Sales-type Lease

In December 2023, Air Wisconsin entered into a sales-type lease for one of its aircraft that was previously treated as an operating lease since September 2022. The term of the sales-type lease is for 36 months, with monthly payments of $64 commencing in December 2023 and ending in November 2026. If the Lessee is not in default at the end of the lease term, the Lessee may purchase the aircraft for a minimal amount at that time. Air Wisconsin did not provide a residual value guarantee as part of the sales-type lease.

The Accounting Standards Update No. 2016-13, Financial Instruments- Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASC 326”) requires assessment of the net investment in the lease as of the commencement date.

Based on the expected payments due under the sales-type lease, and using an implicit rate of 12.6%, Air Wisconsin determined the initial net investment in the lease to be $2,132. The Company monitors publicly available information regarding the credit-worthiness of the non-U.S. governmental agency in custody of the aircraft and the aircraft serves as collateral for the sales-type lease. Management determined that a credit loss reserve of $289 and $333 was appropriate under ASC 326 as of June 30, 2025 and December 31, 2024, respectively. The change in the credit loss reserve for the three and six months ended June 30, 2025 of $(30) and $(44), respectively, reflects payments received and any changes in the publicly available credit-worthiness of the non-U.S. governmental agency in custody of the aircraft. Management also added $18 and $19 of interest accrued to the carrying value of the sales lease receivable under the sales-type lease as of June 30, 2025 and December 31, 2024, respectively. The net sales lease receivable was $1,426 and $1,530 as of June 30, 2025 and December 31, 2024, respectively. As of June 30, 2025 and December 31, 2024, the net investment in the lease, net of the credit loss reserves, are labeled as Sales lease receivable, net in the consolidated balance sheets as $432 and $470, respectively, which reflects the amount expected to be received over the next one-year period, and $994 and $1,060, respectively, for Long-term sales receivable, net, which reflects the remaining amounts to be collected over the remaining term of the lease as of the respective dates of the consolidated balance sheets. For the three and six months ended June 30, 2025, the Company recorded $54 and $110, respectively, of interest income from the lease, compared to $76 and $133 for the three and six months ended June 30, 2024, respectively. The interest income is recorded in Interest and dividend income in the consolidated statements of operations.

Undiscounted cash flows expected over the term of the sales-type lease as of June 30, 2025 are as follows:


Fiscal Year or Portion:	Amount
July 2025 through December 2025	$	387
2026	$	1,544
Total expected cash flows	$	1,931
Interest income	$	(216)
Total sales lease receivable	$	1,715
Less credit loss reserve	$	289
Total sales lease receivable, net	$	1,426

As June 30, 2025, neither Air Wisconsin nor Harbor had any other assets for which it was the lessor. Following the Aviation Disposition, the Company retained its right and interest in both the aircraft and lease, including any revenues derived therefrom. As of the date of filing of this Quarterly Report, the lessee is in default of the lease for non-payment of its lease obligation.