The following table provides a reconciliation of the computation for basic and diluted earnings per share as follows:

Year ended December 31,

Net income (loss)

change in FV of warrants

Income (loss) attributable to common shareholders for EPS

Income (loss) attributable to common stockholders for EPS

Weighted-average number of shares outstanding - basic

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Additional shares from assumed stock-settled restricted stock units

Additional shares issued under the Employee Stock Purchase Plan

Weighted-average number of shares outstanding - diluted

Earnings per share - basic:

Earnings per share - diluted:

Shares/units excluded from earnings per share - dilutive:

Earnings (loss) per share - basic:

Earnings (loss) per share - diluted:

Anti-dilutive shares/units excluded from earnings per share - diluted:

Additional shares from assumed exercise of Private Warrants

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The Company’s common stock consist of $ 0.0001 par value, 200,000,000 shares authorized, of which 53,252,563 and 52,954,430 shares were issued and outstanding as of December 31, 2024 and 2023, respectively.

Effective November 8, 2022, the Board of Directors approved the repurchase, directly from 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 .

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 stock appreciation rights (“SARs”) received a contingent right to receive up to 3,000,000 additional shares of the Company’s common stock.

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:

Prior to the fifth anniversary of the Merger, if the closing price per share of the Company’s common stock is greater than $ 13.50 for any period of 20 trading days out of 30 consecutive trading days, the holders will be entitled to receive 50 % of the Earn-out Shares in the aggregate (“Minimum Target Earn-out Shares”);

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.

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

Effective October 22, 2021, the contingency event related to the Maximum Target Earn-out Shares was met and 1,854,169 shares were issued.

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 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 (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.

Effective October 22, 2021, the contingent event related to the Maximum Target was met and the other half of the Unvested Founder Shares vested.

Public Warrants

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.

Effective November 8, 2022, the Board of Directors approved to repurchase, directly from 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 .

2020 Equity Incentive Plan

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The 2020 Plan authorizes discretionary grants of incentive stock options to employees of the Company and its qualifying subsidiaries.

The 2020 Plan also authorizes discretionary grants of non-

qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents or other equity or cash-based awards to employees and consultants of the Company and its subsidiaries and to members of the Board of Directors of the Company.

To the extent that an award under the 2020 Plan expires, is cancelled, forfeited, terminated, settled in cash or is otherwise settled without issuance of the full number of shares to which it relates, will become or again be available for awards under the 2020 Plan.

The 2020 Plan also authorizes discretionary grants of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents or other equity or cash-based awards to employees and consultants of the Company and its subsidiaries and to members of the Board of Directors of the Company.

To the extent that an award under the 2020 Plan expires, is cancelled, forfeited, terminated, settled in cash or is otherwise settled without issuance of the full number of shares to which it relates, it will become or again be available for awards under the 2020 Plan.

The 2020 Plan is administered by the Company's Compensation Committee.

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Weighted Average

Remaining Contractual

Grant Date Fair Value

Outstanding at December 31, 2023

( 1,192,355 )

Outstanding December 31, 2024

Weighted Average

Remaining Contractual

Grant Date Fair Value

Outstanding at December 31, 2022

( 1,192,355 )

Outstanding December 31, 2023

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

(2) 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 10,403 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 521,996 awards vest over a period ranging from one to three years .

For the restricted stock unit awards granted under the 2020 Plan containing both service and performance conditions, the Company recognizes compensation expense when the awards are considered probable of vesting.

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The fair value of these awards is determined based on the closing price of the shares on the grant date.

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 years ended December 31, 2023 and 2022, the Company recognized share-based compensation expense for certain performance-based awards of $ 7.9 million and $ 14.2 million, respectively, given that the achievement of the performance milestones at the 200 % vesting target have been deemed probable for accounting purposes.

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

As of December 31, 2024, the Company’s restricted stock units include 726,109 performance-based awards that have vesting provisions subject to both time vesting and the achievement of certain performance milestones ranging from 50 % to 200 % vesting targets, while the remaining 654,168 awards vest over a period ranging from one to three years .

For the year ended December 31, 2024, the Company did not recognize share-based compensation expense for the performance-based awards given that the achievement of the performance milestones have been deemed not probable for accounting purposes.

Stock Options

Stock options granted under the 2020 Plan have exercise terms of 10 years and vest in equal installments of one-third of the total number of options granted on each of the first three anniversaries from the grant date beginning one year after the date of grant, and are assigned an exercise price equal to the closing stock price on the day prior to the date of grant.

Options are expensed on a straight-line basis over the grant vesting period, which is considered to be the requisite service period.

In order for the options to vest, the employee must be in the continuous employment of the Company since the date of the grant.

Except for qualifying retirement after the nine-month anniversary of the grant date, any portion of the grant that has not vested will be forfeited upon termination of employment

Under the 2020 Plan, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model.

When determining expected volatility, the Company considers the historical volatility of the Company’s stock price, or benchmark companies when the option exercise period exceeds period for which stock data is available for the Company.

The risk-free interest rate is based on the U.S.

Treasury yield curve in effect at the time of grant, based on the options’ expected term.

The assumptions used in the Black-Scholes option-pricing model for options granted in 2024 are as follows:

Risk-free interest rate

Expected volatility of common stock

Dividend yield

Expected option term in years

Grant-date fair value (per share)

Stock option activity under the 2020 Plan for the year ended December 31, 2024 was as follows:

Weighted Average Exercise Price per Share

Weighted Average Remaining Contractual Life (Years)

Aggregate Intrinsic Value (1)

Outstanding at December 31, 2023

Outstanding December 31, 2024

(1) Total shares valued at the market price of the underlying stock as of December 31, 2024 less the exercise price.

As of December 31, 2024, the unrecognized compensation costs related to these awards was $ 1.6 million.

The Company expects to recognize those costs over a weighted average period of 1.6 years.

The total grant date fair value of stock options awarded during the year ended December 31, 2024 was $ 2.4 million.

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.

For the years ended December 31, 2023 and 2022, the Company issued 45,755 and 46,726 shares, respectively, pursuant to the ESPP and approximately 407,519 shares remain available for future issuance.

For the years ended December 31, 2024 and 2023, the Company issued 89,923 and 45,755 shares, respectively, pursuant to the ESPP and 317,596 shares remain available for future issuance.

NOTE P - BUSINESS SEGMENTS

Consistent with how our chief operating decision maker (Chairman and Chief Executive Officer) evaluates performance and utilizes gross profit as a profitability measure, we report our activities in two business segments:

The Chairman and Chief Executive Officer is our Chief Operating Decision Maker (“CODM”).

We report operational data to our CODM at the segment level, which he uses to evaluate performance and allocate resources based on gross profit and income from operations by segment.

While the Company believes there are synergies between the two business segments, they are managed separately because they have different risks and opportunities.

The two reportable segments are:

● Asset Management Solutions-comprised of activities to extract value from strategic asset acquisitions through leasing, trading, or disassembling for product sales

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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 Flight Equipment to passenger and cargo operators worldwide.

The Asset Management Solutions segment provides 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 sold as whole assets or disassembled and sold as individual spare parts and components.

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Cost of sales consists principally of the cost of product, direct labor, and overhead.

Our engineered solutions revenues consist of sales of products internally developed as permitted by Supplemental Type Certificates issued by the FAA.

Our engineered solutions revenue consist of sales of products internally developed as permitted by Supplemental Type Certificates issued by the FAA.

These products are proprietary in nature and function as non-original equipment manufacturer solutions to airworthiness directives and other technical challenges for operators.

In order to develop these products, we engage in research and development activities.

Periodically, our TechOps division will engage in the repair and sale of used serviceable materials through their ability to overhaul existing inventory.

Our TechOps division will engage in the repair and sale of used serviceable materials through their ability to overhaul existing inventory.

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 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, interest income, other income, net, unrealized loss on investment, change in fair value of warrant liability, and income tax expense.

Gross Profit is calculated by subtracting cost of sales from revenue;

income from operations is calculated by subtracting unapplied operating expenses and selling, general and administrative expenses.

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

The segment reporting excludes the allocation of interest expense, interest income, other income (expense), net, change in fair value of warrant liability and income tax expense (benefit).

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

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Year ended December 31,

Cost of sales and operating expenses

Asset Management Solutions

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Whole asset sales

Year ended December 31,

Asset Management Solutions

Total Depreciation and Amortization Expense

Product sales

Whole asset sales

The following table reconciles segment gross profit to income (loss) before income tax provision:

Year ended December 31,

Asset Management Solutions

Total Capital Expenditures

Asset Management Solutions

The following table reconciles segment gross profit to net income from continuing operations for the years ended December 31, (in thousands):

Year Ended December 31,

Segment gross profit

Asset Management Solutions

Operating expenses

Selling, general and administrative expenses

Payroll support program proceeds

Segment income (loss) from operations

Other corporate expenses (1)

Income (loss) from operations

Other (expenses) income:

Interest (expense) income, net

Other income, net

Unrealized loss on investment

Change in fair value of warrant liability

(Loss) 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):

Total revenues

Income (loss) before income tax provision

(1) Other corporate expenses include other unapplied payroll expenses and benefits, telecommunications and IT support, professional fees, office rent, and depreciation, among others.

Year ended December 31,

Asset Management Solutions

Year ended December 31,

Total Depreciation and Amortization Expense

Asset Management Solutions

Total Capital Expenditures

Asset Management Solutions

The following table presents revenue 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):

Year ended December 31,

Total revenue

Year ended December 31,

Long-lived assets

Total long-lived assets

For the year ended December 31, 2023, the Company had two customers from which revenues generated exceeded 10 % of total sales.

Total sales to these two customers amounted to $ 82.2 million, of which $ 35.7 million was included in TechOps segment and $ 46.5 million was included in the Asset Management Solutions segment.

As of 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.

For the year ended December 31, 2024, the Company had one customer from which revenue generated exceeded 10 % of total sales.

Total sales to this customer amounted to $ 50.9 million, of which $ 33.5 million was included in TechOps segment and $ 17.4 million was included in the Asset Management Solutions segment.

As of December 31, 2023, the Company had two customers from which revenue generated exceeded 10 % of total sales.

Total sales to these customers amounted to $ 82.2 million, of which $ 35.7 million was included in TechOps segment and $ 46.5 million was included in the Asset Management Solutions segment.

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

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Asset Management Solutions

Total intersegment revenues

Total intersegment revenue

NOTE Q - LEASES

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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 operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the term of the lease.

The right-of-use (“ROU”) asset and related operating 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;

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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 2035.

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Operating lease liabilities - non-current

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

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

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Certain executive management entered into employment agreements with the Company.

The contracts are for a period of three years , and the contracts provide that such management may earn discretionary bonuses, computed upon a sliding percentage scale of their base salaries, based on the overall financial performance of the Company and each individual’s contributions, subject to approval by the Company’s Board of Directors.

Additionally, under certain termination conditions, such contracts provide for severance payments under the Company’s Severance Plan, including payment of base salary, bonus, and fringe benefits.

The contracts provide that such management may earn discretionary bonuses, computed upon a sliding percentage scale of their base salaries, based on the overall financial performance of the Company and each individual’s contributions, subject to approval by the Company’s Board of Directors.

Additionally, under certain termination conditions, such contracts provide for severance

payments under the Company’s Severance Plan, including payment of base salary, bonus, and fringe benefits.

The contracts include certain noncompete clauses commencing upon the employee’s separation from the Company.

The Company could be involved in litigation incidental to the operation of the business.

The Company intends to vigorously defend all matters in which the Company is named as a defendant, and, for insurable losses, maintain significant levels of insurance to protect against adverse judgments, claims or assessments that may affect the Company.

claims or litigation, if any, in which the Company is involved will materially affect the Company’s consolidated financial condition or results of operations.

NOTE S - RELATED-PARTY TRANSACTIONS

On November 10, 2021, AerLine, a former consolidated VIE, transferred its ownership in equity investments to the Company in settlement of amounts owed to the Company.

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

Based on the financial deterioration of the undelaying company in which the Company held an equity investment, 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 unrealized loss on investment for the year ended December 31, 2021.

NOTE T - BENEFIT PLANS

The Company intends to vigorously defend all matters in which the Company is named as a defendant, and, for insurable losses, maintain levels of insurance to protect against adverse judgments, claims or assessments that may affect the Company.

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.

NOTE S - 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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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