UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________.

Commission file number: 001-38801

AerSale Corporation

(Exact name of registrant as specified in its charter)


Delaware		84-3976002
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

255 Alhambra Circle, Suite 435
Coral Gables, FL		33134
(Address of Principal Executive Offices)		(Zip Code)

(305) 764-3200

Registrant’s telephone number, including area code

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.0001 par value per share	ASLE	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of Registrant’s common stock outstanding as of August 5, 2024 was 53,207,348.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report may constitute forward-looking statements, and include, but are not limited to, changes in the market for our services; changes in applicable laws or regulations; the ability to launch new services and products or to profitably expand into new markets; and expectations of other economic, business and/or competitive factors. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the following: disruptions in supply chain; factors that adversely impact the commercial aviation industry; the fluctuating market value of our products; our ability to repossess mid-life commercial aircraft and engines (“Flight Equipment”) when a lessee defaults; success at our maintenance, repair and overhaul (“MRO”) facilities is dependent upon continued outsourcing by airlines; shortage of skilled personnel or work stoppages; the inability to obtain certain components and raw materials from suppliers; the highly competitive nature of the markets in which we operate; risks associated with our international operations; the risks from business acquisitions and integration of new businesses acquired; the unique risks we encounter by supplying equipment and services to the U.S. government; further consolidation of customers and suppliers in our markets; cyber or other security threats or disruptions; the significant capital expenditures that may be required to keep pace with technological developments in our industry lack of ownership of certain intellectual property and tooling that is important to our business; intellectual property litigation to protect our intellectual property; our dependence on our facilities, which are subject to physical and other risks that could disrupt production; risks from any improper conduct by our employees, agents, subcontractors, suppliers, business ventures or joint ventures in which we participate; loss of services from key employees; the failure of our subcontractors to perform their contractual obligations; impacts from future outbreaks and infectious diseases on flight activity, demand for MRO and leasing services, our business partners or customers, and the related macro environment; our dependence on continued availability of financing to manage our business and to execute our business strategy, and unavailability of additional financing on terms acceptable to us; our failure to comply with the covenants in the documents governing our existing and future indebtedness; limitations of our current and future operations from restrictive covenants contained in documents governing our indebtedness; unanticipated changes in our tax provision; possible goodwill and other asset impairments; changes in interest rates, foreign currency exchange rates and swap counterparty risks; we are subject to significant government regulation and may need to incur significant expenses to comply with new or more stringent government regulation; compliance with U.S. and other anti-corruption laws, export control laws, import control laws, trade and economic sanction laws and other laws governing our operations; current or future regulatory proceedings or litigation including product liability, intellectual property disputes and other claims not adequately covered by insurance; the liens of Flight Equipment could exceed the value of such Flight Equipment; the risk that our leased aircraft engines are deemed accessions to the aircraft and our ability to repossess an engine is impaired; product and other liability claims not covered by insurance; the extensive environmental requirements with which we must comply; global climate change, or by legal, regulatory or market responses to such change; depressed stock price as a result of substantial future sales of our common stock, or the perception in the public markets that these sales may occur; lack of analyst coverage for our common stock; actual or anticipated sales of significant amounts of our common stock; the fact that we do not intend to pay dividends on our common stock for the foreseeable future; reduced disclosure due to our filing status as an “emerging growth company”; ineffective internal control over financial reporting; insolvency of our customers; the adverse effect of negative economic conditions and other factors described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 8, 2024.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Unless otherwise stated or the context otherwise requires, references in this Quarterly Report to the “Company,” “AerSale,” “we,” “us,” “our” and similar terms refer to AerSale Corporation (f/k/a Monocle Holdings, Inc.) and its consolidated subsidiaries.

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PART I – FINANCIAL INFORMATION

ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AERSALE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data and par value)

(Unaudited)


	June 30,		December 31,
	2024		2023

Current assets:
Cash and cash equivalents	$	4,285	$	5,873
Accounts receivable, net of allowance for credit losses of $978 as of June 30, 2024 and December 31, 2023		37,266		31,239
Income tax receivable		1,700		1,628
Inventory:
Aircraft, airframes, engines, and parts, net		221,371		177,770
Advance vendor payments		13,589		35,757
Deposits, prepaid expenses, and other current assets		17,617		12,507
Total current assets		295,828		264,774
Fixed assets:
Aircraft and engines held for lease, net		31,491		26,475
Property and equipment, net		32,683		27,692
Inventory:
Aircraft, airframes, engines, and parts, net		157,442		151,398
Operating lease right-of-use assets		26,022		27,519
Deferred income taxes		12,032		12,203
Deferred financing costs, net		1,342		1,506
Deferred customer incentives and other assets, net		525		525
Goodwill		19,860		19,860
Other intangible assets, net		21,469		21,986
Total assets	$	598,694	$	553,938

Current liabilities:
Accounts payable	$	29,388	$	29,899
Accrued expenses		6,360		5,478
Lessee and customer purchase deposits		644		1,467
Current operating lease liabilities		4,237		4,593
Current portion of long-term debt		93		1,278
Deferred revenue		2,286		2,998
Total current liabilities		43,008		45,713
Revolving credit facility		80,955		29,000
Long-term debt		522		7,281
Long-term lease deposits		767		102
Long-term operating lease liabilities		23,315		24,377
Maintenance deposit payments and other liabilities		59		64
Warrant liability		269		2,386
Total liabilities		148,895		108,923
Stockholders’ equity:
Common stock, $0.0001 par value. Authorized 200,000,000 shares; issued and outstanding 53,084,214 and 52,954,430 shares as of June 30, 2024 and December 31, 2023		5		5
Additional paid-in capital		313,883		311,739
Retained earnings		135,911		133,271
Total stockholders' equity		449,799		445,015
Total liabilities and stockholders’ equity	$	598,694	$	553,938

See accompanying notes to condensed consolidated financial statements.

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AERSALE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue:
Products	$	43,298	$	37,623	$	104,908	$	83,118
Leasing		4,286		3,286		7,368		8,908
Services		29,517		28,417		55,365		55,571
Total revenue		77,101		69,326		167,641		147,597
Cost of sales and operating expenses:
Cost of products		28,531		26,931		68,150		58,479
Cost of leasing		1,894		1,079		3,087		2,202
Cost of services		24,956		21,176		45,888		42,385
Total cost of sales		55,381		49,186		117,125		103,066
Gross profit		21,720		20,140		50,516		44,531
Selling, general, and administrative expenses		23,572		27,097		47,705		52,321
(Loss) income from operations		(1,852)		(6,957)		2,811		(7,790)
Other (expenses) income:
Interest (expense) income, net		(1,528)		381		(2,463)		1,428
Other income, net		102		138		271		371
Change in fair value of warrant liability		138		1,393		2,117		1,059
Total other (expenses) income		(1,288)		1,912		(75)		2,858
(Loss) income before income tax provision		(3,140)		(5,045)		2,736		(4,932)
Income tax (expense) benefit		(497)		2,357		(96)		2,249
Net (loss) income	$	(3,637)	$	(2,688)	$	2,640	$	(2,683)

(Loss) earnings per share:
Basic	$	(0.07)	$	(0.05)	$	0.05	$	(0.05)
Diluted	$	(0.07)	$	(0.08)	$	0.05	$	(0.07)
Weighted average shares outstanding:
Basic		53,029,359		51,227,484		53,010,425		51,217,990
Diluted		53,029,359		51,404,653		53,111,439		51,417,889

See accompanying notes to condensed consolidated financial statements.

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AERSALE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

For the three and six months ended June 30, 2024 and 2023

(in thousands, except share data)

(Unaudited)


								Total
	Common stock			Additional		Retained		stockholders’
	Amount		Shares	paid-in capital		earnings		equity
Balance at December 31, 2023	$	5	52,954,430	$	311,739	$	133,271	$	445,015
Share-based compensation		-	-		799		-		799
Shares issued under the 2020 Equity Incentive Plan		-	54,596		-		-		-
Shares surrendered for tax withholdings on equity awards		-	-		(108)		-		(108)
Net income		-	-		-		6,277		6,277
Balance at March 31, 2024	$	5	53,009,026	$	312,430	$	139,548	$	451,983
Share-based compensation		-	-		1,144		-		1,144
Shares issued under the 2020 Employee Stock Purchase Plan		-	48,202		325		-		325
Shares issued under the 2020 Equity Incentive Plan		-	26,986		-		-		-
Shares surrendered for tax withholdings on equity awards		-	-		(16)		-		(16)
Net loss		-	-		-		(3,637)		(3,637)
Balance at June 30, 2024	$	5	53,084,214	$	313,883	$	135,911	$	449,799


								Total
	Common stock			Additional		Retained		stockholders’
	Amount		Shares	paid-in capital		earnings		equity
Balance at December 31, 2022	$	5	51,189,461	$	306,141	$	138,834	$	444,980
Share-based compensation		-	-		2,731		-		2,731
Shares issued under the 2020 Equity Incentive Plan		-	31,925		-		-		-
Shares surrendered for tax withholdings on equity awards		-	-		(70)		-		(70)
Net income		-	-		-		5		5
Balance at March 31, 2023	$	5	51,221,386	$	308,802	$	138,839	$	447,646
Share-based compensation		-	-		3,028		-		3,028
Shares issued under the 2020 Employee Stock Purchase Plan		-	21,551		278		-		278
Shares issued under the 2020 Equity Incentive Plan		-	7,470		-		-		-
Net loss		-	-		-		(2,688)		(2,688)
Balance at June 30, 2023	$	5	51,250,407	$	312,108	$	136,151	$	448,264

See accompanying notes to condensed consolidated financial statements.

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AERSALE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	2,640	$	(2,683)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		6,434		5,069
Amortization of debt issuance costs		164		225
Amortization of operating lease assets		79		198
Inventory reserve		627		709
Deferred income taxes		171		(1,729)
Change in fair value of warrant liability		(2,117)		(1,059)
Share-based compensation		1,943		5,759
Changes in operating assets and liabilities:
Accounts receivable		(6,027)		(3,615)
Income tax receivable		(72)		-
Inventory		(56,566)		(134,278)
Deposits, prepaid expenses, and other current assets		(5,110)		4,144
Deferred customer incentives and other assets		(543)		78
Advance vendor payments		22,167		(11,326)
Accounts payable		(509)		4,957
Accrued expenses		795		(3,296)
Deferred revenue		(712)		1,719
Lessee and customer purchase deposits		(158)		6,530
Other liabilities		(6)		(599)
Net cash used in operating activities		(36,800)		(129,197)
Cash flows from investing activities:
Proceeds from sale of assets		3,800		12,700
Acquisition of aircraft and engines held for lease, including capitalized cost		(5,610)		-
Purchase of property and equipment		(7,190)		(4,814)
Net cash (used in) provided by investing activities		(9,000)		7,886
Cash flows from financing activities:
Proceeds from long-term debt		615		8,559
Repayments of long-term debt		(8,559)		-
Proceeds from revolving credit facility		106,936		-
Repayments of revolving credit facility		(54,981)		-
Taxes paid related to net share settlement of equity awards		(124)		(70)
Proceeds from the issuance of Employee Stock Purchase Plan shares		325		278
Net cash provided by financing activities		44,212		8,767

Decrease in cash and cash equivalents		(1,588)		(112,544)
Cash and cash equivalents, beginning of period		5,873		147,188
Cash and cash equivalents, end of period	$	4,285	$	34,644

Supplemental disclosure of cash activities
Income tax payments, net		73		1,276
Interest paid		2,435		286
Supplemental disclosure of noncash investing activities
Reclassification of aircraft and aircraft engines inventory to (from) aircraft and engine held for lease, net		2,494		3,711

See accompanying notes to condensed consolidated financial statements.

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Revenue Recognition

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. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. The parts are sold at a fixed price with no right of return. In determining the performance obligation, management has identified the promise in the contract to be the shipment of the spare parts to the customer. Title passes to the buyer when the goods are shipped, and the buyer is responsible for any loss in transit and the Company has a legal right to payment for the spare parts once shipped. We generally sell our USM products under standard 30-day payment terms, subject to certain exceptions. Customers neither have the right to return products nor do they have the right to extended financing. The Company has determined that physical acceptance of the spare parts to be a formality in accordance with Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers (“ASC 606”).

Spare parts revenue is based on a set price for a set number of parts as defined in the purchase order. The performance obligation is completed once the parts have shipped and as a result, all of the transaction price is allocated to that performance obligation. The Company has determined that it is appropriate to recognize spare parts sales at a point in time (i.e., the date the parts are shipped) in accordance with ASC 606.

Products Revenue — Whole Asset Sales

Revenues from whole asset sales are 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. The Company has identified the transfer of the whole asset as the performance obligation. The transaction price is set at a fixed dollar amount per fixed quantity (number of whole assets) and is explicitly stated in each contract. 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.

Leasing Revenue

The Company leases aircraft and engines (“Flight Equipment”) under operating leases that contain monthly base rent and reports rental income straight line over the life of the lease as it is earned. Additionally, the Company’s leases provide for supplemental rent, which is calculated based on actual hours or cycles of utilization and, for certain components, based on the amount of time until maintenance of that component is required. In certain leases, the Company records supplemental rent paid by the lessees as maintenance deposit 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 payment 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. In the event of premature lease termination or lessee default on the lease terms, revenue recognition will be discontinued when outstanding balances are beyond the customers’ deposits held. Flight Equipment leases are billed in accordance with the lease agreement and invoices are due upon receipt.

Services Revenue

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

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performance obligation, the Company determines the standalone price of each distinct good or service underlying each performance obligation and allocates the transaction price based on their relative standalone selling prices. The transaction price of a contract, which can include both fixed and variable amounts, is allocated to each performance obligation identified. Some contracts contain variable consideration, which could include incremental fees or penalty provisions related to performance. Variable consideration that can be reasonably estimated based on current assumptions and historical information is included in the transaction price at the inception of the contract but limited to the amount that is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

For most service contracts, our performance obligations are satisfied over time as work progresses or at a point in time based on transfer of control of products and services to our customers. We receive payments from our customers based on billing schedules or other terms as written in our contracts.

For our performance obligations that are satisfied over time, we measure progress in a manner that depicts the performance of transferring control to the customer. As such, we utilize the input method of cost-to-cost to recognize revenue over time as this depicts when control of the promised goods or services are transferred to the customer. 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 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 maintenance, repair and overhaul (“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. These changes are primarily adjustments to the estimated profitability for our long-term programs where we provide MRO services.

We have elected to use certain practical expedients permitted under ASC 606. 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 condensed consolidated statements of operations, and are not considered a performance obligation to our customers. Our reported revenue on our condensed consolidated statements of operations is net of any sales or related non-income taxes.

Revision of Prior Period Financial Statements

Certain balances in the condensed consolidated balance sheet as of December 31, 2023, and the condensed consolidated statements of cash flows for the six months ended June 30, 2023, have been reclassified to conform to the presentation in the condensed consolidated financial statements as of and for the three and six months ended June 30, 2024, primarily the reclassification of amounts related to 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), stockholder’s equity or total cash flows from operating activities, and did not have a material impact on the condensed consolidated financial statements.

New Accounting Pronouncements Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (“Topic 740”): Improvements to Income Tax Disclosures, which would require additional transparency for income tax disclosures, including the income tax rate reconciliation table and cash taxes paid both in the United States and foreign jurisdictions. This standard is effective for annual periods beginning after December 15, 2024. We are currently assessing the impact this standard will have on our disclosures.

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

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NOTE C — REVENUE

The timing of revenue recognition, customer billings, and cash collections results in a contract asset or contract liability at the end of each reporting period. Contract assets consist of unbilled receivables or costs incurred where revenue recognized over time exceeds the amounts billed to customers. We record a receivable when revenue is recognized prior to invoicing and we have an unconditional right to consideration (only the passage of time is required before payment of that consideration is due) and a contract asset when the right to payment is conditional upon our future performance. Contract liabilities include advance payments and billings in excess of revenue recognized. Certain customers make advance payments prior to our satisfaction of our performance obligations on the contract. These amounts are recorded as contract liabilities until such performance obligations are satisfied. Contract assets and contract liabilities are determined on a contract by contract basis.

Contract assets are as follows (in thousands):


	June 30, 2024		December 31, 2023		Change
Contract assets	$	4,597	$	6,474	$	(1,877)

Contract assets are reported within deposits, prepaid expenses, and other current assets on our condensed consolidated balance sheets. Changes in contract assets primarily result from the timing difference between the performance of services. Contract liabilities are reported as deferred revenue on our condensed 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 three and six months ended June 30, 2024, the Company recognized as revenue $0.1 million and $2.4 million of contract liabilities included in the 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

The Company reports revenue by segment. The following tables present revenue by segment, as well as a reconciliation to total revenue for the three and six months ended June 30, 2024 and 2023 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2024						2024
	Asset Management						Asset Management
	Solutions		Tech Ops		Total Revenues		Solutions		TechOps		Total Revenues
USM	$	19,600	$	4,118	$	23,718	$	37,132	$	9,493	$	46,625
Whole asset sales		17,913		-		17,913		56,561		-		56,561
Engineered solutions		-		1,667		1,667		-		1,722		1,722
Total products		37,513		5,785		43,298		93,693		11,215		104,908
Leasing		4,286		-		4,286		7,368		-		7,368
Services		-		29,517		29,517		-		55,365		55,365
Total revenues	$	41,799	$	35,302	$	77,101	$	101,061	$	66,580	$	167,641


	Three Months Ended June 30,						Six Months Ended June 30,
	2023						2023
	Asset Management						Asset Management
	Solutions		Tech Ops		Total Revenues		Solutions		TechOps		Total Revenues
USM	$	16,442	$	3,409	$	19,851	$	31,594	$	5,825	$	37,419
Whole asset sales		17,343		218		17,561		44,999		218		45,217
Engineered solutions		-		211		211		-		482		482
Total products		33,785		3,838		37,623		76,593		6,525		83,118
Leasing		3,286		-		3,286		8,908		-		8,908
Services		-		28,417		28,417		-		55,571		55,571
Total revenues	$	37,071	$	32,255	$	69,326	$	85,501	$	62,096	$	147,597

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NOTE D — INVENTORY

Following are the major classes of inventory as of the below dates (in thousands):


	June 30, 2024		December 31, 2023
USM	$	126,807	$	120,053
Work-in-process		25,028		22,270
Whole assets		226,978		186,845
	$	378,813		329,168
Less short term		(221,371)		(177,770)
Long term	$	157,442	$	151,398

The Company recorded inventory scrap loss reserves of $0.4 million and $0.9 million for the three and six months ended June 30, 2024, respectively. The Company recorded inventory scrap loss reserves of $0.2 million and $0.7 million for the three and six months ended June 30, 2023, respectively. Additions to inventory reserves are included in cost of products in the accompanying condensed consolidated statements of operations.

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 are reported under current assets.

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 AerSale as USM. The replacement value of that inventory, which was also destroyed or rendered not sellable by the fire, is estimated at $52.8 million. AerSale carries insurance covering these parts, with a limit of $50 million and a $10,000 deductible, for which it has submitted a claim. The cost of the destroyed inventory is $6.0 million; accordingly, since the insurance claim has yet to be paid, the Company recorded an impairment of $6.0 million and a $6.0 million non-trade receivable within Deposits, prepaid expenses, and other current assets, in the condensed consolidated balance sheets as of June 30, 2024. The recovery of the $6.0 million claim is deemed to be probable. Pursuant to ASC 450-30, Gain Contingencies, any higher amount than our book value that is to be collected from the insurance claim, will not be recorded until the insurance claim is paid.

NOTE E — INTANGIBLE ASSETS

In accordance with ASC 350, Intangibles — Goodwill and Other (“ASC 350”), goodwill and other intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests. The Company reviews and evaluates our goodwill and indefinite life intangible assets for potential impairment at a minimum annually or more frequently if circumstances indicate that impairment is possible.

The Company determined the fair value of assets acquired and liabilities assumed using a variety of methods. An income approach based on discounted cash flows was used to determine the values of our trademarks, certifications, customer relationships and Federal Aviation Administration (“FAA”) certificates. The assumptions the Company used to estimate the fair value of our reporting units are based on historical performance, as well as forecasts used in our current business plan and require considerable management judgment.

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

Table of Contents

Goodwill and other intangible assets, net as of the below dates are (in thousands):


	June 30, 2024		December 31, 2023
Qwest:
FAA Certifications	$	724	$	724
Goodwill		13,416		13,416
ALGS:
FAA Certifications		710		710
Goodwill		379		379
ACS:
Trademarks		600		600
FAA Certifications		7,300		7,300
Goodwill		63		63
ACT:
Trademarks		200		200
FAA Certificates		796		796
Goodwill		6,002		6,002
Total intangible assets with indefinite lives	$	30,190	$	30,190

Intangible assets with definite useful lives are amortized on a straight-line basis over their estimated useful lives. Intangible assets with definite lives as of the below dates are as follows (in thousands):


	Useful Life
	In Years	June 30, 2024		December 31, 2023
Qwest:
Customer relationships	10	$	4,677	$	5,163
ALGS:
Customer relationships	10		20		30
ACS:
Customer relationships	10		928		1,033
ACT:
Customer relationships	10		4,971		5,430
AerSale:
Flight manuals	10		543		-
Total intangible assets with definite lives		$	11,139	$	11,656

Total amortization expense amounted to $0.5 million and $0.6 million for the three months ended June 30, 2024 and 2023, respectively. Total amortization expense amounted to $1.0 million and $1.1 million for the six months ended June 30, 2024 and 2023, respectively. Accumulated amortization amounted to $10.4 million and $9.3 million as of June 30, 2024 and December 31, 2023, respectively.

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 during the quarter. As a result, the Company performed an interim quantitative goodwill impairment test for the Asset Management and ACT reporting units as of March 31, 2024 and determined that the fair values exceeded the carrying values for each reporting unit. Due to the lack of recovery in the stock price during the second quarter of 2024, the Company performed an interim quantitative goodwill impairment test for the Asset Management and ACT reporting units as of June 30, 2024, and determined that the fair values exceeded the carrying values for each reporting unit. As such, the interim quantitative tests did not result in a goodwill impairment for the Company’s reporting units. In addition, the Company performed a qualitative assessment of long-lived assets and concluded it is not more likely than not that long-lived assets are impaired.

The fair value determination of the Company’s reporting units and goodwill is judgmental in nature and requires the use of estimates and assumptions that are sensitive to changes. While the Company believes it has made reasonable

		Page
	Forward-Looking Statements	i
PART I – FINANCIAL INFORMATION		1
Item 1.	Condensed Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Operations (Unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II – OTHER INFORMATION		29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
Signatures		32


	Useful Life
	In Years	June 30, 2024		December 31, 2023
Tooling and equipment	7 - 15	$	16,720	$	16,024
Furniture and other equipment	5		12,475