| BUSINESS SEGMENTS |
NOTE M – 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 the CODM uses to evaluate performance and allocate resources based on gross profit and income (loss) from operations by segment. The CODM utilizes segment gross profit when making strategic decisions which include considerations of pursuing additional capacity and technical capabilities or acquiring additional Flight Equipment. Additionally, the CODM utilizes segment income (loss) from operations when comparing actual results to budgets and making decisions regarding personnel and capital allocations. 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 through USM. |
| ● | TechOps — comprised of MRO services and product sales of internally developed engineered solutions and other serviceable products. |
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 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. The TechOps segment consists of aftermarket support and services businesses that provide maintenance support for aircraft and aircraft components, and sale of engineered solutions. Our MRO business also engages in longer term projects such as aircraft modifications, cargo conversions of wide-body aircraft, and aircraft storage. The segment also includes MRO services for landing gear, structured components, and other accessories components. Cost of sales consists principally of the cost of product, direct labor, and overhead. Our engineered solutions revenue consists 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. Our TechOps segment 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 – Summary of Significant Accounting Policies. Our reportable segments are aligned principally around the differences in products and services. Gross profit is calculated by subtracting cost of sales from revenue; income (loss) from operations is calculated by further 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): | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | | 2026 | | 2025 | | 2026 | | 2025 | | Revenue | | | | | | | | | | | | | | Asset Management Solutions | | | | | | | | | | | | | | Aircraft | | $ | 11,044 | | $ | 10,419 | | $ | 19,742 | | $ | 17,769 | | Engine | | | 26,077 | | | 65,846 | | | 60,525 | | | 97,709 | | | | | 37,121 | | | 76,265 | | | 80,267 | | | 115,478 | | TechOps | | | | | | | | | | | | | | MRO services | | | 26,487 | | | 24,562 | | | 49,951 | | | 45,715 | | Product sales | | | 7,324 | | | 6,555 | | | 11,328 | | | 11,965 | | | | | 33,811 | | | 31,117 | | | 61,279 | | | 57,680 | | Total | | $ | 70,932 | | $ | 107,382 | | $ | 141,546 | | $ | 173,158 | |
| | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | | 2026 | | 2025 | | 2026 | | 2025 | | Cost of sales | | | | | | | | | | | | | | Asset Management Solutions | | | | | | | | | | | | | | Aircraft | | $ | 8,177 | | $ | 6,042 | | $ | 14,188 | | $ | 11,816 | | Engine | | | 16,351 | | | 43,266 | | | 36,550 | | | 64,656 | | | | | 24,528 | | | 49,308 | | | 50,738 | | | 76,472 | | TechOps | | | | | | | | | | | | | | MRO services | | | 25,955 | | | 18,764 | | | 49,202 | | | 35,928 | | Product sales | | | 4,175 | | | 3,973 | | | 6,451 | | | 7,456 | | | | | 30,130 | | | 22,737 | | | 55,653 | | | 43,384 | | Total | | $ | 54,658 | | $ | 72,045 | | $ | 106,391 | | $ | 119,856 | |
| | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | | 2026 | | 2025 | | 2026 | | 2025 | | Gross profit | | | | | | | | | | | | | | Asset Management Solutions | | | | | | | | | | | | | | Aircraft | | $ | 2,867 | | $ | 4,377 | | $ | 5,554 | | $ | 5,953 | | Engine | | | 9,726 | | | 22,580 | | | 23,975 | | | 33,053 | | | | | 12,593 | | | 26,957 | | | 29,529 | | | 39,006 | | TechOps | | | | | | | | | | | | | | MRO services | | | 532 | | | 5,798 | | | 749 | | | 9,787 | | Product sales | | | 3,149 | | | 2,582 | | | 4,877 | | | 4,509 | | | | | 3,681 | | | 8,380 | | | 5,626 | | | 14,296 | | Total | | $ | 16,274 | | $ | 35,337 | | $ | 35,155 | | $ | 53,302 | |
The following table reconciles segment gross profit to (loss) income before income tax provision for the three and six months ended June 30, 2026 and 2025 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2026 | | Three Months Ended June 30, 2025 | | | | Asset Management Solutions | | | TechOps | | | Total | | Asset Management Solutions | | | TechOps | | | Total | | Gross Profit | | $ | 12,593 | | $ | 3,681 | | $ | 16,274 | | $ | 26,957 | | $ | 8,380 | | $ | 35,337 | | Operating expenses | | | (3,652) | | | (342) | | | (3,994) | | | (3,430) | | | (2,525) | | | (5,955) | | Selling, general and administrative expenses | | | (3,736) | | | (2,850) | | | (6,586) | | | (4,066) | | | (3,173) | | | (7,239) | | Segment income from operations | | $ | 5,205 | | $ | 489 | | $ | 5,694 | | $ | 19,461 | | $ | 2,682 | | $ | 22,143 | | Other corporate expenses (1) | | | | | | | | | (10,444) | | | | | | | | | (9,629) | | (Loss) income from operations | | | | | | | | | (4,750) | | | | | | | | | 12,514 | | Other (expense) income: | | | | | | | | | | | | | | | | | | | | Interest expense, net | | | | | | | | | (2,451) | | | | | | | | | (2,452) | | Other income, net | | | | | | | | | 2 | | | | | | | | | 134 | | Change in fair value of warrant liability | | | | | | | | | - | | | | | | | | | 131 | | (Loss) income before income tax provision | | | | | | | | $ | (7,199) | | | | | | | | $ | 10,327 | |
| | | | | | | | | | | | | | | | | | | | | Six Months Ended June 30, 2026 | | Six Months Ended June 30, 2025 | | | Asset Management Solutions | | | TechOps | | | Total | | Asset Management Solutions | | | TechOps | | | Total | Gross Profit | | $ | 29,529 | | $ | 5,626 | | $ | 35,155 | | $ | 39,006 | | $ | 14,296 | | $ | 53,302 | Operating expenses | | | (7,935) | | | (546) | | | (8,481) | | | (7,080) | | | (4,617) | | | (11,697) | Selling, general and administrative expenses | | | (7,195) | | | (5,810) | | | (13,005) | | | (7,802) | | | (8,219) | | | (16,021) | Segment income (loss) from operations | | $ | 14,399 | | $ | (730) | | $ | 13,669 | | $ | 24,124 | | $ | 1,460 | | $ | 25,584 | Other corporate expenses (1) | | | | | | | | | (21,751) | | | | | | | | | (19,717) | (Loss) income from operations | | | | | | | | | (8,082) | | | | | | | | | 5,867 | Other (expense) income: | | | | | | | | | | | | | | | | | | | Interest expense, net | | | | | | | | | (4,581) | | | | | | | | | (3,633) | Other income, net | | | | | | | | | 1,009 | | | | | | | | | 2,022 | Change in fair value of warrant liability | | | | | | | | | - | | | | | | | | | 74 | (Loss) income before income tax provision | | | | | | | | $ | (11,654) | | | | | | | | $ | 4,330 |
(1)Other corporate expenses include other unapplied payroll expenses and benefits, telecommunications and IT support, professional fees, office rent, and depreciation, among others. | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in thousands) | | 2026 | | 2025 | | 2026 | | 2025 | Total depreciation and amortization expense | | | | | | | | | | | | | Asset Management Solutions | | $ | 4,186 | | $ | 3,025 | | $ | 8,919 | | $ | 6,373 | TechOps | | | 1,205 | | | 1,241 | | | 2,357 | | | 2,545 | Corporate | | | 250 | | | 262 | | | 503 | | | 553 | | | $ | 5,641 | | $ | 4,528 | | $ | 11,779 | | $ | 9,471 |
| | | | | | | | | Six Months Ended June 30, | (in thousands) | | 2026 | | 2025 | Total capital expenditures | | | | | | | Asset Management Solutions | | $ | 2,915 | | $ | 3,394 | TechOps | | | 1,197 | | | 1,776 | Corporate | | | 329 | | | 339 | | | $ | 4,441 | | $ | 5,509 |
| | | | | | | | | June 30, | | December 31, | (in thousands) | | 2026 | | 2025 | Total Assets | | | | | | | Asset Management Solutions | | $ | 471,551 | | $ | 434,680 | TechOps | | | 203,110 | | | 193,724 | Corporate | | | 12,400 | | | 12,068 | | | $ | 687,061 | | $ | 640,472 |
Intersegment sales include amounts invoiced by a segment for work performed for another segment. Amounts are based on actual work performed or products sold and agreed-upon pricing which is intended to be reflective of the contribution made by the supplying business segment. All intersegment transactions have been eliminated upon consolidation. Intersegment revenue for the three and six months ended June 30, 2026 and 2025, is as follows (in thousands): | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | 2026 | | 2025 | | 2026 | | 2025 | Asset Management Solutions | | $ | 1,213 | | $ | 1,158 | | $ | 1,838 | | $ | 1,581 | TechOps | | | 2,387 | | | 938 | | | 3,852 | | | 4,033 | Total intersegment revenue | | $ | 3,600 | | $ | 2,096 | | $ | 5,690 | | $ | 5,614 |
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