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Document filed by Joseph P. Adams, Jr., FTAI Aviation Ltd., Eun (Angela) Nam..(Musoff, Scott) (Entered: 02/23/2026)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/453755905/","id":453755905,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69558488/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/468653993/","id":468653993,"tags":[],"absolute_url":"/docket/69558488/75/shannahan-v-ftai-aviation-ltd/","date_created":"2026-02-12T17:10:18.378180-08:00","date_modified":"2026-05-14T07:11:03.498748-07:00","sha1":"20be59a3aa5f1daa6ef6237134cf5ac74212d20e","page_count":12,"file_size":237485,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.75.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.75.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:25-cv-00541-JAV Document 75 Filed 02/12/26 Page 1 of 12\n\n\n\n\n UNITED STATES DISTRICT COURT\n SOUTHERN DISTRICT OF NEW YORK\n\n\nCITY OF HOLLYWOOD FIREFIGHTERS\u2019\nPENSION FUND and BOSTON\nRETIREMENT SYSTEM, Individually and\non Behalf of All Others Similarly Situated,\n No. 1:25-cv-00541-JAV\n Plaintiffs,\n\n v.\n ORAL ARGUMENT REQUESTED\nFTAI AVIATION LTD., JOSEPH P.\nADAMS, JR., and EUN (ANGELA) NAM,\n\n Defendants.\n\n\n\n\nREPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF LEAD PLAINTIFFS\u2019\n MOTION TO STRIKE CERTAIN EXHIBITS FROM DEFENDANTS\u2019 MOTION TO\n DISMISS THE AMENDED CLASS ACTION COMPLAINT\n\f Case 1:25-cv-00541-JAV Document 75 Filed 02/12/26 Page 2 of 12\n\n\n\n\n Lead Plaintiffs City of Hollywood Firefighters\u2019 Pension Fund and Boston Retirement\n\nSystem (collectively, \u201cLead Plaintiffs\u201d) respectfully submit this reply memorandum of law in\n\nfurther support of Lead Plaintiffs\u2019 Motion to Strike Certain Exhibits from Defendants\u2019 1 Motion to\n\nDismiss the Amended Class Action Complaint (the \u201cComplaint,\u201d ECF No. 64). 2\n\nI. INTRODUCTION\n\n Defendants\u2019 MTS Opposition is masterclass in hyperbole over substance. To start,\n\nDefendants condemn the MTS as procedurally improper and accuse Lead Plaintiffs of only using\n\nit as a vehicle to circumvent word limitations in the MTD Opposition. Defendants, however, ignore\n\nthat courts within this District have granted identical relief. See, e.g., Gagnon v. Alkermes PLC,\n\n368 F. Supp. 3d 750, 763 (S.D.N.Y. 2019) (striking motion to dismiss exhibits pursuant to Rule\n\n12(d)); Micholle v. Ophthotech, Corp., 2019 WL 4464802, at *11 n. 13 (S.D.N.Y. Sept. 18, 2019)\n\n(striking motion to dismiss exhibits pursuant to FRE 201). Contrary to their lengthy brief, it is\n\nDefendants who committed procedural error here by both including improper extraneous\n\ndocuments in their motion to dismiss and failing to submit a standalone motion requesting judicial\n\nnotice. 3 Lead Plaintiffs simply seek to address these errors by moving to strike those improperly\n\n\n\n1\n Defendants are FTAI Aviation Ltd. (\u201cFTAI\u201d or the \u201cCompany\u201d), Joseph P. Adams, Jr.\n(\u201cAdams\u201d), and Eun (Angela) Nam (\u201cNam\u201d) (together with FTAI, \u201cDefendants\u201d).\n2\n \u201cCitations to \u201c\u00b6\u201d or \u201c\u00b6\u00b6\u201d refer to paragraphs in the Complaint. Unless otherwise noted, all\nemphasis has been added and internal quotation marks omitted throughout. \u201cMTS\u201d refers to Lead\nPlaintiffs\u2019 memorandum of law in support of their motion to strike (ECF No. 73). \u201cMTS Opp.\u201d or\n\u201cMTS Opposition\u201d refers to Defendants\u2019 memorandum of law in opposition to Lead Plaintiffs\u2019\nmotion to strike (ECF No. 74). \u201cMTD\u201d refers to Defendants\u2019 memorandum of law in support of\nDefendants\u2019 motion to dismiss (ECF No. 69). \u201cMTD Opp.\u201d refers to Lead Plaintiffs\u2019 memorandum\nof law in opposition to Defendants\u2019 motion to dismiss (ECF No. 71).\n3\n Indeed, Defendants\u2019 footnote request for judicial notice is improper. See, e.g., Philpot v. Alternet\nMedia, Inc., 2018 WL 6267876, at *5 n.1 (N.D. Cal. Nov. 30, 2018) (rejecting defendant\u2019s request\nfor judicial notice \u201cstate[d] in a footnote in its motion to dismiss\u201d on the basis that \u201c[defendant]\nsubmits no formal request for judicial notice\u201d and \u201cdoes not explain what, if anything, the Court\nis supposed to infer from [the extrinsic evidence proffered]\u201d).\n 1\n\f Case 1:25-cv-00541-JAV Document 75 Filed 02/12/26 Page 3 of 12\n\n\n\n\nrelied on documents.\n\n Defendants\u2019 other arguments similarly fail. Defendants\u2019 contention that Lead Plaintiffs\n\nused the MTS improperly to pad their MTD Opposition is absurd. See MTS Opp. at 1\u20132. Lead\n\nPlaintiffs\u2019 MTS makes no merits arguments and is limited to addressing the documents at issue\n\nand why Defendants\u2019 inclusion of them at this stage is improper. 4\n\n Moreover, Lead Plaintiffs\u2019 request that the Court not credit Defendants\u2019 exhibits for the\n\ntruth of the matter asserted is not an admission that the MTS lacks merit, as Defendants aver. MTS\n\nOpp. at 3. Indeed, many documents were mentioned in the Complaint in an exceedingly passing\n\nmanner, which courts frequently find to be grounds for refusal to notice such documents. See\n\nBergensen v. Manhattanville College, 2021 WL 3115170, at *2 (S.D.N.Y. July 20, 2021) (finding\n\ndocuments not incorporated by reference when the plaintiff \u201cmakes several clear references . . .\n\nand quotes it twice\u201d). As is uniform in any opposition to a proper request for judicial notice, Lead\n\nPlaintiffs have requested that if the Court finds any document appropriate for notice, that it refuse\n\nto consider them for the truth of the matter asserted as Defendants seek.\n\n All told, Defendants\u2019 MTS Opposition confirms Lead Plaintiffs\u2019 concern about\n\nDefendants\u2019 improper use of the 11 exhibits to dispute the Complaint\u2019s well-pled allegations.\n\nDefendants\u2019 use of the Exhibits and request that the Court interpret the documents in a way\n\ninconsistent with the Complaint\u2019s well-pled allegations are inappropriate at this stage of the\n\nproceedings. Indeed, \u201ca court at this stage of our proceeding is not engaged in an effort to\n\ndetermine the true facts.\u201d Doe v. Columbia Univ., 831 F.3d 46, 48 (2d Cir. 2016). Accordingly,\n\nfor the reasons stated herein in the MTS, Lead Plaintiffs respectfully request that the Court grant\n\n\n\n\n4\n Ironically, Defendants\u2019 MTS Opposition is dripping with merits arguments\u2014evincing a double\nstandard that cuts against Defendants\u2019 arguments. See, e.g., MTS Opp. at 9\u201310, 11\u201313, 14\u201318.\n 2\n\f Case 1:25-cv-00541-JAV Document 75 Filed 02/12/26 Page 4 of 12\n\n\n\n\nthe MTS in full.\n\nII. ARGUMENT\n\n A. The Court May Properly Consider Lead Plaintiffs\u2019 MTS\n\n Lead Plaintiffs ask the Court to strike or exclude certain documents or, at the very least,\n\ndecline to use the documents for the purposes requested by Defendants. In their MTS Opposition,\n\nDefendants first argue that the MTS pursuant to Rule 12(f) is \u201cprocedurally improper\u201d and should\n\nbe denied on those grounds. MTS Opp. at 3\u20134. However, it is well within the Court\u2019s authority to\n\nstrike or exclude matters presented outside the pleadings on a Rule 12(b)(6) motion to dismiss\u2014\n\nsuch as those Defendants submit here. See, e.g., Gagnon, 368 F. Supp. 3d at 763 (striking motion\n\nto dismiss exhibits pursuant to Rule 12(d)); Micholle, 2019 WL 4464802, at *11 n. 13 (striking\n\nmotion to dismiss exhibits pursuant to FRE 201); City of Austin Police Ret. Sys. v. Kinross Gold\n\nCorp., 957 F. Supp. 2d 277, 288\u201389 (S.D.N.Y. 2013) (granting plaintiff\u2019s motion to strike exhibits\n\nsubmitted in connection with defendants\u2019 motion to dismiss in an attempt to dispute allegations in\n\ncomplaint); In re UBS Auction Rate Sec. Litig., 2010 WL 2541166, at *16 (S.D.N.Y. June 10,\n\n2010); Fonte v. Bd. of Managers of Cont\u2019l Towers Condo., 848 F.2d 24, 25 (2d Cir. 1988) (\u201cthe\n\ncourt may exclude the additional material and decide the motion on the complaint alone. . . .\u201d);\n\nFed. R. Civ. P. 12(d) (\u201cIf, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings\n\nare presented to and not excluded by the court, the motion must be treated as one for summary\n\njudgment under Rule 56.\u201d). Indeed, \u201c[w]hether to grant or deny a motion to strike is vested in the\n\ntrial court\u2019s sound discretion.\u201d Schneidermesser v. NYU Grossman Sch. of Med., 2024 WL\n\n4054372, at *1 (S.D.N.Y. Sept. 5, 2024). Accordingly, the MTS is procedurally proper and can\n\nbe considered by the Court.\n\n\n\n\n 3\n\f Case 1:25-cv-00541-JAV Document 75 Filed 02/12/26 Page 5 of 12\n\n\n\n\n B. The Court Should Not Consider Certain Earnings Call Transcripts\u2014Exhibits\n F, G, and P\n\n Defendants cannot make the required showing for incorporation by reference for Exhibits\n\nF, G, and P when Defendants admit that Exhibit F was only referenced once; Exhibit P was\n\nreferenced once; and Exhibit G was referenced three times. See MTS Opp. at 5. \u201cA mere passing\n\nreference or even references . . . to a document outside of the complaint does not, on its own,\n\nincorporate the document into the complaint itself.\u201d QED, LLC v. Faber Daeufer & Itrato, P.C.,\n\n2021 WL 707073, at *2 (S.D.N.Y. Feb. 22, 2021) (quoting Williams v. Time Warner Inc., 440 F.\n\nApp\u2019x 7, 9 (2d Cir. 2011)); see also Cosmas v. Hassett, 886 F.2d 8, 13 (2d Cir. 1989) (holding that\n\nwhere \u201c[t]he amended complaint merely discussed [certain] documents and presented short\n\nquotations from them\u201d the documents were not incorporated by reference because \u201c[l]imited\n\nquotation does not constitute incorporation by reference\u201d). \u201cAs such, the few small quotations in\n\nthe Complaint do not incorporate the Statement by reference.\u201d Bergensen, 2021 WL 3115170, at\n\n*2 (finding documents not incorporated by reference when the plaintiff \u201cmakes several clear\n\nreferences . . . and quotes it twice\u201d).\n\n Even if the documents can be properly considered, Defendants\u2019 argument that \u201c[t]hese\n\ndocuments provide context for Plaintiffs\u2019 assertion that, \u2018[e]ven prior to the Class Period,\u2019\n\nDefendants misleadingly \u2018lauded FTAI\u2019s purportedly strong and growing Aerospace Products\u2019\n\nEBITDA\u2019\u201d demonstrates exactly why the Court should not consider them for their truth. MTS\n\nOpp. at 6. For instance, Defendants purportedly offer Exhibit G to add the additional context that\n\n\u201cFTAI was experiencing \u2018a rapidly expanding backlog of aerospace products business.\u2019\u201d Id.\n\nLikewise, according to Defendants, Exhibits F and P purportedly explain \u201cwhy FTAI was seeing\n\na rapidly expanding backlog.\u201d MTS Opp. at 6\u20137. However, if not offered for its truth that the\n\nCompany\u2019s EBITDA grew because of organic customer demand (and not because of Defendants\u2019\n\n\n 4\n\f Case 1:25-cv-00541-JAV Document 75 Filed 02/12/26 Page 6 of 12\n\n\n\n\nfraudulent accounting improprieties, as the Complaint alleges), for what other purposes could this\n\ndocument serve? None. Therefore, the Court should not consider Exhibits F, G, and P, or at the\n\nleast, not for the truth of the matter asserted therein. 5 MTS at 3\u20134.\n\n C. The Court Should Not Consider Certain SEC Filings\u2014Exhibits H, S, T, U\n\n As an initial matter, while Defendants concede that Exhibit T, which the Complaint neither\n\ncites nor relies on, is not incorporated by reference, see MTS Opp. at 8\u201311, Defendants insist that\n\nthe Complaint\u2019s passing reference to Exhibit H (2023 10-K) warrants incorporation by reference.\n\nSee MTS Opp. at 9. Not so. As explained, \u201c[a] mere passing reference or even references . . . to a\n\ndocument outside of the complaint does not, on its own, incorporate the document into the\n\ncomplaint itself.\u201d QED, LLC, 2021 WL 707073, at *2. In fact, the Complaint does not quote a\n\nsingle word from Exhibit H. See \u00b6137 (quoting from Q2 Form 10-Q); \u00b6163 (quoting from Q3 Form\n\n10-Q). Therefore, Defendants have no basis to claim that Exhibit H is \u201cexpressly incorporated by\n\nreference.\u201d MTS Opp. at 9.\n\n Next, to the extent that Defendants argue that the documents are judicially noticeable, the\n\nCourt may only judicially notice these documents for the limited purpose of determining \u201cwhat\n\nstatements [they] contained.\u201d Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007). This, however,\n\nis not what Defendants are requesting, nor how the MTD uses these documents. Rather,\n\nDefendants ask the Court to consider these documents for the truth of the matter asserted, which\n\nis improper at this stage. See id. (\u201cIf the court takes judicial notice, it does so in order \u2018to determine\n\nwhat statements [they] contained\u2019\u2014but \u2018again not for the truth of the matters asserted.\u2019\u201d).\n\nSpecifically, Defendants posit that Exhibits H and T were offered to show that FTAI\u2019s accounting\n\n\n\n5\n Kramer v. Time Warner Inc. is inapposite. As explained in n. 2, supra, Lead Plaintiffs never\nasked that the Court should \u201crefrain from considering such documents.\u201d 937 F.2d 767, 774 (2d\nCir. 1991).\n 5\n\f Case 1:25-cv-00541-JAV Document 75 Filed 02/12/26 Page 7 of 12\n\n\n\n\nor depreciation policies were not \u201cunknown to investors.\u201d 6 MTS Opp. at 9.\n\n Exhibits H and T were only offered to support Defendants\u2019 counterfactual narrative: that\n\nFTAI had properly and faithfully complied with its accounting policies. 7 See MTS Opp. at 8\u201311.\n\nFor instance, in their MTD Opposition, citing Exhibit H, Defendants argue that \u201cFTAI also\n\ndisclosed that its Aerospace Products\u2019 revenue is \u2018accounted for within the scope of ASC 606.\u2019\u201d\n\nMTD at 12\u201313. Similarly, Defendants cite Exhibit T to argue that \u201cFTAI disclosed in each of its\n\nannual reports that it depreciates engines carried as leasing equipment \u2018using the straight-line\n\nmethod\u2019 over an estimated useful life of \u20182-6 years, based on maintenance adjusted service life.\u2019\u201d\n\nId. As such, Defendants improperly use these exhibits to proffer a competing factual narrative\n\nunripe for consideration that FTAI had complied with ASC 606 and its depreciation policy. See\n\nMTS at 4\u20135. Accordingly, the Court should not consider Exhibits H and T for the truth of the\n\nmatter asserted therein.\n\n Defendants\u2019 argument with respect to Exhibit U is similarly flawed. Defendants offer\n\nExhibit U for its truth that customer demand fueled FTAI\u2019s EBITDA growth and argue that\n\n\u201cPlaintiffs do not allege any facts that contradict FTAI\u2019s repeated attributions of its Aerospace\n\nProducts Adjusted EBITDA growth to increasing customer demand.\u201d MTD at 14. Such factual\n\nargument is in direct contention with the Complaint\u2019s well-pled allegations concerning\n\n\n\n\n6\n However, as already explained in Lead Plaintiffs\u2019 MTD Opposition, \u201cthe fact that whether FTAI\nfully disclosed its accounting policies is irrelevant to the inquiry of whether Defendants employed\nthose accounting policies in a deceptive manner designed to boost EBITDA, as the Complaint\nalleges.\u201d6 MTD Opp. at 14.\n7\n Indeed, Defendants\u2019 misinterpretation of the Complaint\u2019s allegations is confirmed by\nDefendants\u2019 own admission that the exhibits were offered to \u201crebut[] other nondisclosure\nallegations concerning FTAI\u2019s accounting policies.\u201d MTS Opp. at 9.\n 6\n\f Case 1:25-cv-00541-JAV Document 75 Filed 02/12/26 Page 8 of 12\n\n\n\n\nDefendants\u2019 EBITDA accounting scheme. 8 See MTS Opp. at 12. Worse, Defendants\u2019 assertion\n\nattempts to factually rebut Lead Plaintiffs\u2019 allegations concerning the falsity of Defendant\n\nAdams\u2019s October 31, 2024 statement that attributed the adjusted EBITDA growth to Aerospace\n\nProducts\u2019 \u201ctremendous growth\u201d and \u201corganic growth.\u201d See \u00b6\u00b6156\u201373. Accordingly, even if Exhibit\n\nU is incorporated by reference, the Court should not consider the document for its truth. See Glantz\n\nv. James River Group Holdings, Ltd., 2025 WL 278440, at *5 (S.D.N.Y. Jan. 23, 2025).\n\n Finally, as to Exhibit S, Defendants\u2019 MTS Opposition\u2019s arguments are moot. MTS Opp. at\n\n12\u201313. Even if this Court takes judicial notice of Exhibit S, the sole purpose for which Defendants\n\nseek to use it is for the truth of the matter asserted. Specifically, Defendants request that the Court\n\ntake the results of FTAI\u2019s whitewashed internal investigation discussed in Exhibit S as gospel, an\n\napproach wholly inappropriate at the pleading stage. See Lateral Recovery, LLC v. Cap. Merch.\n\nServs., LLC, 632 F. Supp. 3d 402, 436 (S.D.N.Y. 2022) (\u201c[w]hen a court takes judicial notice of a\n\ndocument on a motion to dismiss, it should generally do so only to determine what statements the\n\ndocuments contain not for the truth of the matters asserted\u201d). The means undertaken by and\n\npurported accuracy of the investigation described in Exhibit S are in direct contention with the\n\nfactual allegations of the Complaint. Bedrock civil procedure holds that such factual dispute is\n\nunripe for adjudication at the pleading stage. At bottom, whether or not the Court notices Exhibit\n\nS simply has no bearing on the MTD based on Defendants\u2019 inappropriate usage thereof.\n\n\n\n\n8\n Defendants\u2019 reliance on I. Meyer is misplaced. There, the court took notice of a prospectus that\nplaintiff failed to submit as an exhibit to a complaint \u201cbased only on an alleged written\nmisrepresentation appearing within th[at specific] prospectus [and] no misrepresentations\nstemming from any other source.\u201d I. Meyer Pincus & Associates, P.C. v. Oppenheimer & Co., 936\nF.2d 759, 762 (2d Cir. 1981) (emphasis in original).\n 7\n\f Case 1:25-cv-00541-JAV Document 75 Filed 02/12/26 Page 9 of 12\n\n\n\n\n D. The Court Should Not Consider Certain Accounting Standards\u2014Exhibits K,\n M, V\n\n To start, Defendants once again misrepresent the MTS by stating \u201cthe Court should not\n\nconsider copies of relevant topics of the FASB\u2019s ASC (Exhibits K, M, and V).\u201d MTS Opp. at 15.\n\nThe MTS makes no such argument. See MTS at 5\u20136. To be clear, the thrust of the MTS here is\n\nthat Defendants introduce Exhibits K, M, and V for the sole purpose of establishing: (i) the\n\naccuracy of the fair value and book value of its inventory (MTD at 13; MTS Opp. at 16\u201318) and;\n\n(ii) the accuracy of the Company\u2019s financials (MTS Opp. at 17\u201318). In essence, Defendants use\n\nthese documents to factually rebut that Defendants\u2019 accounting scheme had improperly inflated\n\nthe Company\u2019s financial metrics. See MTS Opp. at 16\u201318. The existence of an accounting standard\n\nis one matter, but seeking judicial notice of that standard to presume the sanctity of FTAI\u2019s\n\naccounting practices is a different beast entirely. Defendants take the latter approach, which is\n\nimproper. Roth, 489 F.3d at 509.\n\n Defendants\u2019 remaining arguments parrot the MTD and are divorced from the analysis at\n\nissue here. For instance, relying on Exhibit M, Defendants insist that \u201cPlaintiffs do not allege that\n\nFTAI failed to estimate the fair value of the noncash consideration received in connection with\n\nengine exchanges with its customers.\u201d MTS Opp. at 17. Yet the Complaint alleges that modules\n\nawaiting repair in FTAI\u2019s inventory (mainly consisting of lower value modules) were valued 50%\n\nhigher than those sold to customers. \u00b6\u00b6106\u201312; see MTD Opp. at 14\u201315. Similarly, citing Exhibit\n\nV, Defendants point out that the adjustment \u201cshows, at most, that FTAI had $244.353 million in\n\ngains from asset sales that it did not attribute to operating activities.\u201d MTS Opp. at 18. However,\n\nthat again ignores the Complaint\u2019s allegations that Aerospace Products obtained 80% of its\n\n\n\n\n 8\n\f Case 1:25-cv-00541-JAV Document 75 Filed 02/12/26 Page 10 of 12\n\n\n\n\nEBITDA from gain on sales. 9 See MTD Opp. at 14\u201315. At a minimum, accepting all factual claims\n\nin the complaint as true and drawing all possible inferences from those allegations in favor of Lead\n\nPlaintiffs, the Court may infer that FTAI performed little repair on the engines. See Rombach v.\n\nChang, 355 F.3d 164, 169 (2d Cir. 2004).\n\n E. The Court Should Not Consider FTAI Historical Stock Price Chart\u2014Exhibit\n W\n\n Defendants\u2019 MTS Opposition also perplexingly levies loss causation arguments that\n\nFTAI\u2019s stock price after the end of the Class Period should negate a finding of loss causation. MTS\n\nOpp. at 13\u201315. However, the Second Circuit has already clarified that \u201cdetermining why a stock\u2019s\n\nprice rebounded after an initial drop requires the court to consider \u2018a competing theory of causation\n\nand raises factual questions not suitable for resolution on a motion to dismiss.\u2019\u201d 10 Acticon AG v.\n\nChina N. E. Petroleum Holdings Ltd., 692 F.3d 34, 39 (2d Cir. 2012). Here, Defendants\u2019 invitation\n\nto consider the competing \u201cinference that the market agreed with the Audit Committee: the short-\n\nsellers\u2019 (and thus Plaintiffs\u2019) allegations of accounting improprieties are meritless\u201d is exactly the\n\ntype of factual question that the Court cannot resolve at the motion to dismiss stage. See MTS Opp.\n\nat 14. Therefore, Lead Plaintiffs request that if the Court is nonetheless inclined to consider Exhibit\n\nW, it should not consider it for the truth of the matter asserted as Defendants request.\n\nIII. CONCLUSION\n\n For the foregoing reasons, Lead Plaintiffs\u2019 Motion to Strike should be granted.\n\n\n\n\n9\n Patel v. L-3 Commun. Holdings Inc. is inapposite. There, the plaintiffs concluded that because\n\u201cthe Whistleblower wore a suit to work on one of the days of Strianese\u2019s visit, . . .\u201d \u201cStrianese met\nwith the Whistleblower in Huntsville.\u201d 2016 WL 1629325, at *9 (S.D.N.Y. Apr. 21, 2016).\n10\n Defendants\u2019 argument is also blind to the fact that Congress, through the passage of the PSLRA,\nalready accounted for post-class period stock price increases through the 90-day lookback period.\nSee 15 U.S.C \u00a7 78u-4(e)(1). Thus, any concerns allayed by Defendants are illusory.\n 9\n\f Case 1:25-cv-00541-JAV Document 75 Filed 02/12/26 Page 11 of 12\n\n\n\n\nDated: February 12, 2026 Respectfully Submitted,\n\n LABATON KELLER SUCHAROW LLP\n\n By: /s/ James T. Christie\n Michael P. Canty\n James T. Christie\n 140 Broadway\n New York, New York 10005\n Telephone: 212-907-0700\n Facsimile: 212-818-0477\n mcanty@labaton.com\n jchristie@labaton.com\n\n KESSLER TOPAZ MELTZER\n & CHECK, LLP\n Sharan Nirmul\n Geoffrey C. Jarvis\n Vanessa M. Milan\n 280 King of Prussia Road\n Radnor, PA 19087\n Telephone: (610) 667-7706\n Facsimile: (610) 667-7056\n snirmul@ktmc.com\n gjarvis@ktmc.com\n vmilan@ktmc.com\n\n Counsel for Lead Plaintiffs City of Hollywood\n Firefighters\u2019 Pension Fund and Boston Retirement\n System and Lead Counsel for the Class\n\n KLAUSNER, KAUFMAN, JENSEN &\n LEVINSON\n Robert D. Klausner\n 7080 N.W. 4th Street\n Plantation, Florida 33317\n bob@robertdklausner.com\n\n Additional Counsel for Lead Plaintiff City of\n Hollywood Firefighters\u2019 Pension Fund\n\n\n\n\n 10\n\f Case 1:25-cv-00541-JAV Document 75 Filed 02/12/26 Page 12 of 12\n\n\n\n\n LOCAL RULE 7.1(C) CERTIFICATION\n\n I, James T. Christie, hereby certify that this memorandum of law complies with the word-\n\ncount limitations set forth in Rule 7.1(c) of the Local Rules of the United States District Court for\n\nthe Southern District of New York and Section 5(c) of the Court\u2019s Individual Rules and Practices\n\nin Civil Cases, and contains 3,011 words, exclusive of the caption, table of contents, table of\n\nauthorities, signature blocks, and this certificate.\n\n\n\nDATED: February 12, 2026\n New York, New York\n\n\n /s/ James T. Christie\n James T. Christie\n\f","ocr_status":2,"date_upload":"2026-05-12T04:14:56.640776-07:00","document_number":"75","attachment_number":null,"pacer_doc_id":"127039063143","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Reply Memorandum of Law in Support of Motion","acms_document_guid":""}],"date_created":"2026-02-12T17:10:18.348828-08:00","date_modified":"2026-10-15T06:55:48.269248-07:00","date_filed":"2026-02-12","time_filed":"18:28:10","entry_number":75,"recap_sequence_number":"2026-02-12.001","pacer_sequence_number":298,"description":"REPLY MEMORANDUM OF LAW in Support re: 72 MOTION to Strike Document No. [70, 70-6 - 70-8, 70-11, 70-13, 70-16, 70-19 - 70-23] Declaration of Tansy Woan, Exhibits F, G, H, K, M, P, S, T, U, V, W Attached Thereto. . Document filed by Boston Retirement System, City of Hollywood Firefighters Pension Fund..(Christie, James) (Entered: 02/12/2026)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/452908677/","id":452908677,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69558488/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/467786812/","id":467786812,"tags":[],"absolute_url":"/docket/69558488/74/shannahan-v-ftai-aviation-ltd/","date_created":"2026-02-05T15:11:25.398842-08:00","date_modified":"2026-05-14T06:47:04.129002-07:00","sha1":"e5d1e20153ccffd17b6e9c4397ad1f485258dbb3","page_count":25,"file_size":315722,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.74.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.74.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 1 of 25\n\n\n\n\nUNITED STATES DISTRICT COURT\nSOUTHERN DISTRICT OF NEW YORK\n-----------------------------------------x\nCITY OF HOLLYWOOD FIREFIGHTERS\u2019 PENSION :\nFUND and BOSTON RETIREMENT SYSTEM, :\nIndividually and on Behalf of All Others Similarly Situated, :\n :\n Plaintiffs, :\n :\n -v- : 25-CV-0541 (JAV)\n :\nFTAI AVIATION LTD., JOSEPH P. ADAMS, JR., and :\nEUN (ANGELA) NAM, :\n :\n Defendants. :\n-----------------------------------------x\n\n\n\n\n DEFENDANTS\u2019 MEMORANDUM OF LAW IN OPPOSITION TO\n LEAD PLAINTIFFS\u2019 MOTION TO STRIKE CERTAIN EXHIBITS\n\n\n\n\n Scott D. Musoff\n Tansy Woan\n Christopher R. Fredmonski\n SKADDEN, ARPS, SLATE,\n MEAGHER & FLOM LLP\n One Manhattan West\n New York, New York 10001\n (212) 735-3000\n\n Attorneys for Defendants\n FTAI Aviation Ltd., Joseph P. Adams,\n Jr., and Eun (Angela) Nam\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 2 of 25\n\n\n\n\n TABLE OF CONTENTS\n Page\n\nTABLE OF AUTHORITIES .......................................................................................................... ii\n\nINTRODUCTION ...........................................................................................................................1\n\nI. PLAINTIFFS\u2019 MOTION TO STRIKE IS PROCEDURALLY IMPROPER .....................3\n\nII. PLAINTIFFS\u2019 MOTION IS SUBSTANTIVELY MERITLESS ........................................4\n\n A. The Court May Consider the Earnings\n Call Transcripts (Exhibits F, G, and P) ....................................................................5\n\n B. The Court May Consider the SEC Filings (Exhibits H, S, T, and U) ......................8\n\n 1. Exhibit H (2023 10-K) and Exhibit T (2015 10-K) .....................................8\n\n 2. Exhibit U (7/23/24 8-K) .............................................................................11\n\n 3. Exhibit S (2/20/25 8-K) .............................................................................12\n\n C. The Court May Take Judicial Notice\n of Historical, Public Stock Prices (Exhibit W) ......................................................13\n\n D. The Court May Consider FASB\n Accounting Standards (Exhibits K, M, and V) ......................................................15\n\n 1. Exhibit K (FASB ASC Topic 330) ............................................................16\n\n 2. Exhibit M (FASB ASC Topic 606) ...........................................................17\n\n 3. Exhibit V (FASB ASC Topic 230) ............................................................17\n\nCONCLUSION ..............................................................................................................................18\n\nLOCAL RULE 7.1(C) CERTIFICATION ....................................................................................20\n\n\n\n\n i\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 3 of 25\n\n\n\n\n TABLE OF AUTHORITIES\n Page(s)\n\nCASES\n\nActicon AG v. China North East Petroleum Holdings Ltd.,\n 692 F.3d 34 (2d Cir. 2012)...........................................................................................13, 15\n\nIn re AmTrust Financial Services, Inc. Securities Litigation,\n No. 17-CV-1545 (LAK), 2019 WL 4257110 (S.D.N.Y. Sept. 9, 2019) ............................15\n\nIn re AppHarvest Securities Litigation,\n 684 F. Supp. 3d 201 (S.D.N.Y. 2023)..................................................................................4\n\nAshcroft v. Iqbal,\n 556 U.S. 662 (2009) ...........................................................................................................15\n\nATSI Communications, Inc. v. Shaar Fund, Ltd.,\n 493 F.3d 87 (2d Cir. 2007)...........................................................................................5, 6, 8\n\nIn re Axis Capital Holdings Ltd., Securities Litigation,\n 456 F. Supp. 2d 576 (S.D.N.Y. 2006)..................................................................................2\n\nIn re Bank of America AIG Disclosure Securities Litigation,\n 980 F. Supp. 2d 564 (S.D.N.Y. 2013)..................................................................................4\n\nIn re Bausch & Lomb, Inc. Securities Litigation,\n No. 01-CV-6190-CJS, 2003 WL 23101782 (W.D.N.Y. Mar. 28, 2003) .............................8\n\nBazzelle v. NovoCure Ltd.,\n No. 1:23-cv-5146-GHW, 2025 WL 843668 (S.D.N.Y. Mar. 18, 2025) ..................3, 4, 8, 9\n\nBKNS Management ex rel. Abbson LLC v. Messner Reeves, LLP,\n No. 24-CV-5581 (JAV), 2025 WL 2022590 (S.D.N.Y. July 18, 2025) ..............................5\n\nChambers v. Time Warner, Inc.,\n 282 F.3d 147 (2d Cir. 2002)...........................................................................................4, 11\n\nCity of Austin Police Retirement System v. Kinross Gold Corp.,\n 957 F. Supp. 2d 277 (S.D.N.Y. 2013)................................................................................11\n\nCortec Industries, Inc. v. Sum Holding L.P.,\n 949 F.2d 42 (2d Cir. 1991)...............................................................................................5, 8\n\nDocdeer Foundation v. BioNTech SE,\n No. 24 Civ. 5310 (KPF), 2025 WL 2781381 (S.D.N.Y. Sept. 30, 2025) ..........................10\n\nEden Alpha CI LP v. Polished.com Inc.,\n 763 F. Supp. 3d 270 (E.D.N.Y. 2025) .........................................................................15, 16\n\n\n ii\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 4 of 25\n\n\n\n\nIn re FuBoTV Inc. Securities Litigation,\n No. 21-cv-01412 (ALC), 2024 WL 1330001 (S.D.N.Y. Mar. 28, 2024) ..........................13\n\nGraham v. UMG Recordings, Inc.,\n No. 25-CV-0399 (JAV), 2025 WL 2879607 (S.D.N.Y. Oct. 9, 2025) ............................3, 4\n\nHalliburton Co. v. Erica P. John Fund, Inc.,\n 573 U.S. 258 (2014) ...........................................................................................................14\n\nHarris v. AmTrust Financial Services, Inc.,\n 135 F. Supp. 3d 155 (S.D.N.Y. 2015),\n aff\u2019d, 649 F. App\u2019x 7 (2d Cir. 2016) ..................................................................................18\n\nIn re Hebron Technology Co. Securities Litigation,\n No. 20 Civ. 4420 (PAE), 2021 WL 4341500 (S.D.N.Y. Sept. 22, 2021) ..........................14\n\nHonig v. Hansen,\n No. 20 Civ. 5872 (AKH), No. 20 Civ. 8618 (AKH), 2021 WL 4651475 (S.D.N.Y.\n Oct. 6, 2021) ........................................................................................................................4\n\nI. Meyer Pincus & Associates, P.C. v. Oppenheimer & Co.,\n 936 F.2d 759 (2d Cir. 1991).................................................................................2, 9, 10, 11\n\nKramer v. Time Warner Inc.,\n 937 F.2d 767 (2d Cir. 1991).................................................................................7, 8, 10, 11\n\nLateral Recovery, LLC v. Capital Merchant Services, LLC,\n 632 F. Supp. 3d 402 (S.D.N.Y. 2022)................................................................................12\n\nIn re Manulife Financial Corp. Securities Litigation,\n 276 F.R.D. 87 (S.D.N.Y. 2011) .........................................................................................15\n\nIn re MINISO Group Holding Ltd. Securities Litigation,\n No. 22-cv-9864 (ER), 2024 WL 759246 (S.D.N.Y. Feb. 23, 2024) .......................... passim\n\nPatel v. L-3 Communications Holdings Inc.,\n Nos. 14-CV-6038 (VEC) et seq., 2016 WL 1629325 (S.D.N.Y. Apr. 21, 2016) ..............18\n\nRoth v. Jennings,\n 489 F.3d 499 (2d Cir. 2007).......................................................................................8, 9, 10\n\nSable v. Southmark/Envicon Capital Corp.,\n 819 F. Supp. 324 (S.D.N.Y. 1993) ....................................................................................10\n\nSafran Elects. & Defense SAS v. iXblue SAS,\n 789 F. App\u2019x 266 (2d Cir. 2019) .......................................................................................11\n\n\n\n\n iii\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 5 of 25\n\n\n\n\nIn re SAIC, Inc. Securities Litigation,\n No. 12 Civ. 1353(DAB), 2013 WL 5462289 (S.D.N.Y. Sept. 30, 2013) ..........................16\n\nSEC v. Fiore,\n 416 F. Supp. 3d 306 (S.D.N.Y. 2019)................................................................................11\n\nStaehr v. Hartford Financial Services Group, Inc.,\n 547 F.3d 406 (2d Cir. 2008).................................................................................................8\n\nIn re Stemline Therapeutics, Inc. Securities Litigation,\n 313 F. Supp. 3d 543 (S.D.N.Y. 2018)................................................................................14\n\nSun v. TAL Education Group,\n No. 22-cv-01015 (ALC), 2023 WL 6394413 (S.D.N.Y. Sept. 29, 2023) ............................7\n\nTellabs, Inc. v. Makor Issues & Rights, Ltd.,\n 551 U.S. 308 (2007) ...................................................................................................2, 4, 15\n\nRULES\n\nFed. R. Civ. P. 7(a) ..........................................................................................................................4\n\nFed. R. Civ. P. 12(f) .........................................................................................................................4\n\n\n\n\n iv\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 6 of 25\n\n\n\n\n INTRODUCTION1\n\n Relying entirely on the carbon-copied, unsubstantiated (and refuted) allegations of two\n\nshort sellers, Plaintiffs claim that Defendants violated the federal securities laws by engaging in a\n\npurported \u201cundisclosed revolving door accounting scheme\u201d to \u201cfraudulently inflate[]\u201d the\n\nreported financial results for FTAI\u2019s Aerospace Products business segment. (AC \u00b6\u00b6 3, 8.) To\n\nobfuscate their obvious pleading failures, Plaintiffs have moved to strike various documents,\n\nmany of which they incorporated by reference in the AC, because they claim that those\n\ndocuments contradict their fabricated and unsupportable narrative.\n\n As a threshold matter, Plaintiffs\u2019 motion is procedurally improper (infra Part I), and\n\ncontrary to established practice in this District. Plaintiffs gripe that they were placed in a \u201cCatch\n\n22\u201d between waiving any challenge to the exhibits or filing their motion to strike. (MTS at 1\n\nn.3.) Not so. Plaintiffs easily could have addressed the exhibits at issue in their opposition to\n\nDefendants\u2019 motion to dismiss.2 The only thing constraining them from doing so was the word\n\nlimit imposed by the Local Rules and this Court\u2019s Individual Rules and Practices in Civil Cases.\n\nPlaintiffs elected to flout that limit and unilaterally extend their word allocation by more than\n\n1,700 words under the guise of a purportedly forced motion to strike. Plaintiffs\u2019 tactics should\n\n\n1\n Capitalized terms not defined herein have the meanings given to them in the Memorandum of\nLaw in Support of Defendants\u2019 Motion to Dismiss the Amended Class Action Complaint (ECF\nNo. 69, the \u201cBrief\u201d), which is cited herein as \u201cMTD at __.\u201d Exhibits that Defendants submitted\nwith that motion (see ECF No. 70) are cited herein as \u201cEx. __ at __,\u201d Lead Plaintiffs\u2019\nMemorandum of Law in Support of Lead Plaintiffs\u2019 Motion to Strike Certain Exhibits from\nDefendants\u2019 Motion to Dismiss the Amended Class Action Complaint (ECF No. 73) is cited\nherein as \u201cMTS at __,\u201d and Lead Plaintiffs\u2019 Memorandum of Law in Opposition to Defendants\u2019\nMotion to Dismiss the Amended Class Action Complaint (ECF No. 71) is cited herein as \u201cOpp.\nat __.\u201d Unless otherwise noted, all emphasis is added and internal citations are omitted.\n2\n Cf. Order, Graham v. UMG Recordings, Inc., No. 25-CV-0399 (JAV), ECF No. 55 (S.D.N.Y.\nMay 15, 2025) (Vargas, J.) (\u201cPlaintiff shall have the opportunity to be heard on the propriety of\nthe court taking judicial notice of the materials in ECF No. 25 in his opposition to the motion to\ndismiss. The Court shall not accept separate briefing on this topic.\u201d).\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 7 of 25\n\n\n\n\nnot be countenanced, and are reason alone to deny their motion.\n\n Equally improper is Plaintiffs\u2019 request for the Court to disregard the exhibits. Courts\n\nmay not \u201cclose [their] eyes to the contents of\u201d documents that are \u201cintegral\u201d to a complaint and\n\nthereby \u201cpermit[] a plaintiff to evade a properly argued motion to dismiss simply because\n\nplaintiff has chosen not to attach the [documents] to the complaint or to incorporate [them] by\n\nreference.\u201d I. Meyer Pincus & Assocs., P.C. v. Oppenheimer & Co., 936 F.2d 759, 762 (2d Cir.\n\n1991). Indeed, doing so in a securities-fraud case like this one would subvert Congress\u2019s\n\nobjectives in enacting the PSLRA, including its \u201c[e]xacting pleading requirements,\u201d as \u201ca check\n\nagainst abusive litigation by private parties.\u201d Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S.\n\n308, 313 (2007); see also In re Axis Cap. Holdings Ltd. Sec. Litig., 456 F. Supp. 2d 576, 584\n\n(S.D.N.Y. 2006) (Rule 9(b) operates to \u201cprohibit plaintiffs from unilaterally imposing upon the\n\ncourt, the parties and society enormous social and economic costs absent some factual basis\u201d).\n\n Plaintiffs\u2019 motion attacks four categories of documents, each of which the Court may\n\nproperly consider when ruling on Defendants\u2019 motion to dismiss:\n\n First, Plaintiffs ask the Court to strike three earnings-call transcripts, which they have\n\nselectively quoted and thereby incorporated by reference into the AC. When ruling on a motion\n\nto dismiss, district courts may consider the full text of documents that plaintiffs selectively quote\n\nin their pleadings, and courts routinely consider full earnings-call transcripts in analogous\n\ncircumstances. (Infra Part II.A.)\n\n Second, Plaintiffs ask the Court to strike four of FTAI\u2019s SEC filings, all of which are\n\nintegral to the AC, and three of which the AC expressly incorporates by reference. In so doing,\n\nPlaintiffs ignore controlling Second Circuit authority, which uniformly holds that such SEC\n\nfilings are properly considered on motions to dismiss. (Infra Part II.B.)\n\n\n\n\n 2\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 8 of 25\n\n\n\n\n Third, Plaintiffs ask the Court to strike a chart of FTAI\u2019s well-publicized, historical stock\n\nprices. Again, Plaintiffs ignore black-letter law providing that district courts may properly take\n\njudicial notice of well-publicized stock prices. (Infra Part II.C.)\n\n Fourth, Plaintiffs ask the Court to strike certain provisions of the Financial Accounting\n\nStandards Board\u2019s (\u201cFASB\u201d) Accounting Standards Codification (\u201cASC\u201d) that are at issue in this\n\ncase and which Defendants submitted as exhibits for the Court\u2019s ease of reference. The Court\n\nmay properly consider these accounting standards when ruling on Defendants\u2019 motion to\n\ndismiss, since courts treat the FASB\u2019s standards as authority, not evidence. (Infra Part II.D.)\n\n Apparently aware that their arguments are legally meritless, Plaintiffs argue that, at the\n\nvery least, the Court should not consider the subject exhibits for the truth of the matters asserted\n\nin them. Plaintiffs\u2019 plea for the Court to give itself a limiting instruction is unnecessary. As\n\nexplained below, the exhibits are not offered for the truth of their contents or to \u201ccreate\u201d a\n\n\u201ccounter-narrative,\u201d as Plaintiffs claim. (MTS at 1.) Rather, they are offered to show only what\n\nDefendants said and what a reasonable investor would have understood at the time Defendants\n\nmade the alleged misrepresentations, which must be analyzed \u201cin their necessary and proper\n\ncontext.\u201d Graham v. UMG Recordings, Inc., No. 25-CV-0399 (JAV), 2025 WL 2879607, at *2\n\n(S.D.N.Y. Oct. 9, 2025) (Vargas, J.) (citing Ganske v. Mensch, 480 F. Supp. 3d 542, 545\n\n(S.D.N.Y. 2020)). Plaintiffs\u2019 motion and alternative request for relief should both be denied.\n\n ARGUMENT\n\nI. PLAINTIFFS\u2019 MOTION TO STRIKE IS PROCEDURALLY IMPROPER\n\n As a threshold matter, Plaintiffs\u2019 motion should be denied because it is \u201cprocedurally\n\nimproper.\u201d Bazzelle v. NovoCure Ltd., No. 1:23-cv-5146-GHW, 2025 WL 843668, at *6\n\n(S.D.N.Y. Mar. 18, 2025) (cited in MTS at 1 n.3). Rule 12(f) permits a court to \u201cstrike from a\n\npleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous\n\n\n 3\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 9 of 25\n\n\n\n\nmatter.\u201d Fed. R. Civ. P. 12(f). Rule 7 excludes motions from the definition of \u201cpleadings,\u201d Fed.\n\nR. Civ. P. 7(a), and \u201ccourts in this district have held that Rule 12(f) does not authorize [a] court\n\nto strike documents other than pleadings.\u201d Honig v. Hansen, Nos. 20 Civ. 5872 (AKH), 20 Civ.\n\n8618 (AKH), 2021 WL 4651475, at *3 (S.D.N.Y. Oct. 6, 2021) (collecting cases). This is reason\n\nalone to deny Plaintiffs\u2019 motion to strike. See, e.g., NovoCure, 2025 WL 843668, at *6 (denying\n\nmotion to strike exhibits submitted in support of motion to dismiss); In re AppHarvest Sec. Litig.,\n\n684 F. Supp. 3d 201, 238 (S.D.N.Y. 2023) (cited in MTS at 1 n.3) (same).\n\nII. PLAINTIFFS\u2019 MOTION IS SUBSTANTIVELY MERITLESS\n\n Plaintiffs alternatively request that the Court disregard the subject exhibits. This request\n\nis meritless. On a motion to dismiss, district courts \u201cmust consider\u201d both \u201cdocuments\n\nincorporated into the complaint by reference\u201d and \u201cmatters of which a court may take judicial\n\nnotice.\u201d Tellabs, 551 U.S. at 322; see also Chambers v. Time Warner, Inc., 282 F.3d 147, 153\n\n(2d Cir. 2002) (similar). A complaint incorporates a document by reference when it \u201cmake[s] a\n\nclear, definite and substantial reference to the document[].\u201d In re MINISO Grp. Holding Ltd.\n\nSec. Litig., No. 22-cv-9864 (ER), 2024 WL 759246, at *7 (S.D.N.Y. Feb. 23, 2024). \u201cJudicial\n\nnotice is appropriate when a matter is not subject to reasonable dispute because it is \u2018generally\n\nknown . . .\u2019 or \u2018can be accurately and readily determined from sources whose accuracy cannot\n\nreasonably be questioned.\u2019\u201d UMG Recordings, 2025 WL 2879607, at *1 (quoting Fed. R. Evid.\n\n201(b)). \u201cMatters of which judicial notice can be taken include press coverage establishing what\n\ninformation existed in the public domain during periods relevant to the plaintiffs\u2019 claims.\u201d In re\n\nBank of Am. AIG Disclosure Sec. Litig., 980 F. Supp. 2d 564, 570 (S.D.N.Y. 2013) (citing Staehr\n\nv. Hartford Fin. Servs. Grp., Inc., 547 F.3d 406, 425 (2d Cir. 2008)).\n\n Courts may also consider \u201clegally required public disclosure documents filed with the\n\nSEC, and documents possessed by or known to the plaintiff and upon which it relied in bringing\n\n\n 4\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 10 of 25\n\n\n\n\nthe suit.\u201d ATSI Commc\u2019ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (cited in\n\nMTS at 1). Thus, even if documents are not incorporated by reference in the complaint, courts\n\nmay still consider them if the plaintiffs relied on them in \u201cframing the complaint,\u201d since those\n\ndocuments are \u201cintegral to plaintiffs\u2019 claim\u201d and the plaintiffs had \u201cundisputed notice\u201d of their\n\ncontents. Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir. 1991); see also\n\nBKNS Mgmt. ex rel. Abbson LLC v. Messner Reeves, LLP, No. 24-CV-5581 (JAV), 2025 WL\n\n2022590, at *3 (S.D.N.Y. July 18, 2025) (Vargas, J.) (\u201c[T]he Court may consider a document not\n\nincorporated by reference if . . . the document [is] integral to the complaint.\u201d). For example,\n\n\u201cpartially quoted securities filings are integral to a complaint based on securities fraud,\u201d and a\n\ncourt thus may consider \u201cthe full text of those documents\u201d when ruling on a motion to dismiss.\n\nMINISO, 2024 WL 759246, at *9 (citing San Leandro Emergency Med. Grp. Profit Sharing Plan\n\nv. Philip Morris Cos., 75 F.3d 801, 809 (2d Cir. 1996)).\n\n Here, through their motion, Plaintiffs urge the Court to disregard four categories of\n\nexhibits that Defendants submitted in support of their motion to dismiss: (i) three earnings-call\n\ntranscripts that Plaintiffs selectively quote in the AC; (ii) four SEC filings that are integral to the\n\nAC, three of which the AC incorporates by reference; (iii) a chart of FTAI\u2019s well-publicized,\n\nhistorical stock prices, and (iv) excerpts of certain FASB accounting standards at issue in the\n\ncase. (See MTS at 3-6.) Plaintiffs\u2019 arguments are entirely without merit.\n\nA. The Court May Consider the Earnings Call Transcripts (Exhibits F, G, and P)\n\n First, the Court should reject Plaintiffs\u2019 request for it to disregard the transcripts of three\n\nFTAI earnings calls from before the alleged Class Period that Plaintiffs selectively quote\n\nthroughout the AC and in their opposition to Defendants\u2019 motion to dismiss (Opp. at 6):\n\n(i) 4Q22 Earnings Call (Exhibit F) (AC \u00b6 61); (ii) 3Q22 Earnings Call (Exhibit G) (AC \u00b6\u00b6 11, 59,\n\n193); and (iii) 2Q22 Earnings Call (Exhibit P) (AC \u00b6 59). Each of these documents is expressly\n\n\n 5\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 11 of 25\n\n\n\n\nincorporated by reference in the AC, and thus is appropriately considered by the Court in\n\nresolving Defendants\u2019 motion to dismiss. See ATSI Commc\u2019ns, 493 F.3d at 98. Even so,\n\nPlaintiffs assert that \u201c[t]he only purpose of introducing these earnings call transcripts is to\n\ndispute the Complaint\u2019s well-pled allegations that Defendants engaged in undisclosed complex\n\naccounting improprieties.\u201d (MTS at 3-4.) Plaintiffs are wrong. These documents provide\n\ncontext for Plaintiffs\u2019 assertion that, \u201c[e]ven prior to the Class Period,\u201d Defendants misleadingly\n\n\u201clauded FTAI\u2019s purportedly strong and growing Aerospace Products\u2019 EBITDA.\u201d (AC \u00b6 11.)\n\n For example, Plaintiffs allege that during the 2Q22 earnings call on July 28, 2022, \u201cin\n\nresponse to an analyst question about customer interest in the maintenance business,\u201d Adams\n\ntold investors that \u201cwe\u2019re seeing very broad-based growth in users\u201d and that FTAI was \u201cbuilding\n\nbacklog for 2023.\u201d (Id. \u00b6 59.) Yet they claim that the Court should not consider the complete\n\nanswer to the very same analyst question. Specifically, Adams stated that the referenced \u201cusers\u201d\n\ncomprised \u201cairlines,\u201d \u201cmaintenance shops,\u201d and \u201cleasing companies.\u201d (MTD at 8 (citing Ex. P,\n\n2Q22 Earnings Call, at 13).)\n\n Similarly, Plaintiffs allege that during the 3Q22 earnings call on October 28, 2022,\n\nAdams misleadingly \u201ccontinued to tout the immediate success of the MRE business in\n\nAerospace Products, stating, \u2018Aerospace [Products] had another solid quarter,\u2019\u201d and that \u201c\u2018[w]e\n\nsee tremendous potential and feel good about generating $20 million to $30 million in quarterly\n\nEBITDA and think $100 million plus in 2023 EBITDA to be very doable.\u2019\u201d (AC \u00b6 59 (quoting\n\n3Q22 Earnings Call, at 4).) Yet they claim that the Court should not consider the reason Adams\n\ngave in his very next breath for \u201cfeel[ing] good\u201d about that projection (id.)\u2014namely, that FTAI\n\nwas experiencing \u201ca rapidly expanding backlog of aerospace products business.\u201d (MTD at 8\n\n(quoting Ex. G, 3Q22 Earnings Call, at 4-5).) They also contend that the Court should not\n\n\n\n\n 6\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 12 of 25\n\n\n\n\nconsider Adams\u2019s explanation for why FTAI was seeing a rapidly expanding backlog: FTAI\n\noffers its customers module or full-engine exchanges, which allows them to avoid the significant\n\ncosts (millions of dollars) and downtime (often months) of a full engine overhaul. (See id. at 5\n\n(citing Ex. G, 3Q22 Earnings Call, at 11-12).) Plaintiffs\u2019 arguments concerning the 4Q22\n\nearnings call on February 24, 2023, flow from the same gamesmanship. (Compare AC \u00b6 61,\n\nwith MTD at 5 (citing Ex. F, 4Q22 Earnings Call, at 9).)\n\n As should be apparent from the above, none of Exhibits F, G, or P is offered to factually\n\ndispute Plaintiffs\u2019 deficient allegations of accounting fraud. Instead, the full earnings-call\n\ntranscripts provide context for the statements that Plaintiffs selectively quote throughout the AC,\n\nand they are properly considered to establish \u201cwhat information existed in the public domain\n\nduring periods relevant to the plaintiffs\u2019 claims,\u201d MINISO, 2024 WL 759246, at *9, and thus to\n\nhighlight Plaintiffs\u2019 failure to plead particularized facts showing that any of the alleged\n\nmisrepresentations were false or misleading when made. \u201cWere courts to refrain from\n\nconsidering such documents, complaints that quoted only selected and misleading portions of\n\nsuch documents could not be dismissed under Rule 12(b)(6) even though they would be doomed\n\nto failure.\u201d Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir. 1991); see also Sun v. TAL\n\nEduc. Grp., No. 22-cv-01015 (ALC), 2023 WL 6394413, at *1 n.1 (S.D.N.Y. Sept. 29, 2023)\n\n(considering, among other documents, \u201ctranscripts of earnings calls which [p]laintiffs quote[d]\n\nfrom extensively in the [complaint] and thus incorporated into the [complaint] by reference\u201d).\n\n Plaintiffs\u2019 tactics are not even supported by the cases on which they rely. For example, in\n\nNovoCure, the court granted the defendants\u2019 motion to dismiss and concluded that certain\n\n\u201ctranscripts of NovoCure\u2019s earnings calls,\u201d among other exhibits, were \u201cproperly considered \u2018in\n\norder to determine what statements they contained\u2019\u201d because the complaint \u201cquote[ed] from\n\n\n\n\n 7\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 13 of 25\n\n\n\n\nthem extensively in alleging that [d]efendants made fraudulent statements.\u201d 2025 WL 843668,\n\nat *7 (quoting Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007)); see also Staehr, 547 F.3d at\n\n425 (district court properly denied motion to strike and considered materials that \u201cwere offered\n\nto show that certain things were said in the press\u201d). The Court should conclude the same here.3\n\nB. The Court May Consider the SEC Filings (Exhibits H, S, T, and U)\n\n Plaintiffs next ask the Court to disregard four SEC filings, three of which they expressly\n\nincorporate by reference in the AC: (i) FTAI\u2019s 2023 Form 10-K (Exhibit H) (AC \u00b6\u00b6 137, 163);\n\n(ii) FTAI\u2019s 2015 Form 10-K (Exhibit T); (iii) FTAI\u2019s July 23, 2024 Form 8-K (Exhibit U) (AC\n\n\u00b6\u00b6 26, 114, 130); and FTAI\u2019s February 20, 2025 Form 8-K (Exhibit S) (AC \u00b6 129). (See MTS at\n\n4-5.) Plaintiffs\u2019 challenge is directly contrary to established Second Circuit law, including the\n\ncases they cite in support of their motion. See ATSI Comm\u2019ns, 493 F.3d at 98; Roth, 489 F.3d at\n\n509. \u201c[W]hen a district court decides a motion to dismiss a complaint alleging securities fraud, it\n\nmay review and consider public disclosure documents required by law to be and which actually\n\nhave been filed with the SEC, particularly where plaintiff has been put on notice by defendant\u2019s\n\nproffer of these public documents.\u201d Cortec, 949 F.2d at 47; see also Kramer, 937 F.2d at 774\n\n(similar). Plaintiffs efforts to avoid this settled law are makeweight.\n\n 1. Exhibit H (2023 10-K) and Exhibit T (2015 10-K)\n\n First, Plaintiffs assert that the Court should not consider Exhibit H because the AC\n\n\u201cd[oes] not cite or rely on Exhibit H.\u201d (MTS at 4.) This assertion is false. Plaintiffs allege that\n\nDefendants falsely reported their quarterly financial results on Forms 10-Q filed with the SEC on\n\nAugust 9 and November 12, 2024, and further allege that these two purportedly misleading\n\n\n3\n In re Bausch & Lomb, Inc. Securities Litigation, No. 01-CV-6190-CJS, 2003 WL 23101782\n(W.D.N.Y. Mar. 28, 2003) (cited in MTS at 3), is distinguishable. Unlike the transcripts at issue\nhere, the transcript at issue in that case was not \u201cintegral\u201d to the complaint, which \u201cd[id] not refer\nto the conference call\u201d that was transcribed. Id. at *17.\n\n\n 8\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 14 of 25\n\n\n\n\nquarterly reports \u201cshould be read in conjunction with the Consolidated Financial Statements and\n\nrelated notes included in the Company\u2019s Annual Report on Form 10-K for the year ended\n\nDecember 31, 2023.\u201d (AC \u00b6\u00b6 137-45, 162-73.) The 2023 10-K thus is expressly incorporated by\n\nreference in the AC and may be considered in its entirety as if it was part of the AC. See\n\nNovocure, 2025 WL 843668, at *7; MINISO, 2024 WL 759246, at *9; see also Roth, 489 F.3d at\n\n509 (\u201cDocuments that are attached to the complaint or incorporated in it by reference are deemed\n\npart of the pleading and may be considered.\u201d); I. Meyer Pincus, 936 F.2d at 762 (\u201c[W]hen\n\n\u2018plaintiff fails to introduce a pertinent document as part of his pleading, defendant may introduce\n\nthe exhibit as part of his motion attacking the pleading.\u2019\u201d (quoting 5 C. Wright & A. Miller,\n\nFederal Practice & Procedure, \u00a7 1327, at 489 & n.15)).\n\n Moreover, Exhibits H and T provide necessary context for Plaintiffs\u2019 demonstrably false\n\nassertion that Defendants perpetuated \u201can undisclosed revolving door accounting scheme of asset\n\ntransfers\u201d between Aviation Leasing and Aerospace Products. (AC \u00b6\u00b6 2, 8.) For example,\n\nPlaintiffs allege that, \u201cunknown to investors, FTAI assigned a useful life of 2-6 years to its\n\naircraft engines.\u201d (Id. \u00b6 90.) Exhibits H and T are offered to show that this allegation is fantasy:\n\nsince FTAI went public in 2015, it has \u201cdisclosed in each of its annual reports that it depreciates\n\nengines carried as leasing equipment \u2018using the straight-line method\u2019 over an estimated useful\n\nlife of \u20182 - 6 years, based on maintenance adjusted service life.\u2019\u201d (MTD at 12-13 (quoting Ex. H,\n\n2023 10-K, at 60, and also citing Ex. T, 2015 10-K, at 84).) Exhibit H also rebuts other\n\nnondisclosure allegations concerning FTAI\u2019s accounting policies. (See id. at 6, 8, 13.) \u201cWhen a\n\ncomplaint alleges . . . that a document filed with the SEC failed to disclose certain facts, it is\n\nappropriate for the court, in considering a Rule 12(b)(6) motion, to examine the document to see\n\nwhether or not those facts were disclosed.\u201d Roth, 489 F.3d at 509.\n\n\n\n\n 9\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 15 of 25\n\n\n\n\n Confirming that their motion to strike is an impermissible attempt to avoid dismissal by\n\ncherry-picking facts that they believe suit their unsupportable narrative while avoiding the\n\ncontext for those statements, Plaintiffs argue that the Court should not consider Exhibits H and T\n\nbecause \u201cthe content of the exhibits directly contradicts the Complaint\u2019s allegations.\u201d (MTS at\n\n4.) Established law forecloses this argument. See Kramer, 937 F.2d at 773-74; I. Meyer Pincus,\n\n936 F.3d at 762. Indeed, as shown in Defendants\u2019 motion to dismiss (MTD at 12) and\n\nunrebutted by Plaintiffs in their opposition brief (Opp. at 12-14), Plaintiffs cannot plead fraud\n\nbased on a \u201cnaked assertion of concealment of material facts\u201d that is \u201ccontradicted by published\n\ndocuments which expressly set forth the very facts allegedly concealed.\u201d Sable v.\n\nSouthmark/Envicon Cap. Corp., 819 F. Supp. 324, 333 (S.D.N.Y. 1993). \u201cEven at the pleading\n\nstage, dismissal is appropriate where the complaint is premised on the nondisclosure of\n\ninformation that was actually disclosed.\u201d Docdeer Found. v. BioNTech SE, No. 24 Civ. 5310\n\n(KPF), 2025 WL 2781381, at *14 (S.D.N.Y. Sept. 30, 2025).4\n\n Finally, Plaintiffs argue that the Court should not consider Exhibits H and T \u201cfor the truth\n\nof the matter[s] asserted\u201d in them. (MTS at 4.) Plaintiffs again miss the point. Exhibits H and T\n\nare not offered for the truth of their contents, but rather to show what was disclosed to the market\n\nat the time of the alleged misrepresentations. For example, in addition to FTAI\u2019s disclosure of\n\nits depreciation and other accounting policies, Exhibit H disclosed the risk factors that could\n\naffect FTAI\u2019s results of operations or financial condition. (See Ex. H, 2023 10-K, at 11-27.)\n\nThese risk factors are relevant context for the forward-looking statements that Plaintiffs claim\n\nwere false or misleading. (See MTD at 20-21 (addressing AC \u00b6\u00b6 133, 147, 156).) Even\n\n\n\n4\n In their forthcoming reply brief in support of their motion to dismiss, Defendants will address\nPlaintiffs\u2019 erroneous invocation of and attack on the \u201ctruth on the market\u201d defense\u2014a straw man\nthey set up to try to circumvent this dispositive case law. (See Opp. at 12-14.)\n\n\n 10\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 16 of 25\n\n\n\n\nPlaintiffs agree that the Court can consider Exhibits H and T \u201cfor the fact that they \u2018contained\n\ncertain information.\u2019\u201d (MTS at 4 (quoting Staehr, 547 F.3d at 424-45).)5\n\n 2. Exhibit U (7/23/24 8-K)\n\n Bizarrely, Plaintiffs assert that the Court cannot consider FTAI\u2019s July 23, 2024 Form 8-K\n\n(Exhibit U)\u2014the purportedly fraudulent press release reporting the Company\u2019s financial results\n\nfor 2Q24 that Plaintiffs claim started the alleged Class Period. (Compare MTS at 4, with AC\n\n\u00b6\u00b6 26, 114-15, 130; Opp. at 8.) This document forms the basis of Plaintiffs\u2019 claims and thus is\n\nincorporated by reference in the AC. See Chambers, 282 F.3d at 152-53. Again, \u201cpartially\n\nquoted securities filings are integral to a complaint based on securities fraud.\u201d MINISO, 2024\n\nWL 759246, at *9. It would be \u201chighly impractical\u201d if the Court could not consider \u201cthe very\n\ndocuments that are alleged to contain the various misrepresentations.\u201d Kramer, 937 F.2d at 774.\n\n Reviewing Exhibit U in full shows precisely why courts may not \u201cclose [their] eyes to the\n\ncontents\u201d of documents containing purported misrepresentations in securities-fraud actions. I.\n\nMeyer Pincus, 936 F.2d at 762. Plaintiffs allege that the June 30, 2024 earnings release \u201cfalsely\n\ntouted all time high Aerospace Products\u2019 EBITDA of \u201891.2mm for Q2.\u2019\u201d (AC \u00b6 26 (quoting\n\n7/23/24 8-K, Ex. 99.1, at 1).) Plaintiffs explain that this report was false and misleading because\n\n\n\n5\n This case is unlike those cited by Plaintiffs in their motion. See SEC v. Fiore, 416 F. Supp. 3d\n306, 329 (S.D.N.Y. 2019) (cited in MTS at 2) (\u201cHere, Defendants ask the Court to consider the\ntruth of the SEC filings\u2019 contents and hold as a matter of law that the statements made therein\nestablish that Eat at Joe\u2019s was primarily involved in the business of \u2018creating American Diner\nthemed restaurants, not investing.\u2019\u201d); City of Austin Police Ret. Sys. v. Kinross Gold Corp., 957\nF. Supp. 2d 277, 289 (S.D.N.Y. 2013) (cited in MTS at 3) (concluding that it was \u201cunavoidable\nthat Kinross [was] relying on the Disputed Exhibits for the truth of the matters asserted in them\u201d\nbecause the documents were \u201cof no assistance to Kinross except if taken for the truth\u201d); see also\nSafran Elecs. & Def. SAS v. iXblue SAS, 789 F. App\u2019x 266, 271 (2d Cir. 2019) (in \u201cunusual\ncircumstances\u201d where both a motion for a preliminary injunction and a motion to dismiss \u201cwere\npending before the court,\u201d the district court erroneously considered a document that \u201cwas\nproperly before the court\u201d on the preliminary injunction motion \u201cas a basis to dismiss the\nPetition\u201d when it \u201cdecid[ed] both motions simultaneously\u201d).\n\n\n 11\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 17 of 25\n\n\n\n\nFTAI\u2019s Aerospace Products EBITDA was artificially inflated by the purported accounting\n\nscheme. (See id. \u00b6\u00b6 139-45.) As shown in Defendants\u2019 motion to dismiss, however, Plaintiffs do\n\nnot plead any particularized facts to support their conclusory assertion that FTAI\u2019s reported\n\nAerospace Products EBITDA was false. (See MTD at 14-15.) Worse, they ask the Court to\n\nignore the contemporaneously disclosed, objective support for FTAI\u2019s reported results, including\n\nthat \u201cFTAI\u2019s Module FactoryTM now has over 50 active customers worldwide.\u201d (Ex. U, 7/23/24\n\n8-K, Ex. 99.1, at 1.) In analyzing whether Plaintiffs have adequately pled that Defendants\n\nmisleadingly reported FTAI\u2019s financial results in the July 23, 2024 earnings release, it is entirely\n\nproper for the Court to consider Plaintiffs\u2019 failure to plead any contemporaneous facts that\n\ncontradict FTAI\u2019s quantification of the Module Factory\u2019s customer base. (See MTD at 14-15.)\n\n 3. Exhibit S (2/20/25 8-K)\n\n Plaintiffs also argue that the Court should not consider FTAI\u2019s February 20, 2025 Form\n\n8-K (Exhibit S), in which FTAI announced that the Audit Committee of its Board of Directors\n\nhad determined that the short sellers\u2019 allegations underlying the AC were \u201cwithout merit.\u201d (Ex.\n\nS, 2/20/25 8-K, Item 8.01.) According to Plaintiffs, Exhibit S \u201cdirectly contradict[s] the\n\nComplaint\u2019s allegations.\u201d (MTS at 4-5.) But Exhibit S comes directly from the AC. Indeed,\n\nquoting from the February 20, 2025 8-K, Plaintiffs allege as follows:\n\n Just one month after the publication of Muddy Waters\u2019 explosive report, FTAI\u2019s\n Audit Committee announced on February 20, 2025, that it had \u201ccompleted its\n review\u201d into the allegations of the report and \u201cdetermined that the allegations made\n against the Company are without merit.\u201d\n\n(AC \u00b6 129 (quoting 2/20/25 8-K, Item 8.01).) The Court \u201cis entitled to consider the full text of\u201d\n\nthe February 20, 2025 8-K, since Plaintiffs \u201cpartially quote[]\u201d from and thus incorporate it by\n\nreference in the AC. MINISO, 2024 WL 759246, at *9; cf. Lateral Recovery, LLC v. Cap.\n\nMerch. Servs., LLC, 632 F. Supp. 3d 402, 435 (S.D.N.Y. 2022) (cited in MTS at 5) (\u201cIn\n\n\n\n 12\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 18 of 25\n\n\n\n\nreviewing a motion to dismiss . . . , a court accepts all factual allegations as true[.]\u201d).\n\n Insofar as Plaintiffs contend that their allegation was limited to the fact of the Audit\n\nCommittee\u2019s \u201cannouncement,\u201d and not its ultimate conclusions, Plaintiffs still come up short.\n\nThe AC conspicuously does not allege\u2014even in conclusory fashion\u2014that the Audit Committee\n\ndid not conduct the referenced \u201creview\u201d or \u201cdetermine[] that the allegations made [by the short\n\nsellers] against the Company [were] without merit.\u201d (AC \u00b6 129.) Instead, they merely assert that\n\nthe Audit Committee never released the \u201cdetails\u201d of its findings. (Id.)\n\n Apparently aware that Exhibit S is properly considered by the Court under settled law,\n\nPlaintiffs argue that Exhibit S is \u201cirrelevant\u201d because it \u201cpostdates the Class Period.\u201d (MTS at\n\n5.) This argument is belied by Plaintiffs\u2019 opposition brief, which highlights the Audit\n\nCommittee\u2019s February 20, 2025 announcement. (See Opp. at 11.) In any event, Exhibit S is\n\nrelevant for loss causation. (See MTD at 26 (citing Exhibit S, 2/20/25 8-K, Item 8.01).) Indeed,\n\nPlaintiffs allege that one of the two purported \u201ccorrective disclosures\u201d is FTAI\u2019s January 21,\n\n2025 announcement that \u201cits Audit Committee had \u2018commenced a review\u2019 of Muddy Waters\u2019\n\nallegations,\u201d which Plaintiffs assert \u201cprovid[ed] substantial credence to Muddy Waters\u2019 claims.\u201d\n\n(AC \u00b6 178.) Particularly since it is alleged in the AC, the Court is entitled to consider the\n\nannouncement of the investigation\u2019s conclusion. (See id. \u00b6\u00b6 129, 178.)\n\nC. The Court May Take Judicial Notice of Historical, Public Stock Prices (Exhibit W)\n\n Next, Plaintiffs assert that it is \u201cimproper\u201d for the Court to consider Exhibit W, a chart\n\ndepicting FTAI\u2019s historical stock prices. (MTS at 5.) Plaintiffs cannot dispute that \u201ca district\n\ncourt may take judicial notice of well-publicized stock prices\u201d when ruling on a motion to\n\ndismiss. In re FuBoTV Inc. Sec. Litig., No. 21-cv-01412 (ALC), 2024 WL 1330001, at *4\n\n(S.D.N.Y. Mar. 28, 2024) (quoting Ganino v. Citizens Utils. Co., 228 F.3d 154, 166 n.8 (2d Cir.\n\n2000)); accord Acticon AG v. China N. E. Petroleum Holdings Ltd., 692 F.3d 34, 37 n.1 (2d Cir.\n\n\n 13\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 19 of 25\n\n\n\n\n2012) (cited in MTS at 5); In re Hebron Tech. Co. Sec. Litig., No. 20 Civ. 4420 (PAE), 2021 WL\n\n4341500, at *1 n.2 (S.D.N.Y. Sept. 22, 2021) (cited in MTS at 2); In re Stemline Therapeutics,\n\nInc. Sec. Litig., 313 F. Supp. 3d 543, 547 (S.D.N.Y. 2018).\n\n Instead, Plaintiffs appear to believe that the Court\u2019s ability to take judicial notice of well-\n\npublicized stock prices is constrained by the start and end dates of the alleged Class Period. (See\n\nMTS at 5.) Plaintiffs are wrong. In securities-fraud cases, courts routinely take judicial notice of\n\nwell-publicized, historical stock prices that post-date the alleged Class Period. For example, in\n\nMINISO, the court took judicial notice of \u201ca chart showing MINISO stock prices from October\n\n15, 2020\u2013June 22, 2023,\u201d even though the alleged class period ended on July 26, 2022. 2024\n\nWL 759246, at *1, *9. And in Stemline Therapeutics, the court took judicial notice of a \u201cStock\n\nPrice Chart\u201d showing that the company\u2019s stock price had recovered completely shortly after the\n\nend of the alleged class period. 313 F. Supp. 3d at 545, 547. This case is no different.\n\n Plaintiffs also contend that the recovery of FTAI\u2019s stock price after the stock drops that\n\nprompted this lawsuit are \u201cirrelevant for the Court\u2019s disposition of Defendants\u2019 MTD.\u201d (MTS at\n\n5.) They are wrong again. While Plaintiffs contend that FTAI engaged in an accounting scheme\n\nduring the Class Period, they do not allege that FTAI changed any of its accounting practices in\n\nresponse to the Muddy Waters Report or Snowcap Report. (See MTD at 15.) To the contrary,\n\nPlaintiffs admit that, after conducting an independent investigation, FTAI\u2019s Audit Committee\n\nconcluded that the short-seller allegations were \u201cwithout merit.\u201d (AC \u00b6 129.) FTAI\u2019s stock-\n\nprice recovery supports a plausible inference that the market agreed with the Audit Committee:\n\nthe short-sellers\u2019 (and thus Plaintiffs\u2019) allegations of accounting improprieties are meritless. See\n\nHalliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 268 (2014) (\u201c[T]he market price of\n\nshares traded on well-developed markets reflects all publicly available information[.]\u201d).\n\n\n\n\n 14\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 20 of 25\n\n\n\n\n In determining whether the AC \u201cstates a plausible claim\u201d for securities fraud, the Court\n\nmust \u201cdraw on its judicial experience and common sense.\u201d Ashcroft v. Iqbal, 556 U.S. 662, 679\n\n(2009); see also, e.g., In re Manulife Fin. Corp. Sec. Litig., 276 F.R.D. 87, 104 (S.D.N.Y. 2011)\n\n(concluding that the plaintiffs\u2019 \u201cfailure to address or explain\u201d a \u201crebound\u201d in the company\u2019s\n\nstock price after the alleged corrective disclosure \u201crender[ed] their loss causation allegation\n\nimplausible\u201d). And in determining whether the AC pleads facts that \u201cgive rise to a \u2018strong\u2019\n\ninference of scienter, the court must take into account plausible opposing inferences.\u201d Tellabs,\n\n551 U.S. at 323. Thus, Exhibit W is properly considered in its entirety.6\n\nD. The Court May Consider FASB Accounting Standards (Exhibits K, M, and V)\n\n Finally, Plaintiffs argue that the Court should not consider copies of relevant topics of the\n\nFASB\u2019s ASC (Exhibits K, M, and V)\u2014the single source of authoritative nongovernmental U.S.\n\ngenerally accepted accounting principles (\u201cUS GAAP\u201d).7 (See MTS at 5-6.) FTAI discloses that\n\nits financial statements are prepared in accordance with US GAAP. (See Ex. H, 2023 10-K, at\n\n59.) In support of their motion to dismiss the AC, which alleges an accounting scheme,\n\nDefendants submitted relevant topics of the FASB ASC for the Court\u2019s convenience, and not to\n\nestablish factual truths. Courts consider the FASB\u2019s ASC, including on motions to dismiss, like\n\nany other regulatory authority, and not as evidence of facts, as Plaintiffs suggest. See, e.g., In re\n\n\n6\n Acticon is not to the contrary. In that case, the Second Circuit merely held a \u201cthe fact that a\nstock\u2019s share price recovered soon after the [alleged] fraud became known\u201d does not \u201cdefeat[] an\ninference of economic loss in a securities fraud suit\u201d as a matter of law. 692 F.3d at 36. In so\nholding, the court reiterated that it was \u201centitled to take judicial notice of well publicized stock\nprices,\u201d including those that post-dated the alleged class period. Id. at 37 & n.1.\n7\n See Fin. Accounting Standards Bd., Accounting Standards Codification, available at\nhttps://asc.fasb.org/Home (last accessed Feb. 5, 2026); see also Eden Alpha CI LP v.\nPolished.com Inc., 763 F. Supp. 3d 270, 295 (E.D.N.Y. 2025) (\u201cThe FASB is \u2018the designated\norganization in the private sector for establishing standards of financial accounting and\nreporting.\u2019\u201d (quoting In re WorldCom, Inc. Sec. Litig., 352 F. Supp. 2d 472, 478 n.3 (S.D.N.Y.\n2005))).\n\n\n 15\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 21 of 25\n\n\n\n\nAmTrust Fin. Servs., Inc. Sec. Litig., No. 17-CV-1545 (LAK), 2019 WL 4257110, at *12\n\n(S.D.N.Y. Sept. 9, 2019) (\u201cFASB\u2019s ASC is authoritative for purposes of the federal securities\n\nlaws.\u201d); Polished.com, 763 F. Supp. 3d at 295 (\u201c[T]he court will consider the FASB\n\nstandards . . . just as it would any other source of regulatory authority.\u201d); In re SAIC, Inc. Sec.\n\nLitig., No. 12 Civ. 1353(DAB), 2013 WL 5462289, at *1 n.2 (S.D.N.Y. Sept. 30, 2013) (\u201cThe\n\nSEC treats the FASB\u2019s standards as authoritative.\u201d (citing Ganino, 228 F.3d at 160 n.5)).8\n\n Notably, regardless of the \u201ctruth\u201d of the accounting standards (if they even have a \u201ctruth\n\nof the matter[] asserted therein\u201d (MTS at 6)), Plaintiffs do not plead any facts (much less\n\nparticularized ones) supporting a plausible inference that FTAI did not account for its business in\n\nconformance with the accounting standards that Plaintiffs ask the Court to disregard. It is\n\nPlaintiffs\u2019 pleading failures, and not the exhibits, that compel dismissal here.\n\n 1. Exhibit K (FASB ASC Topic 330)\n\n As relevant here, ASC Topic 330 provides that \u201cinventory\u201d includes \u201cgoods awaiting\n\nsale,\u201d \u201cgoods in the course of production,\u201d and \u201craw materials and supplies,\u201d but \u201cexcludes long-\n\nterm assets subject to depreciation accounting.\u201d (Ex. K, ASC 330-10-20.) It further provides\n\nthat the \u201ccost\u201d for inventory \u201cis understood to mean acquisition and production cost.\u201d (Id., ASC\n\n330-10-30-1.) Plaintiffs do not allege that FTAI depreciated aircraft engines held as inventory,\n\nas opposed to leasing equipment. (See MTD at 6-7 (citing Ex. K, ASC 330-10-20).) Nor do they\n\nplead particularized facts supporting a plausible inference that FTAI did not record the fair value\n\nof engines that it received from customers as part of exchanges as the book value of those\n\nengines. (See id. at 7, 13 (citing Ex. K, ASC 330-10-30-1).) To the contrary, Plaintiffs concede\n\nthat FTAI did so; they just proclaim, without any particularized, supporting factual allegations,\n\n\n\n8\n Plaintiffs do not challenge the FASB standards submitted as Exhibit I (FASB ASC Topic 360).\n\n\n 16\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 22 of 25\n\n\n\n\nthat FTAI (i) \u201coverstated the fair value of engines received by Aerospace Products,\u201d and\n\n(ii) improperly exercised its discretion to assign book values to the engine\u2019s three modules. (AC\n\n\u00b6 4; see also id. \u00b6\u00b6 5, 19-22 & n.3, 58, 99-104.) Plaintiffs\u2019 allegations fail to support their claims\n\nregardless of the \u201ctruth\u201d of Exhibit K. (See MTD at 14-20.)\n\n 2. Exhibit M (FASB ASC Topic 606)\n\n FTAI discloses that \u201cAerospace Products revenue primarily consists of the transaction\n\nprice related to the sale of repaired CFM56-7B, CFM56-5B and V2500 engines, engine modules,\n\nspare parts and used material inventory,\u201d and that such revenue is \u201caccounted for within the\n\nscope of ASC 606.\u201d (Ex. H, 2023 10-K, at 48.) As relevant here, ASC Topic 660 provides that\n\n\u201c[t]o determine the transaction price for contracts in which a customer promises consideration in\n\na form other than cash,\u201d the entity shall \u201creasonably estimate the fair value of the noncash\n\nconsideration.\u201d (Ex. M, ASC 606-10-32-21, 606-10-32-22.) Plaintiffs do not allege that FTAI\n\nfailed to estimate the fair value of the noncash consideration received in connection with engine\n\nexchanges with its customers; they just allege in conclusory fashion that FTAI \u201cinflated,\u201d\n\n\u201coverstated,\u201d and \u201covervalued\u201d the engines that it received from customers in those exchanges.\n\n(MTD at 20 (citing AC \u00b6\u00b6 4, 5, 19, 113, 139, 148, 164).) Again, Plaintiffs\u2019 allegations fail to\n\nsupport their claims regardless of the \u201ctruth\u201d of Exhibit M. (See MTD at 14-20.)\n\n 3. Exhibit V (FASB ASC Topic 230)\n\n As relevant here, FASB ASC Topic 230 provides that \u201c[e]ntities that choose not to\n\nprovide information about major classes of operating cash receipts and payments by the direct\n\nmethod . . . shall determine and report the same amount for net cash flow from operating\n\nactivities indirectly by adjusting net income of a business entity . . . to reconcile it to net cash\n\nflow from operating activities.\u201d (Ex. V, ASC 230-10-45-28.) FTAI performed this\n\nreconciliation in its 3Q24 10-Q, pursuant to which it deducted $244.353 million in \u201c[g]ain on\n\n\n 17\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 23 of 25\n\n\n\n\nsale of assets\u201d from net income to derive its operating cash flows for the nine months ended\n\nSeptember 30, 2024. (Ex. J. 3Q24 10-Q, at 9.) Plaintiffs speculate that this deduction means\n\nthat FTAI must have \u201cperform[ed] limited work\u201d on the subject assets \u201cin order to sell them to\n\nthird-party customers of Aerospace Products\u201d because otherwise it would have reported the cash\n\nflow from these asset sales as operating cash flow. (AC \u00b6 94.)\n\n ASC Topic 230 is cited to illustrate the drastic \u201cleap of logic\u201d between Plaintiffs\u2019 cherry-\n\npicked financial data point and their wild, conclusory accusations of accounting fraud. Patel v.\n\nL-3 Commc\u2019ns Holdings Inc., No. 14-CV-6038 (VEC), 2016 WL 1629325, at *9 (S.D.N.Y. Apr.\n\n21, 2016). Indeed, as Defendants demonstrated in their motion to dismiss (and Plaintiffs failed\n\nto rebut in their opposition brief), \u201c[t]he referenced adjustment shows, at most, that FTAI had\n\n$244.353 million in gains from asset sales that it did not attribute to operating activities.\u201d (MTD\n\nat 17 (citing Ex. V, ASC 230-10-45-28); cf. Opp. at 14-18.) Regardless of the \u201ctruth\u201d of Exhibit\n\nV, Plaintiffs cannot plead accounting fraud through \u201cspeculation,\u201d \u201cconclusory allegation[s]\u201d or\n\n\u201cipse dixit.\u201d Harris v. AmTrust Fin. Servs., Inc., 135 F. Supp. 3d 155, 170-72 (S.D.N.Y. 2015),\n\naff\u2019d, 649 F. App\u2019x 7 (2d Cir. 2016).\n\n CONCLUSION\n\n For the foregoing reasons, the Court should deny Plaintiffs\u2019 motion to strike and reject\n\nPlaintiffs\u2019 alternative plea to disregard Exhibits F, G, H, K, M, P, S, T, U, V, and W.\n\n\n\n\n 18\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 24 of 25\n\n\n\n\nDated: New York, New York Respectfully submitted,\n February 5, 2026\n /s/ Scott D. Musoff\n Scott D. Musoff\n Tansy Woan\n Christopher R. Fredmonski\n SKADDEN, ARPS, SLATE,\n MEAGHER & FLOM LLP\n One Manhattan West\n New York, New York 10001\n (212) 735-3000\n scott.musoff@skadden.com\n tansy.woan@skadden.com\n christopher.fredmonski@skadden.com\n\n Attorneys for Defendants\n FTAI Aviation Ltd., Joseph P. Adams,\n Jr., and Eun (Angela) Nam\n\n\n\n\n 19\n\f Case 1:25-cv-00541-JAV Document 74 Filed 02/05/26 Page 25 of 25\n\n\n\n\n LOCAL RULE 7.1(C) CERTIFICATION\n\n I, Scott D. Musoff, hereby certify that this memorandum of law complies with the word-\n\ncount limitations set forth in Rule 7.1(c) of the Local Rules of the United States District Court\n\nfor the Southern District of New York and Section 5(A) of the Court\u2019s Individual Rules and\n\nPractices in Civil Cases, and contains 6,221 words, exclusive of the caption, table of contents,\n\ntable of authorities, signature blocks, and this certificate.\n\n\n Dated: New York, New York\n February 5, 2026\n /s/ Scott D. Musoff\n Scott D. Musoff\n\n\n\n\n 20\n\f","ocr_status":2,"date_upload":"2026-05-12T04:14:58.826936-07:00","document_number":"74","attachment_number":null,"pacer_doc_id":"127039020371","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Memorandum of Law in Opposition to Motion","acms_document_guid":""}],"date_created":"2026-02-05T15:11:25.344337-08:00","date_modified":"2026-10-15T06:55:48.177760-07:00","date_filed":"2026-02-05","time_filed":"16:19:33","entry_number":74,"recap_sequence_number":"2026-02-05.001","pacer_sequence_number":295,"description":"MEMORANDUM OF LAW in Opposition re: 72 MOTION to Strike Document No. [70, 70-6 - 70-8, 70-11, 70-13, 70-16, 70-19 - 70-23] Declaration of Tansy Woan, Exhibits F, G, H, K, M, P, S, T, U, V, W Attached Thereto. . Document filed by Joseph P. Adams, Jr., FTAI Aviation Ltd., Eun (Angela) Nam..(Musoff, Scott) (Entered: 02/05/2026)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/451254387/","id":451254387,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69558488/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/466092424/","id":466092424,"tags":[],"absolute_url":"/docket/69558488/71/shannahan-v-ftai-aviation-ltd/","date_created":"2026-01-22T17:10:48.162976-08:00","date_modified":"2026-01-22T17:10:48.169690-08:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"71","attachment_number":null,"pacer_doc_id":"127038938245","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Memorandum of Law in Opposition to Motion","acms_document_guid":""}],"date_created":"2026-01-22T17:10:48.138870-08:00","date_modified":"2026-10-15T06:55:47.985676-07:00","date_filed":"2026-01-22","time_filed":"18:58:28","entry_number":71,"recap_sequence_number":"2026-01-22.001","pacer_sequence_number":286,"description":"MEMORANDUM OF LAW in Opposition re: 68 MOTION to Dismiss the Amended Class Action Complaint. . Document filed by Boston Retirement System, City of Hollywood Firefighters Pension Fund..(Christie, James) (Entered: 01/22/2026)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/451254348/","id":451254348,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69558488/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/466092385/","id":466092385,"tags":[],"absolute_url":"/docket/69558488/72/shannahan-v-ftai-aviation-ltd/","date_created":"2026-01-22T17:10:42.821079-08:00","date_modified":"2026-05-14T06:39:28.710921-07:00","sha1":"0309b94539a02eff89f5589608051fdde4bf31e4","page_count":2,"file_size":149115,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.72.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.72.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:25-cv-00541-JAV Document 72 Filed 01/22/26 Page 1 of 2\n\n\n\n\n UNITED STATES DISTRICT COURT\n SOUTHERN DISTRICT OF NEW YORK\n\n\n CITY OF HOLLYWOOD FIREFIGHTERS\u2019\n PENSION FUND and BOSTON\n RETIREMENT SYSTEM, Individually and\n on Behalf of All Others Similarly Situated,\n\n Plaintiffs,\n No. 1:25-cv-00541-JAV\n v.\n\n FTAI AVIATION LTD., JOSEPH P.\n ADAMS, JR., and EUN (ANGELA) NAM,\n\n Defendants.\n\n\n\n\nNOTICE OF LEAD PLAINTIFFS\u2019 MOTION TO STRIKE CERTAIN EXHIBITS FROM\n DEFENDANTS\u2019 MOTION TO DISMISS THE AMENDED CLASS ACTION\n COMPLAINT\n\n PLEASE TAKE NOTICE that, upon the accompanying Memorandum of Law, Court-\n\nappointed Lead Plaintiffs City of Hollywood Firefighters\u2019 Pension Fund and Boston Retirement\n\nSystem (\u201cLead Plaintiffs\u201d) shall move this Court, before the Honorable Jeannette A. Vargas,\n\nUnited Sates District Judge for the Southern District of New York, at the Daniel Patrick Moynihan\n\nUnited States Courthouse, 500 Pearl Street, New York, New York 10007, on a date and time\n\ndesignated by the Court, for an order striking certain exhibits attached to the Declaration of Tansy\n\nWoan (ECF No. 70), which were improperly submitted in support of Defendants\u2019 Motion to\n\nDismiss the Amended Class Action Complaint (ECF No. 68), and for such other and further relief\n\nas the Court may deem just and proper.\n\f Case 1:25-cv-00541-JAV Document 72 Filed 01/22/26 Page 2 of 2\n\n\n\n\n PLEASE TAKE FURTHER NOTICE that, in accordance with Local Rule 6.1(b),\n\nopposition papers to this motion shall be served \u201cwithin 14 days after service of the moving\n\npapers,\u201d and reply papers shall be served \u201cwithin seven days after service of the answering papers.\u201d\n\n\n\nDated: January 22, 2026 Respectfully Submitted,\n\n LABATON KELLER SUCHAROW LLP\n By: /s/ James T. Christie\n Michael P. Canty\n James T. Christie\n 140 Broadway\n New York, New York 10005\n Telephone: 212-907-0700\n Facsimile: 212-818-0477\n mcanty@labaton.com\n jchristie@labaton.com\n\n KESSLER TOPAZ MELTZER\n & CHECK, LLP\n Sharan Nirmul\n Geoffrey C. Jarvis\n Vanessa M. Milan\n 280 King of Prussia Road\n Radnor, PA 19087\n Telephone: (610) 667-7706\n Facsimile: (610) 667-7056\n snirmul@ktmc.com\n gjarvis@ktmc.com\n vmilan@ktmc.com\n\n Counsel for Lead Plaintiffs City of Hollywood\n Firefighters\u2019 Pension Fund and Boston Retirement\n System and Lead Counsel for the Class\n\n KLAUSNER, KAUFMAN, JENSEN &\n LEVINSON\n Robert D. Klausner\n 7080 N.W. 4th Street\n Plantation, Florida 33317\n bob@robertdklausner.com\n\n Additional Counsel for Lead Plaintiff City of\n Hollywood Firefighters\u2019 Pension Fund\n\n\n 2\n\f","ocr_status":2,"date_upload":"2026-05-12T04:14:58.848792-07:00","document_number":"72","attachment_number":null,"pacer_doc_id":"127038938401","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Strike","acms_document_guid":""}],"date_created":"2026-01-22T17:10:42.795710-08:00","date_modified":"2026-10-15T06:55:48.070018-07:00","date_filed":"2026-01-22","time_filed":"19:35:43","entry_number":72,"recap_sequence_number":"2026-01-22.002","pacer_sequence_number":289,"description":"MOTION to Strike Document No. [70, 70-6 - 70-8, 70-11, 70-13, 70-16, 70-19 - 70-23] Declaration of Tansy Woan, Exhibits F, G, H, K, M, P, S, T, U, V, W Attached Thereto. Document filed by Boston Retirement System, City of Hollywood Firefighters Pension Fund..(Christie, James) (Entered: 01/22/2026)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/451254346/","id":451254346,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69558488/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/466092383/","id":466092383,"tags":[],"absolute_url":"/docket/69558488/73/shannahan-v-ftai-aviation-ltd/","date_created":"2026-01-22T17:10:42.519412-08:00","date_modified":"2026-05-14T06:39:34.897744-07:00","sha1":"3f81bd99188eae47e89debe1ac961a5c7d41efb0","page_count":9,"file_size":238078,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.73.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.73.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:25-cv-00541-JAV Document 73 Filed 01/22/26 Page 1 of 9\n\n\n\n\n UNITED STATES DISTRICT COURT\n SOUTHERN DISTRICT OF NEW YORK\n\n\nCITY OF HOLLYWOOD FIREFIGHTERS\u2019\nPENSION FUND and BOSTON\nRETIREMENT SYSTEM, Individually and\non Behalf of All Others Similarly Situated,\n No. 1:25-cv-00541-JAV\n Plaintiffs,\n\n v.\n ORAL ARGUMENT REQUESTED\nFTAI AVIATION LTD., JOSEPH P.\nADAMS, JR., and EUN (ANGELA) NAM,\n\n Defendants.\n\n\n\n\n LEAD PLAINTIFFS\u2019 MEMORANDUM OF LAW IN SUPPORT OF LEAD\n PLAINTIFFS\u2019 MOTION TO STRIKE CERTAIN EXHIBITS FROM DEFENDANTS\u2019\n MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT\n\f Case 1:25-cv-00541-JAV Document 73 Filed 01/22/26 Page 2 of 9\n\n\n\n\n Lead Plaintiffs City of Hollywood Firefighters\u2019 Pension Fund and Boston Retirement\n\nSystem (collectively, \u201cLead Plaintiffs\u201d) respectfully submit this memorandum of law in support\n\nof Lead Plaintiffs\u2019 motion to strike certain exhibits from Defendants\u2019 1 Motion to Dismiss 2 the\n\nAmended Class Action Complaint (the \u201cComplaint,\u201d ECF No. 64), filed concurrently herewith. 3\n\nI. INTRODUCTION\n\n It is well-established in the Second Circuit that during the motion to dismiss stage, the court\n\nmust \u201caccept[] all factual allegations in the complaint and draw[] all reasonable inferences in the\n\nplaintiff's favor.\u201d ATSI Commc\u2019ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).\n\nHowever, in a transparent attempt to contradict the Complaint\u2019s well-pled factual allegations and\n\ncreate their own counter-narrative, Defendants attached 23 extrinsic exhibits\u2014selectively\n\nexcerpted and collectively spanning more pages than the Complaint itself\u2014to their MTD. See\n\nDecl. of Tansy Woan, Exs. A-W (ECF No. 70-1 through 70-23).\n\n Through these exhibits, Defendants assert an alternative set of facts consisting of irrelevant,\n\nunsubstantiated, and contradictory information contained in earnings call transcripts, FTAI\u2019s\n\n\n\n\n1\n Defendants are FTAI Aviation Ltd. (\u201cFTAI\u201d or the \u201cCompany\u201d), Joseph P. Adams, Jr.\n(\u201cAdams\u201d), and Eun (Angela) Nam (\u201cNam\u201d) (together with FTAI, \u201cDefendants\u201d).\n2\n \u201cMTD\u201d refers to the Memorandum of Law in Support of Defendants\u2019 Motion to Dismiss (ECF\nNo. 69). Citations to \u201c\u00b6\u201d or \u201c\u00b6\u00b6\u201d refer to paragraphs in the Complaint. Unless otherwise noted, all\nemphasis has been added and internal quotation marks omitted throughout.\n3\n Rather than file a request for judicial notice, Defendants introduced the Exhibits through a\ndeclaration in support of their MTD. Defendants\u2019 gamesmanship leaves Lead Plaintiffs with only\ntwo paths\u2014(i) waiving Lead Plaintiffs\u2019 challenge to Defendants\u2019 exhibits or (ii) filing a motion to\nstrike to contest Defendants\u2019 exhibits. Therefore, Lead Plaintiffs opted to file the instant motion.\nIndeed, under similar circumstances, courts within this District have construed similar motions as\n\u201can invitation by the plaintiff to consider whether the [exhibits] as submitted by the defendant may\nproperly be relied upon.\u201d Burns v. Bank of Am., 2007 WL 1589437, at *11 (S.D.N.Y. June 4,\n2007) (quoting Monroe v. Bd. of Ed. of Town of Wolcott, Connecticut, 65 F.R.D. 641, 645 (D.\nConn. 1975)); see Bazzelle v. Novocure Ltd., 2025 WL 843668, at *6\u20137 (S.D.N.Y. Mar. 18, 2025);\nIn re AppHarvest Sec. Litig., 684 F. Supp. 3d 201, 238\u201340 (S.D.N.Y. 2023).\n\f Case 1:25-cv-00541-JAV Document 73 Filed 01/22/26 Page 3 of 9\n\n\n\n\nfilings with the Securities and Exchange Commission (the \u201cSEC\u201d), and a self-serving chart that\n\npurports to contain FTAI\u2019s stock prices. It is improper for Defendants to ask the Court to consider\n\nthese materials at the motion to dismiss stage for the truth of the matter asserted therein. At bottom,\n\nthe introduction of Defendants\u2019 MTD exhibits impermissibly attempts to establish competing facts\n\nand inferences inconsistent with the well-pled allegations of the Complaint, which must be\n\naccepted as true at this stage. See Section III, infra.\n\n Accordingly, Defendants\u2019 gamesmanship should be rejected, and their competing factual\n\ncontentions and exhibits should be either (i) disregarded or (ii) considered only to determine what\n\nthe documents stated\u2014not for the truth of the matter asserted therein.\n\nII. LEGAL STANDARD\n\n On a motion to dismiss, Defendants may not introduce facts not alleged in the complaint\n\nunless such facts fall into specific exceptions. Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007).\n\nA motion to dismiss may draw only on the complaint\u2019s: (i) allegations, (ii) documents attached or\n\nincorporated by reference, or (iii) documents \u201cupon which [the complaint] solely relies and which\n\n[are] integral to the complaint.\u201d Id.; Safran Elecs. & Defense SAS v. iXblue SAS, 789 F. App\u2019x\n\n266, 270 (2d Cir. 2019) (same).\n\n At any rate, even in such a situation \u201cwhere public records [] are integral to a fraud\n\ncomplaint [but] are not attached to it, the court . . . is permitted to take judicial notice of those\n\nrecords\u201d \u201conly to determine what the documents stated,\u201d and \u201cnot to prove the truth of their\n\ncontents.\u201d Roth, 489 F.3d at 509; In re Hebron Tech. Co., Ltd. Sec. Litig., 2021 WL 4341500, at\n\n*1 n. 2 (S.D.N.Y. Sept. 22, 2021) (with respect to matters of public record, considering them \u201c\u2018not\n\nfor the truth of the matters asserted therein,\u2019 but only \u2018for the fact that the statements were made\u2019\u201d);\n\nSEC v. Fiore, 416 F. Supp. 3d 306, 328\u201329 (S.D.N.Y. 2019) (same); Sharette v. Credit Suisse\n\nInt\u2019l., 127 F. Supp. 3d 60, 75 (S.D.N.Y. 2015) (same).\n\n\n 2\n\f Case 1:25-cv-00541-JAV Document 73 Filed 01/22/26 Page 4 of 9\n\n\n\n\n Moreover, even when courts take judicial notice of documents attached to a motion to\n\ndismiss, they should \u201ccontinue[] to draw all reasonable inferences in the [plaintiff\u2019s] favor.\u201d SEC\n\nv. Ripple Labs, Inc., 2022 WL 762966, at *1 n.1 (S.D.N.Y. Mar. 11, 2022). \u201cOutside of these\n\ncategories, it is generally not appropriate for a court, on a motion to dismiss, to consider\n\ninformation or documents extrinsic to the complaint.\u201d City of Austin Police Ret. Sys. v. Kinross\n\nGold Corp., 957 F. Supp. 2d 277, 287 (S.D.N.Y. 2013).\n\nIII. ARGUMENT\n\n In support of their MTD, Defendants rely on a number of exhibits to create an alternative\n\nversion of the facts alleged in the Complaint. Specifically, Defendants seek judicial notice of\n\nfour categories of materials: (i) earnings call transcripts, (ii) certain SEC filings, (iii) FTAI\u2019s\n\nstock price chart, and (iv) certain accounting rules. Because Defendants impermissibly proffer\n\nthe exhibits solely to dispute facts of the Complaint and ask the Court to accept those facts as\n\ntrue, the below exhibits should be either (i) disregarded or (ii) considered only to determine what\n\nthe documents stated\u2014not for the truth of the matter asserted therein.\n\n A. The Court Should Not Consider Certain Earnings Call Transcripts\u2014\n Exhibits F, G, P\u2014Relied Upon by Defendants\u2019 MTD, For the Truth of the\n Matter Asserted Therein\n\n To the extent Defendants introduced Exhibits F (Q4 2022 Earnings Call Transcript), G (Q3\n\n2022 Earnings Call Transcript), P (Q2 2022 Earnings Call Transcript) for the truth of the matter\n\nasserted therein, the Court should not consider these exhibits. In re Bausch & Lomb, Inc. Sec.\n\nLitig., 2003 WL 23101782, at *17 (W.D.N.Y. Mar. 28, 2003) (declining to consider earnings call\n\ntranscript \u201cnot attached to the complaint or incorporated by reference\u201d). The earnings call\n\ntranscripts merely mention that the Company reported positive financial results (MTD at 8), which\n\nDefendants argue should somehow exonerate them of securities fraud, or that the modules have\n\n\u201cdifferent useful life\u201d (MTD at 5). The only purpose of introducing these earnings call transcripts\n\n\n 3\n\f Case 1:25-cv-00541-JAV Document 73 Filed 01/22/26 Page 5 of 9\n\n\n\n\nis to dispute the Complaint\u2019s well-pled allegations that Defendants engaged in undisclosed,\n\ncomplex accounting improprieties. Accordingly, the Court should not consider Exhibits F, G, and\n\nP for the truth of the matter asserted therein.\n\n B. The Court Should Not Consider Certain SEC Filings\u2014Exhibits H, S, T, U\u2014\n Relied Upon by Defendants\u2019 MTD, For the Truth of the Matter Asserted\n Therein\n\n Defendants introduced Exhibits H (2023 Form 10-K), T (2015 Form 10-K), U (July 23,\n\n2024 Form 8-K) to support their arguments that FTAI has disclosed its accounting practices around\n\nits depreciation policy and adequately cautioned the market concerning the uncertainty of the\n\nCompany\u2019s financial results. See MTD at 12, 13, 14, 21. That is also improper. Leaving aside the\n\nfact that the Complaint did not cite or rely on Exhibit H and that Exhibit T was disseminated\n\noutside of the Class Period, the content of the exhibits directly contradicts the Complaint\u2019s\n\nallegations that Defendants engaged in a fraudulent accounting scheme, where among other things,\n\nthey manipulated the depreciation of the modules, inflated the value of the modules, and\n\nfraudulently transferred the modules between Aerospace Products and Aviation Leasing to\n\nartificially inflate the Company\u2019s financial results. See \u00b6\u00b690\u201398, 99\u2013104. Despite the well-pled\n\nallegations, Defendants cite Exhibit U to argue that \u201cPlaintiffs do not allege any facts that\n\ncontradict FTAI\u2019s repeated attributions of its Aerospace Products Adjusted EBITDA growth to\n\nincreasing customer demand.\u201d MTD at 14. Accordingly, the Court should not accept these\n\nstatements for the truth of the matter asserted therein. See Staehr v. Hartford Fin. Servs. Grp., Inc.,\n\n547 F.3d 406, 424-25 (2d Cir. 2008) (considering SEC filings only for the fact that they \u201ccontained\n\ncertain information\u201d and not \u201cfor the truth of the matter asserted\u201d).\n\n Additionally, Defendants improperly introduced Exhibit S (February 20, 2025 Form 8-K)\n\nto assert that FTAI\u2019s \u201cAudit Committee had determined that the short sellers\u2019 allegations were\n\n\u2018without merit.\u2019\u201d MTD at 9\u201310, 15. First, Defendants seek to use the exhibit to directly contradict\n\n\n 4\n\f Case 1:25-cv-00541-JAV Document 73 Filed 01/22/26 Page 6 of 9\n\n\n\n\nthe Complaint\u2019s allegations that the Company\u2019s accounting practices surrounding its Aerospace\n\nProducts and Aviation Leasing were improper. Second, absent any actual reports published by the\n\nAudit Committee and without engaging in further discovery, Defendants\u2019 argument lacks a factual\n\nbasis to rely on the Audit Committee\u2019s findings and to conclude that the Muddy Waters Report\n\nand Snowcap Report were \u201cwithout merit.\u201d Third, Exhibit S postdates the Class Period, rendering\n\nit irrelevant to investors already damaged by Defendants\u2019 fraud. Accordingly, the Court should not\n\nconsider Exhibit S for the truth of the matter asserted therein. See Lateral Recovery, LLC v. Cap.\n\nMerch. Servs., LLC, 632 F. Supp. 3d 402, 436 (S.D.N.Y. 2022) (\u201cWhen a court takes judicial\n\nnotice of a document on a motion to dismiss, it should generally do so only to determine what\n\nstatements the documents contain not for the truth of the matters asserted.\u201d).\n\n C. The Court Should Not Consider FTAI Historical Stock Price Chart\u2014Exhibit\n W\u2014Prepared by Defendants\n\n Defendants\u2019 Exhibit W (FTAI Historical Stock Price Chart) is improper and should be\n\ndisregarded. Specifically, Exhibit W, which purports to show that \u201cFTAI\u2019s stock price was trading\n\nhigher than it was immediately before Muddy Waters published its meritless report\u201d (MTD at 10),\n\nincorporates information that is long past the end of the Class Period, rendering it irrelevant for\n\nthe Court\u2019s disposition of Defendants\u2019 MTD. Acticon AG v. China N. E. Petroleum Holdings Ltd.,\n\n692 F.3d 34, 41 (2d Cir. 2012) (finding that an increase in share price shortly after the close of the\n\nclass period only raises an issue of fact not resolvable at the motion-to-dismiss stage). Accordingly,\n\nthe Court should not consider Exhibit W.\n\n D. The Court Should Not Consider Certain Accounting Standards\u2014Exhibits K,\n M, V\u2014Relied Upon by Defendants\u2019 MTD, For the Truth of the Matter\n Asserted Therein\n\n Finally, to the extent that Defendants introduced Exhibits K (FASB ASC Topic 330), M\n\n(FASB ASC Topic 606), and V (FASB ASC Topic 230) for the sole purpose to establish that (i)\n\n\n\n 5\n\f Case 1:25-cv-00541-JAV Document 73 Filed 01/22/26 Page 7 of 9\n\n\n\n\nthe Company had properly calculated the fair value and book value of its inventory (see MTD at\n\n13) and (ii) the Company\u2019s financials were accurate and not misleading, thereby rebutting well-\n\npled allegations concerning Defendants\u2019 accounting scheme that improperly inflated the\n\nCompany\u2019s financial metrics, the Court should not consider Exhibits K, M, and V \u201cfor the truth of\n\nthe matters asserted therein.\u201d In re Hebron Tech., 2021 WL 4341500, at *1 n. 2.\n\nIV. CONCLUSION\n\n For the foregoing reasons, to the extent Defendants seek to establish the truth of the facts\n\nasserted therein, the Court should decline to consider Exhibits F, G, H, K, M, P, S, T, U, V, and\n\nW.\n\nDated: January 22, 2026 Respectfully Submitted,\n\n LABATON KELLER SUCHAROW LLP\n\n By: /s/ James T. Christie\n Michael P. Canty\n James T. Christie\n 140 Broadway\n New York, New York 10005\n Telephone: 212-907-0700\n Facsimile: 212-818-0477\n mcanty@labaton.com\n jchristie@labaton.com\n\n KESSLER TOPAZ MELTZER\n & CHECK, LLP\n Sharan Nirmul\n Geoffrey C. Jarvis\n Vanessa M. Milan\n 280 King of Prussia Road\n Radnor, PA 19087\n Telephone: (610) 667-7706\n Facsimile: (610) 667-7056\n snirmul@ktmc.com\n gjarvis@ktmc.com\n vmilan@ktmc.com\n\n Counsel for Lead Plaintiffs City of Hollywood\n Firefighters\u2019 Pension Fund and Boston Retirement\n System and Lead Counsel for the Class\n\n\n 6\n\fCase 1:25-cv-00541-JAV Document 73 Filed 01/22/26 Page 8 of 9\n\n\n\n\n KLAUSNER, KAUFMAN, JENSEN &\n LEVINSON\n Robert D. Klausner\n 7080 N.W. 4th Street\n Plantation, Florida 33317\n bob@robertdklausner.com\n\n Additional Counsel for Lead Plaintiff City of\n Hollywood Firefighters\u2019 Pension Fund\n\n\n\n\n 7\n\f Case 1:25-cv-00541-JAV Document 73 Filed 01/22/26 Page 9 of 9\n\n\n\n\n LOCAL RULE 7.1(C) CERTIFICATION\n\n I, James T. Christie, hereby certify that this memorandum of law complies with the word-\n\ncount limitations set forth in Rule 7.1(c) of the Local Rules of the United States District Court for\n\nthe Southern District of New York and Section 5(c) of the Court\u2019s Individual Rules and Practices\n\nin Civil Cases, and contains 1,837 words, exclusive of the caption, table of contents, table of\n\nauthorities, signature blocks, and this certificate.\n\n\n\nDATED: January 22, 2026\n New York, New York\n\n\n /s/ James T. Christie\n James T. Christie\n\n\n\n\n 8\n\f","ocr_status":1,"date_upload":"2026-05-12T04:15:00.984488-07:00","document_number":"73","attachment_number":null,"pacer_doc_id":"127038938411","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Memorandum of Law in Support of Motion","acms_document_guid":""}],"date_created":"2026-01-22T17:10:42.494655-08:00","date_modified":"2026-10-15T06:55:48.148458-07:00","date_filed":"2026-01-22","time_filed":"19:39:24","entry_number":73,"recap_sequence_number":"2026-01-22.003","pacer_sequence_number":292,"description":"MEMORANDUM OF LAW in Support re: 72 MOTION to Strike Document No. [70, 70-6 - 70-8, 70-11, 70-13, 70-16, 70-19 - 70-23] Declaration of Tansy Woan, Exhibits F, G, H, K, M, P, S, T, U, V, W Attached Thereto. . 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Adams, Jr., FTAI Aviation Ltd., Eun (Angela) Nam..(Musoff, Scott) (Entered: 11/20/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/444880801/","id":444880801,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69558488/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/459560532/","id":459560532,"tags":[],"absolute_url":"/docket/69558488/70/shannahan-v-ftai-aviation-ltd/","date_created":"2025-11-20T19:10:03.252018-08:00","date_modified":"2026-05-14T07:09:27.505046-07:00","sha1":"9c23e16c93b22e7dc3b4188b3ec95ccdab81a026","page_count":3,"file_size":256118,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:25-cv-00541-JAV Document 70 Filed 11/20/25 Page 1 of 3\n\n\n\n\nUNITED STATES DISTRICT COURT\nSOUTHERN DISTRICT OF NEW YORK\n-----------------------------------------x\nCITY OF HOLLYWOOD FIREFIGHTERS\u2019 PENSION :\nFUND and BOSTON RETIREMENT SYSTEM, :\nIndividually and on Behalf of All Others Similarly Situated, :\n :\n Plaintiffs, : 25-CV-0541 (JAV)\n :\n -v- :\n :\nFTAI AVIATION LTD., JOSEPH P. ADAMS, JR., and :\nEUN (ANGELA) NAM, :\n :\n Defendants. :\n-----------------------------------------x\n\n DECLARATION OF TANSY WOAN IN SUPPORT OF DEFENDANTS\u2019\n MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT\n\n I, Tansy Woan, declare under penalty of perjury pursuant to 28 U.S.C. \u00a7 1746 that the\n\nfollowing is true and correct:\n\n 1. I am admitted to the bars of the State of New York and this Court. I am a member\n\nof the firm Skadden, Arps, Slate, Meagher & Flom LLP, attorneys for Defendants FTAI Aviation\n\nLtd. (\u201cFTAI\u201d), Joseph P. Adams, Jr., and Eun (Angela) Nam (\u201cDefendants\u201d) in the above-\n\ncaptioned action.\n\n 2. I respectfully submit this declaration in support of Defendants\u2019 Motion to Dismiss\n\nthe Amended Class Action Complaint, filed concurrently herewith, and transmit true and correct\n\ncopies of the following documents, to which reference is made in Defendants\u2019 accompanying\n\nMemorandum of Law:\n\n Exhibit Description\n\n A Muddy Waters Research, FTAI Aviation (January 15, 2025)\n\n B SnowCap, FTAI Aviation (Nasdaq:FTAI) (January 29, 2025)\n\f Case 1:25-cv-00541-JAV Document 70 Filed 11/20/25 Page 2 of 3\n\n\n\n\nExhibit Description\n\n C FTAI Q2 2024 Earnings Call Transcript (July 24, 2024)\n\n FTAI Annual Report for the Fiscal Year Ended December 31, 2024, filed on Form 10-K\n D\n with the SEC (March 3, 2025)\n\n E FTAI Q3 2024 Earnings Call Transcript (October 31, 2024)\n\n F FTAI Q4 2022 Earnings Call Transcript (February 24, 2023)\n\n G FTAI Q3 2022 Earnings Call Transcript (October 28, 2022)\n\n FTAI Annual Report for the Fiscal Year Ended December 31, 2023, filed on Form 10-K\n H\n with the SEC (February 26, 2024)\n\n Financial Accounting Standards Board, Accounting Standards Codification Topic 360,\n I\n Property, Plant, and Equipment, available at https://asc.fasb.org/360/showallinonepage\n\n FTAI Q3 2024 Quarterly Report for the Period Ended September 30, 2024, filed on\n J\n Form 10-Q with the SEC (November 12, 2024)\n\n Financial Accounting Standards Board, Accounting Standards Codification Topic 330,\n K\n Inventory, available at https://asc.fasb.org/330/showallinonepage\n\n FTAI Q2 2024 Quarterly Report for the Period Ended June 30, 2024, filed on Form 10-Q\n L\n with the SEC (August 9, 2024)\n\n Financial Accounting Standards Board, Accounting Standards Codification Topic 606,\n M Revenue from Contracts with Customers, available at\n https://asc.fasb.org/606/showallinonepage\n\n FTAI Letter to the Securities and Exchange Commission\u2019s Division of Corporate\n N Finance (November 27, 2024), available at\n https://www.sec.gov/Archives/edgar/data/1590364/000114036124047965/filename1.htm\n\n FTAI Letter to the Securities and Exchange Commission\u2019s Division of Corporate\n O Finance (January 3, 2025), available at\n https://www.sec.gov/Archives/edgar/data/1590364/000114036125000197/filename1.htm\n\n\n\n\n 2\n\f Case 1:25-cv-00541-JAV Document 70 Filed 11/20/25 Page 3 of 3\n\n\n\n\n Exhibit Description\n\n P FTAI Q2 2022 Earnings Call Transcript (July 28, 2022)\n\n FTAI Annual Report for the Fiscal Year Ended December 31, 2022, filed on Form 10-K\n Q\n with the SEC (February 27, 2023)\n\n R FTAI Press Release filed with Form 8-K with the SEC (January 21, 2025)\n\n S FTAI Press Release filed with Form 8-K with the SEC (February 20, 2025)\n\n FTAI Annual Report for the Fiscal Year Ended December 31, 2015, filed on Form 10-K\n T\n with the SEC (March 10, 2016)\n\n U FTAI Press Release filed with Form 8-K with the SEC (July 24, 2024)\n\n Financial Accounting Standards Board, Accounting Standards Codification Topic 230,\n V\n Statement of Cash Flows, available at https://asc.fasb.org/230/showallinonepage\n\n W FTAI Historical Stock Price Chart (July 23, 2024 to September 18, 2025)\n\n\nExecuted on November 20, 2025, in New York, New York.\n\n\n\n\n Tansy Woan\n\n\n\n\n 3\n\f","ocr_status":2,"date_upload":"2026-05-12T04:15:04.101277-07:00","document_number":"70","attachment_number":null,"pacer_doc_id":"127038602944","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Declaration in Support of Motion","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874401/","id":478874401,"tags":[],"absolute_url":"/docket/69558488/70/1/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.368758-07:00","date_modified":"2026-05-14T07:12:17.566735-07:00","sha1":"49f4f05d9835e72fbe56a00e3dd54f583a646f9c","page_count":65,"file_size":4709629,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.1.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.1.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 1 of 65\n\n\n\n\n Exhibit A\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 2 of 65\n\n\n\n\nFTAI Aviation\nFinancial Engineering and Accounting Manipulation in the MRO Business\n\n\nJanuary 15, 2025\n\nMUDDY WATERS RESEARCH 1\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 3 of 65\nAs of the time and date of this report, Muddy Waters (defined below) is short the securities of, or derivatives linked to, FTAI Aviation, Ltd. (the \u201cCovered Issuer\u201d). Upon\npublication, we intend to begin covering a substantial majority \u2013 possibly all \u2013 of our short positions. As we elaborate below, our risk reduction is not a reflection of a lack\nof conviction in our opinions or the facts presented; rather, it has to do with managing risk in a manner that is prudent for a fiduciary of our investors\u2019 money.\n\n\nThis report has been published by Muddy Waters, LLC (\u201cMuddy Waters Research\u201d or \u201cwe\u201d or \u201cus\u201d). Muddy Waters Research is under common control and affiliated with Muddy Waters Capital LLC (\u201cMuddy Waters Capital\u201d). Muddy Waters Research is an\nonline research publication that produces due diligence-based reports on publicly traded securities, and Muddy Waters Capital LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. This presentation is the property of\nMuddy Waters Research. Muddy Waters Research and Muddy Waters Capital, collectively their respective affiliates and related parties, including, but not limited to any principals, officers, directors, employees, members, clients, investors, consultants and\nagents, are referred herein to as \u201cMuddy Waters\u201d.\nMuddy Waters will continue transacting in the securities of Covered Issuer for an indefinite period after this report on the Covered Issuer, and we may be net short, net long or flat positions in the Covered Issuer\u2019s securities after the initial publication of this\nreport, regardless of our initial position and views herein.\nWe are a \u201cfor profit\u201d journalistic organization with a non-traditional revenue model \u2013 rather than accepting advertising money or subscriptions, we finance our journalism through taking positions in the securities of companies on which we report. This revenue\nmodel enables us to report in great depth on a limited number of investigations, and also entails our taking significant financial risk on behalf of ourselves and our clients. In order to manage risk, we must close open positions as we deem prudent. We do not\nprovide \u201cprice targets\u201d, although we may express our opinion of what the security is worth. An opinion of the value of a security differs from a price target in that we do not purport to have any insight as to how the market as a whole might value a security \u2013\nwe can only speak for how we, ourselves, view its value. We therefore do not hold a position until it reaches a certain price target, nor do we hold positions until they reach the price at which we have expressed a valuation opinion. There are numerous factors\nthat enter into investment decisions aside from opinions of the value of the security, including without limitation, the borrow cost of a shorted security, the potential for a \u201cshort squeeze\u201d, prudent risk sizing relative to capital and volatility, reduced information\nasymmetry, the opportunity cost of capital, client expectations, the ability to hedge market risk, our perception of the efficacy of market regulators and gatekeepers, our perception of the resource imbalance between us and Covered Issuers, and our moods\nand gut feelings. Therefore, you should assume that upon publication of this report, we will, or have begun to, close a substantial portion \u2013 possibly the entirety \u2013 of our positions in the Covered Issuer\u2019s securities.\nWe are not providing you with a recommendation to buy or sell securities of the Covered Issuer. We are articulating our reasons at the time of publication we have positions in the securities of the Covered Issuer.\nWe have no duty or obligation to update this report or update you on the size or direction of any position we hold in a Covered Issuer. We do not provide investment advice to any person, unless our affiliate has entered into an investment adviser-client\nrelationship with that person in writing.\nAll information and opinions set forth herein are for informational purposes only. Under no circumstances should any information or opinions herein be construed as investment advice, as an offer to sell, or the solicitation of an offer to buy any securities or\nother financial instruments.\nThis report is opinion journalism. We are providing our journalistic opinions about issues of concern to the general public. The opinions, information, and reports set forth herein are solely attributable to Muddy Waters Research. Before making any investment\ndecision, you should do your own research and due diligence before making any investment decision with respect to securities of or derivatives linked to the Covered Issuer.\nThis report represents the views of Muddy Waters Research only and is based on publicly available information. To the best of our knowledge, all information contained herein is accurate and reliable and has been obtained from publicly available sources\nthat we believe to be accurate and reliable. The information presented herein is \u201cas is,\u201d without warranty of any kind, whether express or implied. This report contains a large measure of analysis and opinion. All expressions of opinion are subject to change\nwithout notice.\n\nBy viewing and accessing this report, you further agree to the following terms of use:\n\nMuddy Waters shall not be liable for any claims, losses, costs, or damages of any kind, including direct, indirect, punitive, exemplary, incidental, special or consequential damages, arising out of or in any way connected with this report. This limitation of liability\napplies regardless of any negligence or gross negligence of Muddy Waters. You accept all risks in relying on the information and opinions in this report.\n\nYou agree that any dispute between you and Muddy Waters arising from or related to this presentation shall be governed by the laws of the State of Texas, without regard to any conflict of law provisions. You knowingly and independently agree to submit to\nthe personal and exclusive jurisdiction of the state and federal courts located in Austin, Texas and waive your right to any other jurisdiction or applicable law, given that Muddy Waters are based in Austin, Texas.\n\nThe failure of Muddy Waters to exercise or enforce any right or provision herein shall not constitute a waiver of such right or provision. If any provision of these terms of use is found by a court of competent jurisdiction to be invalid, the parties nevertheless\nagree that the court should endeavor to give effect to the parties\u2019 intentions as reflected in the other provisions set forth herein, in particular as to this governing law and jurisdiction provision.\n\nYou agree and understand that, by the time you read this report, we may be covering or have already covered (i.e., bought back) our short position, and we are unlikely to increase our short positions unless it is in our financial interest to do so. You should\nnot make any investment decision based your interpreted view of our positioning in the Covered Issuer\u2019s securities.\n\nYou agree that regardless of any statute or law to the contrary, any claim or cause of action arising out of or related to this presentation must be filed within one (1) year after the occurrence of the alleged harm that gave rise to such claim or cause of action,\nor such claim or cause of action be forever barred.\n\n\n\n\n MUDDY WATERS RESEARCH 2\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 4 of 65\n\n\n Table of Contents\n\n Introduction \u2013 How FTAI Materially Manipulates Its Financials 4\n\n A Substantial Portion of Aerospace Products\u2019 Revenue Is Whole Engine Sales 12\n\n New Cash Flow Statement Disclosure Supports our View of the Materiality of Whole Engine Sales 22\n\n FTAI Depreciates Engine in Leasing to Exaggerate Profits in its MRO Business 28\n\n FTAI Could Be Stuffing the Channel 38\n\n EBITDA Margins Are Falling Even Faster Than Reported Numbers Suggest 48\n\n Aerospace Products Is Capital Intensive 54\n\n Appendix 59\n\n\n\nMUDDY WATERS RESEARCH 3\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 5 of 65\n\n\n\n\n How FTAI Materially\n Manipulates Its Financials\n We believe:\n \u2022 FTAI is exaggerating the size of its aftermarket aerospace business\n \u2022 Misleading investors by presenting whole engine sales as individual module\n sales\n \u2022 Inflating Aerospace Products\u2019 EBITDA margins by means of over-depreciation in\n the leasing segment\n \u2022 Engaging in channel stuffing\n \u2022 Facing fundamental headwinds\n\nMUDDY WATERS RESEARCH 4\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 6 of 65\n\nFTAI Materially Manipulates Its Financials\n\nMuddy Waters is short FTAI Aviation Ltd. (FTAI US) because its financial reporting is highly misleading. We believe revenue from true maintenance\nand individual off-the-rack module sales are materially lower than reported. FTAI, in our view, is misleading investors by reporting one-time engine\nsales as Maintenance Repair & Overhaul (MRO) revenue in its Aerospace Products (AP) segment. It appears that FTAI\u2019s AP revenue growth story\nis due to trading whole engines (i.e., asset sales). We estimate ~80% of FTAI's Aerospace Products adjusted EBITDA is gains on sale, which we\nbelieve is largely from selling whole engines. The goal of these misrepresentations appears to be to generate a valuation materially greater than\nthat of a leasing business. Fortress sold significant stock in a May 2024 secondary offering on the back of FTAI\u2019s misleading narrative.\n\nFTAI claims that the average Aerospace Products transaction is two modules. 1 We disagree. We think ~70% to 80% of module sales are whole\nengine sales. To exaggerate the size of its MRO business, reportedly FTAI deceptively counts each whole engine sale as a sale of three separate\nmodules. As of Q3 2024, FTAI no longer discloses how many modules it sells per quarter. We believe this omission helps FTAI preserve its\naerospace aftermarket story. Ultimately, in our view, Aerospace Products is simply a dressed-up leasing business. Substantially all leasing\ncompanies trade assets; and, given its inherent cyclicality, engine trading income is highly volatile. We see nothing durable or proprietary about\ntrading engines.\n\nEvidence suggests that FTAI stuffed the channel through questionable aircraft sales in 2023.\n\nOur analysis finds that FTAI\u2019s current EBITDA margin run-rate is not sustainable. FTAI's outlier EBITDA margins appear to be due to an accounting\ngame FTAI plays whereby it depreciates engines in its Leasing segment, even when engines are not on lease (merely when they are ready for\nuse). Then it transfers the depreciated engines to AP Inventory. FTAI\u2019s AP Inventory has been largely comprised of depreciated Leasing\nEquipment, which results in considerable margin outperformance compared to peers. FTAI generates EBITDA margins that are ~10 percentage\npoints higher than peers, including Boeing (~18% EBIT margin) 2 and GE Commercial Engines and Services (~27% EBITDA margin), each of\nwhich have considerably greater scale. This mirage benefits selling insiders.\n1 FTAI Aviation Q1 2024 Earnings Call April 26, 2024. Per FTAI\u2019s CEO: \u201dSo, but on average, the average transaction averages out to two modules per transaction.\u201d 2 FTAI\u2019s Aerospace Products reports minimal\n\nD&A allowing for this comparison.\n\n\nMUDDY WATERS RESEARCH 5\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 7 of 65\n\nApproximately One-Third of Aerospace Product\u2019s YTD 2024 Revenue\nAppears to Really Be Whole Engine Sales \u2013 Not Module Swaps\n MW engaged an industry expert with 20+ years of experience, who is also a former FTAI executive, to canvass the major aerospace\n asset traders to determine the magnitude of FTAI\u2019s whole engine sales. The research findings are below:\n \u2022 FTAI has likely sold ~70 whole engines through the first nine months of 2024, which are counted as three modules per engine, and\n likely account for ~80% of reported module sales (i.e. ~210 reported module sales are actually ~70 whole engines):\n \"FTAI is roughly selling 22 CFM[-56] engines (i.e., Narrowbody engines) a quarter. They've sold 82 to date [2024], and they still\n have some closing before the end of the year... I called all the major [traders], all the big guys... I'm averaging around that 22 a\n quarter.\"1\n \u2022 FTAI is currently actively marketing 10-12 whole engines:\n \"It looks like they\u2019re gonna sell around 90 for the year [2024], maybe a couple more than that...They\u2019re marketing a whole bunch\n right now to try to get some year-end sales in\u2026I know right now they are trying to sell 10 or 12 engines\u2026they could get [to]100\n engines this year.\" 1\n \u2022 FTAI apparently did not perform significant repairs or upgrades of these engines:\n \"They've not really had a lot of touch work done by FTAI...\u201d1\n \u2022 Whole engine sales are getting done as exchanges or swaps:\n \"They\u2019re doing a lot of the deals as exchanges, which makes sense. They\u2019re selling a good engine and taking in an\n unserviceable engine\u2026They\u2019re selling three modules and taking in three modules.\" 1\n \"I\u2019ve got the 10-Q right now\u2026they\u2019ve got one narrowbody [engine] sale all year\u2026 and actually the [true] number is closer to the\n purchase numbers...they could be recording the [engine] exchanges as purchases (ie. Engine being received in the exchange is\n disclosed as a purchase).\" 1\n1 Consultant A.\n\n\n\n\nMUDDY WATERS RESEARCH 6\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 8 of 65\n ~80% of Aerospace Products EBITDA Is Gain on Sale Which\n Supports Our View of the Materiality of Whole Engine Sales\n\n FTAI\u2019s new Q3 2024 disclosure, discussed infra, implicitly acknowledges its AP segment (the MRO) performs limited\n repair and maintenance work on the engine assets sold. 1\n\n After normalizing for Leasing gain on sale, ~80% of Aerospace Product\u2019s Adj. EBITDA is gain on sale.\n\n\n Percentage of GAAP Gain on Sale Derived from AP Adj. EBITDA Q1 2024 Q2 2024 Q3 2024 YTD 2024\n\n Total gains on sale, per cash flow statement 58.1 88.0 98.3 244\n\n Less: gains on sale booked to Leasing, per FTAI\u2019s supplement (6.7) (13.5) (14.2) (34)\n\n Total AP gain on sale 51.4 74.5 84.1 210\n\n Total adj EBITDA, AP, as reported 70.3 91.2 101.8 263\n\n AP gain on sale / AP reported adj EBITDA 73% 82% 83% 80%\n Source: Company filings, MW. Units: $ in millions, unless otherwise noted. Note: Module sales could also generate gains on sale, per GAAP accounting.\n\n\n\n1 See slides 22 to 27 for further detail.\n\n\n\n\nMUDDY WATERS RESEARCH 7\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 9 of 65\n\nFTAI is Deliberately Inflating the Profitability of Aerospace Products\n\nFTAI depreciates engines in Leasing to boost Aerospace Products\u2019 margin. High depreciation rates in the Leasing segment help AP report lower\nCOGS. Because AP realizes lower COGS, it reports a materially higher gross margin than it would otherwise. We believe this explains the significant\ndifference in EBITDA margin between FTAI and its peers. A major FTAI MRO competitor remarked about FTAI\u2019s margin profile:\n\n \u201cSomething to think about when you\u2019re studying them is, kind of, why are their margins so high, and my theory is that their\n [Aerospace Products] asset base is at [the] depreciated book value and that\u2019s the cost that gets baked into their margins.\u201d 1\n\n Adj. EBITDA Margins \u2013 FTAI vs Peers\n\n Heico ~26%\n SARO Engine Services ~13%\n Lufthansa Technik1 18%\n MTU Aero2 17%\n GE Commercial Engines & Services3 27%\n Boeing Global Services4 18%\n Average ~20%\n FTAI AP, Adj EBITDA, YTD-2024 ~36%\n FTAI AP, Adj. EBITDA margin commentary 30% - 40%\n Source: Company filings except as noted\n\n 1 MRO Competitor.\n\n Notes to table: 1 Excludes intercompany revenue. 2 2024E EBITDA margin per S&PCapIQ. 3 2023 GE CES figures =(5600 CES op profit + ~800 D&A) / 23,900 = 27% EBITDA margin. 4 EBIT\n margin \u2013 FTAI\u2019s Aerospace Products reports minimal D&A allowing for this comparison. Per sell side re Boeing Global Services: \u201cT he engineering modification and maintenance business acts as an\n internal MRO shop servicing Boeing and other aircraft needs. We estimate that this represents about 37.5% of total BGS revenu e.\u201d\n\n\n MUDDY WATERS RESEARCH 8\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 10 of 65\n\nFTAI Appears to Have Stuffed the Channel to Inflate YE 2023 Numbers\n\n \u2022 In the final days of December 2023, FTAI sold two on-lease in-service aircraft, as described below by Cirium for a\n promissory note to an intermediary.\n \u2022 Title seems to have been conveyed to the intermediary, Aerolease. But Aerolease did not pay FTAI for the assets\n (conveying title was likely a prerequisite to booking the related revenue). 1\n \u2022 Aerolease reportedly also did not novate the leases per the lessee. 1\n \u2022 We understand Aerolease may have received a commission for acting as a \u201cplaceholder\u201d buyer. 1\n \u2022 The assets were reportedly transferred to Aerolease for ~$16m but could have been worth ~$20m, potentially\n leaving some room for an Aerolease commission.1\n \u2022 FTAI received a promissory note for this sale (FTAI had a promissory note balance of $102.3m at year-end 2023).2\n \u2022 Looking for a bonafide buyer, FTAI marketed the assets in 2024. 1\n \u2022 When the assets were sold nearly seven months later to a bonafide buyer, FTAI received payment on the promissory\n note. At the same time, the leases with the lessee was novated to the buyer. 1\n \u2022 Given the June 2024 transaction was not disclosed in FTAI\u2019s 2024 asset sales schedule, we believe it was recorded\n in Q4 2023 results.\n \u2022 See slide 38 to 47 for the supporting documentation.\n July 7 th, 2024. Per Cirium (in its public communications): 3\n\n\n\n\n1 Consultant A. Aerolease corporate website here. 2 FTAI 2023 10-K pg 63. 3 Link to Cirium communications.\n\n\n\n\nMUDDY WATERS RESEARCH 9\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 11 of 65\n\n Our Consultant, A Former FTAI Executive, Relays How the MRO\n Was Born of a Financial Engineering Scheme\n\n Our consultant explained that FTAI was a traditional leasing platform that was valued on a P/B basis.\n Management saw an opportunity by changing the narrative to aerospace. Management perceived that if FTAI\n were considered to be an MRO, it would trade on a multiple of EBITDA.\n\n To do so FTAI first undertook seemingly cosmetic changes by bolting on limited maintenance and repair\n capabilities and picking up spare parts and feedstock on the market. It entered into a basic MRO contract with\n Lockheed and marketed it as the Module Factory.\n\n FTAI then entered a consignment agreement with AAR and called it the USM business (used serviceable\n material - 2nd hand parts).\n\n Last, it bought LLP (life limited parts \u2013 spare parts) on the market for feedstock. 1\n\n\n\n\n1 Consultant A.\n\n\n\n\nMUDDY WATERS RESEARCH 10\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 12 of 65\n\n Industry Insiders Question FTAI\u2019s MRO Narrative\n\n\n According to one of FTAI\u2019s key counterparties, FTAI is still essentially a leasing company with an MRO\n overlay:\n\n Source H: \"It\u2019s fundamentally, in my opinion, an engine leasing company.\u201d1\n\n Our consultant, a former FTAI Executive, expressed skepticism about FTAI\u2019s ability to profitably operate the\n former Lockheed Martin facility, called the Module Factory:\n\n Consultant A: \u201cAir Canada owned that shop. Aveos owned that shop. Lockheed Martin owned that shop.\n And it was always a big struggle. And if you look at Lockheed, that engine shop before Covid was dying,\n it was dead.\u201d2\n Our consultant related a recent anecdote about industry bankers who also question FTAI\u2019s reporting:\n\n Consultant A: \u201cI'm out last night with the guys from [Bulge Bracket] Bank, everyone is asking questions,\n like then, and the statements are \u2018none of this makes sense.\u2019 And when you really do a deep dive\u2026 you\n can see that, it doesn't make sense.\u201d2\n1 Source H. 2 Consultant A.\n\n\n\n\nMUDDY WATERS RESEARCH 11\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 13 of 65\n\n\n\n\n A Substantial Portion of\n Aerospace Products\u2019 Revenue\n Is Whole Engine Sales\n We Believe FTAI Is Selling Whole Engines and Telling Investors it\n Sold Three Modules. This Helps FTAI Sell Investors on an\n Aerospace Aftermarket Story.\n\n\n\n\nMUDDY WATERS RESEARCH 12\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 14 of 65\n\n\nEvidence Whole Engine Sales Are Material\n\n CFM56 engines are commonly thought of as containing three modules: the Fan, the Core, and the Low-\n Pressure Turbine (LPT). FTAI also reports CFM56 engines as being in three modules. 1\n FTAI\u2019s GAAP financials indicate that whole engine sales are a material contributor to FTAI\u2019s AP segment:\n \u2022 FTAI\u2019s revenue and EBITDA per employee are significant outliers vs peers (~3x and ~7x, higher,\n respectively).\n \u2022 FTAI generates about ~$2m in GAAP revenue per module sold, compared to the sticker price a\n customer would pay for an off-the-rack module (~$700k - ~$1.5m).\n We spoke with a former senior FTAI executive who believes that ~80% of the reported module swaps are\n actually whole engine sales.\n We engaged another former FTAI executive to canvass the major aftermarket traders in the industry.\n \u2022 His research determined that approximately 1/3 of FTAI\u2019s YTD 2024 Aerospace Products revenue\n consisted of misreported whole engine sales largely executed via engine exchanges.\n \u2022 Another industry expert echoed a similar sentiment.\n New language in the Q3 2024 10-Q explicitly states that whole engines are now a component of Inventory,\n highlighting the materiality of whole engines to Aerospace Products.3\n\n1 FTAI Aviation Investor's Day Presentation June 7, 2023., Q1 2024 Earnings Call April 26, 2024, CEO: \u201cThree modules is a whole engine.\u201d Et alia. 3 FTAI Aviation 10-Q Q3 2024, Pg. 12\n\n\n\n\nMUDDY WATERS RESEARCH 13\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 15 of 65\nFTAI\u2019s Metrics Indicate that Aerospace Products Primarily Sells\nWhole Engines\nFTAI\u2019s per employee revenue and EBITDA is ~3x and ~7x higher, respectively, than peers. The most plausible\nexplanation is that FTAI\u2019s business is primarily trading whole engines, which is far less labor intensive than an\nMRO business. The EBITDA outperformance also seems to be due to FTAI over-depreciating engines in\nLeasing before selling them in Aerospace Products (see slide 28 to 37 for further detail on this).\n\n Estimating Revenue, and EBITDA, per Employee - FTAI vs Peers Revenue Per Employee Adj. EBITDA Per Employee\n\n MTU Aero MRO Segment1 973 104\n\n SARO Engineering Services2 736 95\n\n SARO Component Repair Services2 285 69\n\n VSEC3 717 95\n\n AAR4 407 43\n\n Average 624 81\n FTAI Aerospace Products4 (employee count = 560 as confirmed by FTAI) 1,757 627\n Units: US$ in thousands. Source: Company filings. FTAI employee count vetted with FTAI IR.\n\n\n 1 Per MTU reported employee figures, Rev and EBITDA estimated by annualizing H1-2024 for MTU Aero\u2019s MRO segment. 2 Source: Sell-Side report. 3 VSEC FY2023 figures, VSEC is an MRO specialist, employee counts\n\n includes all employees. 4 AAR FY2024 (YE 5/31/24) figures, employee counts includes all employees, EBITDA is adj. EBITDA. 5 FTAI Revenue and Adj. EBITDA estimated by annualizing Q3 2024 results. Revenue and\n EBITDA are for Aerospace Products only, whereas employee count includes all business segments.\n\n\nMUDDY WATERS RESEARCH 14\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 16 of 65\n\n FTAI\u2019s Revenue Per Module Shows that Aerospace Products Is\n Primarily Trading Whole Engines\n FTAI\u2019s GAAP revenue per reported module is ~$2m per module. However, FTAI only charges\n ~$700k to ~$1.5m per module (see Appendix). We believe this discrepancy illustrates that FTAI is\n categorizing revenue from whole engine sales as module sales.\n\n Estimating FTAI\u2019s Revenue Per Module Sold Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024\n\n Reported number of modules sold 41 61 72 82 953\n\n Aerospace Products revenue, as reported 1072 159 189 245 304\n\n Less: V-2500 revenue, MW estimate1 0.0 -20 -20 -20 -20\n\n Less: USM revenue, MW estimate 1 -35 -49 -47 -61 -76\n\n Total Est. CFM-56 module revenue 72 90 122 164 208\n\n Aerospace Products revenue per module 1.8 1.5 1.7 2.0 2.2\n\n\n 1 Estimates vetted from conversations / models with sell side Analysts. 2 This is the number FTAI reported before the V-2500 reclassification, so we used this figure and assigned zero value to the V-2500 revenue in this\n\n period. FTAI appears to have begun reporting V-2500 revenue in Q4 2023. 3 FTAI, as of Q3 2024, does not disclose the number of modules sold; 95 is an MW estimate.\n\n\n\nMUDDY WATERS RESEARCH 15\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 17 of 65\n Counting Whole Engine Sales as Modules Sales Was FTAI\u2019s Modus\n Operandi, According to a Former Senior Employee\n\n A former FTAI executive explained that while he worked for the company it sold whole engines but\n reported such transactions as the sale of three modules:\n\n \"And here's the other thing you have to be very cautious about\u2026 when they sell an engine,\n they're not selling an engine. They're selling [three] modules. So the, The Module Factory\n numbers are much higher than what real [customer demand for the Factory] is.\u201d 1\n\n Later in the same discussion:\n\n MW: \"How do we know that is still happening at the moment?\u201d\n\n Consultant: \"Well, I'm no longer there. But I could tell you that was the line of thought when I\n was there\u2026so what I\u2019m suggesting is that that is still happening\u2026there would be more of those\n modules [that] would be attributed to engine sales than to true module swaps.\" 1\n1\n Consultant A.\nNote: FTAI and most industry experts consider a CFM56 engine to be a three-module engine (Fan, Core, LPT). Consultant A counts the HPT as an additional module, bringing his total to four; we standardized the figure above.\n\n\nMUDDY WATERS RESEARCH 16\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 18 of 65\n\n\nThe Misrepresentation of Engine Sales Is Material\n\n\n Another former FTAI executive echoed the same sentiment:\n\n Source C: \u201cI think they sell between 60 and 80 engines a year and they report 95% into the\n Aerospace business.\u201d1\n\n Later in the same conversation, MW asked Source C about the YTD 2024 reported module sales\n\n MW: \u201cWhat portion of the business that they're doing do you think would be real individual module\n sales and whole engine exchanges counted as three modules?...\u201d\n\n Source C: \"...I think it's 80/20, right. So, I think they do 80 [whole] engine sales a year that\n they count as modules.\"1\n\n1 Source C, former Senior FTAI executive.\n\n\n\n\nMUDDY WATERS RESEARCH 17\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 19 of 65\n\nAn Industry Expert\u2019s Skepticism of FTAI\u2019s Module Sale Numbers\nCorroborates Our Analysis 1\n\n\n MW: \"Do you think the 82 number [FTAI\u2019s reported module sales in Q2-2024] is not\n really sensible?\"\n\n Expert: \"I was at a [CFM International] lessor conference with my CEO and we actually\n asked for a show of hands. This was two years ago. Has anybody in this room bought\n a standalone module? And no one raised their hand. So, I just don't believe that\n there's 82 standalone modules being sold. And if you tell me that that comprises, they\n sold 20 standalone modules in the quarter and the rest are three times the engines\n they sold, okay, I don't, that's not bad.\"1\n\n\n\n\n1 Source E, former CFM & GE senior engineer.\n\n\n\n\nMUDDY WATERS RESEARCH 18\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 20 of 65\n\n FTAI\u2019s Inventory Disclosure in its 10-Q Now Includes Aircraft\n Engines, Which We See as a CYA Disclosure\n\n \u2022 FTAI's 10-Q Q2 2024 definition of Inventory makes no mention of stand-alone aircraft engines:\n\n \"We hold aircraft engine modules, spare parts and used material inventory\u2026\u201d1\n\n \u2022 FTAI's 10-Q Q3 2024 definition of Inventory newly adds stand-alone aircraft engines:\n\n \"We hold aircraft engines, engine modules, spare parts and used material inventory\u2026\u201d2\n \u2022 We suspect this language changed because whole engines make up a material portion of\n inventory and Aerospace Products\u2019 revenue.\n\n \u2022 We note that when analysts previously asked about whole engines sales and their share among\n reported CFM56 module sales, management\u2019s replies were evasive.3\n\n\n\n1 FTAI Aviation 10-Q Q2 2024, Pg. 12. 2 FTAI Aviation 10-Q Q3 2024, Pg. 12 (emphasis added). 3 FTAI Aviation Q1 2024 Earnings Call April 26, 2024.\n\n\n\n\nMUDDY WATERS RESEARCH 19\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 21 of 65\n\nAfter FTAI Stopped Disclosing Module Sales, Management Still\nPushes the Module Narrative\n\n\n Q2 20241 Q3 20242\n\n\n\n\n1 FTAI Aviation Earnings Supplement Q2 2024, Pg. 9. 2 FTAI Aviation Earnings Supplement Q3 2024, Pg. 9.\n\n\n\n\nMUDDY WATERS RESEARCH 20\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 22 of 65\n\nOn the Q3 2024 Call, FTAI\u2019s CEO Refused to Disclose Module Sales\n\nQuestion:\n \"If I can maybe just ask a quick follow-up. Are you guys able to share with us kind of the\n number of CFM56 modules you've sold during the quarter and just sort of provide an update\n on that side?\"1\n\nJoe Adams, CEO:\n \"No, we've stopped providing that level of detail. We think it's commercially not a great\n idea. And so we think we give enough information without that.\"1\n\nWhen MW asked a former FTAI executive about this disclosure change, the Former said:\n \u201cThat makes no sense. There is no competition.\u201d 2\n\n1 FTAI Aviation Earnings Call October 31, 2024. 2 Source C.\n\n\n\n\nMUDDY WATERS RESEARCH 21\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 23 of 65\n\n\n\n\n New Cash Flow Statement\n Disclosure Supports our View of the\n Materiality of Whole Engine Sales\n The New Disclosure Added in Q3 2024 Implicitly Acknowledges that\n FTAI's Aerospace Products Segment\u2014the MRO\u2014Performs Limited\n Repair and Maintenance Work on the Engine Assets Sold\n\n\n\n\nMUDDY WATERS RESEARCH 22\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 24 of 65\n\nFTAI in Q3 2024 Introduced a New Cash Flow Disclosure That\nImplies Aerospace Products Generally Adds Little Value to\nAssets Sold\n\n In FTAI\u2019s Q3 2024 10-Q, management introduced this disclosure for the first time (see Appendix\n for full excerpt):\n\n \u201cWhen the costs to manufacture the assets are greater than (predominant to) the estimated\n value transferred from Leasing equipment into inventory, the related cash receipt has been\n recorded as an inflow in net cash (used in) provided by operating activities.\u201d1\n\n An investor spoke with FTAI. FTAI confirmed that the new language indicates that the test to\n report Aerospace Products income on the Operating or Investing side of the Cash Flow Statement\n is determined by the amount of capitalized costs to the assets while held in Inventory.\n\n\n\n1 FTAI Q3-2024 10-Q pg 13.\n\n\n\n\nMUDDY WATERS RESEARCH 23\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 25 of 65\n\nGain on Sale of Assets Cash Flow Further Explained\n\n\n\n For FTAI to realize AP EBITDA through cash flows from operating activities (CFO) it must invest\n 101% of the book value of Inventory after the inventory is transferred from Leasing Equipment.\n\n For example, if FTAI Transfers $100 book value of assets from Leasing Equipment to Inventory,\n when it must subsequently capitalize $101 to Inventory (total $201 of Inventory) for that\n Inventory to be later recorded as a cash inflow in CFO when sold (because $101 capitalized to\n Inventory is > $100 of transferred from Leasing Equipment).\n\n\n\n\nMUDDY WATERS RESEARCH 24\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 26 of 65\n\nThe Cash Flow Adjustment to Gain on Sale of Assets Supports Our\nView that Aerospace Products Is Likely Comprised Principally of\nWhole Engine Sales\n In the YTD 2024 period, FTAI adjusted lower its Cash flows from Operating activities by ~$244m for gains on\n sale of assets.\n\n This therefore implies that FTAI has performed limited work on these assets, when viewed in conjunction with\n the above new disclosure.\n\n CONSOLIDATED STATEMENTS OF CASH FLOWS\n\n Nine Months\n Ended\n September 30,\n 2024 2023\n Cash flows from operating activities:\n Net (loss) income $ (93,766) $ 125,457\n Adjustments to reconcile net (loss) income to net\n cash (used in) provided by operating activities:\n Equity in losses of unconsolidated entities 1,799 1,669\n Gain on sale of assets (244,353) (110,511)\n\n\nMUDDY WATERS RESEARCH 25\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 27 of 65\n\n~80% of FTAI\u2019s Aerospace Products\u2019 EBITDA Is Gains on Asset Sales\n\nAs illustrated below, after normalizing for Leasing Gains on Sale, ~80% of AP\u2019s EBITDA\nhas been reclassed to the Investing section and seemingly is largely whole engine sales:\n\n\n\n Percentage of GAAP Gain on Sale Derived from AP Adj. EBITDA Q1 2024 Q2 2024 Q3 2024 YTD 2024\n\n Total gains on sale, per cash flow statement 58.1 88.0 98.3 244\n\n Less: gains on sale booked to Leasing, per FTAI\u2019s supplement (6.7) (13.5) (14.2) (34)\n\n Total Aerospace Products gain on sale 51.4 74.5 84.1 210\n\n Total adj EBITDA, Aerospace Products, as reported 70.3 91.2 101.8 263\n\n AP gain on sale / AP reported adj EBITDA 73% 82% 83% 80%\n Source: Company filings, MW. Units: $ in millions, unless otherwise noted. Note: Module sales could also generate gains on sale, per GAAP accounting.\n\n\n\n\nMUDDY WATERS RESEARCH 26\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 28 of 65\n\n\n Aerospace Products Is a Dressed-Up Leasing Business\n\n\u2022 As we show, the primary function of Aerospace Products appears to be to sell or exchange whole engines\n (not individual modules).\n\u2022 Substantially all leasing companies sell, trade, and exchange, engines / aircraft.\n\u2022 We believe as little as 20% of Aerospace Products volume is true module-swapping work.\n\u2022 Despite FTAI\u2019s 2026 guidance for improved FCF, which investors require in an aerospace aftermarket\n business, FTAI\u2019s financial profile looks like that of other leasing businesses.\n\u2022 We believe FTAI\u2019s profile will continue to mirror that of a leasing business.\n\u2022 Generally, leasing companies trade on a P/BV and/or a P/E basis,1 and have the following features:\n - Highly capital intensive\n - Cyclical\n - Volatile earnings\n - Low growth\n - Subpar ROIC\n\n\n1 Per JPM\u2019s coverage of Aercap, May 8, 2024: \u201cAccordingly, our YE24 equity price target is lifted to $105, predicated on a blend of 1.1x BV and 10x forward P/E.\u201d\n\n\n\n\nMUDDY WATERS RESEARCH 27\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 29 of 65\n\n\n\n\n FTAI Depreciates Engines in\n Leasing to Exaggerate the\n Profits in Its MRO Business\n FTAI\u2019s Leasing Segment Assumes a Material Portion of\n Aerospace Products\u2019 COGS, Which Explains the ~1,000bps\n Discrepancy in EBITDA Margins Vs Peers\n\n\n\n\nMUDDY WATERS RESEARCH 28\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 30 of 65\nFTAI\u2019s Accounting Is Organized to Misleadingly Boost\nAerospace Products\u2019 Margins\n Engines are\n depreciated when\n AP acquires a used engine,\n ready for lease, even\n capitalizing the full cost to Leasing\n if not on lease, which\n Equipment even if FTAI purchases\n is recorded in Leasing\n an unserviceable engine always\n Equipment\n intended for the MRO1\n Engines are moved via noncash\n balance sheet transfers to Inventory.\n FTAI has wide latitude to estimate\n residual values, giving it the benefit of\n potentially moving equipment to\n Inventory with artificially low carrying\n values\n AP sells, or exchanges,\n whole engine/ splits into\n Analysts value FTAI using a modules in Inventory, realizing\n ~20x multiple for FTAI\u2019s the COGS of equipment that\n Aerospace Products business was depreciated in Leasing\n prior to being transferred to AP\n Inventory\n\n\n1 Per FTAI IR and accounting, all intact engines (serviceable or unserviceable) are recorded in Leasing Equipment, at inception , in line with the guidance it has received from their Auditor.\n\n\n\n\nMUDDY WATERS RESEARCH 29\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 31 of 65\n\nFTAI\u2019s EBITDA Margins Are a Direct Result of Its Misleading\nAccounting\n\n\u2022 FTAI\u2019s AP EBITDA margins (~30% - 40%) are not representative of economic reality because ~70%\n of AP\u2019s COGS originated in the Leasing segment and, we believe, benefit from depreciation while\n held in Leasing.\n\u2022 Aerospace Products incurs COGS from the engines it sells on the basis of Inventory carrying\n values. Because its Inventory has largely come from depreciated Leasing Equipment, FTAI incurs\n materially lower Aerospace COGS than do its MRO peers.\n\u2022 FTAI also has considerable subjectivity to calculate engine residual values, which can cause\n material differences in the values of assets FTAI transfers from Leasing to Inventory.\n\u2022 This has the consequence of inflating FTAI\u2019s EBITDA margins, which are ~ten percentage points\n higher than peers.\n\u2022 FTAI has also moved Inventory back to Leasing, which could be an effort to again benefit from\n Leasing depreciation.\n\n\nNote: See Appendix where FTAI notes ~80% of shop visit costs are materials, which suggests that there is opportunity for meaningful depreciation while held in Leasing Equipment.\n\n\nMUDDY WATERS RESEARCH 30\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 32 of 65\n FTAI Benefits from Owning Used Engines with Short Useful\n Lives that are Depreciated Even When Off-Lease\n \u2022 We estimate FTAI\u2019s current carrying value per narrowbody engine in the leasing\n portfolio to be ~$3.2m (vs $10m+ for a like-new engine). Useful Lives of Engines\n \u2022 FTAI\u2019s depreciation policy in Leasing reflects the shorter useful lives of the company's FTAI vs Peers3\n engines.\n \u2022 Mere months of off-lease depreciation, which would have no impact on the actual\n useful life of engine, has the potential to meaningfully impact carrying value. FTAI 2-6 years\n\n \u2022 FTAI's assets are depreciable even when off-lease, per a September 2023 FTAI\n SEC Comment Letter:1\n \u2022 \u201dFor both aircraft and engines, depreciation begins when the asset is initially placed Willis Lease\n 15 years\n Finance\n into service, which generally coincides with the date when the asset is ready for its\n intended use. Depreciation continues whether leased or not, until the asset is\n permanently removed from service.\"1\n \u2022 FTAI\u2019s depreciation practice may not differ from that of other leasing companies; AAR Corp4 3-10 years\n however, most leasing peers do not own/operate a large MRO that relies, in large part,\n on its related leasing segment for raw material. Thus, we believe its peers do not\n exploit this accounting trick to materially boost EBITDA margins. AerCap 20 years\n \u2022 A peer who does depreciate engines based on usage is ATSG US. 2\n1 Link to SEC Comment Letter. 2 ATSG\u2019s 2023 10-K: \u201cAssets are typically depreciated on a straight-line basis except for certain engines which are depreciated based on their usage levels during the period.\u201d ATSG is an\n\naircraft leasing and air cargo transportation service company. 3 Per most recent annual report. 4 AAR useful life includes \"equipment, furniture, and fixtures, and capitalized software.\u201d\n\n\nMUDDY WATERS RESEARCH 31\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 33 of 65\n~70% of FTAI\u2019s Aerospace Products\u2019 COGS Originated in Leasing\nWhere They Could Have Been Depreciated\n\nWhen these assets are depreciated before being transferred to Inventory, the Leasing segment\nbears these costs instead of Aerospace Products.1\n\n As disclosed, the inception of Aerospace Products to-date\n ($ in millions, unless otherwise noted)\n\n Transfers from Leasing Equipment to Inventory (2021 \u2013 Q3-2024) 581\n\n Aerospace Products COGS (2021 \u2013 Q3-2024) 861\n\n Transferred Inventory / Aerospace Products COGS ~68%\n\n\n\n1 As stated infra, per FTAI IR and accounting, all intact engines (serviceable or unserviceable) are recorded in Leasing Equipment, at inception, in line with the Auditor's guidance.\n\n\n\n\nMUDDY WATERS RESEARCH 32\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 34 of 65\nResidual Value Subjectivity Offers FTAI More Opportunities to Accelerate\nDepreciation of Assets While Held in Leasing\nThe residual values of FTAI\u2019s engines seem considerably more subjective than for its peers. 1 Slight differences in residual values and\nuseful lives can meaningfully impact carrying values of Leasing Equipment and thus the transfer-in values to Inventory (see Appendix).\nThis could help FTAI transfer leasing equipment to Inventory at arbitrarily low costs. Recall, a lower carrying value for Inventory results\nin lower COGS and consequently a higher gross margin for Aerospace Products.\n\n Below: From FTAI\u2019s 10-K 2023, Pg. 48.\n\n Asset Range of Estimated Useful Lives Residual Value Estimates\n Generally not to exceed 15% of\n Aircraft 25 years from date of manufacture\n manufacturer\u2019s list price when new\n\n 2 - 6 years, based on maintenance Sum of engine core salvage value plus the\n Aircraft engines\n adjusted service life estimated fair value of life limited parts\n\n Aviation tooling and equipment 3 - 6 years from date of purchase Scrap value at end of useful life\n\n\n\n A former senior FTAI employee noted: \u201cThey can assign different values to different modules.... They may be assigning a really\n low book value to modules to show, like, a 35% EBITDA margin on that module, and a really high book value to the part, [spare parts\n for consumption not resale] because, you know, they don't need to make money on parts. They don't get the valuation for the\n company out of it, right?\u201d2\n\n1 FTAI\u2019s 10-K 2023, Pg. 48. Also see the Appendix for the comparable disclosure for WLFC US, which provides a quantifiable precise engine residual value. 2 Source C.\n\n\nMUDDY WATERS RESEARCH 33\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 35 of 65\nFTAI\u2019s Misleading Accounting Results in a ~1,000bps Margin\nDifference Between FTAI and Peers\n\n FTAI\u2019s Aerospace Products EBITDA Adj.EBITDA Margins \u2013 FTAI vs Peers\n margins are inflated because hundreds of Heico ~26%\n\n millions of cash costs are incurred by the SARO Engine Services ~13%\n\n Leasing segment rather than in Aerospace Lufthansa Technik1 18%\n Products. MTU Aero2 17%\n\n GE Commercial Engines & Services3 27%\n\n Boeing Global Services4 18%\n\n Average ~20%\n\n FTAI AP, Adj. EBITDA margin, YTD-2024 ~36%\n\n FTAI AP, Adj. EBITDA margin commentary 30% - 40%\n\n Source: Company filings except as noted\n\n\n\nNotes to table: 1 Excludes intercompany revenue. 2 2024E EBITDA margin per S&PCapIQ. 3 2023 GE CES figures =(5600 CES op profit + ~800 D&A) / 23,900 = ~27% EBITDA margin. 4 EBIT margin \u2013\nFTAI\u2019s Aerospace Products reports minimal D&A allowing for this comparison. Per sell side re Boeing Global Services: \u201cThe engineering modification and maintenance business acts as an internal MRO\nshop servicing Boeing and other aircraft needs. We estimate that this represents about 37.5% of total BGS revenue.\u201d\n\n\nMUDDY WATERS RESEARCH 34\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 36 of 65\nIf FTAI\u2019s Accounting Weren\u2019t Misleading, Its Leasing Equipment\nCapex Would Be Aerospace Products' COGS\n \u25aa Recall, being on lease is not a prerequisite to taking depreciation.\n \u25aa Leasing Equipment capex is a significant cost (see below).1\n 2023 2022 2021\n Cash flows from investing activities: Below: From FTAI\u2019s 10-K 2023.\n Investment in unconsolidated entities (19,500) (7,344) (54,655)\n Principal collections on finance leases 3,638 2,227 7,387\n Principal collections on notes receivable 4,875 \u2014 \u2014\n Acquisition of business, net of cash acquired (29,632) (3,819) (627,090)\n Acquisition of leasing equipment (749,780) (638,329) (572,624)\n Acquisition of property, plant and equipment (6,148) (144,196) (157,332)\n Acquisition of lease intangibles (20,964) (31,127) (24,017)\n Investment in convertible promissory notes \u2014 \u2014 (10,000)\n Investment in promissory notes (11,500) \u2014 \u2014\n Purchase deposit for acquisitions (23,937) (6,671) (13,658)\n Proceeds from sale of leasing equipment 477,886 408,937 158,927\n Proceeds from sale of property, plant and equipment \u2014 5,289 4,494\n Proceeds for deposit on sale of aircraft and engine 1,413 3,780 600\n Return of purchase deposits 300 \u2014 1,010\n Net cash used in investing activities $ (373,349) $ (411,253) $ (1,286,958)\n\n\n1 FTAI 2023 10-K Pg. 57.\n\nNote: Per FTAI IR prior year cash flow statements include FIP US numbers for the 2022 and 2021 years; however, FIP US reporte d a negligible amount of leasing capex in prior years.\n\n\nMUDDY WATERS RESEARCH 35\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 37 of 65\n\nAerospace Products Is Not Capital Lite\n\nBy the time FTAI\u2019s Aerospace Products sells an engine/module, its carrying value could have been reduced to an\nartificially low level because the magnitude of depreciation is subject to a high degree of management discretion.\nThe capital assets allocated to Aerospace Products are minimal, given that total depreciation & amortization was\n~$3.2m and ~$300k in the YTD 2024 and 2023 periods, respectively. This gives the misleading appearance of a\ncapital liteness to FTAI\u2019s AP\u2019s business. In fact, the company has simply allocated the costs to Leasing.\n\n\n Consultant: \u201cBut then, you know, to really get the numbers where they are, this is where\u2026 to use your phrase,\n that sleight of hand comes in\u2014is that, you know when, when you're selling an engine, are you selling an engine or\n are you selling four modules? And if you start booking engine sales as module sales, and... then also you have\n assets that have been in the leasing portfolio for quite some time; so, you can, you can, you know, depreciate\n those down, and you can really boost the numbers on the aerospace side to show the strength on the aerospace\n to really get that valuation, and really kind of you're robbing Peter to pay Paul internally. You're kind of taking the\n money way out of the leasing sector and putting that into the aerospace sector and spinning it that way.\u201d 1\n\n\n\n\n1 Consultant A and former FTAI executive\n\n\n\n\nMUDDY WATERS RESEARCH 36\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 38 of 65\n\nFTAI Appears to Move Inventory Back Into Leasing, Further Gaming\nCarrying Values. Recall, Assets are Depreciated Even When Off-Lease\n Below is an excerpt from FTAI\u2019s Q2 2024 10-Q which reports supplemental disclosure for non-cash activities. Balance sheet non-\n cash transfers from inventory to leasing are highlighted in red.\n FTAI Aviation 10-Q Q2 2024, Pg. 10.\n\n Supplemental disclosure of non-cash investing and financing activities:\n\n Transfers from leasing equipment to inventory $ 70,897 $ (8,421)\n Transfers from inventory to leasing equipment (98,192) 73,329\n Sale on and issuance of promissory notes 37,367 12,538\n Acquisition of leasing equipment in accrued expenses (17,975) (3,100)\n Purchase deposits reclassified to leasing equipment (12,108) (6,371)\n Settled security deposits (4,077) (2,406)\n Settled maintenance deposits (24,536) (11,532)\n\n\nFormer FTAI executive: \"So that inventory, let's say it's got high book value. [I\u2019m assuming] they'll just call the leasing\nteam and put this engine back on lease, and then we'll just get some depreciation of the year, run it down, and then we\u2019ll\ntransfer it back to Aerospace Products... Because, you know, you like, oh shit, if I'm not gonna make, you know, 35%\nmargin on that module, it's really going to affect my numbers or my valuation. So I\u2019ll pop it back to leasing for three\nmonths, find a customer, put it on wing for six months a year, two years, whatever the life is. And then, you know, comes\noff wing, which is to the same circus again.\"1\n1 Source C.\n\n\n\n\nMUDDY WATERS RESEARCH 37\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 39 of 65\n\n\n\n\n FTAI Could Be\n Stuffing the Channel\n In the Final Days of December, FTAI Seemingly\n Parked Aircraft With an Intermediary to Record\n Questionable Revenue\n\n\n\n\nMUDDY WATERS RESEARCH 38\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 40 of 65\nFTAI May Have Used a Questionable Buyer to Record the Sale of\nTwo Aircraft in December 2023\n\n \u2022 In December 2023, FTAI apparently sold two on-lease in-service aircraft to a buyer that\n apparently was not a bonafide purchaser.\n \u2022 We understand that FTAI sold these assets to an intermediary (a \u201cplaceholder\u201d1 buyer),\n Aerolease, that had no intention of registering and using the assets.1\n \u2022 While title may have transferred to Aerolease, FTAI did not receive payment.\n \u2022 Instead, FTAI received a promissory note, allowing it book the related revenue.\n \u2022 Our Consultant reported that:\n \u2022 Aerolease did not novate the lease with the lessee, Global Crossing Airlines.1\n \u2022 The cash related to the note was only collected by FTAI when a bonafide buyer purchased\n these assets in June 2024 (detailed on the following slides).1\n \u2022 The airframe and engine were written up and sold separately.1\n \u2022 The assets were reportedly transferred to Aerolease for ~$16m but could have been worth\n ~$20m, potentially leaving some margin for Aerolease to capture a commission.1\n \u2022 We believe this was done just before year end 2023 to inflate Q4 and full year 2023 numbers.\n\n1Consultant A. Aerolease corporate website here.\n\n\n\n\nMUDDY WATERS RESEARCH 39\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 41 of 65\n In June 2024 Two Major Aerospace Databases Picked Up This Transaction\n Between Setna iO, the Subsequent Bonafide Buyer, and FTAI\n\n If FTAI had really sold these two on-lease aircraft in 2023, how could FTAI sell them again to\n Setna iO in June 2024?\n Approx date: June 2024 2\n\n\n Per Cirium (in its public communications) 1:\n\n\n\n\n In addition to Cirium, MW confirmed the\n existence and counterparties of this transaction\n with another leading aerospace database\n provider.\n\n\n\n 1 Link to Cirium communications. 2 Link to Linkedin Post. Despite the same surname, we do not believe that Hunter Edens is related to Wes Edens, Founder of Fortress.\n\n\nMUDDY WATERS RESEARCH 40\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 42 of 65\n Here is the Title Conveyance, as Filed with the FAA, Between\n Setna iO\u2019s Trustee and UMB Bank\n Below: From FAA Registry, Document #LJ032867.\n\n \u2022 The FAA registry shows the tail\n numbers of the two A320s Setna\n acquired in June 2024: N282GX &\n N281GX.\n\n \u2022 The seller was UMB Bank as\n Trustee. Note the conveyance for\n N282GX & N281GX are recorded\n together under the 282GX tail\n number (top right of document). x\n\n\n\n\nMUDDY WATERS RESEARCH 41\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 43 of 65\n\n FTAI Used UMB Bank as its Trustee, Suggesting It Could Have\n Conveyed Title to Setna in June 2024\n\n\n See the following pages for evidence of the 2023 agreement where FTAI conveys title of N282GX\n to UMB Bank as Trustee.\n\n We see that FTAI financed the asset (U.S. Registration/Tail No. N282GX) through JP Morgan\n which, in turn, established a trusteeship through UMB Bank.\n\n Recall, per the FAA registry, the conveyance for tail N282GX is combined with tail N281GX.\n\n\n\n\nMUDDY WATERS RESEARCH 42\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 44 of 65\n 2023 FAA Documents State FTAI is the Borrower and UMB Bank is\n the Trustee\n Per the 2023 Financing Agreement filed with FAA, Document ID ARE015236786.\n\n\n\n\nTrustee\nUMB Bank\n\n\n\n\nBorrower\nFTAI\n\n\n\n\n MUDDY WATERS RESEARCH 43\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 45 of 65\n\nThe 2023 FAA Documents Also Provide Evidence of the Lease to Global\nCrossing Airlines\n\n\n The excerpt at right is per Financing\n Agreement filed with FAA, Document\n ID ARE015236786.\n\n A 2021 PR notes Global Crossing\n leased two A320s aircraft from FTAI in\n November 2021.1\n\n The Global Crossing \u2013 FTAI lease as\n filed with the SEC also notes that UMB\n Bank was the lessor.2\n\n\n\n\n 1 Global Crossing Airlines 2021 PR available here. 2 FTAI \u2013 Global Crossing lease available here.\n\n\n\n\nMUDDY WATERS RESEARCH 44\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 46 of 65\nSetna Takes Title in June 2024 to Two In-Service Aircraft\n\n\n\n Here is evidence of the agreement\n between Setna and Valley National\n Bank.\n\n In 2024, the two aircraft sold with two\n CFM56-5B engines each were still on-\n lease to Global Crossing.\n\n\n\n\nMUDDY WATERS RESEARCH 45\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 47 of 65\nFTAI\u2019s 2024 Aviation Assets Schedule Shows the Setna Sales Must\nHave Been Booked in 2023, Which Is Highly Questionable\nAviation Assets - Held in Leasing\nEquipment Widebody Narrowbody Total\nAircraft\nAssets at January 1, 2024 5 91 96\nPurchases \u2014 27 27\nSales \u2014 (1) (1)\nTransfers \u2014 (26) (26)\nAssets at September 30, 2024 5 91 96\n\nEngines\nAssets at January 1, 2024 32 235 267\nPurchases 4 86 90\nSales (9) (1) (10)\nTransfers \u2014 (50) (50)\nAssets at September 30, 2024 27 270 297\nFTAI 10-Q Q3 2024, Pg 40. Note: Disclosure here excludes the sale of Airframes.\n\n\nMUDDY WATERS RESEARCH 46\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 48 of 65\n\n\nFTAI Seemingly Used an Intermediary to Boost Year-End 2023 Results\nthrough Questionable Sales\n\n\u2022 Our Consultant concluded, after reportedly speaking with a well-placed individual at Aerolease, that\n FTAI transferred these assets in the final days of December 2023 to boost Q4 2023 numbers. 1\n\u2022 Even though title may have transferred, FTAI did not receive cash payment and instead received a\n promissory note, which allowed it to book the related revenue.\n\u2022 FTAI appears to have still been the lessor, as our Consultant also reported that FTAI did not novate the\n leases to Aerolease.1\n\u2022 FTAI had a $102.3m note receivable on its books at Dec 31 2023, 2 implying there could have been other\n similar transactions, given this transaction appears to have been worth only ~$20 million.\n\u2022 Aerolease seemingly had no intention of using these assets (industry databases do not see Aerolease\n registering the assets with the FAA \u2013 our Consultant1 said the intermediary was \u201cacting as a placeholder\u201d\n until a real buyer was interested).\n\u2022 FTAI appears to have been responsible for finding a bonafide purchaser in 2024.\n\n\n1 Consultant A. Aerolease corporate website here. 2 FTAI 2023 10-K pg 63.\n\n\n\n\nMUDDY WATERS RESEARCH 47\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 49 of 65\n\n\n\n\n EBITDA Margins Are Falling\n Even Faster Than Reported\n Numbers Suggest\n Aerospace Products Suffers from Fundamental Headwinds\n That Should Be a Cause for Concern Even in the Absence of\n Accounting Games\n\n\n\nMUDDY WATERS RESEARCH 48\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 50 of 65\n\n Aerospace Products Is Facing Fundamental Headwinds\n\n Reported EBITDA margins dropped by 200bps YoY in Q3 2024; however, FTAI\u2019s ~20% gross\n margin Used Serviceable Material (USM / spare parts) business has declined from 25% to 15% of\n total Aerospace Products EBITDA.1 A lower proportion of USM revenue should be a tailwind for\n margins, but core-module margins have declined by ~600bps Q3 2024 vs H1 2024 after\n normalizing for the USM business. We believe this is evidence that the fundamentals of core\n Aerospace Products have deteriorated.\n\n Less than half of Aerospace Products\u2019 inventory was ever actually on lease,2 implying that the\n business is reliant on the secondary market for Inventory. Before COVID, FTAI was paying ~$4.5m,\n on average for an ~half-life engine (CFM56-7B), with ~48 months of flight time.3 During COVID the\n same engine fell to ~$2.5m per engine, and today the same engine is worth ~$7m.3\n\n\n\n1 FTAI Aviation Q1 2024 Earnings Call April 26, 2024, CEO: \u201cOn USM, it's been -- we've indicated in the past that we -- it was roughly previously about 25% of EBITDA from Aerospace Products, but\nas we have ramped up the MRE business that percentage is going down to where it less than 15% of EBITDA at this point. And we'll continue as a percentage to decline because that's not a high-\ngrowth business. So hopefully, that helps.\u201d 2 Investor call with FTAI IR, October 2024. 3 Consultant A.\n\n\nMUDDY WATERS RESEARCH 49\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 51 of 65\n\n Margins are Inflecting Lower, Despite What Should Be a Significant\n USM Tailwind\n We estimate that net of USM, FTAI\u2019s module business is currently delivering EBITDA margins ~600bps lower than\n in H1 2024. In Q3 2024, Aerospace Products added ~$60m of revenue QoQ at a ~20% EBITDA margin.\n\n $ millions, unless otherwise noted H1 2023 H1 2024 Q3 2024\n USM at 15% of EBITDA in F24 vs 25% in Past, Per Mgmt. Commentary\n (see Appendix for conf. call excerpt) 25% 15% 15%\n\n Total Aerospace Products Adj EBITDA 622 162 102\n\n USM EBITDA (=25% or 15% of total AP EBITDA) 16 24 15\n\n MRO-Module EBITDA (=Total AP EBITDA less USM EBITDA) 47 137 87\n\n USM EBITDA Margins, MW Estimate1 20% 20% 20%\n\n Implied USM Revenue (=USM EBITDA / Est. USM EBITDA margin of 20%) 78 121 75\n\n MRO-Module Revenue 100 313 229\n Implied MRO-Module EBITDA Margin 47% 44% 38%\n 1 Margin estimate vetted with former employees, industry experts, and the sell side. Above totals may not add due to rounding.\n 2 H1-2023 Adj. EBITDA number is as FTAI reported in FY 2024.\n\n\n\n\nMUDDY WATERS RESEARCH 50\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 52 of 65\n FTAI Is Becoming Increasingly Dependent on the More Expensive\n Secondary Market for Its Engines\n\n As FTAI\u2019s IR recently informed an investor, FTAI must buy engines in this market. Despite ~70% of AP\u2019s COGS\n originating in Leasing, less than half were ever on lease.\n\n Investor: \"Of the ~500m that was transferred from Leasing to Inventory, what portion was ever on lease?\"\n\n IR: \"Less than half.\"1\n\n Engine values have seen significant price increases recently, which will be a headwind Aerospace Products. As\n one industry expert told us:\n\n \"And to put it in perspective too, by the way, in the past year and a half, the prices for both serviceable and\n unserviceable engines, particularly CFM, has skyrocketed. Like I would say 40% to 50%.\"2\n\n\n\n\n1 Investor call with FTAI IR, October 2024. 2 Source E.\n\n\n\nMUDDY WATERS RESEARCH 51\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 53 of 65\nFTAI Management Claims to be Immune From a Significant Supply-\nDemand Shift in the Market. But if This Were True, Why Would\nEBITDA Margins Be Falling So Quickly?\n\n Investor: \"Given the macro situation for CFM-56 7B [prices] have gone up quite a bit, like some say\n on the order of 30 to 50 percent, is that something that could flow through Products margin? How\n should I model the cost of engines flowing through the business?\u201d\n\n IR: \"The key thing to note is the difference between the market in general and FTAI when it comes to\n procuring engines, the market is just pricing serviceable green time engines...We specifically go out\n to look for opportunities to find unserviceable engines, at significant discounts and then repairing\n that and then obviously then reselling it to market with green time\u2026when you do note that 30 to 50\n increase in the market rate, that isn't reflective of what the unserviceable market looks like.\"\n\n Investor: \"Got it. Okay, so that's sort of the Special Sauce a little bit.\"\n\n IR: \"Exactly.\"1\n\n\n1 FTAI IR call with Investor, October 2024.\n\n\n\n\nMUDDY WATERS RESEARCH 52\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 54 of 65\n\nAn Industry Expert Doesn\u2019t Agree With FTAI\u2019s Claimed Procurement\nAdvantage\n MW: \"They say they get run out engines for $1 million even today, because they're the buyer of last resort for the most\n undesirable maintenance event, etc. engines. Is that reasonable?\"\n\n Expert: \"That's complete bullshit. Sorry. No way. Not on average. Can they buy some engines that have had bad things\n happen to them for a million? Yes, but I thought you said that they said on average they're spending a million. Did I hear\n you wrong?\"\n MW: \"No, you didn't hear me wrong. And that's the number they told me to use for my ROIC calculation...\"\n\n Expert: \"BS. Complete BS. No way. No way. Absolutely not. Um, I just again, like, uh, between [prior and current\n employer], I've probably bought more CFM runout engines than Fortress did during that time . And, um, it's just a fact. Like\n we bought, I bought 200 engines in the past 3 years. The amount of engines we bought for under $2 million, I can count\n on, like, my two hands.\n\n No way. No way... There is no way they're buying an initial unserviceable engine for a million. That's off by a factor of two...\n Those are garbage engines. There's like trash. Um, yeah. They're not buying engines at an average of $1 million.\n\n They might be able to buy one and two engines that have had a catastrophic failure, and then you're very high\n maintenance cost to fix it...You could fly through a flock of birds and wipe out engines, and then occasionally something let s\n loose inside the engine, and then it's toast. And those engines are generally by definition called BER, which means Beyond\n Economic Repair.\"1\n 1 Source E.\n\n\n\n\nMUDDY WATERS RESEARCH 53\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 55 of 65\n\n\n\n\n Aerospace Products\n Is Capital Intensive\n Aerospace Products' Engine Management Service Offerings\n Require a Fleet of Stand By Replacement CFM56-5B & 7B\n Engines for its Customers\n\n\n\nMUDDY WATERS RESEARCH 54\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 56 of 65\n\n FTAI Promises Lessees Replacement Engines, Which Implies a\n Material Portion of Aerospace Products Is Capex Intensive\n\n\u2022 As we show in the following slides, FTAI is selling assets that are still in service, suggesting aircraft (ie. Airframes plus two\n engines) were sold.\n\u2022 Our research suggests FTAI is selling the airframes, leasing the engines, and shifting the maintenance income\n associated with such leases to the AP segment. 1\n \u2022 FTAI retains title to the engine and, concurrent with the airframe sale, leases the engine to the airframe owner as\n part of a Perpetual Power Program.\n\u2022 Through the Perpetual Power Program, FTAI promises lessees a serviceable engine through the duration of lease.\n \u2022 This removes the burden of shop visits from lessees.\n \u2022 This also seems to enable FTAI to record the revenue in the AP segment.\n\u2022 Our research suggests this occurred for nearly all 12 Mavi Gok transactions (detailed on the following slides).\n\u2022 This means FTAI needs replacement engines with flying time on standby to perform these contracts.\n\n\n\n1 Consultant A\n\n\n\n\nMUDDY WATERS RESEARCH 55\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 57 of 65\n\nFTAI\u2019s Revenue Recognition Disclosure Includes a Telling Excerpt\nLikely Related to the Perpetual Power Program\n\n\n The Perpetual Power program seems far more akin to a leasing business, as opposed to an\n aerospace aftermarket business. It is capital intensive to have engines on standby to provide to\n lessees.\n Aerospace Products revenue\u2014Aerospace Products revenue primarily consists of the transaction\n price related to the sale of repaired CFM56-7B, CFM56-5B and V2500 engines, engine modules, spare\n parts and used material inventory, and are accounted for within the scope of ASC 606. Revenue is\n recognized when a performance obligation is satisfied by transferring control over the related asset to a\n customer. Revenue is recorded with corresponding costs of sales, presented on a gross basis in the\n Consolidated Statements of Operations. Shipping costs to deliver assets to customers are included in\n cost of sales. Aerospace products revenue also consists of engine management service\n contracts, where the Company has a stand-ready obligation to provide replacement CFM56-7B\n and CFM56-5B engines to customers as they become unserviceable during the contract\n term. The Company recognizes revenue over time using a straight-line attribution method and\n the costs related to fulfilling the performance obligation are expensed as incurred. 1\n\n\n\n1 FTAI 2023 10-K, p. 48, et alia. emphasis added.\n\n\n\n\nMUDDY WATERS RESEARCH 56\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 58 of 65\nThere Were At Least 14 Disposals of In-Service Assets in 2024;\nMany of Which Relate to Perpetual Power Programs\nAccording to an industry-leading database provider, FTAI sold ~14 aircraft in 2024. Flight tracking databases indicate, and\nour Consultant confirmed that all the below Mavi Gok transactions are Perpetual Power programs. 1\n Event Date MSN Aircraft Type New Owner Old Owner Event New Operator Old Operator Flight Status2\n 26-06-202 4 283 0 A32 0 Set na Aero Lease 1 LLC WWTAI AirOpCo 1 Berm uda Ltd Pur cha sed - subject to existing lease Globa lX Globa lX Active\n 26-06-202 4 285 1 A32 0 Set na Aero Lease 1 LLC WWTAI AirOpCo 1 Berm uda Ltd Pur cha sed - subject to existing lease Globa lX Globa lX Active\n 22-08-202 4 329 34 737 NG Aventure Aviation WWTAI AirOpCo 1 Berm uda Ltd Pur cha sed - par ked Aventure Aviation FTAI Aviation Par t-out / airframe only\n 19-01-202 4 288 28 737 NG Mavi Gok Airline s WWTAI AirOpCo 1 Berm uda Ltd Pur cha sed - par ked Mavi Gok Airline s FTAI Aviation Airframe only\n 19-01-202 4 288 29 737 NG Mavi Gok Airline s WWTAI AirOpCo 1 Berm uda Ltd Pur cha sed - par ked Mavi Gok Airline s FTAI Aviation Active\n 20-03-202 4 292 48 737 NG Mavi Gok Airline s WWTAI AirOpCo 1 Berm uda Ltd Pur cha sed - par ked Mavi Gok Airline s FTAI Aviation Active\n 13-02-202 4 292 49 737 NG Mavi Gok Airline s WWTAI AirOpCo 1 Berm uda Ltd Pur cha sed - par ked Mavi Gok Airline s FTAI Aviation Active\n 05-11-202 4 352 77 737 NG Stratt on Aviation WWTAI AirOpCo 1 Berm uda Ltd Pur cha sed - par ked Stratt on Aviation FTAI Aviation Airframe only\n 10-07-202 4 353 78 737 NG Aventure Aviation WWTAI AirOpCo 1 Berm uda Ltd Pur cha sed - par ked Aventure Aviation FTAI Aviation Airframe only\n 15-03-202 4 304 76 737 NG Mavi Gok Airline s WWTAI AirOpCo 1 Berm uda Ltd Pur cha sed - par ked Mavi Gok Airline s FTAI Aviation In-service , per Sou rce\n 15-03-202 4 305 69 737 NG Mavi Gok Airline s WWTAI AirOpCo 1 Berm uda Ltd Pur cha sed - par ked Mavi Gok Airline s FTAI Aviation Active\n 13-02-202 4 300 06 737 NG Mavi Gok Airline s WWTAI AirOpCo 1 Berm uda Ltd Pur cha sed - par ked Mavi Gok Airline s FTAI Aviation Active\n 28-06-202 4 298 78 737 NG Aeroitalia WWTAI Airopc o BPA Irela nd Ltd Pur cha sed off le ase Aeroitalia Aeroitalia In-service , per Sou rce\n\n 12-03-202 4 301 78 757 Mavi Gok Airline s WWTAI Airopc o II DAC Pur cha sed - subject to existing lease - par ked Sky line E xpress Airline Sky line E xpress Airline Airframe only\n\n 28-06-202 4 298 88 737 NG Aeroitalia WWTAI Airopc o II DAC Pur cha sed off le ase Aeroitalia Aeroitalia In-service , per Sou rce\n\n 02-04-202 4 299 23 737 NG Mavi Gok Airline s WWTAI Airopc o II DAC Pur cha sed - par ked Mavi Gok Airline s FTAI Aviation In-service , per Sou rce\n\n 12-03-202 4 250 77 767 Mavi Gok Airline s WWTAI Airopc o II DAC Pur cha sed - subject to existing lease - par ked Sky line E xpress Airline Sky line E xpress Airline Airframe only\n\n 12-03-202 4 301 59 737 NG Mavi Gok Airline s WWTAI Airopc o II DAC Pur cha sed - subject to existing lease - par ked Sky line E xpress Airline Sky line E xpress Airline Airframe only\n\n 12-03-202 4 281 39 767 Mavi Gok Airline s WWTAI Airopc o II DAC Pur cha sed - subject to existing lease - par ked Sky line E xpress Airline Sky line E xpress Airline Airframe only\n\n 15-06-202 4 255 97 757 Sky O ne FZE WWTAI Fina nce Ltd Pur cha sed - par ked Sky O ne FZE FTAI Aviation Active\n 15-05-202 4 174 5 319-112 AviAM Le asing FTAI Italia DAC Pur cha sed - par ked AviAM Le asing FTAI Aviation Airframe only\n 10-06-202 4 177 9 319-112 AviAM Leasing FTAI Italia DAC Pur cha sed - par ked AviAM Le asing FTAI Aviation Airframe only\n Eng ine on-lease with an Eng ine\n 11-03-202 4 207 4 319-112 Fly Lili FTAI Italia DAC Pur cha sed - par ked Fly Lili FTAI Aviation\n maintenan ce contract\n 30-09-202 4 121 7 320-200 Aurick One Ltd FTAI Italia DAC Pur cha sed - par ked Maverick Horizon FTAI Aviation In-service , see next slide\n\n\n\n\n 1Consultant A. 2 Flight status per Link, Link (insert manufacturer\u2019s serial number, MSN), Consultant A. Note: We highlighted the sold aircraft that appear to be still in service.\n\n\nMUDDY WATERS RESEARCH 57\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 59 of 65\n\n Evidence of Another Perpetual Power Agreement\n\n\n\n \u2022 This LinkedIn post from October 2024 indicates an\n A320 aircraft was sold by FTAI to Maverick\n Horizon\u2014we understand this was a Perpetual\n Power agreement.1\n\n \u2022 Maverick Horizon notes:\n\n \u201cThis aircraft will soon join the fleet\u2026\u201d\n\n\n\n\n1Link to LinkedIn post.\n\n\n\n\nMUDDY WATERS RESEARCH 58\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 60 of 65\n\n\n\n\n Appendix\n\n\n\n\nMUDDY WATERS RESEARCH 59\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 61 of 65\nModule Swap Costs Start at ~$600k-$700 for a Fan, But Most Are\nLPTs, Which Will Be in the Low-Mid One Million Range\n Below: From FTAI Investor's Day Presentation June 7, 2023. Pg. 10.\n\n\n\n\nFTAI's 2023 Module pricing is cited above. Former employees and industry experts we spoke with believe most modules swaps wi ll be for LPTs,\nfollowed by fans. Although prices will have come up some from July 2023, they will still be in the low to mid one million range. Fans will be the\nleast expensive. Cores will be the most expensive of the three but are very rare as modules. Prices vary depending on factor s such as condition,\ncycle life remaining, configuration, etc. FTAI's modules tend to be built to 5,000-6,000 or fewer cycles.1\n1 Consultant A, Source B, a former Delta executive & an engineer; Source D, a FTAI technical manager; Source E, Source G, a current executive of an FTAI customer; and Source H.\n\n\n\n\nMUDDY WATERS RESEARCH 60\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 62 of 65\n\n The Full Excerpt of the New Q3-2024 Disclosure 1\n\n \u2022 Cash Flow Presentation\u2014 Included in net cash (used in) provided by operating activities are inflows from the sale of engine modules and\n parts that were on engines originally purchased and reported as Leasing equipment, net on the Consolidated Balance Sheet. The\n purchase of the original engine was reported as an outflow in net cash used in investing activities at the time of purchase through the\n Acquisition of leasing equipment line item.\n\n \u2022 As part of the Aerospace products business, the Company breaks down generally unserviceable engines with the intent to manufacture\n modules and parts for creation and sale of new assets. To manufacture the modules and parts and bring them into a salable condition, the\n Company spends significant costs, often over multiple reporting periods, for new inventory and capitalizable labor (e.g., engineering) that\n are included in net cash (used in) provided by operating activities as components of the changes in the related working capital accounts.\n\n \u2022 Therefore, when the costs to manufacture the assets are greater than (predominant to) the estimated value transferred from Leasing\n equipment into inventory, the related cash receipt has been recorded as an inflow in net cash (used in) provided by operating activities.\n\n \u2022 Additionally, the Company buys inventory from third parties with the intent to use the parts in the manufacturing of the items discussed\n above, which is reported as an outflow in net cash (used in) provided by operating activities. When rebuilding whole engines for resale, for\n which the cash inflow upon sale is reported as a cash inflow from investing activities, the Company will transfer modules and parts needed\n (those purchased from third parties as well as parts from engines previously transferred to inventory from leasing equipment and rebuilt as\n discussed above) in the rebuild from inventory to leasing equipment.\n\n\n\n1 FTAI Q3-2024 10-Q pg 13. Emphasis added to indicate the excerpt referenced infra.\n\n\nMUDDY WATERS RESEARCH 61\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 63 of 65\n\n80% of Industry Shop Visit Costs Are Materials, per FTAI\n\n\n\n\n1) Based on management\u2019s current views and estimates, actual results may vary materially\n\nMUDDY WATERS RESEARCH 62\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 64 of 65\n\n FTAI\u2019s Residual Values Are Highly Subjective\n\n\n Willis Lease Finance (WLFC US) states explicitly the way residual value is calculated, giving\n quantitative data instead of a vague \u201cestimated fair value of life limited parts.\u201d\n\n\n\n Below: From Willis Lease Finance 10-K 2023, Pg. 25.\n\n\n \u201cWe generally depreciate engines on a straight-line\n basis over 15 years to a 55% residual value.\u201d\n\n\n\n\nMUDDY WATERS RESEARCH 63\n\f Case 1:25-cv-00541-JAV Document 70-1 Filed 11/20/25 Page 65 of 65\n\n Small Differences in Residual Value and Useful Life Can Have\n Large Effects on Transfer-In Values to Inventory\n\n Carrying Values Carrying Values\n $4.5m Engine Purchase Assumptions $4.5m Engine Purchase Assumptions\n Years 1-5 Years 1-5\n\n T=0 4,500 Useful life 6 T=0 4,500 Useful life 10\n\n Residual\n T=1 3,875 ~17% T=1 4,095 Residual value 10%\n value\n\n Residual Residual value\n T =2 3,250 750 T =2 3,690 450\n value $ $\n\n Depreciation Depreciation\n T=3 2,625 625 T=3 3,285 405\n p.a. p.a.\n\n T =4 2,000 T =4 2,880\n\n\n T=5 1,375 T=5 2,475\n\n\n\n Note this is an illustrative example. The difference is a ~$1.1m per engine increase in the carrying value of Inventory that\n will be transferred from Leasing Equipment to Inventory, and eventually the same increase in COGS to hit the income\n statement. In the YTD 2024 period, FTAI transferred 50 narrowbody engines from Leasing to Inventory.\n\nMUDDY WATERS RESEARCH 64\n\f","ocr_status":1,"date_upload":"2026-05-12T04:15:15.214318-07:00","document_number":"70","attachment_number":1,"pacer_doc_id":"127038602945","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit A - Muddy Waters Report","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874402/","id":478874402,"tags":[],"absolute_url":"/docket/69558488/70/2/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.391021-07:00","date_modified":"2026-05-14T07:10:30.960366-07:00","sha1":"55f33deb7a53a8c7b34d628178c2e4efa3571bd5","page_count":48,"file_size":5450611,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.2.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.2.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 1 of 48\n\n\n\n\n Exhibit B\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 2 of 48\n\n SNOWCAP\n\n\n\n\nFTAI Aviation (Nasdaq:FTAI)\n\nSHORT\n\n29 January 2025\n\n\n\n\n 1\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 3 of 48\n\n SNOWCAP\nImportant Disclaimer\nThis presentation is for discussion and informational purposes only. The views expressed herein represent the opinions of Snowcap and its affiliates (collectively, \u201cSnowcap\u201d, \u201cwe\u201d, \u201cus\u201d, or \u201cours\u201d) as of the\ndate hereof. Snowcap reserves the right to change or modify any of its opinions expressed herein at any time and for any reason and expressly disclaims any obligation to correct, update or revise the\ninformation contained herein or to otherwise provide any additional materials. This presentation and its contents are not intended to be and do not constitute or contain any financial product advice.\nInvestors should seek their own financial, legal and tax advice in respect of any decision regarding any securities discussed herein. You should do your own research and due diligence before making any\ninvestment decisions, including with respect to the securities discussed herein. We have a short interest in FTAI\u2019s securities and therefore stand to realize significant gains on our\ninvestment in the event that the price of such securities declines. Depending on market conditions, we may exit our position at any time for any reason.\n\nAll of the information contained herein is based on publicly available information with respect to FTAI Aviation (\u201cFTAI\u201d or the \u201ccompany\u201d), including public filings made by the company and other sources,\nas well as Snowcap\u2019s analysis of such publicly available information. Snowcap has relied upon and assumed, without independent verification, the accuracy and completeness of all data and information\navailable from public sources, and no representation or warranty is made that any such data or information is accurate. Snowcap recognises that there may be confidential or otherwise non-public\ninformation with respect to the company that could alter the opinions of Snowcap were such information known. No representation, warranty or undertaking, express or implied, is given as to the reliability,\naccuracy, fairness or completeness of the information or opinions contained herein, and Snowcap and each of its directors, officers, employees, representatives and agents expressly disclaim any liability\nwhich may arise from this presentation and any errors contained herein and/or omissions here from or from any use of the contents of this presentation.\n\nExcept for the historical information contained herein, the information and opinions included in this presentation constitute forward-looking statements, including estimates and projections prepared with\nrespect to, among other things, the company\u2019s anticipated operating performance, the value of the company\u2019s securities, debt or any related financial instruments that are based upon or relate to the value\nof securities of the company (collectively, \u201ccompany securities\u201d), general economic and market conditions and other future events. You should be aware that all forward-looking statements, estimates and\nprojections are inherently uncertain and subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. Actual results may\ndiffer materially from the information contained herein due to reasons that may or may not be foreseeable. There can be no assurance that the company securities will trade at the prices that may be implied\nherein, and there can be no assurance that any opinion or assumption herein is, or will be proven, correct.\n\nThis presentation and any opinions expressed herein should in no way be viewed as advice on the merits of any investment decision with respect to the company, company securities or any transaction.\nThis presentation is not (and may not be construed to be) legal, tax, investment, financial or other advice. Each recipient should consult their own legal counsel and tax and financial advisers as to legal and\nother matters concerning the information contained herein. This presentation does not purport to be all-inclusive or to contain all of the information that may be relevant to an evaluation of the company,\ncompany securities or the matters described herein. This presentation does not constitute (and may not be construed to be) a solicitation or offer Snowcap or any of its directors, officers, employees,\nrepresentatives or agents to buy or sell any company securities or securities of any other person in any jurisdiction. This presentation does not constitute financial promotion, investment advice or an\ninducement or encouragement to participate in any product, offering or investment or to enter into any agreement with the recipient. No agreement, commitment, understanding or other legal relationship\nexists or may be deemed to exist between or among Snowcap and any other person by virtue of furnishing this presentation. No representation or warranty is made that Snowcap\u2019s investment processes or\ninvestment objectives will or are likely to be achieved or successful or that Snowcap\u2019s investments will make any profit or will not sustain losses. Past performance is not indicative of future results.\nIn no event will we be liable for any direct or indirect trading losses caused by any information available on this presentation. Think critically about our opinions and do your own research and analysis\nbefore making any investment decisions. We are not registered as an investment advisor in any jurisdiction. By downloading, reading or otherwise using this presentation, you agree to do your own research\nand due diligence before making any investment decision with respect to securities discussed herein, and by doing so, you represent to us that you have sufficient investment sophistication to critically\nassess the information, analysis and opinions in this presentation. You should seek the advice of a security professional regarding your stock transactions. The value of any investment or income may go\ndown as well as up, and investors may not get back the full (or any) amount invested. Past performance is not necessarily a guide to future performance. Neither Snowcap nor any of its principals or agents\naccept any liability for any loss (including investment loss) or damage arising out of the use of all or any of our presentations.\n\nAs of the publication date of this presentation, the Snowcap (possibly along with or through our members, partners, affiliates, employees, and/or consultants) along with our clients and/or investors has a\nshort position in FTAI, and therefore stands to realize significant gains in the event that the price of FTAI\u2019s stock herein declines. Snowcap also reserves the right to take any actions with respect to its\ninvestments in the company as it may deem appropriate. Following publication of this report, we intend to continue transacting in the securities covered therein, and we may be long, short, or neutral at\nany time hereafter regardless of our initial opinion. We can and will trade our underlying position, including exiting in whole or in part, at any time for any reason, including market conditions and risk\nmanagement. You should not assume any minimum holding period.\n\nSnowcap has not sought or obtained consent from any third party to use any statements or information contained herein. Any such statements or information should not be viewed as indicating the support\nof such third party for the views expressed herein. All trademarks and trade names used herein are the exclusive property of their respective owners.\n\n 2\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 4 of 48\n\n SNOWCAP\nContents\n\n1. Egregiously High Inventory Values Suggest FTAI has Inflated its\n Aerospace EBITDA\n\n2. We Estimate ~50% of Aerospace EBITDA is Repackaged One-off\n Covid Trading Gains from FTAI\u2019s Leasing Business\n\n3. Evidence Suggests FTAI has Misrepresented its Aerospace\n Business Model to Investors\n o Former FTAI Executive Says No Third-Party Module Swaps at\n Montreal\n o TAM 8x Smaller than Claimed\n4. Where is FTAI\u2019s Cash Flow?\n o FTAI Under-Reports Maintenance Capex\n5. Selective Environmental Claims\n\n\n\n 3\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 5 of 48\n\n SNOWCAP\nExecutive Summary\n \u2022 We are short FTAI Aviation (\u201cFTAI\u201d or \u201cthe Company\u201d). We agree with many of the conclusions of the Muddy\n Waters report published on 15 January, and today we are sharing new findings from our own 3-month\n investigation into FTAI.\n\n \u2022 As part of our investigation, we spoke to former FTAI Executives, industry experts, and competitors\n who all seemed equally confounded by the accounting and public disclosures of FTAI\u2019s Aerospace\n Segment. Based on our findings, we are led to believe that FTAI\u2019s Aerospace Segment is in substance\n an elaborate fabrication.\n\n \u2022 Specifically, FTAI\u2019s supposed Aerospace business model seems illusory; a former FTAI executive told us\n that FTAI is \u201cnot really\u201d performing 3rd party module swaps at its key facility \u201cno matter what the reporting\n says\u201d! And, by our estimate, as much as 50% of the Segment\u2019s profits are just repackaged, one-off\n Covid gains from FTAI\u2019s leasing business. FTAI\u2019s inventories also look egregiously overvalued, suggesting that\n the Company may have inflated its Aerospace profits by marking up the value of older engines it\n receives as payment.\n\n \u2022 For context, aircraft and engine lessors typically trade on the book value of their assets. Yet FTAI trades at 87x\n book because it has convinced investors to value it at a premium MRO multiple of its reported EBITDA1. We\n believe FTAI\u2019s EBTIDA is at best meaningless, and at worst, materially inflated. Symptomatic of this, FTAI\n appears to be generating much less underlying cash flow than investors have been led to believe.\n All considered, we believe the potential downside in FTAI\u2019s stock may be significant.\n\n \u2022 Disclaimer: Snowcap have a short position in FTAI. As such, we have a vested interest in the price of FTAI\u2019s stock declining. We\n can and will trade our underlying position, including exiting in whole or in part, at any time for any reason.\n\n\n1 FTAI\u2019s Aerospace Segment trades at an implied 22x Run-rate EBITDA - a premium to MRO peers such as SARO, MTX and AIR.\n\n 4\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 6 of 48\n\n SNOWCAP\nSnowcap\u2019s New Findings\n\n Muddy Waters\u2019 Key Allegations Snowcap Additional Findings\n\n\n We believe:\n \u25aa FTAI has inflated its Aerospace EBITDA\n via inventory accounting games\n \u2022 FTAI misleads investors by presenting \u25aa As much as 50% of FTAI\u2019s Aerospace\n whole engine sales as individual module EBITDA is from one-off Gains generated\n sales from buying Leasing engines at bargain\n \u2022 FTAI is Inflating Aerospace products prices during Covid\n EBITDA by over-depreciating engines in \u25aa FTAI has mislead investors about its\n leasing segment Aerospace business model and TAM\n \u2022 FTAI is engaging in channel stuffing\n \u25aa Symptomatic of the Company inflating its\n profits, FTAI appears to be generating\n much less underlying cash flow than\n investors likely believe\n\n\n\n\n 5\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 7 of 48\n\n SNOWCAP\nAircraft and Engine Lessors Typically Trade on Book\nValue\n \u2022 Even following FTAI\u2019s recent share price slump, the stock trades at a massive premium to other lessors on a\n price-to-book basis \u2013 signalling investor belief that it is more than just a leasing business.\n\n Aircraft and Engine Lessors \u2013 Price/Book\n\n 86.6x\n\n\n\n\n 2.4x 1.1x 0.7x 0.9x 0.6x\n FTAI WLFC AER AL BOC Aviation China Aircraft\n Leasing\n Source: CapitalIQ as of 28/01/25\n\n 6\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 8 of 48\n\n SNOWCAP\nFormer Executives and Competitors are Confounded\nby FTAI\u2019s Accounting and Disclosures\n\n\n\n\n 7\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 9 of 48\n\n SNOWCAP\n\n\n\n\n1. Egregiously High Inventory Values\n Suggest FTAI has Inflated its\n Aerospace Profits\n\n\n\n\n 8\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 10 of 48\n\n SNOWCAP\nFTAI\u2019s Inventories Appear to be 50% More Expensive\nPer Module than its COGs\n \u2022 Indicative that FTAI has inflated its Aerospace profits, the Company\u2019s inventories appear to be significantly\n overvalued.\n \u2022 As of Q1 2024, we calculate that FTAI\u2019s inventories had an average book value of $1.54 million per CFM56\n module1. In the same quarter, based on detailed commentary provided in FTAI\u2019s earnings call, we estimate that\n the modules sold by FTAI\u2019s Aerospace Segment had an average book value of just $1.01 million2.\n\n\n\n\n +52%\n\n\n\n\n1 This has since become difficult to calculate due to the addition of large numbers of V2500 engines to FTAI\u2019s inventories. See appendix for calculation.\n2 See appendix for calculation.\n\n 9\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 11 of 48\n\n SNOWCAP\nThis Seems Inexplicable, Suggesting FTAI has\nInflated its Aerospace Profits\n \u2022 This makes no sense. Because many of FTAI\u2019s inventories are run-out and under repair, we would expect them\n to have a lower book value than the modules FTAI sold. Not higher.\n \u2022 The difference is even more inexplicable considering that FTAI\u2019s Aerospace sales have supposedly contained a\n higher proportion of more expensive modules in recent periods1. This appears to be supported by FTAI\u2019s listed\n for sale inventories, which show higher numbers of low value modules available.\n \u2022 We think either FTAI has over-valued old modules that it receives in exchange sales, or it is understating the\n cost of modules it has sold.\n\nFTAI Module Store \u2013 Available Modules. Inventories Appear to Contain Mostly Low Value Modules\n # of Modules # %\n Cores 6 13%\n LPTs 19 40%\n Fans 22 47%\n Total 47 100%\n Source: FTAI Module Store\n\n\n \u201cSo fans and boosters and HPTs are kind of a dime a dozen right now, so\n there's not much premium on them. However, a serviceable core could easily run\n at 15 to 20% upside in itself\u201d.\n Former FTAI Executive 1\n\n\n\n1 CFM56 engines are comprised of 3 modules; a core, an LPT and a fan. Core modules are the most expensive. Fans are the least. In Q1-24, FTAI said it generated\n\n\u201cabout $600,000 per module sale or exchange\u201d vs $500,000 average per module in previous quarters (Earnings Call Q4-23).\n 10\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 12 of 48\n\n SNOWCAP\nFTAI\u2019s Inflated Inventories are Concerning Given the\nSeemingly High Level of Accounting Discretion FTAI\nHas Over its Aerospace Profits\n\n\n\n\n 11\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 13 of 48\n\n SNOWCAP\nAccounting Issue 1: FTAI\u2019s Aerospace Profits are\nPredicated on the Valuation FTAI Ascribes to Old\nEngines\n \u2022 80% of FTAI\u2019s Aerospace sales are exchange sales in which FTAI receives a customer\u2019s old, run-out engine as\n 00partial payment for a new one1.\n \u2022 Based on comments made by an FTAI executive at a 2023 investor day2, our understanding is that FTAI ascribes\n a value or \u201csales credit\u201d to these old engines and books this as revenue. By our calculation, based on the\n illustrative example provided by management, this sales credit accounts for as much as 80% of the EBITDA for\n an individual exchange sale.\n\n Illustrative Module Swap Economics based on FTAI Management Commentary\n $m\n Cash received 1.75\n Sales credit for old modules 0.80\n Total revenue 2.55\n (-) Cash cost of new modules (1.55)\n EBITDA 1.00\n % of EBITDA from exchange credit 80%\n Source: Snowcap\u2019s interpretation of management\u2019s commentary from Investor Day Presentation June 2023\n\n\n1 Investor Day Presentation June 2023, Page 10\n2 \u201cSo to your question, how are we sourcing the fan for $600,000, that's actually a net exchange number. So the real number, the gross number is 0.9 [million], just for an example.\n\nAnd then the credit we give back to the customer for their module, which has value to us, is $300,000, so that gets you to the $600,000.\u2026What's the gross number for the LPT? For\na runout module, it would be about the same with the 5,000 [cycles]. It's about $500,000 total, about $0.5 million.\u201d \u2013 FTAI Executive, June 2023 Investor Day Transcript.\n 12\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 14 of 48\n\n SNOWCAP\nAccounting Issue 2: FTAI has Significant Discretion\nOver How It Allocates Costs to Sales vs Inventories\n \u2022 FTAI\u2019s Head of Engine Leasing recently explained at a conference that FTAI allocates the costs of its engines\n across each of the 3 individual modules in them. These modules are then interchanged with other engines and\n or sold separately.\n \u2022 Not only is this arrangement complex we believe it affords FTAI significant discretion over how it allocates costs\n to individual sales. One competitor even publicly joked that this must require FTAI to \u201cgive its accountants\n Valium.\u201d1\n Illustrative Potential Accounting Flaw (Snowcap)\n Note: Numbers are illustrative only\n\n\n\n\n1 Aviation Weekly, \u201cOverhaul Alternatives \u2018Not the Holy Grail,\u2019 Says MTU Leasing Director, June 2024\n\n 13\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 15 of 48\n\n SNOWCAP\nAccounting Issue 3: We Suspect Lower Margin, Repair-\nIntensive Modules Naturally Accumulate in FTAI\u2019s\nInventories\n \u2022 Some of the modules in FTAI\u2019s inventories require heavy repair work. Others (with cycles remaining) \u2013 can be\n resold with little to no work required1. Because of this, we suspect that the margins for the latter are much\n higher.\n \u2022 Our concern is that FTAI\u2019s Aerospace sales contain a disproportionate volume of the quick, high margin module\n flip sales while the slow, low margin repair sales have ended up either accumulating in FTAI\u2019s inventories or\n being transferred to its leasing business at cost.\n Illustrative Potential Accounting Flaw (Snowcap)\n Note: Numbers are illustrative only\n\n\n\n\n1\n \"Say the core has 8,000 cycles and the other two components have zero, it can take out the core to a minor shop and then sell that module serviceable rather\nthan have to do a full induction on all three modules or the engine as a whole. So that module aspect can be quite profitable\" \u2013 Former FTAI Executive [1]\n 14\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 16 of 48\n\n SNOWCAP\nFTAI Can Wash Out Excess Inventory Costs Through\nDepreciation Charges in its Leasing Business\n \u2022 Investors might reason that if FTAI\u2019s inventories were overvalued, at some point this will impact the Aerospace\n Segment\u2019s profits. But one of the points Muddy Waters makes well in their report (page 37) is that FTAI\u2019s\n accounting policies allow it to wash out excess inventory costs by simply transferring overvalued inventories to\n is Leasing Business, where the engines are depreciated to their residual value.\n \u2022 In the 9 months to September 2024, supplementary disclosures reveal that FTAI transferred $160m of\n Aerospace inventories to leasing equipment; equivalent to ~50% of total Aerospace inventories at the start of\n the year1.\n\n\n\n\n1 FTAI Q3 2024 10-Q\n\n 15\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 17 of 48\n\n SNOWCAP\nWe Believe FTAI\u2019s Internal Transfer Accounting\nAllows It to Perpetually Inflate Aerospace EBITDA\n Illustrative Potential Flaws with FTAI\u2019s Transfer Accounting1\n\n\n\n\n1\n Source: Snowcap\n 16\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 18 of 48\n\n SNOWCAP\n\n\n\n\n2. We Estimate 50% of Aerospace\n Profits are from One-off Covid\n Trading Gains\n\n\n\n\n 17\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 19 of 48\n\n SNOWCAP\nFTAI Acquired Large Numbers of CFM56 Engines at\nBargain Prices During the Depths of Covid\n \u2022 In late 2020, news outlets reported that FTAI was acquiring large volumes of CFM56 engines \u201cextremely\n distressed prices\u201d; quoted as being 30-40% lower than pre-covid levels. This decision by FTAI was considered\n bold at the time1. But FTAI\u2019s gamble paid off. In the years since, CFM56 engine values have reportedly risen\n more than 50%-100%2, generating a significant windfall for FTAI.\n \u2022 A Former FTAI executive told us that CFM56 engine prices are now at the top of their 15-year cycle.\n\n\n\n\n1 Industry peers described FTAI\u2019s prediction that engine prices would rise in the future to be \u201cwildly ambitious\u201d.\n2 Bloomberg Intelligence, Ishka Global\n\n 18\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 20 of 48\n\n SNOWCAP\nAccording to an FTAI Executive, these \u2018Covid\nEngines\u2019 Provided the \u201cFeedstock\u201d for FTAI\u2019s\nAerospace Business\n \u2022 In a recent podcast, FTAI\u2019s Head of CFM claimed that these Covid engines provided the \u201cseed feedstock\u201d for\n FTAI\u2019s Aerospace Business.\n\n\n\n\n \u201cWe made hay while the sun was shining and we were\n able to get a lot of good assets at a good value that now\n are paying off. A lot of those assets were the seed\n feedstock to feed the modules business, the parts\n business. And so it\u2019s helped us get a head start.\u201d\n FTAI Head of CFM, Aerospace Executive Podcast, September 2023\n\n\n\n\n 19\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 21 of 48\n\n SNOWCAP\nBy Transferring these Engines at Cost, We Think\nFTAI Repackaged One-Off Trading Gains as\nRecurring Aerospace EBITDA\n \u2022 Critically, FTAI transferred the engines at their original cost (less any accumulated depreciation) meaning that\n any change in the market value of the engines since purchase has been captured as EBITDA by the Aerospace\n Segment.\n \u2022 In doing so, we believe FTAI has repackaged these one-off Gain on Sale profits within its supposedly recurring\n Aerospace EBITDA. Had the Company simply booked gains in its Leasing Segment, we suspect investors would\n mostly have disregarded the profits as one-off.\n\n\n\n\n 20\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 22 of 48\n\n SNOWCAP\nA Former FTAI Executive Described the Covid Gains\nas the Primary Driver of FTAI\u2019s Recent Results\n\n \u201cThe results you're seeing right now is probably the [engine selling] activity\n culminating with the favourable or fortunate buy-side through COVID\u2026 they\n bought well for 18 months, held it for six to 12 months, and then the\n last 12 to 18 months has been the gain on sale of those assets in the\n height of the market.\u201d\n \u201cSo if you had an engine for 7500 cycles, you bought it [during Covid] for $4\n million and you sat on it for 2 years, you'd be sitting on an $8 million asset.\n So your whole cost would be a 100% return or a $4 million upside. That's on a\n one engine basis. So you do that across a fleet of whatever they\n bought through Covid, call it a hundred engines. You can see why\n the EBITDA a gains have been so excessively high.\n \u201cEverybody jumping on the bandwagon by seeing the EBITDA,\n which is in my view from an analytics perspective, kind of inflated\u201d\n Former FTAI Executive 1\n\n\n 21\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 23 of 48\n\n SNOWCAP\nWe Estimate these Covid Gains May Account for 50%\nof FTAI\u2019s Aerospace Profits\n \u2022 Irrespective of whether FTAI has subsequently performed additional work on these engines, we believe these\n Covid gains have made a material contribution to FTAI\u2019s Aerospace profits in recent periods.\n \u2022 Between Q1 2023, and Q3 2024, FTAI sold a total of 79 engines in its Leasing Business, for a total Gain on Sale\n of $116 million; or $1.5million per engine (assuming airframe sales were made at book1).\n \u2022 Using the average Gain on Sale per engine in FTAI\u2019s Leasing Business as a proxy, we estimate these Covid gains\n may have contributed as much as 49% of the Aerospace Segment\u2019s total profits since Q1 2023.\n\n Estimated Contribution of Covid Trading Gains to Aerospace EBITDA2\n\n\n\n\n1\n In 2021, FTAI\u2019s CEO claimed that the Company often acquires engines by acquiring aircraft and scrapping the airframe (JP Morgan Virtual Industrial Conference Transcript\nMarch 2021). We assume that FTAI\u2019s airframe sales are mostly these scrap sale transactions.\n2 Snowcap estimate, Company Filings.\n\n 22\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 24 of 48\n\n SNOWCAP\n\n\n\n\n3. Evidence Suggests FTAI has\n Misrepresented its Aerospace\n Business Model to Investors\n\n\n\n\n 23\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 25 of 48\n\n SNOWCAP\n\n\u2022 Comments by a former FTAI executive lead us to believe that FTAI is \u201cnot\n really\u201d performing 3rd party module swaps as a service. At best, we\n believe the Company is just selling modules/engines.\n\n\u2022 We suspect that most of FTAI\u2019s module sales are whole engine sales,\n due to the small number of inventories listed for sale as modules on FTAI\u2019s\n website \u2013 corroborating Muddy Waters\u2019 findings.\n\n\u2022 FTAI\u2019s purported growth seems illusory; at a group level, the # of\n engine equivalents sold by FTAI has been stagnant since Q1 2023.\n\n\u2022 A notable change in FTAI\u2019s press release language leads us to suspect that\n FTAI\u2019s recent module guidance numbers may include modules\n transferred to its leasing business, not just 3rd party sales.\n\n\u2022 FTAI\u2019s self-proclaimed TAM contradicts its own purported business model.\n We estimate FTAI\u2019s TAM is a fraction of the size claimed.\n\n\n 24\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 26 of 48\n\n SNOWCAP\nOne of the Key Investor Beliefs Perpetuated by FTAI\nis that its Aerospace Segment is Like a \u201c3rd Party\nMRO\u201d Service1\n \u2022 We think investors are led to believe that FTAI provides \u201cmodular shop visits\u201d2 to third parties at its facilities\n Montreal & Miami. This underpins FTAI\u2019s characterization of its Aerospace Segment as a service3 business with\n \u201csticky\u201d 4 and recurring revenues.\n\n FTAI Says it Has 50 Customers in its Montreal Facility\n\n\n\n\n Source: Earnings Call Q2 2024\n\n FTAI Tells Investors that its Aerospace Segment is \u201cProviding a Service to Airlines\u201d.\n\n\n\n\n Source: Earnings Call March 2023\n\n\n\n1 Wolfe Research\n2 FTAI Investor Day Presentation June 2023\n3\u201cWe also have a service component. As I said, we\u2019re providing a service to airlines\u201d \u2013 FTAI CEO, Earnings Call, March 2023\n4 FTAI Investor Day Presentation June 2023, Page 13\n\n 25\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 27 of 48\n\n SNOWCAP\nBut a Former FTAI Executive Told Us FTAI is \u201cNot\nReally\u201d Performing 3rd Party Module Swaps in\nMontreal, \u201cNo Matter What the Reporting Says\u201d\n \u201c[The Montreal Facility] is not really generating third party business no\n matter what the reporting says\u2026 There is a very, very low amount of truly\n external [business] in the sense of [FTAI] selling module services to\n someone else.\u201d\n\n You can see on the, in the public domain that a lot of [the Aerospace Segment\u2019s\n revenues] are now declared as third party. So I'm just, I'm just kind of questioning, or I\n would be careful with this. Third party can [mean] a lot of things, right? It's not that\n there's a long list of airlines that say, oh, I'm sending now my work to [FTAI\u2019s] shop\n instead of MTU, instead of Delta Tech, TechOps instead of Luhan and they do it and\n now suddenly FTAI is making so much money. That's not really how it is. It's, it's just,\n if, you know, [FTAI] sell the module after [they] finished it or if [they] lease it out to an\n airline, then I guess it's declared as third party. But it's, it's definitely not third\n party MRO business. That's not, that's not the case.\n Former FTAI Executive 2\n\n\n\n\n 26\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 28 of 48\n\n SNOWCAP\nThe Former FTAI Executive Seemingly Disputed\nFTAI\u2019s Claim That its Module Swaps Can Offer an\nAlternative to a Traditional Shop Visit\n\n \u201cI've yet to see how FTAI would turn this into\n something they can offer to the market as a standalone\n service. For me, module swaps only makes sense in the context\n of fleet management. And this is why airlines have been doing\n it, but it's not something that you would really talk\n about much in the MRO industry because it's not\n something you do, you don't take one engine and send\n it to someone that says do a module swap instead of an\n overhaul.\u201d\n Former FTAI Executive 2\n\n\n\n\n 27\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 29 of 48\n\n SNOWCAP\nJust 17% of FTAI\u2019s Inventories are Listed for Sale as\nModules on its Website, Supporting MW\u2019s Claim that\nMost Modules Are Sold as Whole Engines\n \u2022 Further supporting the suspicion that most of FTAI\u2019s module sales are whole engines; we counted just 47\n modules for sale on FTAI\u2019s website, which equates to 17% of FTAI\u2019s CFM56 inventories as of the most recent\n quarter, and 10% of total inventories including V2500 engines1.\n\n FTAI Module Store \u2013 Available Modules\n\n\n\n\n Source: FTAI Module Store\n\n\n\n\n1 FTAI reports to have 271 CFM56 modules in its inventories as of Q3-24. We counted 47 inventories as listed as for sale on FTAI\u2019s Module Store. As of Q3-24, we calculate FTAI\n\nhad 61 V2500 engines in its inventories, which for the purposes of this argument we have counted as 3 module equivalents per engine.\n 28\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 30 of 48\n\n SNOWCAP\nFTAI Appears to have the Same # of Modules for Sale\non its Website as it did 3 Years Ago!\n\n\n\n\n Source: FTAI Presentation February 2022\n\n\n 29\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 31 of 48\n\n SNOWCAP\nRecent Change in Press Release Language Leads us to\nSuspect that FTAI\u2019s Guidance Module #s may Include\nModules Transferred to its Leasing Business\n \u2022 Despite sell-side analysts describing it as the #1 driver of FTAI\u2019s stock, in Q3 2024 FTAI suddenly stopped\n reporting the # of module sales each quarter.\n \u2022 Look closely and investors will notice that in a recent press release FTAI guided that it would \u201cproduce\u201d 100\n modules per quarter. Not sell them. We view the change in language as highly suspect. By guiding in\n terms of production, we think FTAI may be baking in internal transfers to its Leasing Business.\n\n FTAI Historically Referred to Modules \u201cSold\u201d in Press Releases\n\n\n\n\n Source: FTAI Press Release February 2024\n\n But in its Most Recent Press Release, FTAI Guided in Terms of Modules \u201cProduced\u201d\n\n\n\n\n Source: FTAI Press Release December 2024\n\n 30\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 32 of 48\n\n SNOWCAP\nFlat # of Engine Sales Contradict FTAI\u2019s Growth\nNarrative\n \u2022 Investors are led to believe that FTAI\u2019s Aerospace sales have grown rapidly because FTAI reports growing\n numbers of individual module sales.\n \u2022 But if a significant portion of these are just whole engines, we believe this growth is only illusory. At a group\n level, the number of engine equivalents sold by FTAI has remained flat since Q4 2022.\n\n\n\n\n Source: Company Filings. 92 module sales assumed in Q3\u201924 as per analyst estimates.\n\n\n\n 31\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 33 of 48\n\n SNOWCAP\nFTAI\u2019s Self-Proclaimed TAM Implies 3 Module Sales\nper Shop Visit, Contradicting its Own Purported\nBusiness Model\n \u2022 FTAI tells investors that the Total Addressable Market (\u201cTAM\u201d) for its aerospace segment is 9,000 modules a\n year (# of global shop visits [3000] x number of modules in an engine [3]). In other words, FTAI\u2019s self-\n proclaimed TAM numbers imply that it sells 3 modules for every shop visit.\n FTAI\u2019s TAM Estimates Assume 3 Module Sales for Each Shop Visit\n\n\n\n\n Source: Q2-2024 earnings call.\n\n \u2022 But this straight up contradicts FTAIs purported business model in which it supposedly targets replacing \u201c1 to\n 2 modules\u201d for each shop visit \u2013 according to management1. We think this supports the thesis that FTAI\u2019s\n Aerospace business is mostly selling whole engines rather than individual modules.\n\n\n\n\n1 \u201cSo when you think about a heavy shop visit, right, you\u2019re replacing 1 or 2 modules, right? So that\u2019s kind of the rule of thumb is 1 to 2 modules is what you\u2019re targeting\n\nand replacing. So let\u2019s say 2 is per shop visit that you\u2019re going to replace on each heavy [shop visit]. So for us to address a market of 3,000, you would need 6,000 modules to\nbe able to, more or less to maintain that.\u201d \u2013 FTAI Executive, Investor Day Transcript, June 2023\n 32\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 34 of 48\n\n SNOWCAP\nIn 2021, FTAI\u2019s CEO Claimed FTAI\u2019s Module Swaps\nAre \u201cBest Suited\u201d to the 20% of Shop Visits That\nRequire Just 1 Module Replacing\n \u2022 In 2021, FTAI\u2019s CEO claimed that its module swaps are best suited to the 20% of global third-party shop visits\n that only require 1 module (of 3) replacing. FTAI\u2019s CEO further drilled this point home more recently; stating\n that there are \u201ctremendous efficiencies\u201d in swapping modules if \u201conly one section of the engine needs\n maintenance\u201d.\n\n 20% of Shop Visits That Only Require Work on One Module are \u201cPerfect Candidates\u201d for FTAI\n\n\n\n\n Source: Earnings Call April 2021\n\n Tremendous Efficiencies in Module Swaps if Only One Section Needs Maintenance\n\n\n\n\n Source: Earnings Call March 2023\n\n\n\n\n 33\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 35 of 48\n\n SNOWCAP\nWe Estimate FTAI\u2019s Aerospace TAM is 8x Smaller\nThan it Claims\n \u2022 Even if we assume that FTAI sells 2 modules for each of the 20% of shop visits that only require 1 module to\n be repaired, we estimate that FTAI\u2019s TAM is a fraction of the size claimed.\n \u2022 Using this estimate for TAM, FTAI\u2019s 2026 guidance implies a market share of 42%.\n\n TAM Calculation\n FTAI Snowcap\n Global CFM56 Shop Visits 3,000 3,000\n % Addressable by FTAI's Module Offering 100% 20%\n Shop Visits Addressable by FTAI's Module Offering 3,000 600\n Modules per Shop Visit 3 2\n TAM (Modules) 9,000 1,200\n 2026 Guidance 500 500\n % of TAM 6% 42%\n Source: Company Filings\n\n\n\n\n 34\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 36 of 48\n\n SNOWCAP\n\n\n\n\n4.Where is FTAI\u2019s Cash Flow?\n\n\n\n\n 35\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 37 of 48\n\n SNOWCAP\nWhere is FTAI\u2019s Cash Flow?\n \u2022 FTAI tells investors that its reported EBITDA numbers (less interest and maintenance capex) are a proxy for\n the free cash flow of its business1. Based on this, investors are led to believe that FTAI will generate significant\n free cash flow in the coming years.\n \u2022 In the past 12 months, FTAI reported $772 million of EBITDA. Yet in the same period, we calculate that FTAI\u2019s\n distributable cash flow was just $145 million. This is despite making several generous adjustments in FTAI\u2019s\n favour2 including giving full credit to its ballooning inventory balance and estimated growth capex.\n\n Distributable Cash Flow \u2013 Snowcap\n $m LTM\n Cash from Operations (134)\n Cash from Investing (625)\n Add Backs\n (+) Business Acquisitions inc. Minorities 173\n (+) Cash Termination Fee Paid to Affiliate 150\n (+) Change in Net Leasing Assets (Growth Capex Proxy) 261\n (+) Addition to Inventories (Net of Acquisitions) 159\n (+) Prepaid Maintenance Not Yet Incurred 130\n (+) Financing Receivable for Failed SLB 64\n Preferred Dividends\n (-) Preferred Dividends (33)\n Distributable Cash Flow (Snowcap) 145\n Common Dividends 121\n Coverage Ratio 1.2x\n Reported EBITDA 772\n Source: Company Filings\n\n1 \u201cSo we're going to maintain that leverage and that rating. In terms of free cash flow, what we do is we take the EBITDA, subtract corporate and interest, and then we use a number\n\nfor maintenance CapEx\u201d- FTAI CEO, Earnings Call Q2 2024\n2 Change in Net Leasing Assets factors in transfer of assets to held for sale.\n\nNote: Growth Capex estimate implies cost of ~$5 million per additional engine in FTAI\u2019s leasing fleet.\n 36\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 38 of 48\n\n SNOWCAP\nFTAI\u2019s Cash Flow vs EBITDA\n LTM ($m)1\n\n\n 772\n\n\n\n\n 465\n\n\n\n\n 145\n\n\n\n\n Adjusted EBITDA Reported FCF (FTAI) Distributable Cash Flow\n (Snowcap)\n\n\n1 Note: FTAI FCF calculated as EBITDA less interest less reported maintenance capex. Snowcap calculation for Distributable Cash Flow as per the previous page.\n\n 37\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 39 of 48\n\n SNOWCAP\nWe believe FTAI Under-Reports Maintenance Capex\nby Excluding Cost of Replacing Sold Engines\n \u2022 FTAI tells investors to calculate Free Cash Flow by deducting its self-reported maintenance capex (and interest)\n from its EBITDA. In FY23, FTAI reported $60 million of maintenance capex, which FTAI\u2019s CEO claims is \u201cwhat\n [FTAI] would need to invest each year to maintain the engines so they can fly forever at infinitum\u201d1.\n \u2022 But we believe FTAI\u2019s reported maintenance capex numbers are grossly misleading because they\n seemingly only include the costs of repair work undertaken on FTAI\u2019s leasing engines.\n\n\n Source: FTAI FY2023 Presentation\n\n \u2022 The problem is that FTAI routinely sells large numbers of its engines in its leasing fleet, and or transfers them\n to its Aerospace business. In doing so, FTAI avoids incurring maintenance expenditures on these run-out\n engines.\n \u2022 But the maintenance saving is only superficial since FTAI must replace the sold engines by acquiring new ones\n to maintain the same level of earnings. Yet absurdly, it seems that FTAI does not include these replacement\n acquisition costs in its reported maintenance capital expenditures.\n\n\n\n\n1 \u201cSo we're going to maintain that leverage and that rating. In terms of free cash flow, what we do is we take the EBITDA, subtract corporate and interest, and then we use a number\n\nfor maintenance CapEx, what we would use -- what we need to invest each year to maintain the engines so that they can fly forever at infinitum. And that number tends to be\nbetween $60 million and $80 million a year of maintenance CapEx.\u201d - FTAI CEO, Earnings Call Q2 2024\n\n 38\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 40 of 48\n\n SNOWCAP\nProxy Calculation Historically Used by FTAI Suggests\nMaintenance Capex May be 2x Higher Than Reported\n \u2022 Based on a proxy calculation1 which FTAI itself historically used to estimate its maintenance capex (until Q4\n 2022), we estimate that FTAI\u2019s maintenance capex in FY23 was as much as ~$90-130 million, or 1.5-2x higher\n than reported by the Company.\n\n Snowcap Maintenance Capex Calculation\n FTAI FTAI\n Snowcap\n Reported Proxy\n Average # of Engines 250 231\n Shop Visit Interval (yrs) 5 4\n Average Cost per Visit ($m) 2.75 3.5\n Utilization (%) 65% 65%\n Maintenance Capex 60 89 131\n % of Leasing EBITDA (ex GoS) 15% 23% 34%\n Source: Snowcap, Company Filings\n In our sensitivity calculation we assume $3.5m average cost per shop visit to account for inflation in module prices since\n FTAI\u2019s Proxy estimates in Q4 2022\n\n\n\n\n1\n FTAI Q4 2022 Presentation, Page 13\n 39\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 41 of 48\n\n SNOWCAP\n\n\n\n\n5. Selective Environmental Claims\n\n\n\n\n 40\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 42 of 48\n\n SNOWCAP\nFTAI\u2019s Supposed Shop Visit Emissions Savings Are\nDwarfed by the Environmental Impact of Extending\nthe Lives of Older, Less Efficient Engines\n \u2022 FTAI claims that its business is sustainable because its module swaps supposedly save 84% of the carbon\n emissions incurred by a traditional shop visit1. But FTAI\u2019s Aerospace business model is seemingly predicated\n on extending the life of older generation CFM56 engines, which are ~15% less fuel-efficient than newer LEAP\n models, contributing to higher emissions.\n\n FTAI\u2019s Emissions Savings in Context (Tons of CO2)\n 9,381\n\n\n\n\n 25\n\n Emmissions Savings per Shop Visit Incremental Emissions from CFM56\n engines vs LEAP over 5 Years\n\n1 FTAI ESG. Emissions savings per shop visits calculated as global shop visit emissions (75,000 tons) / global shop visits (3,000) x FTAI purported emissions savings per shop visit\n\n(84%). Incremental emissions estimated as total flight cycles (5,000) x average fuel used per flight (3.61 tonnes) x CO2 emissions per tonne of fuel (3.16 tonnes) x Ton conversion\n(1.1) x fuel efficiency of newer generation LEAP engines (15%).\n 41\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 43 of 48\n\n SNOWCAP\n\n\n\n\n6. Insiders Have Exited\n\n\n\n\n 42\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 44 of 48\n\n SNOWCAP\nIn 2022, FTAI Signed a New External Management\nAgreement with Fortress\n \u2022 When FTAI separated from its infrastructure business (Nasdaq:FIP) in 2022, the Company signed a new\n external management agreement with Fortress Investment Group (\u201cFortress\u201d), which entitled Fortress to 10%\n of FTAI\u2019s net income (\u201cincentive allocation\u201d) plus a management fee, until 2028.\n \u2022 At the same time, FTAI implemented a change in accounting policy that allowed it to book gain on sale profits\n as recurring revenues1. We suspect that the change also facilitated the inclusion of these gains in calculating\n Fortress\u2019 incentive allocation.\n\n Fortress Incentive Allocation\n\n\n\n\n Source: FTAI\n\n Change of Accounting Policy Allowed FTAI to Book Asset Sales in Revenues\n\n\n\n\n Source: FTAI 10K\n\n\n1 In Q3 2022, FTAI changed its accounting policies to state that \u201cthat the sale of aircraft and engines is now and output of our recurring, ordinary activities\u201d.\n\nFollowing the change, FTAI included sales of aircraft and engines in its revenues and COGs, whereas previously the net gain on these sales had been recognised in\nother income.\n 43\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 45 of 48\n\n SNOWCAP\nFTAI Paid $300m to Buy Fortress Out of its This\nAgreement at what Seems Like a High Price\n \u2022 In May 2024, FTAI announced that it had agreed to pay $300 million to effectively cancel this agreement with\n Fortress (\u201cInternalization Payment\u201d)1 .\n \u2022 Even if we give credit to FTAI\u2019s 2026 EBITDA targets, FTAI appears to have overpaid for the internalization.\n The timing also seems odd if Fortress believed in the future growth story.\n\n\n\n\n1 The Internalization Payment was paid 50% in cash and 50% in FTAI shares.\n\nConsensus Estimates from Capital IQ as of 01/07/2024, the quarter-end date for the period in which the Internalization Agreement was announced.\n 44\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 46 of 48\n\n SNOWCAP\nThe Independence of the Board That Approved the\nPayment Seems Questionable\n \u2022 The Internalization Payment was negotiated and approved by a Special Committee, supposedly comprised\n entirely of \u201cindependent and disinterested\u201d directors. Yet basic analysis of FTAI\u2019s board indicates that all of\n these independent directors have either previously worked with \u2013 or are currently working with - FTAI\u2019s CEO\n in roles at other companies.\n\n\n\n\n Source: Snowcap\n\n 45\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 47 of 48\n\n SNOWCAP\nAppendix\n\n Inventory Value per Module\n $m Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 Q3-24\n Inventories 164 193 232 275 317 346 373 491\n # of engines\n CFM56 38 51 65 58 63 75 82 91\n V2500 - - - - - - 35 61\n Other? 1 (1) (1) 2 2\n Total # of engines in inventories 39 50 64 60 65 75 117 152\n CFM56 Module Equivalents (x3) 117 150 192 180 195 225 NA NA\n Inventory value per Module 1.40 1.29 1.21 1.53 1.62 1.54 NA NA\n Source: Company Filings\n\n Cost of Sales per Module Calc. (Q1-2024)\n $m Q1-24 Notes\n Modules Sold 72 Reported\n EBITDA per module 0.6 Transcript\n EBITDA from Module Sales 43.2\n % Margin 35% Transcript\n Module Revenue 123.4\n Revenue per Module 1.71\n COGs % of Revenues 59% Reported\n Module COGs 72.4\n COGs per Module 1.01\n Source: Company Filings, Earnings Call Transcript, Snowcap Calculation\n Note 1: In the Q2 2023 earnings call CEO Joseph Adams stated that 35% was a sustainable margin for the Aerospace Product\n segment.\n\n\n\n\n 46\n\f Case 1:25-cv-00541-JAV Document 70-2 Filed 11/20/25 Page 48 of 48\n\n SNOWCAP\n Alternative Cost of Sales Per Module Calc. (FY2023)\n $m FY 2 0 2 3 Notes\n\n USM Cost of Sa les Ca lc.\n # of USM T ea r dow n s 40 Analys t Es tim ates\n CoS per T ea r dow n 2 .0 Managem ent Com m entary\n USM CoS 8 0 .0\n\n Modu le Cost of Sa les Ca lc.\n A er ospa ce Cost of Sa les 2 8 0 .3 Reported\n (-) USM CoS (8 0 .0 )\n (-) V 2 5 0 0 CoS (1 2 .0 ) Snow cap Es tim ate\n Modu l es CoS 188.3\n (/) # of Modules Sold 178 Reported\n CoS per Modu l e 1.06\nSource: Company Filings, Earnings Call Transcripts, Analyst Reports, Snowcap Calculation\n\n\n\n\n 47\n\f","ocr_status":1,"date_upload":"2026-05-12T04:15:22.000581-07:00","document_number":"70","attachment_number":2,"pacer_doc_id":"127038602946","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit B - Snowcap Report","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874403/","id":478874403,"tags":[],"absolute_url":"/docket/69558488/70/3/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.423973-07:00","date_modified":"2026-05-14T07:09:24.640267-07:00","sha1":"224fe2bbb7d6097ce591d83ace08cdbe9251636e","page_count":18,"file_size":436002,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.3.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.3.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 1 of 18\n\n\n\n\n Exhibit C\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 2 of 18\n\n\n\n\nFTAI Aviation Ltd. NasdaqGS:FTAI\nFQ2 2024 Earnings Call Transcripts\nWednesday, July 24, 2024 12:00 PM GMT\nS&P Global Market Intelligence Estimates\n -FQ2 2024- -FQ3 2024- -FY 2024- -FY 2025-\n\n CONSENSUS ACTUAL SURPRISE CONSENSUS CONSENSUS CONSENSUS\n\n EPS (GAAP) 0.46 (2.26) NM 0.59 1.99 3.36\n\n Revenue (mm) 363.65 443.59 21.98 370.38 1453.26 1678.59\nCurrency: USD\nConsensus as of Jul-22-2024 4:02 PM GMT\n\n\n\n\n - EPS (GAAP) -\n\n CONSENSUS ACTUAL SURPRISE\n\n FQ3 2023 0.41 0.33 (19.51 %)\n\n FQ4 2023 0.43 1.09 153.49 %\n\n FQ1 2024 0.39 0.31 (20.51 %)\n\n FQ2 2024 0.46 (2.26) NM\n\n\n\n\nCOPYRIGHT \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved 1\nspglobal.com/marketintelligence\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 3 of 18\nContents\n\n\n\n\nTable of Contents\n\nCall Participants .................................................................................. 3\nPresentation .................................................................................. 4\nQuestion and Answer .................................................................................. 6\n\n\n\n\nCOPYRIGHT \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved 2\nspglobal.com/marketintelligence\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 4 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\n\nCall Participants\nEXECUTIVES\n\nAlan John Andreini\nInvestor Relations\n\nDavid Moreno\nChief Operating Officer\n\nJoseph P. Adams\nChairman & CEO\n\nANALYSTS\n\nBrandon Robert Oglenski\nBarclays Bank PLC, Research\nDivision\n\nBrian J. Mckenna\nJMP Securities LLC, Research\nDivision\n Stephen Trent\nGiuliano Jude Anderes Bologna Citigroup Inc., Research Division\nCompass Point Research &\nTrading, LLC, Research Division Unknown Analyst\n\nHillary Cacanando\nDeutsche Bank AG, Research\nDivision\n\nJason Thomas Holcomb\nMorgan Stanley, Research Division\n\nJoshua Ward Sullivan\nThe Benchmark Company, LLC,\nResearch Division\n\nKenneth George Herbert\nRBC Capital Markets, Research\nDivision\n\nMyles Alexander Walton\nWolfe Research, LLC\n\nSherif Ehab Elmaghrabi\nBTIG, LLC, Research Division\n\n\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 3\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 5 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\n\nPresentation\nOperator\nLadies and gentlemen, thank you for standing by. Welcome to the Second Quarter 2024 FTAI Aviation's\nEarnings Conference Call. [Operator Instructions] Please be advised that today's conference is being\nrecorded.\n\nI would like now to turn your conference over to Alan Andreini, Investor Relations. Please go ahead.\nAlan John Andreini\nInvestor Relations\nThank you, Michelle. I would like to welcome you all to the FTAI Aviation Second Quarter 2024 Earnings\nCall. Joining me here today are Joe Adams, our Chief Executive Officer; Angela Nam, our Chief Financial\nOfficer; and David Moreno, our Chief Operating Officer.\n\nWe have posted an investor presentation and our press release on our website, which we encourage\nyou to download if you have not already done so. Also, please note that this call is open to the public\nin listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial\nmeasures during the call today, including EBITDA. The reconciliation of those measures to the most\ndirectly comparable GAAP measures can be found in the earnings supplement.\n\nBefore I turn the call over to Joe, I would like to point out that certain statements made today will be\nforward-looking statements, including regarding future earnings. These statements, by their nature, are\nuncertain and may differ materially from actual results. We encourage you to review the disclaimers in\nour press release and investor presentation regarding non-GAAP financial measures and forward-looking\nstatements and to review the risk factors contained in our quarterly report filed with the SEC.\n\nNow I would like to turn the call over to Joe.\nJoseph P. Adams\nChairman & CEO\nThank you, Alan. To start today, I'm pleased to announce our 37th dividend as a public company and our\n52nd consecutive dividend since inception. Dividend of $0.30 per share will be paid on August 20 based on\na shareholder record date of August 12.\n\nNow let's turn to the numbers. The key metric for us is adjusted EBITDA. We continued the year strongly\nwith adjusted EBITDA of $213.9 million in Q2 2024, which is up 30% compared to $164.1 million in Q1 of\nthis year. and up 40% compared to $153.1 million in Q2 of 2023. During the second quarter, the $213.9\nmillion EBITDA number was comprised of $125 million from our Leasing Segment, $91.2 million from our\nAerospace Products segment and negative 2.3% from Corporate and Other.\n\nTurning now to leasing. Leasing had a great quarter, posting approximately $125 million of EBITDA. The\npure leasing component of the $125 million came in at $112 million for Q1 for Q2 versus $98 million\nin Q1 of 2024. Additionally, we sold $59 million book value of assets for a gain of $13.5 million. With\nexceptionally strong demand for assets and the continuation of a robust Northern Hemisphere summer\ntravel season, we now expect to generate $500 million in EBITDA in 2024, which includes $50 million in\ngains on asset sales versus our prior estimate of $475 million.\n\nAerospace Products had yet another excellent quarter with $91.2 million of EBITDA at an overall EBITDA\nmargin of 37%. We're seeing tremendous growth in the aerospace products business in general and feel\ngood about raising our estimates for 2024 EBITDA in aerospace products from our prior estimate of $250\nmillion, up to $325 million to $350 million.\n\nWe also are experiencing expansion in Aerospace Products margins as demand for refurbished modules\nand engines remains very high, while increasing efficiencies at our two CFM56 maintenance facilities\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 4\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 6 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\nin Montreal and Miami is controlling or, in some cases, lowering our costs. Overall, looking ahead, we\nnow expect annual aviation EBITDA for 2024 to be between $825 million to $850 million, not counting\ncorporate and other versus our original estimate of $675 million to $725 million.\n\nAnd finally, about 2 years ago, we first outlined our corporate financial goal of generating in 2026, $1\nbillion of EBITDA, comprised of $500 million from leasing and $500 million from aerospace products. So\nnow that we're halfway through this time period and ahead of plan, we're resetting the target. Our new\ngoal is $1.25 billion of EBITDA in 2026 comprised of $550 million of leasing EBITDA and $700 million of\nAerospace Products EBITDA.\n\nWith that, I'll turn the call back to Alan.\nAlan John Andreini\nInvestor Relations\nThank you, Joe. Michelle, you may now open the call to Q&A.\n\n\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 5\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 7 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\n\nQuestion and Answer\nOperator\nThe first question comes from Jason Holcomb with Morgan Stanley.\nJason Thomas Holcomb\nMorgan Stanley, Research Division\nWithin Aerospace Products, you've historically mentioned that you target EBITDA margin of around 35%.\nThe last couple of quarters, we've seen you surpass that target. It would be great if you could talk about\nwhere you see margins going from here as you continue to grow and develop the business. Also, it would\nbe great if you could speak to how that margin path may differ between both the CFM56 and the V2500\nengines.\nJoseph P. Adams\nChairman & CEO\nGreat. Thanks for the question. Yes, we are -- as I mentioned in the remarks, we are seeing margins\ntrending up, and it's fairly basic. It's -- our revenues are going up and our expenses are either flat or\ndown. And so the revenue side is really demand-based where, as you can realize, the equipment is in\nshort supply.\nTurn times at maintenance shops are getting longer. So that means it puts a premium on having a prebuilt\nengine or module available. So we can actually get higher -- slightly higher prices and still generate\nsignificant savings for the customers. At the same time, by controlling costs through our own facilities, we\ndo that with controlling the labor cost and that we have more specialization in the facilities. We're basically\nrunning on engine and we're teaching people to do it in a high-volume manner.\n\nSo it's a learning curve process where you get better and better at it is you do it more and more\nfrequently. So that's part of it. And we're also getting smarter about used serviceable material, forecasting\nthe demand. Where is it going to be needed, when are we going to need it, getting our repairs done in\nadvance. So we're using -- we're smarter and more efficient about using used materials. So it's really on\nboth sides of the equation, revenue is up, expenses down that we see growing margins.\n\nWe will also see increased savings when we close on Lockheed Martin. And so we do see the margins\ntrending towards 40%, and we think that, that will continue to grow as we get better and more experience\nwith that facility as well, and we generate more volume. So a pretty positive outlook for today and also for\nthe near future for the coming years.\n\nI would say on your other question on Pratt versus CFM, we've -- we have said that the Pratt & Whitney\nV2500 deal will not be dilutive to margins, and I would continue to say that. We're seeing very good\ndemand for those engines, extremely high. And we're also seeing good turnaround times on getting\nengines through the shop. So we continue to expect that, that will be the same or as good as or better\nthan the CFM side.\nOperator\nThe next question comes from Sheila Kahyaoglu with Jefferies.\nUnknown Analyst\nThis is Kyle [indiscernible] on for Sheila.\nJoseph P. Adams\nChairman & CEO\nHello.\nUnknown Analyst\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 6\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 8 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\nVery nice quarter here and first half really in Aero products. It's not just the EBITDA growth, but the\nmargins like you said, kind of trending towards 40% is now kind of the watermark. So maybe just drilling\nin on your comments, Joe, about the Lockheed facility. How are you thinking about the margin opportunity\nwithin that facility as that deal is going to close in the second half and kind of what it means for the\nproductivity, the throughput and the Piece-Part opportunity there for the modules.\nJoseph P. Adams\nChairman & CEO\nYes. So good question. I think that we've indicated we expect about $30 million of savings per annum\nonce we close on initially on just on the CFM56. Overhaul operations. So that should add 3 to 4 percentage\npoints to the margins just from that closing. Then I think the efficiency, we haven't really baked that in\nyet, but we did see quite an improvement when we took control of the Miami facility.\n\nWe've seen a pretty significant increase in throughput per person. So we expect a similar trend in that\nfacility, although we don't yet have our hands on it. So it's something we think we'll be able to accomplish\nand we don't see any reason because we've done it before. And then lastly, incremental to that is the\nPiece-Part repair business, which we've talked about for quite some time, and there's a lot of capability in\nthe Lockheed Martin facility that was not really fully developed.\n\nSo we are going to accelerate the development of the Piece-Part business, we do more repairs for our own\nengines, repairs for third parties and then we'll develop new repairs. And so that I've indicated, we expect\nto generate probably an incremental $10 million to $15 million of EBITDA from that over but not really\nstarting until probably 2025 and then potentially growing from there, we'll update you on that.\n\nBut we see this -- every time we look at the engine and we look at something new, we find millions of\ndollars lying on the floor. So it's -- there's so many opportunities that we can pursue that are big dollars.\nSo we're very optimistic that we're going to -- we'll keep. This is continuous improvement as what we've\nalways said over the last 5, 6 years. And we're nowhere near the end of our list of opportunities.\nOperator\nThe next question comes from Josh Sullivan with The Benchmark Company.\nJoshua Ward Sullivan\nThe Benchmark Company, LLC, Research Division\nCongratulations on the quarter here. What is the relative turnaround time for an airline or lease or using\nthe module factory versus the open market at this point?\nDavid Moreno\nChief Operating Officer\nYes, I can take that. This is David. So the typical industry turn time what we're seeing is anything from\n120 days to 180 days. Our turn time on modules is about 30 to 60 days to do module -- to actually build a\nmodule, right? And then to actually execute that module depends on the module is anywhere from 5 to 25\ndays.\n\nSo from a customer's perspective, they're doing the module swap in 5 to 25 days versus 120 to 180\ndays. And again, we're seeing industry turn times that are long and getting longer. And I think we're\nin a much better position predominantly for four reasons, right? Number one is we have capacity up in\nMontreal and in Miami. So we have the capacity and the workforce. Number two is we have access to use\nservice material via our AAR program. Number three is what Joe mentioned is we have access to repairs at\nLockheed, where we can repair parts.\n\nAnd number four, we have the flexibility since it's our fleet of mixing, matching modules as well as\nplanning. So as we see turn times go down into [ July ], I think it is accelerating more and more demand\nfor modules because one of the key attributes of modules is a faster product than a traditional MRO.\nJoshua Ward Sullivan\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 7\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 9 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\nThe Benchmark Company, LLC, Research Division\nGot it. And then just as a follow-up on the Piece-Part repair business expansion. Is that an organic effort?\nOr do you see opportunities to bolt-on inorganically at Montreal?\nJoseph P. Adams\nChairman & CEO\nBoth. I think that our base case is organic, but we have a lot of conversations that we've been engaging\nwith different parties in that business for the last 2 years looking at different alternatives. And there might\nbe some combination of the two, which is organic plus working with another player in the industry.\nSo we are always open-minded and flexible and over whatever the math and the operations would\nsupport, we'll take a look at it. there's not enough capacity in the Piece-Part repair business globally. And\nwe realized that last year, I think we spent $50 million on -- with third parties where we we're a pretty big\nbuyer of care services and no one had ever called on us and marketed as a product to us. It's amazing.\nIt's -- the industry is -- it's all order takers. So there's a lot of things that we think we can do to grow and\nincrease that business that are -- we're just at the very, very beginning of that.\nOperator\nThe next question comes from Hillary Cacanando with Deutsche Bank.\nHillary Cacanando\nDeutsche Bank AG, Research Division\nYou had previously mentioned that savings this year from internalization would be about $30 million. So\ngiven that you're raising guidance, does that number change? And could you now expect more savings\nfrom internalization for 2024? And how should we think about that number for 2025 and beyond?\nJoseph P. Adams\nChairman & CEO\nWe -- yes, it will go up as we've increased our expectations of -- for this year and for the out year 2026.\nSo we had indicated at the time of the internalization that we would save $30 million annually, which we\nthink we'll do at least that this year, and that number will grow to $40 million or $50 million in the next\ncouple of years and potentially higher than that. So it's a -- I mean we're very confident that the numbers\nthat we'll save are better than what we had thought -- what we expected a couple of months ago.\nHillary Cacanando\nDeutsche Bank AG, Research Division\nOkay. So then we should probably assume for modeling purposes is probably assume like $30 million this\nyear and then maybe like $40 million to $50 million next year and then maybe even higher in 2026? Had\nof upward trending in terms of savings?\nJoseph P. Adams\nChairman & CEO\nYes.\nHillary Cacanando\nDeutsche Bank AG, Research Division\nOkay. Perfect. And then in Slide #8 in the leasing segment, it says that you performed ten engine\nexchanges for aircraft leases year-to-date. I think this is the first time you discuss engine exchanges\nwith the [indiscernible]. Could you just over exactly what that is? And if those ten engine exchanges are\nincluded in the 82 module sold number and all these engine exchanges with lessees one-offs? Or do you\nhave contracts with them to [ Jemma ]?\nJoseph P. Adams\nChairman & CEO\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 8\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 10 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\nI'll let David walk through that.\nDavid Moreno\nChief Operating Officer\nSo the answer is in addition to the 82. So on our entire aircraft portfolio, we manage the shop is it via\nexchanges. So we're manufacturing engines ahead of removals and providing exchanges instead of lessees\ndoing shop visits, which is typically how these contracts are written. So it's a value add. The reason why\nwe like it is because we're able to charge OEM rates per the contract for every hour in cycle flown.\n\nAnd then we're able to manufacture those entrants for a lot less. So that margin is going to show up\nthrough the maintenance revenue on our financial statements. The reason why airlines like it is because\nthey're able to avoid the major shop visits, so they don't -- they have zero turn time. typically, they'd have\nto lease an engine during that interim period, which can be very expensive as well as they are responsible\nfor the most part, on all negative surprises. So if the shop is it overruns, typically, the airline would be in\ncharge of that over and above. So they really like that service, and it's a value add as part of our aircraft\nleasing business.\nJoseph P. Adams\nChairman & CEO\nYes. It goes to the -- when we talk about our business model is basically we are in the engine\nmaintenance business. Most lessors are in the maintenance avoidance business, and they force it on to the\nairline, and we're the opposite. So we want to do the maintenance, and we want the airlines to get out of\nthe maintenance business because we're better at it. So it's really the -- we're providing an outsourced\nopportunity for airlines to not have to manage shop visits, which for the most part, most airlines are not\nparticularly good at.\nHillary Cacanando\nDeutsche Bank AG, Research Division\nAnd I'm sure when you're talking to potential like potential lease fees, this is something that you pitch as\nwell, right? Like if we continue to do exchanges as well. And that's probably a selling point.\nJoseph P. Adams\nChairman & CEO\nYes. we're saving them time and money and eliminating a major possible negative surprise in the lease.\nOperator\nThe next question comes from Giuliano Bologna with Compass Point.\nGiuliano Jude Anderes Bologna\nCompass Point Research & Trading, LLC, Research Division\nCongratulations on another incredible quarter, especially on the product side of the business. As the first\nquestion, I'd be curious, looking at the leasing side of the business, you outperformed pretty strongly,\nespecially on even on core leasing. I'm curious what drove the leasing outperformance and that's a trend\nthat we should expect to continue going forward.\nJoseph P. Adams\nChairman & CEO\nYes. The two big drivers are rents and hours slowing. And so both of those are up. It's very -- the rent\nmarket is you probably obviously aware with the demand for equipment, particularly older equipment that\nwe own is quite high airlines around the world or extending leases and not giving those back given that\nthey can't get -- they can't fly a lot of GTF-powered engine aircraft, and they can't get deliveries from\nBoeing on time.\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 9\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 11 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\nSo the old -- the demand for older equipment and engines related to those is very high. And then typically,\nthe second quarter and really the third quarter are very high utilization quarters for airlines because\nthe demand is there for flying. So we see it in the maintenance revenues as well. So it's both rent and\nmaintenance reserves are up.\nGiuliano Jude Anderes Bologna\nCompass Point Research & Trading, LLC, Research Division\nThat's very helpful. And then thinking about the storage engines globally and a lot of the supply chain\nissues that are out there, there are a few industry leaders that have suggested that the industry will take\na normalized -- or won't normalize until somewhere between late 2026 and 2030, I'm curious how you\nthink about what that means for the opportunity for FTAI and also what normalization would mean or look\nlike on the side of that? I realize it's pretty far out, so a pretty good run-rate here.\nJoseph P. Adams\nChairman & CEO\nYes. So we've always thought to run our business assuming normalization. This is just an unexpected gift\nthat we got. So we think we have a great business even in an environment where everything is smooth\nand running and functionally well. Having said that, the -- it is difficult to project, but I also would point\nout that it's not going to be a cliff.\n\nYou're not going to wake up in 2027 and all of a sudden, everything is good. So it will be a gradual return\nto normalization over some extended period of time because as you see, fixing supply chains, hiring\npeople back is a very lengthy process, and it only takes one part of that supply chain to negatively affect\nthe entire supply chain. So I think it will be probably what everybody -- generally, the extremes are not\nright. It's somewhere in the middle. Somebody says 2030, something said 2026, it's probably in the\nmiddle, but it's a -- it's a gradual return to normal, not all of a sudden a bright line event.\nGiuliano Jude Anderes Bologna\nCompass Point Research & Trading, LLC, Research Division\nThat's very helpful. And then one last one. Thinking about the product segment and kind of the demand\nfor CFM56 and V2500. I'm curious what the pipeline or the order backlog looks like in the third quarter\nand fourth quarter relative to the second quarter? And how we should think about what that pipeline is\nalready indicated or telling us?\nJoseph P. Adams\nChairman & CEO\nSo we're getting -- I mean, we have some long-term contracts like if you talk about WestJet and LATAM\nor Avianca, where we have 6- to 8-year deals locked in. So we have very good visibility on that type of\nbusiness. The other more transactional is probably we have 3- to 6-month visibility. We're getting people\nto give us forecast of when they're going to need equipment earlier so that we can -- as David said, we\ncan order a material, we can plan better.\n\nWe can have the modules ready. So I would say it's -- our visibility is getting longer than it even a year\nago, and we're encouraging airlines to really be -- once they've tasted and experience the product and\nthey like it. And they say, \"Well, okay, now give us all your business and give us your program and give us\nyour profile when you're going to need it. So I think we're going to continue to push for more programs,\nmore visibility, longer time to get ready and everybody benefits from that.\nOperator\nThe next question comes from Ken Herbert with RBC.\nKenneth George Herbert\nRBC Capital Markets, Research Division\n\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 10\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 12 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\nI just wanted to ask you, you did 82 modular swaps this quarter. What percentage of the global sort of\nCFM56 operator universe are you currently working with? And how quickly is that expanding? And what\nsort of the time frame as you think about an airline today with everything going on that may not have\nbeen a customer that comes to you and ultimately becomes a customer. Sort of how is that sales cycle\ncompressing?\nJoseph P. Adams\nChairman & CEO\nLots of aspects of that question. But just if you start off and you -- we indicated that we have now 50\ncustomers in our module factory. And if you think back in 2022, when we sort of rolled out our math for\ngetting to $1 billion, we were forecasting $50 million by 2026.\n\nSo we're now at 50% in 2024. So things are moving quickly. And part of what happens in a crisis is when\npeople need something, then they're more receptive to changing their business model. And so we see\nthat the current environment is accelerating people's transitioning to outsourcing maintenance, engine\nmaintenance, which is what we're offering the customer. Those 50 represent what we would say, 300 total\npotential. So maybe we're 1/6 of the operator base, and we're not getting -- with a couple of exceptions,\nwe're not getting 100% of people's business yet.\n\nBut we're aspiring to because we don't see any reason why we shouldn't once people realize they save\nmoney, they save time and they eliminate negative surprises. It's like how hard -- what else do you need\nto tell you. So I think it's still growing. It's a huge market. The total universe, if you think about 3,000\nshop visits a year and you can argue whether it's 4,000 or 2,500 or something, but roughly 3,000, that's\n9,000 modules moving through a maintenance facility somewhere in the world per year. And we're talking\nabout doing 400, 500, it's still less than 10%.\n\nIt's half of 10%. So we're not anywhere near where we think the penetration could get to. And we have\nour own maintenance capacity, we can do 300 shop visits in Montreal a year, which is 900 modules. And\n150 in Miami, which is 450 modules. So we have 1,350 module rebuild capacity that we own now. So if\nyou think about 400, 500 is what we're shooting for that's 5% market penetration, we can handle 15%\ntoday based on what we own and we're in a pretty good position to keep growing that. We haven't had\nanybody that use the product that didn't want to do it again.\n\nSo That, to me, is one of the main litmus test is that people like it and they have a good experience,\nand that's what we're trying to foster so the word-of-mouth spreads, people put testimonials up in their\nInstagram accounts and they talk about how great this is we have photos of people and maintenance\nfacilities, like I say, I just did an LPT swap in 2 weeks, and that engine would have been in the shop for 6\nmonths if I hadn't done that. So those are the kind of things where the viral marketing that we're using to\naccelerate even more. So I might have missed -- there are a lot of elements to your question, but I don't\nknow if I got all of them, but...\nKenneth George Herbert\nRBC Capital Markets, Research Division\nNo, that's great. If I could just one follow-up. I mean obviously, you're benefiting from the supply chain\ndisruptions and turnaround times and lead times on material, but you obviously also buy a lot of material\nto fulfill demand while we're waiting for PMA parts and other stuff. Are you seeing an extension in the\nmaterial you're looking to buy, the new OEM material or even on the USM side? And has that been maybe\na headwind to some of throughput?\nJoseph P. Adams\nChairman & CEO\nI mean there's two parts. There's the CFM part and in the Pratt part. Talking about the CFM, I'll talk about\nPratt.\nDavid Moreno\nChief Operating Officer\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 11\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 13 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\nSure. So on the CFM side, yes, we are seeing a delay for, let's say, repairing parts. I think we're well\npositioned because we have the inventory ahead of time, right? So we are carrying down 40 to 50 engines\nper year with AR. We're able to recall those parts and use them ahead of time. So really, it's having the\nUSM available and then number two is planning, right?\n\nSo before module comes in the shop, we understand and we have a kitting process ahead of time. So we\nproduce the kit what exactly is needed in that module. So we're able to be one step ahead in that process,\nright? Typically, what would happen is that you're engaging in third-party work, an engine would show up\nand you'd have a very limited amount of time to react in order parts, right? So that's all happening ahead\nof time. So we feel like we're well positioned, and that's why our turn times have not been impacted.\nJoseph P. Adams\nChairman & CEO\nAnd on the V2500, I mean we just -- we spent time with Pratt last week, and we're talking about material\navailability and turn times, and they're very confident. I mean, earlier this year, they had some sort\nof delays in producing some of the V2500 parts of material, but they're on top of it now. They're very\nconfident, and we are, I would say, a high priority customer.\n\nSo with an order of 100 shop visits we get -- they're going to put us at the top of the list. So they're very\nconfident that the -- what they've indicated as the 90-day turn times that they're going to deliver on that.\nIt's also it's helpful from our point of view that we're very flexible, and they can put those engines into\nwhatever shop in their network they want to. And that -- the [indiscernible] was very helpful because they\ncan use our orders to fill in shops and don't have enough...\nOperator\nThe next question comes from Brandon Oglenski with Barclays.\nBrandon Robert Oglenski\nBarclays Bank PLC, Research Division\nJoe, I appreciate updated guidance for this year and longer-term outlook on the business. I guess though,\nwith how tight the market is, I mean, I know you're generating better margins now, but when we think\nof acquisition costs, especially for new engines, does this get more challenging looking ahead? Or is it the\nswap aspect that makes this so viable?\nJoseph P. Adams\nChairman & CEO\nYes, that's a great question. We've been pretty good at sourcing engines. And I think the main reason is\nwe tend to excel when an engine is in need of a shop visit in the immediate or near future. So if you think\nabout most buyers when a portfolio or an aircraft comes up, and they do their model, and they have to do\na shop visit in the next 18, 6 to 24 months, it's a huge negative to them.\n\nSo we're one of the few buyers that actually when we see a shop visit in the near future, we're like, this is\ngreat. we'd love this because we know we're going to, A, we can do the shop visit generally for less than\nother people can and, B, we can also optimize by doing module swaps. We can sometimes do hospital\nshop repairs, we can generate more -- we can burn off some of the green time that other people can't\nvalue.\n\nSo we have so many ways to make that into a better deal than virtually anybody else that we win a\ndisproportionate now of that business. And there's a lot of engines out there that during COVID, people\ndidn't do any maintenance on. So we're seeing a lot of -- a very good pipeline of acquisition opportunities.\nAnd that is one of our core strengths is sourcing run-out engines.\n\nSo that's the first part of our business model, which is to buy run out engines, then we fix them up and\nthen we lease them, sell them or exchange them. And we love the exchange option too because then\nyou're getting another engine back that's run out generally at a very good price because you're solving\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 12\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 14 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\nsome of these problems and you also then get to do it all over again. So it's a virtuous circle for us in\nsourcing.\nBrandon Robert Oglenski\nBarclays Bank PLC, Research Division\nOkay. I appreciate that, Joe. And then I guess, as you transition more earnings in the business mix to\naviation products, how should investors think about free cash flow in the business? And maybe on other\nterm, where do you want to see leverage on the balance sheet [indiscernible]?\nJoseph P. Adams\nChairman & CEO\nYes. So the second question, we just did an $800 million high-yield deal, and we indicated that our goal\nis to be strong BB by all agencies and have debt to total EBITDA in the 3 to 3.5x range. And this quarter,\nwe're at the bonds have traded up. I think we're trading pretty much like a strong BB at the moment. And\nthat's something we think is achievable this year in the near future.\n\nSo we're going to maintain that leverage and that rating. In terms of free cash flow, what we do is we take\nthe EBITDA, subtract corporate and interest, and then we use a number for maintenance CapEx, what\nwe would use -- what we need to invest each year to maintain the engines so that they can fly forever at\ninfinitum. And that number tends to be between $60 million and $80 million a year of maintenance CapEx.\n\nSo when you get -- when you run the math, will generate hundreds of millions of free cash flow in the\nnear future. And that's -- then our goal since as you remember back from 2022, when we set those\ntargets is not to be in a perpetual cycle of always buying more equipment, but just turning it faster and\ngenerating a lot of cash.\nOperator\nThe next question comes from Stephen Trent with Citi.\nStephen Trent\nCitigroup Inc., Research Division\nThe first, I recall you had commented about your global footprint and opportunities you sought to expand,\nfor example. And I believe you previously called out Southeast Asia geographically. And I was wondering,\nsince that time, what sort of elements you've seen in the market that might be reinforcing your view on\nthat being an attractive footprint.\nDavid Moreno\nChief Operating Officer\nStephen, I can take that question. This is David. So yes, Southeast Asia is a very important region for us.\nIt has a high concentration of 737NG and A320s typically, that fleet has been newer. And now with time,\nit's maturing and the engines are shop visit. So it's an area that we're keenly focused on.\n\nRecently, we started working with an airline by doing all module swaps at their hangar facility. So they\nhave a hanger where they do air framework and light engine work as well. So we started doing module\nswaps on LPTs, so we have a large program with that airline. And then we've also then recently started\noffering that as a third-party business. So now we have airlines coming in with aircraft that have engines\nthat need module swaps we are performing those module swaps for those -- for that airline and the\naircraft is going back in the air in 15 to 20 days.\n\nSo it's operating like a pitstop. So we started with a few third-party customers, and we're very excited to\ngrow that presence in Southeast Asia.\nStephen Trent\nCitigroup Inc., Research Division\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 13\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 15 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\nI appreciate that, David. Very helpful. And just as a follow-up on the M&A side. You guys seem to be really\nputting together a potent story on MRE and I know you've done your own acquisitions like quick turn and\nwhat have you. Long term, would you ever consider a larger competitor acquiring you?\nJoseph P. Adams\nChairman & CEO\nWell, that's -- I mean it's up to the shareholders. We're always -- we're very shareholder-oriented. So\nwe all own a lot of stock. And if the right offer came in and somebody was interested, we would certainly\nentertain it. That's also -- that's a board-level call, not just an individual so.\nOperator\nThe next question comes from Brian McKenna with Citizens JMP.\nBrian J. Mckenna\nJMP Securities LLC, Research Division\nAll right. Great. Most questions have been asked. But it would be great just to get an update on capital\nmanagement. I'm assuming returns on new investments today are quite high. So I suspect your top\npriority for capital is investing back into the business for longer-term growth. But can you just walk\nthrough your capital priorities today as it relates to new investments, further deleveraging strategic M&A\nand then dividends and buybacks?\nJoseph P. Adams\nChairman & CEO\nYes. So, we -- first priority is to achieve and maintain the strong BB rating, which I mentioned, and\nmaintain debt at 3x to 3.5x debt to total EBITDA. So that we're on course. We're in that zone in Q2, and\nwe expect by the end of the year to be solidly in that. So that's priority number one. Priority number two,\nas you mentioned, is investments. We do have a good pipeline of acquisitions. We also are turning that by\nselling modules and engines quicker. So our goal is not to have a huge increase in net assets owned this\nyear.\n\nHaving said that, at the beginning of the year, we did indicate with the V2500 program, we expected to\nincrease our engine count from roughly [ 6TV ] 2500 the beginning of this year to about 150 to 200 by\nthe end of this year. We're well on our way. We're at 130 now. And so we expect to achieve that. And\nthat if you think of an average engine being $5 million or so, adding 100 engines adds about $500 million\nof capital. So that's been a focus this year is to have the V2500. But once we achieve, having [ 400 ] to\n[ 500 ] CFM56 engines and 150 to 200 V2500s, we don't need to grow that number significantly. So after\nthat, it then becomes a question for shareholder returns and dividends and stock buybacks would be the\nthird priority.\nBrian J. Mckenna\nJMP Securities LLC, Research Division\nOkay. Great. Helpful. And then just one more follow-up for you, Joe. Just given how much the business\nhas grown over the past couple of years, how are you splitting your time between managing the two\nsegments? And then somewhat related, is there an opportunity to lean in on hiring here just given the\nbroader macro environment to further accelerate growth in some of the emerging opportunities within the\naerospace products.\nJoseph P. Adams\nChairman & CEO\nWell, I spend 100% of my time on FTAI, whatever is needed. So I don't think of it as like splitting. I've\nsaid to people, my dream is that one day, people will not do a sum of the parts calculation. And think of\nthis as we do as an integrated product. We go to the airlines and we say, \"Look, we can provide you your\nengine maintenance without you having to do it.\"\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 14\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 16 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\nYou outsource it to us, and we'll always have an engine for you. And we'll save you time and money and\nprovide you a lot of flexibility. And that's our pitch. And so what we do is we go buy runout engines, we\nrebuild them, and then we can offer either a lease, a sale or an exchange to an airline. And so the leasing\nis just one spoke, one arm of what we offer, but it's an important one because having that ability gives the\nairline the flexibility to say, \"Well, you know what, I only want 3 years, I think is what I'm going to need\"\nand somebody else wants 6 years. And so you have the ability to customize and say whatever you want,\nwill deliver that for you.\n\nAnd that integrated product is extremely powerful. So we don't think of it as two different businesses. We\nreport it that way, but someday, we'll -- hopefully, people will stop doing some of the parts and they'll say\nthis is just a -- this is a great product. This is an outsourced engine maintenance business for aftermarket\nfor the most popular engines in the world.\nOperator\nThe next question comes from Myles Walton with Wolfe Research.\nMyles Alexander Walton\nWolfe Research, LLC\nAnd Joe, I was wondering if you could maybe decompose the $700 million of EBITDA in '26. The $500\nmillion previously, I think, had $50 million of PMA third-party parts and a couple of hundred million of\nbetter drop-through in the module business. is the PMA contribution at $700 million, about the same and\nthe remainder's better business elsewhere plus the V2500?\nJoseph P. Adams\nChairman & CEO\nYes. So there are similar PMA USM, each about $50 million and then we've added probably between $100\nmillion and $150 million for the V2500 program. And then the rest is just higher margins and more volume\non CFM modules.\nMyles Alexander Walton\nWolfe Research, LLC\nIs that higher margin volume on CFM required that PMA because that was sort of the selling point to get to\nthat higher margin? Or is the market now so robust that you don't need the PMA for that drop through?\nJoseph P. Adams\nChairman & CEO\nWe're going to get it. So I don't Think of it as the PMA will come, and that will increase the margins. I\nthink we're going to increase margins even without PMA, but definitely, we're planning on PMA and PMA\nincreasing margins.\nMyles Alexander Walton\nWolfe Research, LLC\nOkay. And there's been a lot of news about airlines and clearly, yields are working against them, and\nthey're running more into cost questions about containment. Are you finding that this business that you\nhave has more durability in a market where airlines are cost cutting. Where are your weak points where\nyour strengths if we go into that cash conservation mode that sometimes cyclically happens with airlines.\nJoseph P. Adams\nChairman & CEO\nYes, it does help us. And we're providing, as I said, cost savings. So when everybody is told to look at\nevery line item in the P&L, One of the line items that always pops up as engine maintenance as a big one\nand one that they seem to never be able to get it to go down. So we can provide a flattening out of that in\nsavings. And so when people do have an intense focus on cost savings and outsourcing of these types of\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 15\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 17 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\nactivities is -- goes up, the demand for that goes up. So we're happy in any environment, but particularly\nwhen people are focusing on -- that's what we're providing is expense management reduction.\nOperator\nThe next question comes from Sherif Elmaghrabi with BTIG.\nSherif Ehab Elmaghrabi\nBTIG, LLC, Research Division\nI want to start with an update on PMA. How is industry acceptance going for your first part? And can you\ntalk through what the second PMA part does within the engine and timing for approval there, please?\nJoseph P. Adams\nChairman & CEO\nYes, the timing we've said is shortly. We -- obviously, we're closer today than we were last quarter. We've\ndone many -- we don't forecast specific timing, but very good progress made on all fronts on that. So\nwe're very confident. The first part, we have installed in 15 engines. It's been flying with another airline\nand no issues, very -- it's a high-quality product as always with Chromalloy and we think the industry\nacceptance is going to grow.\n\nThere is a school of thought on -- for many airlines that if they're going to put PMA, they want more\nthan one part. So there are airlines that will wait until there's more cards approved. And once those are\navailable, then we expect the industry take up to be quite robust. It's also -- there's an additional element\ntoday in supply chain availability in that it's not just cost savings for PMA is availability, which is also\nimportant that you have another alternative if you can't get in a timely manner, the OEM parts. That's\ngood color.\nSherif Ehab Elmaghrabi\nBTIG, LLC, Research Division\nAnd then on the corporate side, both of the well intervention vessels are now on charter, and it looks like\nthe rate that their earning has melted up nicely. So how are you progressing on the sale of these vessels?\nAnd are there any recent transactions you can point you to give us a sense of how they're valued?\nJoseph P. Adams\nChairman & CEO\nYes. So you're right. The market is improving nicely, we have a handshake deal on both vessels today.\nwhich we expect to close by the end of the year, subject to a couple of conditions that we think will be\nmet, but the market has strengthened and we expect for the next few years, it's going to be a strong\nmarket. So the vessels are both on charter are doing well, generating EBITDA and the values have gone\nup. We originally said we thought we would get approximately $150 million, and we're in that ZIP code. So\nwe're very happy with that the end of that chapter is close.\nOperator\nI show no further questions at this time. I would now like to turn the call back over to Alan Andreini for\nclosing remarks.\nAlan John Andreini\nInvestor Relations\nThank you all for participating in today's conference call. We look forward to updating you after Q3.\nOperator\nThis concludes today's conference call. Thank you for participating. You may now disconnect.\n\n\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 16\n\f Case 1:25-cv-00541-JAV Document 70-3 Filed 11/20/25 Page 18 of 18\nFTAI AVIATION LTD. FQ2 2024 EARNINGS CALL | JUL 24, 2024\n\n\n\nCopyright \u00a9 2024 by S&P Global Market Intelligence, a division of S&P Global Inc. 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All Rights reserved.\nspglobal.com/marketintelligence 17\n\f","ocr_status":2,"date_upload":"2026-05-12T04:15:18.483106-07:00","document_number":"70","attachment_number":3,"pacer_doc_id":"127038602947","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit C - 2Q24 Earnings Call Transcript","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874404/","id":478874404,"tags":[],"absolute_url":"/docket/69558488/70/4/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.435596-07:00","date_modified":"2026-05-14T07:11:46.574900-07:00","sha1":"a7a25f77feaf5c0ca34167cda46b2c4d262e89a6","page_count":100,"file_size":3717168,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.4.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.4.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 1 of 100\n\n\n\n\n Exhibit D\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 2 of 100\n\n UNITED STATES SECURITIES AND EXCHANGE COMMISSION\n WASHINGTON, D.C. 20549\n\n FORM 10-K\n \u2611 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n For the fiscal year ended December 31, 2024\n OR\n \u2610 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n For the transition period from ____ to ____\n Commission file number 001-37386\n\n\n\n\n FTAI AVIATION LTD.\n (Exact name of registrant as specified in its charter)\n Cayman Islands XX-XXXXXXX\n (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)\n\n 415 West 13th Street, 7th Floor New York NY 10014\n (Address of principal executive offices) (Zip Code)\n\n (Registrant\u2019s telephone number, including area code) (332) 239-7600\n (Former name, former address and former fiscal year, if changed since last report) N/A\n\n\n Securities registered pursuant to Section 12(b) of the Act:\n Title of each class: Trading Symbol: Name of exchange on which registered:\n Ordinary shares, $0.01 par value per share FTAI The Nasdaq Global Select Market\n 8.25% Fixed-Rate Reset Series C Cumulative Perpetual\n Redeemable Preferred Shares FTAIN The Nasdaq Global Select Market\n 9.50% Fixed-Rate Reset Series D Cumulative Perpetual\n Redeemable Preferred Shares FTAIM The Nasdaq Global Select Market\n\n\n\nSecurities registered pursuant to Section 12(g) of the Act: None\nIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes \u2611 No \u2610\nIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes \u2610 No \u2611\nIndicate 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\nduring 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\nrequirements for the past 90 days. Yes \u2611 No \u2610\nIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of\nRegulation S-T (\u00a7232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).\nYes \u2611 No \u2610\nIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an\nemerging growth company. See the definitions of \u201clarge accelerated filer,\u201d \u201caccelerated filer,\u201d \u201csmaller reporting company,\u201d and \u201cemerging growth company\u201d in\nRule 12b-2 of the Exchange Act.\n\n Large accelerated filer \u2611 Accelerated filer \u2610\n Non-accelerated filer \u2610 Smaller reporting company \u2610\n Emerging Growth Company \u2610\n\n\n\n\n 1\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 3 of 100\n\nIf 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\nrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. \u2610\nIndicate by check mark whether the registrant has filed a report on and attestation to its management\u2019s assessment of the effectiveness of its internal control\nover financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued\nits audit report. \u2611\nIf securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing\nreflect the correction of an error to previously issued financial statements. \u2610\nIndicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received\nby any of the registrant\u2019s executive officers during the relevant recovery period pursuant to \u00a7240.10D-1(b). \u2610\nIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes \u2610 No \u2611\nThe aggregate market value of the voting and non-voting ordinary equity of FTAI Aviation Ltd. held by non-affiliates as of the close of business as of June 30,\n2024 was approximately $10.4 billion.\nThere were 102,550,975 ordinary shares outstanding at February 26, 2025.\n DOCUMENTS INCORPORATED BY REFERENCE\nPortions of the registrant's definitive proxy statement for the registrant's 2025 annual meeting, to be filed within 120 days after the close of the registrant's\nfiscal year, are incorporated by reference into Part III of this Annual Report on Form 10-K.\n\n\n 2\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 4 of 100\n\n FTAI AVIATION LTD.\n INDEX TO FORM 10-K\n PART I\n Forward-Looking Statements 5\nItem 1. Business 6\nItem 1A. Risk Factors 10\nItem 1B. Unresolved Staff Comments 26\nItem 1C. Cybersecurity 26\nItem 2. Properties 27\nItem 3. Legal Proceedings 27\nItem 4. Mine Safety Disclosures 27\n PART II\nItem 5. Market for Registrant\u2019s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 28\nItem 6. [Reserved] 30\nItem 7. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations 30\nItem 7A. Quantitative and Qualitative Disclosures About Market Risk 50\nItem 8. Consolidated Financial Statements of FTAI Aviation Ltd.: 52\n Report of Independent Registered Public Accounting Firm 53\n Consolidated Balance Sheets as of December 31, 2024 and 2023 55\n Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 56\n Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023 and 2022 57\n Consolidated Statement of Changes in Equity for the years ended December 31, 2024, 2023 and 2022 58\n Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 59\n Notes to Consolidated Financial Statements 61\n Note 1: Organization 61\n Note 2: Summary of Significant Accounting Policies 61\n Note 3: Discontinued Operations 68\n Note 4: Acquisition of Lockheed Martin Commercial Engine Solutions 70\n Note 5: Acquisition of QuickTurn 72\n Note 6: Leasing Equipment, net 73\n Note 7: Investments 74\n Note 8: Intangible Assets and Liabilities, net 75\n Note 9: Debt, net 76\n Note 10: Fair Value Measurements 77\n Note 11: Equity-Based Compensation 80\n Note 12: Income Taxes 81\n Note 13: Affiliate Transactions 83\n Note 14: Segment Information 85\n Note 15: Earnings per Share and Equity 91\n Note 16: Commitments and Contingencies 92\n Note 17: Restructuring Charges 92\n Note 18: Subsequent Events 92\nItem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 93\nItem 9A. Controls and Procedures 93\nItem 9B. Other Information 94\nItem 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 95\n PART III\nItem 10. Directors, Executive Officers and Corporate Governance 95\nItem 11. Executive Compensation 95\n\n\n\n\n 3\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 5 of 100\n\nItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 95\nItem 13. Certain Relationships and Related Transactions, and Director Independence 95\nItem 14. Principal Accountant Fees and Services 95\n PART IV\nItem 15. Exhibits 96\nItem 16. Form 10-K Summary 97\n Signatures 97\n\n\n\n\n 4\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 6 of 100\n\n\n FORWARD-LOOKING STATEMENTS AND RISK FACTORS SUMMARY\nThis report contains \u201cforward-looking statements\u201d within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are\nnot statements of historical fact but instead are based on our present beliefs and assumptions and on information currently available to us. You can identify\nthese forward-looking statements by the use of forward-looking words such as \u201coutlook,\u201d \u201cbelieves,\u201d \u201cexpects,\u201d \u201cpotential,\u201d \u201ccontinues,\u201d \u201cmay,\u201d \u201cwill,\u201d \u201cshould,\u201d\n\u201ccould,\u201d \u201cseeks,\u201d \u201capproximately,\u201d \u201cpredicts,\u201d \u201cintends,\u201d \u201cplans,\u201d \u201cestimates,\u201d \u201canticipates,\u201d \u201ctarget,\u201d \u201cprojects,\u201d \u201ccontemplates\u201d or the negative version of those\nwords or other comparable words. Any forward-looking statements contained in this report are based upon our historical performance and on our current\nplans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as\na representation by us, that the future plans, estimates or expectations contemplated by us will be achieved.\nSuch forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial\ncondition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ\nmaterially from those indicated in these statements. The following is a summary of the principal risk factors that make investing in our securities risky and\nmay materially adversely affect our business, financial condition, results of operations and cash flows. This summary should be read in conjunction with the\nmore complete discussion of the risk factors we face, which are set forth in Item 1A. \u201cRisk Factors\u201d of this report. We believe that these factors include, but\nare not limited to:\n \u2022 changes in economic conditions generally and specifically in our industry sectors, and other risks relating to the global economy, including, but\n not limited to, the Russia-Ukraine conflict and any related responses or actions by businesses and governments;\n \u2022 reductions in cash flows received from our assets, as well as contractual limitations on the use of our aviation assets to secure debt for borrowed\n money;\n \u2022 our ability to take advantage of acquisition opportunities at favorable prices;\n \u2022 our ability to realize the anticipated benefits of our strategic initiatives;\n \u2022 a lack of liquidity surrounding our assets, which could impede our ability to vary our portfolio in an appropriate manner;\n \u2022 the relative spreads between the yield on the assets we acquire and the cost of financing;\n \u2022 adverse changes in the financing markets we access affecting our ability to finance our acquisitions;\n \u2022 customer or lessee defaults on their obligations;\n \u2022 our ability to renew existing contracts and enter into new contracts with existing or potential lessees;\n \u2022 the availability and cost of capital for future acquisitions;\n \u2022 concentration of a particular type of asset or in a particular sector;\n \u2022 competition within the aviation industry;\n \u2022 the competitive market for acquisition opportunities;\n \u2022 risks related to operating through joint ventures, partnerships, consortium arrangements or other collaborations with third parties;\n \u2022 our ability to successfully integrate acquired businesses;\n \u2022 obsolescence of our assets or our ability to sell, re-lease or re-charter our assets;\n \u2022 exposure to uninsurable losses and force majeure events;\n \u2022 the impact of trade disputes, including the imposition of new or increased tariffs, sanctions or other restrictions, and the legislative/regulatory\n environment and exposure to increased economic regulation;\n \u2022 exposure to the oil and gas industry\u2019s volatile oil and gas prices;\n \u2022 difficulties in obtaining effective legal redress in jurisdictions in which we operate with less developed legal systems;\n \u2022 our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended (the \u201cInvestment Company Act\u201d)\n and the Investment Advisers Act of 1940, as amended (the \u201cInvestment Advisers Act\u201d) and the fact that maintaining such exemption imposes\n limits on our operations;\n \u2022 our ability to successfully utilize leverage in connection with our investments;\n \u2022 foreign currency risk and risk management activities;\n \u2022 effectiveness of our internal control over financial reporting;\n \u2022 exposure to environmental risks, including natural disasters, increasing environmental legislation and the broader impacts of climate change;\n \u2022 changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes;\n \u2022 actions taken by national, state, or provincial governments, including nationalization, or the imposition of new taxes, could materially impact the\n financial performance or value of our assets;\n\n\n\n\n 5\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 7 of 100\n\n \u2022 our ability to attract and retain highly skilled management and other personnel;\n \u2022 risks relating to the Company entering into an Internalization Agreement (the \u201cInternalization Agreement\u201d) with FIG LLC (the \u201cFormer Manager\u201d)\n and the impact on the Company\u2019s management functions and business operations;\n \u2022 volatility in the market price of our shares;\n \u2022 the inability to pay dividends to our shareholders in the future;\n \u2022 impacts from our past and future acquisitions, and our ability to successfully integrate acquired assets and assumed liabilities; and\n \u2022 other risks described in the \u201cRisk Factors\u201d section of this report.\nThese factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report.\nThe forward-looking statements made in this report relate only to events as of the date on which the statements are made. We do not undertake any\nobligation to publicly update or review any forward-looking statement except as required by law, whether as a result of new information, future developments\nor otherwise.\nIf one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary\nmaterially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of\nour forward-looking statements. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how\nthey may affect us.\n PART I\nItem 1. Business\nOur Company\nFTAI Aviation Ltd. (Nasdaq: FTAI) is, a Cayman Islands exempted company, except as otherwise specified, \u201cwe\u201d, \u201cus\u201d, \u201cour\u201d, \u201cFTAI\u201d, \u201cFTAI Aviation\u201d or \u201cthe\nCompany\u201d refer to us and our consolidated subsidiaries.\nWe own, lease and sell aviation equipment. We also develop and manufacture through a joint venture, and repair and sell, through our maintenance facilities\nand exclusivity arrangements, aftermarket components for aircraft engines. We target assets that, on a combined basis, generate strong cash flows with\npotential for earnings growth and asset appreciation. We believe that there is a large number of acquisition opportunities in our markets and that our\nexpertise and business and financing relationships, together with our access to capital, will allow us to take advantage of these opportunities. As of\nDecember 31, 2024, we had total consolidated assets of $4.0 billion and total equity of $81.4 million.\nAs of December 31, 2024, our operations consisted of Aviation Leasing and Aerospace Products. Our Aviation Leasing business acquires assets that are\ndesigned to carry cargo or people. Aviation equipment assets are typically long-lived, moveable and leased by us on either operating leases or finance\nleases to companies that provide transportation services. Our leases generally provide for long-term contractual cash flow with high cash-on-cash yields and\ninclude structural protections to mitigate credit risk. Our Aerospace products business develops and manufactures, through a joint venture, and repairs and\nsells, through our maintenance facilities and exclusivity arrangements, aftermarket components for aircraft engines.\nFTAI is the surviving parent company upon completion of the transactions completed in that certain Agreement and Plan of Merger (the \u201cMerger\u201d) on\nNovember 10, 2022 between Fortress Transportation and Infrastructure Investors LLC and FTAI Aviation Ltd. and certain other parties thereto.\nOur business has been, and will continue to be, conducted through FTAI Aviation Holdco Ltd. (\u201cHoldco\u201d) for the purpose of acquiring, managing and\ndisposing of transportation and transportation-related equipment assets.\nOur Strategy\nIn general, we seek to own a diverse mix of high-quality aviation assets and equipment that generate predictable cash flows in markets that we believe\nprovide the potential for strong long-term growth and attractive returns on deployed capital. We believe that by investing in a diverse mix of assets, we can\nselect from among the best risk-adjusted investment opportunities.\nWe take a proactive investment approach by identifying key secular trends as they emerge and then pursuing what we believe are the most compelling\nopportunities. We look for unique investments, including assets that are distressed or undervalued, or where we believe that we can add value through\nactive management. We consider investments across the size spectrum, including smaller opportunities often overlooked by other investors, particularly\nwhere we believe we may be able to grow the investment over time. We believe one of our strengths is our ability to create attractive follow-on investment\nopportunities and deploy incremental capital within our existing portfolio.\nWe believe that as owners of aviation assets, we have access to more opportunities and can be a more attractive counterparty to the users of our assets.\nOur management has significant prior experience, as well as a network of industry relationships, that we believe positions us well to make successful\nacquisitions and to actively manage and improve operations and cash flows of our existing and newly-acquired assets. These relationships include senior\nexecutives at lessors and operators, end users of aviation assets, as well as banks, lenders and other asset owners.\nOn December 30, 2024, we announced the launch of a Strategic Capital Initiative in collaboration with third-party institutional investors. The first partnership\nunder the initiative (the \u201c2025 Partnership\u201d) will focus on acquiring 737NG and A320ceo aircraft.\n\n\n\n 6\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 8 of 100\n\n\nThe Strategic Capital Initiative, and its related partnerships, will allow us to maintain an asset-light business model while the partnerships actively acquire on-\nlease narrowbody aircraft at scale. We have agreed that the 2025 Partnership, and follow-on partnerships, will be the primary buyer of all future on-lease\n737NG and A320ceo aircraft. In addition, the 2025 Partnership has agreed to acquire 46 on-lease narrowbody aircraft from us for an estimated net purchase\nprice of $549 million and has signed an agreement through which our MRE business will exclusively provide replacement aircraft engines and modules for\nthe life of the partnership. We will provide aircraft management services to the 2025 Partnership, and the Company will receive customary, market-based\ncompensation for providing such services. The Company has also committed to make a minority investment in the 2025 Partnership. We expect to provide\naircraft management services to, and make minority investments in, future partnerships.\nAsset Acquisition Process\nOur strategy is to acquire assets that are essential to the transportation of goods and people globally. We seek to acquire assets and businesses that we\nbelieve operate in sectors with long-term macroeconomic growth opportunities and that have significant cash flow and upside potential from earnings growth\nand asset appreciation.\nWe approach markets and opportunities by first developing an asset acquisition strategy and then pursuing optimal opportunities within that strategy. In\naddition to relying on our own experience, we source new opportunities through our network of industry relationships in order to find, structure and execute\nattractive acquisitions. These relationships include senior executives at industry leading operators, end users of the assets as well as banks, lenders and\nother asset owners. We believe that sourcing assets both globally and through multiple channels will enable us to find the most attractive opportunities. We\nare selective in the assets we pursue and efficient in the manner in which we pursue them.\nOnce attractive opportunities are identified, our Company performs detailed due diligence on each of our potential acquisitions. Due diligence on each of our\nassets always includes a comprehensive review of the asset itself as well as the industry and market dynamics, competitive positioning, and financial and\noperational performance. Where appropriate, our Company conducts physical inspections, a review of the credit quality of each of our counterparties, the\nregulatory environment, and a review of all material documentation. In some cases, third-party specialists are hired to physically inspect and/or value the\ntarget assets.\nWe also spend a significant amount of time on structuring our acquisitions to minimize risks while also optimizing expected returns. We employ what we\nbelieve to be reasonable amounts of leverage in connection with our acquisitions. In determining the amount of leverage for each acquisition, we consider a\nnumber of characteristics, including, but not limited to, the existing cash flow, the length of the lease or contract term, and the specific counterparty.\nInternalization of Management\nOn May 28, 2024, the Company entered into definitive agreements with the Former Manager and Master GP to internalize the Company\u2019s management\nfunction. As part of the termination of the Management Agreement, the Company (i) agreed to pay the Former Manager (for itself and on behalf of the Master\nGP, as applicable) $150.0 million (the \u201cCash Consideration\u201d), the compensation accrued and payable, but not yet paid, under the Management Agreement\nand the expenses that were reimbursable, but not yet reimbursed, under the Management Agreement; (ii) issued to the Former Manager (for itself and on\nbehalf of the Master GP, as applicable) the Share Consideration; (iii) purchased from Master GP all of its partnership interests in FTAI Aviation Holdco Ltd., a\nsubsidiary of the Company, in exchange for $30 thousand. Following the Internalization, the Company no longer pays management fees or incentive\ndistributions to the Former Manager and Master GP.\nIn connection with the termination of the Management Agreement, the Company also entered into a Transition Services Agreement with the Former\nManager. Under the Transition Services Agreement, the Former Manager is required to continue to provide the services that are reasonably required by the\nCompany to prepare its quarterly and annual financial statements until May 31, 2025. The Company is required to continue to provide the Reverse Services\nuntil the later to occur of the dissolution or sale of the entities receiving Reverse Services. The Transition Services Agreement may be terminated earlier (x)\nby mutual agreement of the parties, (y) by either the Former Manager or the Company in the event of a material breach by the non-terminating party that is\nnot cured within thirty (30) days following written notification thereof, or (z) by the Former Manager if the Company fails to pay any undisputed sum overdue\nand payable for a period of at least thirty (30) days.\nPlease refer to Note 13 of our consolidated financial statements included in Item 8 in this Annual Report on Form 10-K for further details regarding our\nAffiliate Transactions.\n\n\n\n\n 7\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 9 of 100\n\n\nOur Portfolio\nWe own and acquire high quality aviation equipment that is essential for the transportation of goods and people globally. We currently invest across two\nmarket sectors: aviation leasing and aerospace products. We target assets that, on a combined basis, generate strong and stable cash flows with the\npotential for earnings growth and asset appreciation.\nAviation Leasing\nAs of December 31, 2024, in our Aviation Leasing segment, we own and manage 421 aviation assets, consisting of 109 commercial aircraft and 312\nengines, including eight aircraft and seventeen engines that were still located in Russia.\nAs of December 31, 2024, 94 of our commercial aircraft and 181 of our engines were leased to operators or other third parties. Aviation assets currently off\nlease are either undergoing repair and/or maintenance, being prepared to go on lease or held in short term storage awaiting a future lease. Our aviation\nequipment was approximately 76% utilized during the three months ended December 31, 2024, based on the percent of days on-lease in the quarter\nweighted by the monthly average equity value of our aviation leasing equipment, excluding airframes. Our aircraft currently have a weighted average\nremaining lease term of 47 months, and our engines currently on-lease have an average remaining lease term of 22 months. The table below provides\nadditional information on the assets in our Aviation Leasing segment:\nAviation Assets Widebody Narrowbody Total\nAircraft\nAssets at January 1, 2024 5 91 96\nPurchases \u2014 50 50\nSales \u2014 (3) (3)\nTransfers \u2014 (34) (34)\nAssets at December 31, 2024 5 104 109\n\n\nEngines\nAssets at January 1, 2024 32 235 267\nPurchases 4 134 138\nSales (13) (1) (14)\nTransfers \u2014 (79) (79)\nAssets at December 31, 2024 23 289 312\n\nAerospace Products\nThe Aerospace Products segment, through our maintenance facilities, equity method investment and exclusivity arrangements, develops and manufactures,\nrepairs/refurbishes and sells aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines.\nOur engine, module and parts sales are facilitated through a dedicated commercial maintenance program, designed to focus on modular and parts repair\nand refurbishment of CFM56-7B and CFM56-5B engines. In addition, other serviceable used modules and parts are sold through our exclusive partnership,\nwho is responsible for the teardown, repair, marketing and sales of parts from our CFM56 engine pool. We also hold a 25% interest in the Advanced Engine\nRepair JV which focuses on developing new cost savings programs for engine repairs.\nAsset Management\nThe Company actively manages and monitors our portfolios of assets on an ongoing basis, and in some cases engages third parties to assist with the\nmanagement of those assets. Our Company frequently reviews the status of all of our assets, and in the case that any are returning from lease or\nundergoing repair, outlines our options, which may include the re-lease or sale of that asset. Our Company plays a central role in developing and executing\noperational, finance and business development strategies. On a periodic basis, our Company discusses the status of our acquired assets with our board of\ndirectors.\nIn some situations, we may acquire assets through a joint venture entity or own a minority position in an investment entity. In such circumstances, we will\nseek to protect our interests through appropriate levels of board representation, minority protections and other structural enhancements.\nWe maintain relationships with operators worldwide and, through these relationships, hold direct conversations as to leasing needs and opportunities. Where\nhelpful, we reach out to third parties who assist in leasing our assets. As an example, we partner with Maintenance, Repair and Overhaul (\u201cMRO\u201d) facilities in\nthe aviation sector to lease engines and support airlines\u2019 fleet management needs.\nWhile we expect to hold our assets for extended periods of time, we continually review our assets to assess whether we should sell or otherwise monetize\nthem. Aspects that will factor into this process include relevant market conditions, the asset\u2019s age, lease profile, relative concentration or remaining expected\nuseful life.\n\n\n\n\n 8\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 10 of 100\n\n\nCredit Process\nWe monitor the credit quality of our customers and lessees on an ongoing basis. This monitoring includes interacting with our customers and lessees\nregularly to monitor collections, review periodic financial statements and discuss their operating performance. Most of our lease agreements are written with\nconditions that require reporting on the part of our lessees, and we actively reach out to our lessees to maintain contact and monitor their liquidity positions.\nFurthermore, many of our leases and contractual arrangements include credit enhancement elements that provide us with additional collateral or credit\nsupport to strengthen our credit position.\nWe are subject to concentrations of credit risk with respect to amounts due from customers and lessees. We attempt to limit credit risk by performing\nongoing credit evaluations. See \u201cCustomers and Lessees.\u201d\nCustomers and Lessees\nOur customers and lessees primarily consist of global operators of transportation networks and global industrial companies, including airlines. We maintain\nongoing relationships and discussions with our customers and lessees and seek to have consistent dialogue. In addition to helping us monitor the needs and\nquality of our customers and lessees, we believe these relationships help source additional opportunities and gain insight into attractive opportunities in the\naviation sector. A substantial portion of our revenue has historically been derived from a small number of customers and lessees. As of and for the year\nended December 31, 2024, no customer or lessee accounted for more than 10% of our revenue or total accounts receivable, net. We derive a significant\npercentage of our revenue within specific sectors from a limited number of customers and lessees. However, we do not think that we are dependent upon\nany particular customer or lessee, or that the loss of one or more of them would have a material adverse effect on our business or the relevant segment,\nbecause of our ability to re-lease or resell assets at similar terms following the loss of any such lessee or customer. See \u201cRisk Factors-Contractual defaults\nmay adversely affect our business, prospects, financial condition, results of operations and cash flows by decreasing revenues and increasing storage,\npositioning, collection, recovery and lost equipment expenses.\u201d\nCompetition\nThe business of acquiring, managing and marketing aviation assets is highly competitive. Market competition for acquisition opportunities includes traditional\naviation companies, commercial and investment banks, as well as a growing number of non-traditional participants, such as hedge funds, private equity\nfunds, and other private investors.\nAdditionally, the markets for our products and services are competitive, and we face competition from a number of sources. These competitors include\nengine and aircraft parts manufacturers, aircraft and aircraft engine lessors, airline and aircraft services and repair companies, and aircraft spare parts\ndistributors.\nWe compete with other market participants on the basis of industry knowledge, availability of capital, and deal structuring experience and flexibility, among\nother things. We believe our Company\u2019s experience in the aviation industry, in both leasing and maintenance and our access to capital provide a competitive\nadvantage.\nGovernmental Regulations\nWe are subject to federal, state, local and foreign laws and regulations relating to the protection of the environment, including those governing the discharge\nof pollutants to air and water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites and noise and\nemission levels. Under some environmental laws in the United States and certain other countries, strict liability may be imposed on the owners or operators\nof assets, which could render us liable for environmental and natural resource damages without regard to negligence or fault on our part. We could incur\nsubstantial costs, including cleanup costs, fines and third-party claims for property or natural resource damage and personal injury, as a result of violations of\nor liabilities under environmental laws and regulations in connection with our or our lessee\u2019s current or historical operations. While we typically maintain\nliability insurance coverage and typically require our lessees to provide us with indemnity against certain losses, the insurance coverage is subject to large\ndeductibles, limits on maximum coverage and significant exclusions and may not be sufficient or available to protect against any or all liabilities and such\nindemnities may not cover or be sufficient to protect us against losses arising from environmental damage. In addition, changes to environmental standards\nor regulations in the aviation industry, including as a result of executive actions or policies, could limit the economic life of the assets we acquire or reduce\ntheir value, and also require us to make significant additional investments in order to maintain compliance.\nSustainability\nAs part of our strategy, we are focused on supporting the transition to a low-carbon economy and aim to provide sustainable aviation solutions by leveraging\nour Company\u2019s expertise and business and financing relationships, as well as our access to capital. Certain of our current sustainability solutions and\ninvestments are highlighted below, and we expect to continue to explore additional sustainability-related opportunities.\n\n\n\n\n 9\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 11 of 100\n\n\nHuman Capital Management\nWe had 580 full-time employees as of December 31, 2024. Approximately 68% of our workforce in Canada is covered by collective bargaining agreements.\nWe have not encountered any significant union-related work stoppages and maintain satisfactory relationships with our employees and labor unions. We\nvalue our relationship with our employees and place significant emphasis on employee engagement. We have invested substantial time and resources in\nbuilding our team. Our human capital management objectives include identifying, recruiting, retaining, incentivizing and integrating both existing and new\nemployees. To attract and retain talent, we strive to create an inclusive and safe workplace, offering opportunities for career growth and development,\nsupported by strong compensation and benefits programs.\nInsurance\nOur leases generally require that our lessees carry physical damage and liability insurance providing primary insurance coverage for loss and damage to our\nassets as well as for related cargo and third parties while the assets are on lease. In addition, in certain cases, we maintain contingent liability coverage for\nany claims or losses on our assets while they are on hire or otherwise in the possession of a third-party. Finally, we procure insurance for our assets when\nthey are not on hire or are otherwise under our control.\nConflicts of Interest\nPotential conflicts of interest may arise with respect to our decisions regarding how to allocate investment opportunities between us and partnerships in our\nStrategic Capital Initiative. Allocating investment opportunities appropriately frequently involves significant and subjective judgments. Investors in our\nStrategic Capital Initiative and our shareholders may perceive conflicts of interest regarding such investment decisions, which could harm our reputation with\nsuch investors and our shareholders. See \u201cRisks Related to Our Business-Our Strategic Capital Initiative involves certain risks which could adversely affect\nour business, prospects, financial condition, results of operations and cash flows.\u201d\nWhere Readers Can Find Additional Information\nFTAI Aviation Ltd. is a Cayman Islands exempted company. Our principal executive offices are located at 415 West 13th Street, New York, New York 10014.\nFTAI Aviation Ltd. files annual, quarterly and current reports, proxy statements and other information required by the Exchange Act, with the SEC. Our SEC\nfilings are available to the public from the SEC\u2019s internet site at http://www.sec.gov.\nOur internet site is http://www.www.ftaiaviation.com. We will make available free of charge through our internet site our annual reports on Form 10-K,\nquarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and Forms 3, 4 and 5 filed on behalf of directors and executive officers and\nany amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material\nwith, or furnish it to, the SEC. Also posted on our website in the \u2018\u2018Investor Center - Corporate Governance\u2019\u2019 section are charters for our Audit Committee,\nCompensation Committee, Nominating Committee, as well as our Corporate Governance Guidelines, Code of Ethics for our officers, and our Code of\nBusiness Conduct and Ethics governing our directors, officers and employees. Investors and others should note that we use our website to communicate\nwith our investors and the public about the Company, and from time to time we may announce material information through our website. Therefore, we\nencourage investors, the media and others interested in the Company to monitor and review the information we make available on our website. Information\non, or accessible through, our website is not a part of, and is not incorporated into, this report.\nItem 1A. Risk Factors\nYou should carefully consider the following risks and other information in this Form 10-K in evaluating us and our shares. Any of the following risks, as well\nas additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of\noperations or financial condition. The risk factors generally have been separated into the following categories: risks related to our business, risks related to\ntaxation and risks related to the Company\u2019s shares. However, these categories do overlap and should not be considered exclusive.\nRisks Related to Our Business\nUncertainty relating to macroeconomic conditions, including those that affect the commercial aviation industry, may reduce the demand for our\nassets, result in non-performance of contracts by our lessees or charterers, limit our ability to obtain additional capital to finance new\ninvestments, or have other unforeseen negative effects.\nUncertainty and negative trends in general economic conditions in the United States and abroad, including significant tightening of credit markets and\ncommodity price volatility, historically have created difficult operating environments for owners and operators in the aviation industry. As a provider of\nproducts and services to the commercial aviation industry, we are greatly affected by the overall economic conditions and other trends that affect our\ncustomers and lessees in that industry, including any projected market growth that may not materialize or be sustainable. The commercial aviation industry is\nhistorically cyclical and has been negatively affected in the past, and could be negatively affected in future periods, by geopolitical events, natural disasters,\npandemics, supply chain disruptions, labor issues, environmental concerns (including climate change), lack of capital, cost inflation, and weak economic\nconditions. A number of governments have implemented, or are considering implementing, a broad variety of governmental actions or new regulations for\nthe financial markets. In addition, limitations on the availability of\n\n\n\n\n 10\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 12 of 100\n\n\ncapital, higher costs of capital for financing expenditures or the desire to preserve liquidity, may cause our current or prospective customers and lessees to\nmake reductions in future capital budgets and spending.\nFurther, demand for our assets is related to passenger and cargo traffic growth, which in turn is dependent on general business and economic conditions.\nGlobal economic downturns could have an adverse impact on passenger and cargo traffic levels and consequently our customers\u2019 and lessees\u2019 business,\nwhich may in turn result in a significant reduction in revenues, earnings and cash flows, difficulties accessing capital and a deterioration in the value of our\nassets. We have in the past been exposed to increased credit risk from our customers and lessees and third parties who have obligations to us, which\nresulted in non-performance of contracts by our customers and lessees and adversely impacted our business, financial condition, results of operations and\ncash flows. We cannot assure you that similar loss events may not occur in the future.\nInstability in geographies where we have assets or where we derive revenue could have a material adverse effect on our business, customers,\nlessees, operations and financial results.\nEconomic, civil, military and political uncertainty exists and may increase in regions where we operate and derive our revenue. Various countries in which we\noperate are experiencing and may continue to experience military action and civil and political unrest. We have assets in the emerging market economies of\nEastern Europe, including some assets in Russia. In late February 2022, Russian military forces launched significant military action against Ukraine. The\nconflict remains ongoing and sustained conflict and disruption in the region is likely. The impact to Russia and Ukraine, as well as actions taken by other\ncountries, including new and stricter export controls and sanctions by Canada, the United Kingdom, the European Union, the U.S. and other countries and\norganizations against officials, individuals, regions, and industries in Russia and Ukraine, and each country\u2019s potential response to such sanctions, tensions\nand military actions, could have a material adverse effect on our business and delay or prevent us from accessing certain of our assets. We are actively\nmonitoring the security of our remaining assets in the region.\nThe aviation industry has experienced periods of oversupply during which lease rates and asset values have declined, particularly during\neconomic downturns, and any future oversupply could materially adversely affect our results of operations and cash flows.\nThe oversupply of a specific asset is likely to depress lease rates for and the value of that type of asset and result in decreased utilization of our assets, and\nthe aviation industry has experienced periods of oversupply during which rates and asset values have declined, particularly during economic downturns.\nFactors that could lead to such oversupply include, without limitation:\n \u2022 general demand for the type of assets that we purchase;\n \u2022 general macroeconomic conditions, including market prices for commodities that our assets may serve;\n \u2022 geopolitical events, including war, prolonged armed conflict and acts of terrorism;\n \u2022 outbreaks of communicable diseases and natural disasters;\n \u2022 governmental regulation;\n \u2022 interest rates;\n \u2022 the availability of credit;\n \u2022 potential reduced cash flows and financial condition, including potential liquidity restraints;\n \u2022 restructurings and bankruptcies of companies in the industries in which we operate, including our customers and lessees;\n \u2022 manufacturer production levels and technological innovation;\n \u2022 manufacturers merging or exiting the industry or ceasing to produce certain asset types;\n \u2022 retirement and obsolescence of the assets that we own, maintain, repair or exchange; and\n \u2022 increases in supply levels of assets in the market due to the sale or merging of operating lessors.\nThese and other related factors are generally outside of our control and could lead to (i) persistence of, or increase in, the oversupply of the types of assets\nthat we acquire, maintain, repair or exchange or (ii) decreased utilization of our assets, either of which could materially adversely affect our results of\noperations and cash flow.\nThe aviation industry is heavily regulated, and if we fail to comply with applicable requirements, our results of operations could suffer.\nGovernmental agencies throughout the world, including the Federal Aviation Administration (\u201cFAA\u201d) and Transport Canada, prescribe standards and\nqualification requirements for aircraft components, including virtually all commercial airline and general aviation products. Specific regulations vary from\ncountry to country, although compliance with FAA requirements generally satisfies regulatory requirements in other countries. If any material authorization or\napproval qualifying us to supply our products is revoked or suspended, then sale of the product would be prohibited by law, which would have an adverse\neffect on our business, financial condition and results of operations.\nThe FAA and equivalent regulatory agencies in other jurisdictions in which we operate have increasingly focused on the need to assure that airline industry\nproducts are designed with sufficient cybersecurity controls to protect against unauthorized access or other unwanted compromise. A failure to meet these\nevolving expectations could negatively impact sales into the industry and expose us to legal or contractual liability.\n\n\n\n\n 11\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 13 of 100\n\n\nFrom time to time, the FAA or equivalent regulatory agencies in other countries propose new regulations or changes to existing regulations, which often are\nmore stringent than existing regulations. If such proposals are adopted and enacted, we may incur significant additional costs to achieve compliance, which\ncould have a material adverse effect on our business, financial condition and results of operations.\nThe retirement or prolonged grounding of commercial aircraft could reduce our revenues and the value of any related inventory.\nWe sell aircraft components and replacement parts. If aircraft or engines for which we offer aircraft components and replacement parts are retired or\ngrounded for prolonged periods of time and there are fewer aircraft that require these components or parts, our revenues may decline as well as the value of\nany related inventory.\nContractual defaults may adversely affect our business, prospects, financial condition, results of operations and cash flows by decreasing\nrevenues and increasing storage, positioning, collection, recovery and lost equipment expenses.\nThe success of our business depends in large part on the success of the operators in the sectors in which we participate. Cash flows from our assets are\nsubstantially impacted by our ability to collect compensation and other amounts to be paid in respect of such assets from the lessees with whom we enter\ninto leases or other contractual arrangements with lessees or customers. Inherent in the nature of the leases and other arrangements for the use of such\nassets is the risk that we may not receive, or may experience delay in realizing, such amounts to be paid. While we target the entry into contracts with credit-\nworthy counterparties, no assurance can be given that such counterparties will perform their obligations during the term of the leases or other contractual\narrangements. In addition, when counterparties default, we may fail to recover all of our assets, and the assets we do recover may be returned in damaged\ncondition or to locations where we will not be able to efficiently lease or sell them. In most cases, we maintain, or require our lessees to maintain, certain\ninsurances to cover the risk of damages or loss of our assets. However, these insurance policies may not be sufficient to protect us against a loss.\nDepending on the specific sector, the risk of contractual defaults may be elevated due to excess capacity as a result of oversupply during the most recent\neconomic downturn. We lease assets to our lessees pursuant to fixed-price contracts, and our lessees then seek to utilize those assets to transport goods\nand provide services. If the price at which our lessees receive for their transportation services decreases as a result of an oversupply in the marketplace,\nthen our lessees may be forced to reduce their prices in order to attract business (which may have an adverse effect on their ability to meet their contractual\nlease obligations to us), or may seek to renegotiate or terminate their contractual lease arrangements with us to pursue a lower-priced opportunity with\nanother lessor, which may have a direct, adverse effect on us. See \u201c-The industries in which we operate have experienced periods of oversupply during\nwhich lease rates and asset values have declined, particularly during economic downturns, and any future oversupply could materially adversely affect our\nresults of operations and cash flows.\u201d Any default by a material customer or lessee would have a significant impact on our profitability at the time the\ncustomer or lessee defaulted, which could materially adversely affect our operating results and growth prospects. In addition, some of our counterparties\nmay reside in jurisdictions with legal and regulatory regimes that make it difficult and costly to enforce such counterparties\u2019 obligations.\nWe acquire a high concentration of CFM-56 and V2500 engines and related parts and our business, prospects, financial condition, results of\noperations and cash flows could be adversely affected by changes in market demand or problems specific to that asset or sector.\nIf we acquire a high concentration of CFM-56 and V2500 engines and related parts and our business and financial results could be adversely affected by\nsector-specific or asset-specific factors. If the market demand for such engines and related parts declines, it is redesigned or replaced by its manufacturer or\nit experiences design or technical problems, the value and rates relating to such asset may decline, and we may be unable to lease or sell such engines or\nrelated parts on favorable terms, if at all. Any decrease in the value and rates of our assets may have a material adverse effect on our business, prospects,\nfinancial condition, results of operations and cash flows.\nWe operate in highly competitive markets.\nThe markets for our products and services are highly competitive. Market competition for opportunities to acquire aviation assets includes traditional\ntransportation companies, commercial and investment banks, as well as a growing number of non-traditional participants, such as hedge funds, private\nequity funds and other private investors. Some of these competitors may have access to greater amounts of capital and/or to capital that may be committed\nfor longer periods of time or may have different return thresholds than us, and thus these competitors may have certain advantages not shared by us. In\naddition, competitors may have incurred, or may in the future incur, leverage to finance their debt investments at levels or on terms more favorable than\nthose available to us. Strong competition for investment opportunities could result in fewer such opportunities for us, as certain of these competitors have\nestablished and are establishing investment vehicles that target the same types of assets that we intend to purchase.\nMarket competition for our Aerospace Products business includes aircraft manufacturers, aircraft component and parts manufacturers, airline and aircraft\nservice companies, companies providing maintenance, repair and overhaul services and aircraft spare parts distributors and redistributors.\nSome of our competitors may have longer operating histories, greater financial resources and lower costs of capital than us, and consequently, may be able\nto compete more effectively in one or more of our target markets. We likely will not always be able to compete successfully with our competitors and\ncompetitive pressures or other factors may also result in significant price\n\n\n\n\n 12\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 14 of 100\n\n\ncompetition, particularly during industry downturns, which could have a material adverse effect on our business, prospects, financial condition, results of\noperations and cash flows.\nThe success of our Aerospace Products segment is dependent upon our ability to manage our operational footprint.\nWe currently perform maintenance, repair and exchange activities at our maintenance facilities. Our maintenance facilities could become unavailable either\ntemporarily or permanently due to labor disruptions at any of our facilities or other circumstances that may be beyond our control, such as geopolitical\ndevelopments or logistical complications arising from catastrophic and weather-related events.\nPotential logistical complications resulting from circumstances beyond our control may include, but are not limited to, power loss, telecommunication and\ninformation systems failures, or other internal or external system or service failures, accidents or incidents arising from acts of war, terrorism, cyber-attacks,\nweather, global climate change, earthquakes, hurricanes, fires, floods, tornadoes, explosions or other natural disasters or pandemics, including public health\ncrises.\nIf any of these events were to occur at or around any of our facilities, this could result in potential damage to physical assets and we may be unable to shift\nwork to other facilities or to make up for lost work, which could result in a prolonged interruption of our business, significant delays in shipments of products,\nthe loss of sales and customers and large expenses to repair or replace the facility or facilities. We may not have insurance to adequately compensate us for\nany of these events. If insurance or other risk transfer mechanisms, such as existing disaster recovery and business continuity plans, are insufficient to\nrecover all costs, we could experience a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.\nCertain liens may arise on our assets.\nCertain of our assets are currently subject to liens under our third amended and restated revolving credit facility (the \u201cRevolving Credit Facility\u201d. In the event\nof a default under the Revolving Credit Facility, the lenders thereunder would be permitted to take possession of or sell such assets. In addition, our currently\nowned assets and assets that we purchase in the future may be subject to other liens based on the industry practices relating to such assets. Until they are\ndischarged, these liens could impair our ability to repossess, re-lease or sell our assets, and to the extent our lessees do not comply with their obligations to\ndischarge any liens on the applicable assets, we may find it necessary to pay the claims secured by such liens in order to repossess such assets. Such\npayments could materially adversely affect our operating results and growth prospects.\nThe values of our assets may fluctuate due to various factors.\nThe fair market values of our assets may decrease or increase depending on a number of factors, including the prevailing level of charter or lease rates from\ntime to time, general economic and market conditions affecting our target markets, type and age of assets, supply and demand for assets, competition, new\ngovernmental or other regulations and technological advances, all of which could impact our profitability and our ability to lease, develop, operate, or sell\nsuch assets. In addition, our assets depreciate as they age and may generate lower revenues and cash flows. We must be able to replace such older,\ndepreciated assets with newer assets, or our ability to maintain or increase our revenues and cash flows will decline. In addition, if we dispose of an asset for\na price that is less than the depreciated book value of the asset on our balance sheet or if we determine that an asset\u2019s value has been impaired, we will\nrecognize a related charge in our Consolidated Statement of Operations and such charge could be material.\nWe may not generate a sufficient amount of cash or generate sufficient free cash flow to fund our operations or repay our indebtedness.\nAs of December 31, 2024, we had $3.4 billion of indebtedness outstanding. Our ability to make payments on our indebtedness depends on our ability to\ngenerate cash flow in the future. This ability, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors\nthat are beyond our control. If we do not generate sufficient free cash flow to satisfy our debt obligations, including interest payments and the payment of\nprincipal at maturity, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying\ncapital investments or seeking to raise additional capital. We cannot provide assurance that any refinancing would be possible, that any assets could be\nsold, or, if sold, of the timeliness and amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at all,\nor that additional financing would be permitted under the terms of our various debt instruments then in effect. Furthermore, our ability to refinance would\ndepend upon the condition of the finance and credit markets. Our inability to generate sufficient free cash flow to satisfy our debt obligations, or to refinance\nour obligations on commercially reasonable terms or on a timely basis, would materially affect our business, financial condition and results of operations.\nOur use of joint ventures or partnerships may present unforeseen obstacles or costs.\nWe have acquired and may in the future acquire interests in certain assets in cooperation with third-party partners or co-investors through jointly-owned\nacquisition vehicles, joint ventures or other structures. In these co-investment situations, our ability to control the management of such assets depends upon\nthe nature and terms of the joint arrangements with such partners and our relative ownership stake in the asset, each of which will be determined by\nnegotiation at the time of the investment. Such arrangements present risks not present with wholly-owned assets, such as the possibility that a co-investor\nbecomes bankrupt, develops business interests or goals that conflict with our interests and goals in respect of the assets, all of which could materially\nadversely affect our business, prospects, financial condition, results of operations and cash flows.\n\n\n\n\n 13\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 15 of 100\n\n\nIn addition, we expect to utilize third-party contractors to perform services and functions related to the operation and leasing of our assets. These functions\nmay include billing, collections, recovery and asset monitoring. Because we do not directly control these third parties, there can be no assurance that the\nservices they provide will be delivered at a level commensurate with our expectations, or at all. The failure of any such third-party contractors to perform in\naccordance with our expectations could materially adversely affect our business, prospects, financial condition, results of operations and cash flows.\nOur Strategic Capital Initiative involves certain risks which could adversely affect our business, prospects, financial condition, results of\noperations and cash flows.\nOn December 30, 2024, we announced the launch of a Strategic Capital Initiative in collaboration with third-party institutional investors. The first partnership\nunder the initiative (the \u201c2025 Partnership\u201d) will focus on acquiring 737NG and A320ceo aircraft. The Strategic Capital Initiative, and its related partnerships,\nwill allow us to maintain an asset-light business model while the partnerships actively acquire on-lease narrowbody aircraft at scale. We have agreed that the\n2025 Partnership, and follow-on partnerships, will be the primary buyer of on-lease 737NG and A320ceo aircraft. We will provide aircraft management\nservices to the 2025 Partnership, and the Company will receive customary, market-based compensation for providing such services. The Company has also\ncommitted to make a minority investment in the 2025 Partnership. We expect to provide aircraft management services to, and make minority investments in,\nfuture partnerships. Our Strategic Capital Initiative is subject to certain risks, which include, but are not limited to:\n \u2022 Market Risk. Difficult market conditions may adversely affect our Strategic Capital Initiative in many ways, including by negatively impacting the\n 2025 Partnership and future partnerships\u2019 ability to raise or deploy capital, lowering management fee income and incentive income, increasing the\n cost of financial instruments and executing transactions and adversely affecting the performance of the partnerships\u2019 investments. In addition,\n market or idiosyncratic factors may make it difficult to raise new capital from investors into the Strategic Capital Initiative. Any of these\n circumstances could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.\n \u2022 Liquidity Risk. Our Strategic Capital Initiative may invest in relatively high-risk, illiquid assets and may fail to realize any profits from these activities\n for a considerable period of time, if at all.\n \u2022 Valuation Risk. Valuation methodologies for certain assets held by our Strategic Capital Initiative are subject to significant subjectivity and the\n values established pursuant to such methodologies may never be realized, which could result in significant losses from our Strategic Capital\n Initiative.\n \u2022 Key Personnel Risk. Our business and financial condition may be materially adversely impacted by the loss of any of the key investment\n professionals involved in our Strategic Capital Initiative. Our ability to retain and attract investment professionals is critical to the success and\n growth of our Strategic Capital Initiative. In addition, evaluating transactions for our Strategic Capital Initiative may divert the time and attention of\n our management from other parts of our business.\n \u2022 Litigation Risk. One of our subsidiaries is the general partner of the 2025 Partnership and we expect to serve as general partner of future\n partnerships. As general partner, we may be subject to the risk of litigation by third parties, including investors in our Strategic Capital Initiative\n dissatisfied with our management of the Strategic Capital Initiative or the performance thereof.\n \u2022 Allocation and Conflicts of Interest Risk. We have agreed that the 2025 Partnership, and follow-on partnerships, will be the primary buyer of on-\n lease 737NG and A320ceo aircraft. In the future, we may agree to allocate buying opportunities for certain assets to other partnerships. In addition,\n potential conflicts of interest may arise with respect to our decisions regarding how to allocate investment opportunities between us and\n partnerships in our Strategic Capital Initiative. Allocating investment opportunities appropriately frequently involves significant and subjective\n judgments. Investors in our Strategic Capital Initiative and our shareholders may perceive conflicts of interest regarding such investment decisions,\n which could harm our reputation with such investors and our shareholders.\n \u2022 Leverage Risk. Our Strategic Capital Initiative expects to use leverage in investments, which could materially adversely affect its ability to achieve\n positive rates of return on those investments. The use of leverage poses a significant degree of risk, including by significantly increasing the risk of\n loss associated with leveraged investments that decline in value, and enhances the possibility of a significant loss in the value of the investments\n made by our Strategic Capital Initiative.\n \u2022 Risks of loss related to our investment. We agreed to make a minority investments in the 2025 Partnership and expect to make minority\n investments in future partnerships. Our investment is subject to the risk of loss if the 2025 Partnership and future partnership do not perform well. In\n addition, we will receive management and incentive fees for the services we provide to the 2025 Partnership and expect to perform for future\n partnerships. If the 2025 Partnership and future partnerships are not successful, that will have an adverse affect on our results of operations and\n cash flows.\n \u2022 Regulatory Risk. Tariffs, sanctions and other restrictions imposed by the U.S. government, and the potential for further regulatory changes, may\n create regulatory uncertainty and adversely affect the investment strategies and the profitability of the 2025 Partnership and future partnerships. In\n addition, changes in laws or regulations could affect our ability to continue to execute on our Strategic Capital Initiative in a manner that does not\n require us or any of our subsidiaries to register as an investment company under the Investment Company Act or as an investment adviser under\n the Investment Advisers Act.\n\n\n\n\n 14\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 16 of 100\n\n\n \u2022 Diligence Risk. The due diligence process that our Strategic Capital Initiative undertakes in connection with its investments may not reveal all facts\n that may be relevant in connection with making an investment.\n \u2022 Hedging and Risk Management. Risk management activities may materially adversely affect the return on our Strategic Capital Initiative\u2019s\n investments. When managing our Strategic Capital Initiative\u2019s exposure to market risks, we may from time to time use hedging strategies, and if our\n risk management processes and systems are ineffective, we may be exposed to material unanticipated losses.\nThe partnerships in our Strategic Capital Initiative and its investments may be subject to numerous additional risks, which we may not be able to foresee or\nanticipate. Many of these factors are outside of our control and any one of them could result in a material adverse effect on our business, prospects, financial\ncondition, results of operations and cash flows.\nWe are subject to the risks and costs of obsolescence of our assets.\nTechnological and other improvements expose us to the risk that certain of our assets may become technologically or commercially obsolete. For example,\nas manufacturers introduce technological innovations and new types of aircraft and engines, our engines and related parts could become less desirable to\npotential lessees and maintenance and repair customers. Such technological innovations may increase the rate of obsolescence of existing aircraft and our\nengines faster than currently anticipated by us. It could also adversely affect the performance of our maintenance facilities if they are not able to perform the\nrequired maintenance and repairs or necessitate us to invest significant capital to upgrade our facilities. In addition, the imposition of increased regulation\nregarding stringent noise or emissions restrictions may make some of our aircraft and engines less desirable and less valuable in the marketplace. Any of\nthese risks may adversely affect our ability to lease or sell our aircraft, engines and related parts and conduct maintenance, repair and exchanges on\nfavorable terms, if at all, which could materially adversely affect our operating results and growth prospects.\nThe inability to obtain certain components from suppliers could harm our business.\nOur business is affected by the availability and price of the component parts that we use to maintain or repair our engines or for our partners to manufacture\nproducts. Our ability to manage inventory and meet delivery requirements may be constrained by our suppliers\u2019 ability to adjust delivery of long-lead time\nproducts during times of volatile demand. The supply chains for our business could also be disrupted by external events such as natural disasters, extreme\nweather events, pandemics, labor disputes, governmental actions such as tariffs and legislative or regulatory changes. As a result, our suppliers may fail to\nperform according to specifications when required and we may be unable to identify alternate suppliers or to otherwise mitigate the consequences of their\nnon-performance.\nTransitions to new suppliers may lead to significant costs and delays, particularly due to the recertification of newly supplied parts, as required by our\ncustomers, lessees, and/or regulatory agencies. Our inability to fill our supply needs could jeopardize our ability to fulfill obligations under contracts, which\ncould result in reduced revenues and profits, contract penalties or terminations, and damage to lessee and customer relationships. Further, increased costs\nof such components could reduce our profits if we were unable to pass along such price in-creases to our customers and lessees.\nWe could be negatively impacted by environmental, social, and governance (ESG) and sustainability-related matters.\nGovernments, investors, customers, lessees, employees and other stakeholders are increasingly focusing on corporate ESG practices and disclosures, and\nexpectations in this area are rapidly evolving. We have announced, and may in the future announce, sustainability-focused investments, partnerships and\nother initiatives and goals. These initiatives, aspirations, targets or objectives reflect our current plans and aspirations and are not guarantees that we will be\nable to achieve them. Our efforts to accomplish and accurately report on these initiatives and goals present numerous operational, regulatory, reputational,\nfinancial, legal, and other risks, any of which could have a material negative impact, including on our reputation and stock price.\nIn addition, the standards for tracking and reporting on ESG matters are relatively new, have not been harmonized and continue to evolve. Our selection of\ndisclosure frameworks that seek to align with various voluntary reporting standards may change from time to time and may result in a lack of comparative\ndata from period to period. Moreover, our processes and controls may not always align with evolving voluntary standards for identifying, measuring, and\nreporting ESG metrics, our interpretation of reporting standards may differ from those of others, and such standards may change over time, any of which\ncould result in significant revisions to our goals or reported progress in achieving such goals. In this regard, the criteria by which our ESG practices and\ndisclosures are assessed may change due to the quickly evolving landscape, which could result in greater expectations of us and cause us to undertake\ncostly initiatives to satisfy such new criteria. The increasing attention to corporate ESG initiatives could also result in increased investigations and litigation or\nthreats thereof. If we are unable to satisfy such new criteria, investors may conclude that our ESG and sustainability practices are inadequate. If we fail or\nare perceived to have failed to achieve previously announced initiatives or goals or to accurately disclose our progress on such initiatives or goals, our\nreputation, business, financial condition and results of operations could be adversely impacted.\nOur assets generally require routine maintenance, and we may be exposed to unforeseen maintenance costs.\nWe may be exposed to unforeseen maintenance costs for our assets associated with a lessee\u2019s or charterer\u2019s failure to properly maintain the asset. We\nenter into leases with respect to some of our assets pursuant to which the lessees are primarily responsible for many obligations, which generally include\ncomplying with all governmental requirements applicable to the lessee or charterer, including operational, maintenance, government agency oversight,\nregistration requirements and other applicable directives. Failure of a lessee or charterer to perform required maintenance during the term of a lease or\ncharter could result in a\n\n\n\n\n 15\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 17 of 100\n\n\ndecrease in value of an asset, an inability to re-lease or charter an asset at favorable rates, if at all, or a potential inability to utilize an asset. Maintenance\nfailures would also likely require us to incur maintenance and modification costs upon the termination of the applicable lease or charter; such costs to restore\nthe asset to an acceptable condition prior to re-leasing, charter or sale could be substantial. Any failure by our lessees to meet their obligations to perform\nrequired scheduled maintenance or our inability to maintain our assets could materially adversely affect our business, prospects, financial condition, results\nof operations and cash flows.\nOur customers and lessees operate in highly regulated industries and changes in laws or regulations, including laws with respect to international\ntrade, may adversely affect our ability to lease or sell our assets.\nOur customers and lessees operate in highly regulated industries such as aviation. A number of our contractual arrangements - for example, our leasing\naircraft engines to third-party operators-require the operator (our lessee) to obtain specific governmental or regulatory licenses, consents or approvals.\nThese include consents for certain payments under such arrangements and for the export, import or re-export of the related assets. Failure by our lessee or,\nin certain circumstances, by us, to obtain certain licenses and approvals could negatively affect our ability to conduct our business. In addition, the shipment\nof goods, services and technology across international borders subjects the operation of our assets to international trade laws and regulations. Moreover,\nmany countries, including the United States, control the export and re-export of certain goods, services and technology and impose related export\nrecordkeeping and reporting obligations. Governments also may impose economic sanctions against certain countries, persons and other entities that may\nrestrict or prohibit transactions involving such countries, persons and entities. If any such regulations or sanctions affect the asset operators that are our\ncustomers, lessees, our business, prospects, financial condition, results of operations and cash flows may be materially adversely affected.\nWe may not be able to renew or obtain new or favorable leases, which could adversely affect our business, prospects, financial condition, results\nof operations and cash flows.\nOur ability to renew existing leases or obtain new leases will also depend on prevailing market conditions, and upon expiration of the contracts governing the\nleasing of the applicable assets, we may be exposed to increased volatility in terms of rates and contract provisions. For example, our lessees may reduce\ntheir activity levels or seek to terminate or renegotiate their leases with us. If we are not able to renew or obtain new leases in direct continuation, or if new\nleases are entered into at rates substantially below the existing rates or on terms otherwise less favorable compared to existing contractual terms, or if we\nare unable to sell assets for which we are unable to obtain new contracts or leases, our business, prospects, financial condition, results of operations and\ncash flows could be materially adversely affected.\nLitigation to enforce our contracts and recover our assets has inherent uncertainties that are increased by the location of our assets in\njurisdictions that have less developed legal systems.\nWhile some of our contractual arrangements are governed by New York law and provide for the non-exclusive jurisdiction of the courts located in the state of\nNew York, our ability to enforce our counterparties\u2019 obligations under such contractual arrangements is subject to applicable laws in the jurisdiction in which\nenforcement is sought. While some of our existing assets are used in specific jurisdictions, transportation and aviation assets by their nature generally move\nthroughout multiple jurisdictions in the ordinary course of business. As a result, it is not possible to predict, with any degree of certainty, the jurisdictions in\nwhich enforcement proceedings may be commenced. Litigation and enforcement proceedings have inherent uncertainties in any jurisdiction and are\nexpensive. These uncertainties are enhanced in countries that have less developed legal systems where the interpretation of laws and regulations is not\nconsistent, may be influenced by factors other than legal merits and may be cumbersome, time-consuming and even more expensive. For example,\nrepossession from defaulting lessees may be difficult and more expensive in jurisdictions whose laws do not confer the same security interests and rights to\ncreditors and lessors as those in the United States and where the legal system is not as well developed. As a result, the remedies available and the relative\nsuccess and expedience of collection and enforcement proceedings with respect to the owned assets in various jurisdictions cannot be predicted. To the\nextent more of our business shifts to areas outside of the United States and Europe, such as Asia and the Middle East, it may become more difficult and\nexpensive to enforce our rights and recover our assets.\nOur international operations involve additional risks, which could adversely affect our business, prospects, financial condition, results of\noperations and cash flows.\nWe and our customers and lessees operate in various regions throughout the world. As a result, we may, directly or indirectly, be exposed to political and\nother uncertainties, including risks of:\n \u2022 terrorist acts, armed hostilities, war and civil disturbances;\n \u2022 acts of piracy;\n \u2022 potential cybersecurity attacks;\n \u2022 significant governmental influence over many aspects of local economies;\n \u2022 seizure, nationalization or expropriation of property or equipment;\n \u2022 repudiation, nullification, modification or renegotiation of contracts;\n \u2022 limitations on insurance coverage, such as war risk coverage, in certain areas;\n \u2022 political unrest;\n \u2022 foreign and U.S. monetary policy and foreign currency fluctuations and devaluations;\n\n\n\n 16\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 18 of 100\n\n \u2022 the inability to repatriate income or capital;\n \u2022 complications associated with repairing and replacing equipment in remote locations;\n \u2022 import-export quotas, wage and price controls, imposition of trade barriers;\n \u2022 U.S. and foreign sanctions or trade embargoes;\n \u2022 restrictions on the transfer of funds into or out of countries in which we operate;\n \u2022 compliance with U.S. Treasury sanctions regulations restricting doing business with certain nations or specially designated nationals;\n \u2022 regulatory or financial requirements to comply with foreign bureaucratic actions;\n \u2022 compliance with applicable anti-corruption laws and regulations;\n \u2022 changing taxation policies, including confiscatory taxation;\n \u2022 other forms of government regulation and economic conditions that are beyond our control; and\n \u2022 governmental corruption.\nAny of these or other risks could adversely impact our customers\u2019 and lessees\u2019 international operations which could materially adversely impact our\noperating results and growth opportunities.\nWe may make acquisitions in emerging markets throughout the world, and investments in emerging markets are subject to greater risks than\ndeveloped markets and could adversely affect our business, prospects, financial condition, results of operations and cash flows.\nTo the extent that we acquire assets in emerging markets-which we may do throughout the world-additional risks may be encountered that could adversely\naffect our business. Emerging market countries have less developed economies and infrastructure and are often more vulnerable to economic and\ngeopolitical challenges and may experience significant fluctuations in gross domestic product, interest rates and currency exchange rates, as well as civil\ndisturbances, government instability, nationalization and expropriation of private assets and the imposition of taxes or other charges by government\nauthorities. In addition, the currencies in which investments are denominated may be unstable, may be subject to significant depreciation and may not be\nfreely convertible or may be subject to the imposition of other monetary or fiscal controls and restrictions.\nEmerging markets are still in relatively early stages of their development and accordingly may not be highly or efficiently regulated. Moreover, emerging\nmarkets tend to be shallower and less liquid than more established markets which may adversely affect our ability to realize profits from our assets in\nemerging markets when we desire to do so or receive what we perceive to be their fair value in the event of a realization. In some cases, a market for\nrealizing profits from an investment may not exist locally. In addition, issuers based in emerging markets are not generally subject to uniform accounting and\nfinancial reporting standards, practices and requirements comparable to those applicable to issuers based in more developed countries, thereby potentially\nincreasing the risk of fraud and other deceptive practices. Settlement of transactions may be subject to greater delay and administrative uncertainties than in\ndeveloped markets and less complete and reliable financial and other information may be available to investors in emerging markets than in developed\nmarkets. In addition, economic instability in emerging markets could adversely affect the value of our assets subject to leases in such countries, or the ability\nof our lessees, which operate in these markets, to meet their contractual obligations. As a result, lessees that operate in emerging market countries may be\nmore likely to default under their contractual obligations than those that operate in developed countries. Liquidity and volatility limitations in these markets\nmay also adversely affect our ability to dispose of our assets at the best price available or in a timely manner.\nAs we have and may continue to acquire assets located in emerging markets throughout the world, we may be exposed to any one or a combination of these\nrisks, which could adversely affect our operating results.\nWe are actively evaluating potential acquisitions of assets and operating companies in other aviation sectors which could result in additional\nrisks and uncertainties for our business and unexpected regulatory compliance costs.\nWhile our existing portfolio primarily consists of assets in the aviation sector, we are actively evaluating potential acquisitions of assets and operating\ncompanies in sectors of the aviation market in which we do not currently operate and we plan to be flexible as other attractive opportunities arise over time.\nTo the extent we make acquisitions in other sectors, we will face numerous risks and uncertainties, including risks associated with the required investment of\ncapital and other resources and with combining or integrating operational and management systems and controls. Entry into certain lines of business may\nsubject us to new laws and regulations and may lead to increased litigation and regulatory risk. Many types of transportation assets, including certain\naviation assets, are subject to registration requirements by U.S. governmental agencies, as well as foreign governments if such assets are to be used\noutside of the United States. Failing to register the assets, or losing such registration, could result in substantial penalties, forced liquidation of the assets\nand/or the inability to operate and, if applicable, lease the assets. We may need to incur significant costs to comply with the laws and regulations applicable\nto any such new acquisition. The failure to comply with these laws and regulations could cause us to incur significant costs, fines or penalties or require the\nassets to be removed from service for a period of time resulting in reduced income from these assets. In addition, if our acquisitions in other sectors produce\ninsufficient revenues, or produce investment losses, or if we are unable to efficiently manage our expanded operations, our results of operations will be\nadversely affected, and our reputation and business may be harmed.\n\n\n\n\n 17\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 19 of 100\n\n\nImplementing new or expanded platforms, products and services and keeping pace with technological or process developments in our industries\nmay require significant capital and operational risk.\nThe commercial and business aviation industries are constantly undergoing development and change, and it is likely that new products, platforms,\nequipment, digital tools and methods which are more advanced, will be introduced in the future. We may need to make significant expenditures to fund and\nimplement new or expanded platforms and purchase new equipment.\nNew or expanded platforms with new technologies typically carry risks associated with design responsibility, development of new production tools, hiring and\ntraining of qualified personnel, increased capital and funding commitments, ability to meet customer specifications, delivery schedules and unique\ncontractual requirements, supplier performance, subcontractor performance, ability of the lessee to meet its contractual obligations to us, and our ability to\naccurately estimate costs associated with such platforms. We may face financial risks in connection with new or expanded platforms or technologies if we\nare not able to reduce the costs of these products over time, through experience and other measures, including the introduction of new designs,\ntechnologies, manufacturing methods and suppliers. In addition, any new or expanded platform may not generate sufficient demand or may experience\ntechnological problems or significant delays in the regulatory certification or manufacturing and delivery schedule. If we were unable to perform our\nobligations under new or expanded platforms to the customer\u2019s satisfaction or expectations or manufacture products at our estimated costs, if we were to\nexperience unexpected fluctuations in raw material prices or other fluctuations in supplier costs leading to cost overruns, if we were unable to successfully\nperform under revised design and manufacturing plans or successfully and equitably resolve claims and assertions, or if a new or expanded platform in\nwhich we had made a significant investment was terminated or experienced weak demand, delays or technological problems, our business, financial\ncondition and results of operations could be adversely affected. This risk includes the potential for default, quality problems or failure to meet contractual\nrequirements and could result in low margin or forward loss contracts, and the risk of having to write-off inventory or contract assets if they were deemed to\nbe unrecoverable over the life of the platform. In addition, beginning new work on existing platforms carries risks associated with the transfer of technology,\nknowledge and tooling. Any of the foregoing risks or expenditures could adversely affect our business, results of operations and financial condition.\nTo perform on new or expanded platforms, we may be required to construct or acquire new facilities, requiring additional up-front investment costs. In the\ncase of significant platform delays and/or platform cancellations, we could be required to bear certain unrecoverable construction and maintenance costs\nand incur potential impairment charges for the new facilities. We also may need to expend additional resources to determine an alternate revenue generating\nuse for the facilities. Likewise, significant delays in the construction or acquisition of a plant site could impact production schedules.\nIn addition, we may need to make significant expenditures to keep pace with new technological or process developments in our industries. Technological\ndevelopment and expenditures pose a number of challenges and risks, including the following:\n \u2022 we may not be able to successfully protect the proprietary interests we have in our aftermarket services and component and accessory repair\n processes;\n \u2022 we may need to expend significant capital to (i) purchase new equipment and machines, (ii) train employees in new methods of servicing engines,\n components or parts and (iii) fund the research and development of new platforms; and\n \u2022 development by our competitors of patents or methodologies that preclude us from providing aftermarket services could adversely affect our\n business, financial condition and results of operations.\nIn addition, we may not be able to successfully develop new products, equipment or methods of repair and overhaul service, and the failure to do so could\nadversely affect our business, financial condition and results of operations.\nThe agreements governing our indebtedness place restrictions on us and our subsidiaries, reducing operational flexibility and creating default\nrisks.\nThe agreements governing our indebtedness, including, but not limited to, the indentures governing our senior unsecured notes due 2028, 2030, 2031, 2032\nand 2033 (\u201cSenior Notes\u201d) and (the Revolving Credit Facility), contain covenants that place restrictions on us and our subsidiaries. The indentures governing\nour Senior Notes and the Revolving Credit Facility restrict among other things, our and certain of our subsidiaries\u2019 ability to:\n \u2022 merge, consolidate or transfer all, or substantially all, of our assets;\n \u2022 incur additional debt or issue preferred shares;\n \u2022 make certain investments or acquisitions;\n \u2022 create liens on our or our subsidiaries\u2019 assets;\n \u2022 sell assets;\n \u2022 make distributions on or repurchase our shares;\n \u2022 enter into transactions with affiliates; and\n \u2022 create dividend restrictions and other payment restrictions that affect our subsidiaries.\nThese covenants could impair our ability to grow our business, take advantage of attractive business opportunities, pay dividends on our ordinary shares or\nsuccessfully compete. A breach of any of these covenants could result in an event of default. Cross-default provisions in our debt agreements could cause\nan event of default under one debt agreement to trigger an event of\n\n\n\n\n 18\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 20 of 100\n\n\ndefault under our other debt agreements. Upon the occurrence of an event of default under any of our debt agreements, the lenders or holders thereof could\nelect to declare all outstanding debt under such agreements to be immediately due and payable.\nWe may not realize some or all of the targeted benefits of the Internalization.\nIn connection with the Internalization, we entered into a Transition Services Agreement with the Former Manager. Under the Transition Services Agreement,\nthe Former Manager is required to continue to provide the Company and its affiliates with certain Services for a transition period during which the Company\nwill procure replacements for the Services. The Services are provided to the Company for a fee equal to the Former Manager\u2019s cost of providing the\nServices, including the allocated cost of, among other things, overhead, employee wages and compensation, rent and related real estate expenses and\nactually incurred out-of-pocket expenses, plus a mark-up of ten percent (10%). The Company is required to use commercially reasonable efforts to make\navailable to the Former Manager certain employees of the Company who were previously employees of the Former Manager to provide the Reverse\nServices, subject to certain exceptions. The Former Manager is required to continue to provide the services that are reasonably required by the Company to\nprepare its quarterly and annual financial statements until May 31, 2025. The Company is required to continue to provide the Reverse Services until the later\nto occur of the dissolution or sale of the entities receiving Reverse Services. The Transition Services Agreement may be terminated earlier (x) by mutual\nagreement of the parties, (y) by either the Former Manager or the Company in the event of a material breach by the non-terminating party that is not cured\nwithin thirty (30) days following written notification thereof, or (z) by the Former Manager if the Company fails to pay any undisputed sum overdue and\npayable for a period of at least thirty (30) days. The failure to effectively complete the transition of these services to a fully internal basis, efficiently manage\nthe transition with the Former Manager or find adequate internal replacements for these services, could impede our ability to achieve the targeted cost\nsavings of the Internalization and adversely affect our operations. In addition, complexities arising from the Internalization could increase our overhead costs\nand detract from management\u2019s ability to focus on operating our business. There can be no assurance we will be able to realize the expected cost savings of\nthe Internalization.\nWe are reliant on certain transition services provided by the Former Manager under the Transition Services Agreement, and may not find a\nsuitable provider for these transition services if the Former Manager no longer provides the transition services to which we are entitled under the\nTransition Services Agreement.\nWe remain reliant on the Former Manager during the period of the Transition Services Agreement, and the loss of these transition services could adversely\naffect our operations. We are subject to the risk that the Former Manager will default on its obligation to provide the transition services to which we are\nentitled under the Transition Services Agreement, or that we or the Former Manager will terminate the Transition Services Agreement pursuant to its\ntermination provisions, and that we will not be able to find a suitable replacement for the transition services provided under the Transition Services\nAgreement in a timely manner, at a reasonable cost or at all. In addition, the Former Manager\u2019s liability to us if it defaults on its obligation to provide transition\nservices to us during the transition period is limited by the terms of the Transition Services Agreement, and we may not recover the full cost of any losses\nrelated to such a default. We may also be adversely affected by operational risks, including cybersecurity attacks, that could disrupt the Former Manager\u2019s\nfinancial, accounting and other data processing systems during the period of the transition services.\nTerrorist attacks or other hostilities could negatively impact our operations and our profitability and may expose us to liability and reputational\ndamage.\nTerrorist attacks may negatively affect our operations. Such attacks have contributed to economic instability in the United States and elsewhere, and further\nacts of terrorism, violence or war could similarly affect world trade and the industries in which we and our customers and lessees operate. In addition,\nterrorist attacks or hostilities may directly impact airports or aircraft or our physical facilities or those of our lessees. In addition, it is also possible that our\nassets could be involved in a terrorist attack or other hostilities. The consequences of any terrorist attacks or hostilities are unpredictable, and we may not be\nable to foresee events that could have a material adverse effect on our operations. Although our lease and charter agreements generally require the\ncounterparties to indemnify us against all damages arising out of the use of our assets, and we carry insurance to potentially offset any costs in the event\nthat our lessee indemnifications prove to be insufficient, our insurance does not cover certain types of terrorist attacks, and we may not be fully protected\nfrom liability or the reputational damage that could arise from a terrorist attack which utilizes our assets.\nProjects in the aerospace products and services sector are exposed to a variety of unplanned interruptions which could cause our results of\noperations to suffer.\nProjects in the aerospace products and services sector are exposed to unplanned interruptions caused by breakdown or failure of equipment, aging\ninfrastructure, employee error or contractor or subcontractor failure, limitations that may be imposed by equipment conditions or environmental, safety or\nother regulatory requirements, fuel supply or fuel transportation reductions or interruptions, labor or legal disputes, difficulties with the implementation or\noperation of information systems, power outages, pipeline or electricity line ruptures, catastrophic events, such as hurricanes, cyclones, earthquakes,\nlandslides, floods, explosions, fires, or other disasters. Any equipment or system outage or constraint can, among other things, reduce sales, increase costs\nand affect the ability to meet regulatory service metrics, customer expectations and regulatory reliability and security requirements. Operational disruption, as\nwell as supply disruption, and increased government oversight could adversely impact the cash flows available from these assets. In addition, the cost of\nrepairing or replacing damaged assets could be considerable. Repeated or prolonged interruption may result in temporary or permanent loss of customers,\nsubstantial litigation or penalties for regulatory or contractual non-compliance, and any loss from such events may not be recoverable under relevant\n\n\n\n\n 19\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 21 of 100\n\n\ninsurance policies. Although we believe that we are adequately insured against these types of events, no assurance can be given that the occurrence of any\nsuch event will not materially adversely affect us.\nOur leases typically require payments in U.S. dollars, but many of our lessees operate in other currencies; if foreign currencies devalue against\nthe U.S. dollar, our lessees may be unable to meet their payment obligations to us in a timely manner.\nOur current leases typically require that payments be made in U.S. dollars. If the currency that our lessees typically use in operating their businesses\ndevalues against the U.S. dollar, our lessees could encounter difficulties in making payments to us in U.S. dollars. Furthermore, many foreign countries have\ncurrency and exchange laws regulating international payments that may impede or prevent payments from being paid to us in U.S. dollars. Future leases\nmay provide for payments to be made in euros or other foreign currencies. Any change in the currency exchange rate that reduces the amount of U.S.\ndollars obtained by us upon conversion of future lease payments denominated in euros or other foreign currencies, may, if not appropriately hedged by us,\nhave a material adverse effect on us and increase the volatility of our earnings.\nOur inability to obtain sufficient capital would constrain our ability to grow our portfolio and to increase our revenues.\nOur business is capital intensive, and we have used and may continue to employ leverage to finance our operations. Accordingly, our ability to successfully\nexecute our business strategy and maintain our operations depends on the availability and cost of debt and equity capital. Additionally, our ability to borrow\nagainst our assets is dependent, in part, on the appraised value of such assets. If the appraised value of such assets declines, we may be required to reduce\nthe principal outstanding under our debt facilities or otherwise be unable to incur new borrowings.\nWe can give no assurance that the capital we need will be available to us on favorable terms, or at all. Our inability to obtain sufficient capital, or to renew or\nexpand our credit facilities, could result in increased funding costs and would limit our ability to:\n \u2022 meet the terms and maturities of our existing and future debt facilities;\n \u2022 purchase new assets or refinance existing assets;\n \u2022 fund our working capital needs and maintain adequate liquidity; and\n \u2022 finance other growth initiatives.\nIn addition, we conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment\nCompany Act or as an investment adviser under the Investment Advisers Act. As such, certain forms of financing such as finance leases may not be\navailable to us. Please see \u201c- If we are deemed an \u201cinvestment company\u201d under the Investment Company Act, it could have a material adverse effect on our\nbusiness, prospects, financial condition, results of operations and cash flows.\u201d\nThe effects of various environmental regulations may negatively affect the industries in which we operate which could have a material adverse\neffect on our financial condition, results of operations and cash flows.\nWe are subject to federal, state, local and foreign laws and regulations relating to the protection of the environment, including those governing the discharge\nof pollutants to air and water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites and noise and\nemission levels and greenhouse gas emissions. Legislative and regulatory measures currently under consideration or being implemented by government\nauthorities to address climate change could require reductions in our greenhouse gas or other emissions, establish a carbon tax or increase fuel or energy\ntaxes. These legal requirements are expected to result in increased capital expenditures and compliance costs, and could result in higher costs and may\nrequire us to acquire emission credits or carbon offsets. These costs and restrictions could harm our business and results of operations by increasing our\nexpenses or requiring us to alter our operations. The inconsistent international, regional and/or national requirements associated with climate change\nregulations also create economic and regulatory uncertainty.\nUnder some environmental laws in the United States and certain other countries, strict liability may be imposed on the owners or operators of assets, which\ncould render us liable for environmental and natural resource damages without regard to negligence or fault on our part. We could incur substantial costs,\nincluding cleanup costs, fines and third-party claims for property damage and personal injury, as a result of violations of or liabilities under environmental\nlaws and regulations in connection with our or our lessee\u2019s or charterer\u2019s current or historical operations, any of which could have a material adverse effect\non our results of operations and financial condition. In addition, a variety of new legislation is being enacted, or considered for enactment, at the federal,\nstate and local levels relating to greenhouse gas emissions and climate change. While there has historically been a lack of consistent climate change\nlegislation, as climate change concerns continue to grow, further legislation and regulations are expected to continue in areas such as greenhouse gas\nemissions control, emission disclosure requirements and building codes or other infrastructure requirements that impose energy efficiency standards.\nGovernment mandates, standards or regulations intended to mitigate or reduce greenhouse gas emissions or projected climate change impacts could result\nin increased energy and transportation costs, and increased compliance expenses and other financial obligations to meet permitting or development\nrequirements that we may be unable to fully recover (due to market conditions or other factors), any of which could result in reduced profits and adversely\naffect our results of operations. In addition, there also is an increasing number of state-level anti-ESG initiatives in the U.S. that may conflict with other\nregulatory requirements, resulting in regulatory uncertainty. While we typically maintain liability insurance coverage and typically require our lessees to\nprovide us with indemnity against certain losses, the insurance coverage is subject to large deductibles, limits on maximum coverage and significant\nexclusions and may\n\n\n\n\n 20\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 22 of 100\n\n\nnot be sufficient or available to protect against any or all liabilities and such indemnities may not cover or be sufficient to protect us against losses arising\nfrom environmental damage. In addition, changes to environmental standards or regulations in the industries in which we operate could limit the economic\nlife of the assets we acquire or reduce their value, and also require us to make significant additional investments in order to maintain compliance, which\nwould negatively impact our cash flows and results of operations.\nA cyberattack that bypasses our information technology (\u201cIT\u201d), security systems or the IT security systems of our third-party providers, causing\nan IT security breach, may lead to a disruption of our IT systems and the loss of business information which may hinder our ability to conduct\nour business effectively and may result in lost revenues and additional costs.\nParts of our business depend on the secure operation of our IT systems and the IT systems of our third-party providers to manage, process, store, and\ntransmit information associated with aircraft leasing. We have, from time to time, experienced threats to our data and systems, including malware and\ncomputer virus attacks. A cyberattack that bypasses our IT security systems or the IT security systems of our third-party providers, causing an IT security\nbreach, could adversely impact our daily operations and lead to the loss of sensitive information, including our own proprietary information and that of our\ncustomers, suppliers and employees. Such losses could harm our reputation and result in competitive disadvantages, litigation, regulatory enforcement\nactions, lost revenues, additional costs and liabilities. While we devote substantial resources to maintaining adequate levels of cybersecurity, our resources\nand technical sophistication may not be adequate to prevent all types of cyberattacks.\nIf we are deemed an \u201cinvestment company\u201d under the Investment Company Act, it could have a material adverse effect on our business,\nprospects, financial condition, results of operations and cash flows.\nWe conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment Company\nAct. Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily, or\nproposes to engage primarily, in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an\ninvestment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities\nand owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer\u2019s total assets (exclusive of U.S. government\nsecurities and cash items) on an unconsolidated basis. Excluded from the term \u201cinvestment securities,\u201d among other things, are U.S. government securities\nand securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition\nof investment company for certain privately-offered investment vehicles set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.\nWe are a holding company that is not an investment company because we are engaged in the business of holding securities of our wholly-owned and\nmajority-owned subsidiaries, which are engaged in transportation and related businesses which lease assets pursuant to operating leases and finance\nleases. The Investment Company Act may limit our and our subsidiaries\u2019 ability to enter into financing leases and engage in other types of financial activity\nbecause less than 40% of the value of our and our subsidiaries\u2019 total assets (exclusive of U.S. government securities and cash items) on an unconsolidated\nbasis can consist of \u201cinvestment securities.\u201d\nIf we or any of our subsidiaries were required to register as an investment company under the Investment Company Act, the registered entity would become\nsubject to substantial regulation that would significantly change our operations, and we would not be able to conduct our business as described in this report.\nWe have not obtained a formal determination from the SEC as to our status under the Investment Company Act and, consequently, any violation of the\nInvestment Company Act would subject us to material adverse consequences.\nIf we are deemed an \u201cinvestment adviser\u201d under the Investment Advisers Act, it could have a material adverse effect on our business, prospects,\nfinancial condition, results of operations and cash flows.\nWe conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment adviser under the Investment Advisers\nAct. If we or one or more of our subsidiaries registers as an investment adviser under the Investment Advisers Act, we will become subject to various\nrequirements under the Investment Advisers Act, such as fiduciary duties to clients, anti-fraud provisions, substantive prohibitions and requirements,\ncontractual and record-keeping requirements and administrative oversight by the SEC (primarily by inspection). In addition, if we or one or more of our\nsubsidiaries registers as an investment adviser under the Investment Advisers Act, we will be required to continually address potential conflicts between our\ninterests and those of our clients. It is possible that actual, potential or perceived conflicts of interest could give rise to investor dissatisfaction, litigation or\nregulatory enforcement actions. If we or any of our subsidiaries are deemed to be out of compliance with any such rules and regulations, we may be subject\nto civil liability, criminal liability and/or regulatory sanctions, which could have a material adverse effect on our business, prospects, financial condition, results\nof operations and cash flows.\nBecause we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to\nprotect your rights through the U.S. federal courts may be limited.\nWe are an exempted company incorporated under the laws of the Cayman Islands. As a result, it may be difficult for investors to effect service of process\nwithin the United States upon our directors or officers, or enforce judgments obtained in the United States courts against our directors or officers.\n\n\n\n\n 21\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 23 of 100\n\n\nOur corporate affairs are governed by our Articles, the Companies Act (As Revised) of the Cayman Islands (the \u2018\u2018Cayman Companies Act\u2019\u2019) and the common\nlaw of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities\nof our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman\nIslands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose\ncourts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of\nour directors under Cayman Islands law are different from what they would be under statutes or judicial precedent in some jurisdictions in the United States.\nIn particular, the Cayman Islands has a different body of securities laws as compared to the United States, and certain states, such as Delaware, may have\nmore fully developed and judicially interpreted bodies of corporate law. In addition, Cayman Islands companies may not have standing to initiate a\nshareholders derivative action in a federal court of the United States.\nWe have been advised by Maples and Calder (Cayman) LLP, our Cayman Islands legal counsel, that the courts of the Cayman Islands are unlikely (1) to\nrecognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the\nUnited States or any state; and (2) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability\nprovisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. In those\ncircumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman\nIslands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle\nthat a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided\ncertain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated\nsum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on\nthe grounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman\nIslands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement\nproceedings if concurrent proceedings are being brought elsewhere.\nAs a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management,\nmembers of the board of directors or controlling shareholders than they would as public shareholders of a United States company.\nRisks Related to Taxation\nThe Company may be a passive foreign investment company (\u201cPFIC\u201d) and it could be a controlled foreign corporation (\u201cCFC\u201d) for U.S. federal\nincome tax purposes, which may result in adverse tax considerations for U.S. shareholders.\nThe Company may be treated as a PFIC for the taxable year ended December 31, 2024, or for any subsequent taxable year, and we believe it was treated\nas a PFIC in the taxable years ended December 31, 2022, and December 31, 2023 (collectively, the \u201cPFIC years\u201d). In addition, it could be treated as a CFC\nfor U.S. federal income tax purposes for any given taxable year. If you are a U.S. person and do not make a valid qualified electing fund (\u201cQEF\u201d) election with\nrespect to us and each of our PFIC subsidiaries, then, unless we are a CFC and you own 10% or more of our shares (by vote or value), you would generally\nbe subject to special deferred tax with respect to certain distributions on our shares, any gain realized on a disposition of our shares, and certain other\nevents. These rules generally continue to apply to each shareholder who held our shares during the PFIC years even if the Company is not treated as a\nPFIC for any subsequent taxable year. The effect of this deferred tax could be materially adverse to you. Alternatively, if you are such a shareholder and\nmake a valid QEF election for us and each of our PFIC subsidiaries, or if we are a CFC and you own 10% or more of our shares (by vote or value), you will\ngenerally not be subject to those taxes, but could recognize taxable income in a taxable year in which the Company is treated as a PFIC with respect to our\nshares in excess of any distributions that we make to you in that year, thus giving rise to so called \u201cphantom income\u201d and to a potential out-of-pocket tax\nliability. No assurances can be given that any given shareholder will be able to make a valid QEF election with respect to us or our PFIC subsidiaries. See\n\u201cU.S. Federal Income Tax Considerations \u2014Considerations for U.S. Holders\u2014PFIC Status and Related Tax Considerations.\u201d The Company intends to\nprovide information to shareholders regarding its PFIC status for the taxable year ended December 31, 2024, once determination has been made.\nAssuming we are a PFIC, distributions made by us to a U.S. person will generally not be eligible for taxation at reduced tax rates generally applicable to\n\u201cqualified dividends\u201d paid by certain U.S. corporations and \u201cqualified foreign corporations\u201d to individuals. The more favorable rates applicable to other\ncorporate dividends could cause individuals to perceive investment in our shares to be relatively less attractive than investment in the shares of other\ncorporations, which could adversely affect the value of our shares.\nInvestors should consult their tax advisors regarding the potential impact of these rules on their investment in us.\nTo the extent we recognize income treated as effectively connected with a trade or business in the United States, we would be subject to U.S.\nfederal income taxation on a net income basis, which could adversely affect our business and result in decreased cash available for distribution\nto our shareholders.\nIf we are treated as engaged in a trade or business in the United States, the portion of our net income, if any, that is \u201ceffectively connected\u201d with such trade\nor business would be subject to U.S. federal income taxation at maximum corporate rates, currently 21%. In addition, we may be subject to an additional\nU.S. federal branch profits tax on our effectively connected earnings and profits at a rate of 30%. The imposition of such taxes could adversely affect our\nbusiness and would result in decreased cash\n\n\n\n 22\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 24 of 100\n\n\navailable for distribution to our shareholders. Although we (or one or more of our non-U.S. corporate subsidiaries) are expected to be treated as engaged in\na U.S. trade or business, it is currently expected that only a small portion of our taxable income will be treated as effectively connected with such U.S. trade\nor business. However, no assurance can be given that the amount of effectively connected income will not be greater than currently expected, whether due\nto a change in our operations or otherwise.\nIf there is not sufficient trading in our shares, or if 50% of our shares are held by certain 5% shareholders, we could lose our eligibility for an\nexemption from U.S. federal income taxation on rental income from our aircraft or ships used in \u201cinternational traffic\u201d and could be subject to\nU.S. federal income taxation which would adversely affect our business and result in decreased cash available for distribution to our\nshareholders.\nWe expect that we will be eligible for an exemption under Section 883 of the Internal Revenue Code of 1986, as amended (the \u201cCode\u201d), which provides an\nexemption from U.S. federal income taxation with respect to rental income derived from aircraft and ships used in international traffic by certain foreign\ncorporations. No assurances can be given that we will continue to be eligible for this exemption as changes in our ownership or the amount of our shares\nthat are traded could cause us to cease to be eligible for such exemption. To qualify for this exemption in respect of rental income, the lessor of the aircraft or\nships must be organized in a country that grants a comparable exemption to U.S. lessors. The Cayman Islands and the Marshall Islands grant such\nexemptions. Additionally, certain other requirements must be satisfied. We can satisfy these requirements in any year if, for more than half the days of such\nyear, our shares are primarily and regularly traded on a recognized exchange and certain shareholders, each of whom owns 5% or more of our shares\n(applying certain attribution rules), do not collectively own more than 50% of our shares. Our shares will be considered to be primarily and regularly traded\non a recognized exchange in any year if: (i) the number of trades in our shares effected on such recognized stock exchanges exceed the number of our\nshares (or direct interests in our shares) that are traded during the year on all securities markets\u037e (ii) trades in our shares are effected on such stock\nexchanges in more than de minimis quantities on at least 60 days during every calendar quarter in the year\u037e and (iii) the aggregate number of our shares\ntraded on such stock exchanges during the taxable year is at least 10% of the average number of our shares outstanding in that class during that year. If we\nwere not eligible for the exemption under Section 883 of the Code, we expect that our U.S. source rental income would generally be subject to U.S. federal\ntaxation, on a gross income basis, at a rate of not in excess of 4% as provided in Section 887 of the Code. If, contrary to expectations, we or certain of our\nnon-U.S. subsidiaries did not comply with certain administrative guidelines of the U.S. Internal Revenue Service (the \u201cIRS\u201d), such that 90% or more of the\nU.S. source rental income of the Company or any of such subsidiaries were attributable to the activities of personnel based in the United States (in the case\nof bareboat leases), or from \u201cregularly scheduled transportation\u201d as defined in such administrative guidelines (in the case of time charter leases), our, or such\nsubsidiary\u2019s, U.S. source rental income would be treated as income effectively connected with the conduct of a trade or business in the United States. In\nsuch case, such U.S. source rental income would be subject to U.S. federal income taxation at the maximum corporate rate as well as state and local\ntaxation. In addition, the Company or such subsidiary would be subject to the U.S. federal branch profits tax on its effectively connected earnings and profits\nat a rate of 30%. The imposition of such taxes could adversely affect our business and would result in decreased cash available for distribution to our\nshareholders.\nWe or our subsidiaries may become subject to increased and/or unanticipated tax liabilities that may have a material adverse effect on our results\nof operations.\nSome of our subsidiaries are subject to income, withholding or other taxes in certain non-U.S. jurisdictions by reason of their jurisdiction of incorporation,\nactivities and operations, where their assets are used or where the lessees of their assets (or others in possession of their assets) are located, and it is also\npossible that taxing authorities in any such jurisdictions could assert that we or our subsidiaries are subject to greater taxation than we currently face or\notherwise anticipate. Further, the Organisation for Economic Co-operation and Development (the \u201cOECD\u201d) is conducting a project focused on base erosion\nand profit shifting in international structures, which seeks to establish certain international standards for taxing the worldwide income of multinational\ncompanies. In addition, the OECD is working on a \u201cBEPS 2.0\u201d initiative, which is aimed at (i) shifting taxing rights to the jurisdiction of the consumer and (ii)\nensuring all companies pay a global minimum tax. On October 8, 2021, the OECD announced an agreement among over 140 countries delineating an\nimplementation plan, on December 20, 2021, the OECD released model rules for the domestic implementation of a 15% global minimum tax, on December\n15, 2022, the member states of the European Union unanimously voted to adopt the OECD\u2019s minimum tax rules and phase them into national law, and on\nFebruary 2, 2023 the OECD released technical guidance on the global minimum tax which was agreed by consensus of the BEPS 2.0 signatory jurisdictions.\nNumerous countries, including European Union member states, have enacted or are expected to enact minimum tax legislation, and other countries may\nenact such legislation in the future. Additionally, On December 27, 2023, Bermuda enacted a corporate tax regime with a 15% rate (the \u201cBermuda CIT\u201d) and\nwith requirements similar to those of the OECD\u2019s minimum tax proposal. The Bermuda CIT is effective for tax years beginning on or after January 1, 2025\n(see footnote 12 to our consolidated financial statements entitled \u201cIncome Taxes\u201d included elsewhere in this Annual Report). As a result of these\ndevelopments, the tax laws of certain countries in which we and our affiliates do business are expected to change (and could change on a retroactive basis)\nand certain of such changes are expected to increase our liabilities for taxes (and possibly interest and penalties) and therefore could harm our business,\ncash flows, results of operations and financial position. In addition, a portion of certain of our or our non-U.S. corporate subsidiaries\u2019 income is treated as\neffectively connected with a U.S. trade or business and is accordingly subject to U.S. federal income tax or may be subject to gross-basis U.S. withholding\ntax. It is possible that the IRS could assert that a greater portion of our or any such non-U.S. subsidiaries\u2019 income is effectively connected income that should\nbe subject to U.S. federal income tax or subject to withholding tax.\n\n\n\n\n 23\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 25 of 100\n\n\nRisks Related to Our Shares\nThe market price and trading volume of our ordinary and preferred shares may be volatile, which could result in rapid and substantial losses for\nour shareholders.\nThe market price of our ordinary and preferred shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our\nordinary and preferred shares may fluctuate and cause significant price variations to occur. If the market price of our ordinary or preferred shares declines\nsignificantly, you may be unable to resell your shares at or above your purchase price, if at all. The market price of our ordinary and preferred shares may\nfluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading\nvolume of our shares include:\n \u2022 a shift in our investor base;\n \u2022 our quarterly or annual earnings, or those of other comparable companies;\n \u2022 actual or anticipated fluctuations in our operating results;\n \u2022 changes in accounting standards, policies, guidance, interpretations or principles;\n \u2022 announcements by us or our competitors of significant investments, acquisitions or dispositions;\n \u2022 the failure of securities analysts to cover our ordinary shares;\n \u2022 changes in earnings estimates by securities analysts or our ability to meet those estimates;\n \u2022 the operating and share price performance of other comparable companies;\n \u2022 prevailing interest rates or rates of return being paid by other comparable companies and the market for securities similar to our preferred shares;\n \u2022 additional issuances of preferred shares;\n \u2022 whether we declare distributions on our preferred shares;\n \u2022 overall market fluctuations;\n \u2022 general economic conditions; and\n \u2022 developments in the markets and market sectors in which we participate.\nStock markets in the United States have experienced extreme price and volume fluctuations. Market fluctuations, as well as general political and economic\nconditions, such as acts of terrorism, prolonged economic uncertainty, a recession or interest rate or currency rate fluctuations, could adversely affect the\nmarket price of our ordinary and preferred shares.\nShort sellers have and may in the future engage in activity intended to drive down the market price of our ordinary shares, which could in the\nfuture result in related governmental and regulatory scrutiny, among other effects.\nShort selling is the practice of selling securities that the seller does not own but rather has borrowed or intends to borrow from a third party with the intention\nof later buying lower priced identical securities to return to the lender. Accordingly, it is in the interest of a short seller of our ordinary shares for the price to\ndecline. At any time, short sellers may publish, or arrange for the publication of, opinions or characterizations that are intended to create negative market\nmomentum. Short selling reports can cause increased volatility in an issuer\u2019s share price and result in regulatory and governmental inquiries. For example, in\nJanuary 2025, several short seller reports were published which contained certain allegations against the Company (the \u201cShort Seller Reports\u201d). In response\nto the Short Seller Reports, the Audit Committee of our board of directors completed an internal investigation with the assistance of outside counsel and\nforensic accountants into the allegations in the Short Seller Reports. The internal investigation concluded that the allegations of misconduct in the Shore\nSeller Reports were all without merit. Any future inquiries or investigations conducted by a governmental organization or other regulatory body, or any future\ninternal investigation could result in a material diversion of our management\u2019s time and result in substantial cost and, in the event of an adverse finding,\ncould have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows. In addition, any perceived or actual\nfailure by us to comply with applicable laws, rules, regulations, and standards could have a significant impact on our reputation and expose us to legal risk\nand potential criminal and civil liability.\nAn increase in market interest rates may have an adverse effect on the market price of our shares.\nOne of the factors that investors may consider in deciding whether to buy or sell our shares is our distribution rate as a percentage of our share price relative\nto market interest rates. If the market price of our shares is based primarily on the earnings and return that we derive from our investments and income with\nrespect to our investments and our related distributions to shareholders, and not from the market value of the investments themselves, then interest rate\nfluctuations and capital market conditions will likely affect the market price of our shares. For instance, if market interest rates rise without an increase in our\ndistribution rate, the market price of our shares could decrease, as potential investors may require a higher distribution yield on our shares or seek other\nsecurities paying higher distributions or interest. In addition, rising interest rates would result in increased interest expense on our outstanding and future\n(variable and fixed) rate debt, thereby adversely affecting cash flows and our ability to service our indebtedness and pay distributions.\n\n\n\n\n 24\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 26 of 100\n\n\nWe are required by Section 404 of the Sarbanes-Oxley Act to evaluate the effectiveness of our internal controls, and the outcome of that effort\nmay adversely affect our results of operations, financial condition and liquidity.\nAs a public company, we are required to comply with Section 404 (\u201cSection 404\u201d) of the Sarbanes-Oxley Act. Section 404 requires that we evaluate the\neffectiveness of our internal control over financial reporting at the end of each fiscal year and to include a management report assessing the effectiveness of\nour internal controls over financial reporting in our Annual Report on Form 10-K for that fiscal year. Section 404 also requires an independent registered\npublic accounting firm to attest to, and report on, management\u2019s assessment of our internal controls over financial reporting. The outcome of our review and\nthe report of our independent registered public accounting firm may adversely affect our results of operations, financial condition and liquidity. During the\ncourse of our review, we may identify control deficiencies of varying degrees of severity, and we may incur significant costs to remediate those deficiencies\nor otherwise improve our internal controls. As a public company, we are required to report control deficiencies that constitute a \u201cmaterial weakness\u201d in our\ninternal control over financial reporting. If we discover a material weakness in our internal control over financial reporting, our share price could decline and\nour ability to raise capital could be impaired.\nYour percentage ownership in us may be diluted in the future.\nYour percentage ownership in FTAI Aviation Ltd. may be diluted in the future because of equity awards that we expect will be granted to our directors,\nofficers and employees, as well as other equity instruments such as debt and equity financing.\nOur board of directors has adopted the Incentive Plan, which provides for the grant of equity-based awards, including restricted shares, stock options, stock\nappreciation rights, performance awards, restricted share units, tandem awards and other equity-based and non-equity based awards, in each case the\nFormer Manager, to the directors, officers, employees, service providers, consultants and advisors of the Former Manager who performed services for us,\nand to our directors, officers, employees, service providers, consultants and advisors. We initially reserved 30,000,000 ordinary shares for issuance under\nthe Incentive Plan. As of December 31, 2024, rights relating to 112,343 of our ordinary shares were outstanding under the Incentive Plan. In the future on the\ndate of any equity issuance by us during the remaining portion of the ten-year term of the Incentive Plan (including in respect of securities issued as\nconsideration in an acquisition), the maximum number of shares available for issuance under the Plan will be increased to include an additional number of\nordinary shares equal to ten percent (10%) of either (i) the total number of ordinary shares newly issued by us in such equity issuance or (ii) if such equity\nissuance relates to equity securities other than our ordinary shares, a number of our ordinary shares equal to 10% of (A) the gross capital raised in an equity\nissuance of equity securities other than ordinary shares during the ten-year term of the Incentive Plan, divided by (B) the fair market value of an ordinary\nshare as of the date of such equity issuance.\nSales or issuances of our ordinary shares could adversely affect the market price of our ordinary shares.\nSales of substantial amounts of our ordinary shares in the public market, or the perception that such sales might occur, could adversely affect the market\nprice of our ordinary shares. The issuance of our ordinary shares in connection with property, portfolio or business acquisitions or the exercise of outstanding\noptions or otherwise could also have an adverse effect on the market price of our ordinary shares.\nThe incurrence or issuance of debt, which ranks senior to our ordinary shares upon our liquidation, and future issuances of equity or equity-\nrelated securities, which would dilute the holdings of our existing ordinary shareholders and may be senior to our ordinary shares for the\npurposes of making distributions, periodically or upon liquidation, may negatively affect the market price of our ordinary shares.\nWe have incurred and may in the future incur or issue debt or issue equity or equity-related securities to finance our operations, acquisitions or investments.\nUpon our liquidation, lenders and holders of our debt and holders of our preferred shares (if any) would receive a distribution of our available assets before\nordinary shareholders. Any future incurrence or issuance of debt would increase our interest cost and could adversely affect our results of operations and\ncash flows. We are not required to offer any additional equity securities to existing ordinary shareholders on a preemptive basis. Therefore, additional\nissuances of ordinary shares, directly or through convertible or exchangeable securities warrants or options, will dilute the holdings of our existing ordinary\nshareholders and such issuances, or the perception of such issuances, may reduce the market price of our ordinary shares. Any preferred shares issued by\nus would likely have a preference on distribution payments, periodically or upon liquidation, which could eliminate or otherwise limit our ability to make\ndistributions to ordinary shareholders. Because our decision to incur or issue debt or issue equity or equity-related securities in the future will depend on\nmarket conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising\nefforts. Thus, ordinary shareholders bear the risk that our future incurrence or issuance of debt or issuance of equity or equity-related securities will\nadversely affect the market price of our ordinary shares.\nOur determination of how much leverage to use to finance our acquisitions may adversely affect our return on our assets and may reduce funds\navailable for distribution.\nWe utilize leverage to finance many of our asset acquisitions, which entitles certain lenders to cash flows prior to retaining a return on our assets. While we\ntarget using only what we believe to be reasonable leverage, our strategy does not limit the amount of leverage we may incur with respect to any specific\nasset. The return we are able to earn on our assets and funds available for distribution to our shareholders may be significantly reduced due to changes in\nmarket conditions, which may cause the cost of our financing to increase relative to the income that can be derived from our assets.\n\n\n\n 25\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 27 of 100\n\n\nWhile we currently intend to pay regular quarterly dividends to our shareholders, we may change our dividend policy at any time.\nAlthough we currently intend to pay regular quarterly dividends to holders of our ordinary shares, we may change our dividend policy at any time. Our net\ncash provided by operating activities has been less than the amount of distributions to our shareholders. The declaration and payment of dividends to\nholders of our ordinary shares are at the discretion of our board of directors in accordance with applicable law after taking into account various factors,\nincluding actual results of operations, liquidity and financial condition, net cash provided by operating activities, restrictions imposed by applicable law, our\ntaxable income, our operating expenses and other factors our board of directors deem relevant. There can be no assurance that we will continue to pay\ndividends in amounts or on a basis consistent with prior distributions to our investors, if at all. Because we are a holding company and have no direct\noperations, we will only be able to pay dividends from our available cash on hand and any funds we receive from our subsidiaries. Our indirect intermediate\nholding company subsidiary FTAI LLC is currently, and may in the future be, subject to certain covenants included in its financing agreements that limit its\nability to make distributions to us. In addition, our existing indebtedness does, and our future indebtedness may, limit our ability to pay dividends on our\nordinary and preferred shares. Furthermore, the terms of our preferred shares generally prevent us from declaring or paying dividends on or repurchasing\nour ordinary shares or other junior capital unless all accrued distributions on such preferred shares have been paid in full.\nAnti-takeover provisions in our Articles could delay or prevent a change in control.\nProvisions in our Articles may make it more difficult and expensive for a third party to acquire control of us even if a change of control would be beneficial to\nthe interests of our shareholders. For example, our Articles provides for a staggered board, requires advance notice for proposals by shareholders and\nnominations, places limitations on convening shareholder meetings, and authorizes the issuance of preferred shares that could be issued by our board of\ndirectors to thwart a takeover attempt. The market price of our shares could be adversely affected to the extent that provisions of our operating agreement\ndiscourage potential takeover attempts that our shareholders may favor.\nIf securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding\nour ordinary shares, our share price and trading volume could decline.\nThe trading market for our ordinary shares are influenced by the research and reports that industry or securities analysts publish about us or our business. If\nany of the analysts who cover us downgrades our ordinary units or publishes inaccurate or unfavorable research about our business, our ordinary share\nprice may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn\ncould cause our ordinary share price or trading volume to decline and our ordinary shares to be less liquid.\nItem 1B. Unresolved Staff Comments\nWe have no unresolved staff comments.\nItem 1C. Cybersecurity\nRisk Management and Strategy\nThe Company\u2019s cybersecurity is overseen by the Chief Executive Officer, who receives reports directly from other officers and individuals who perform\nservices for the Company, including, but not limited to, the Former Manager\u2019s Information Security Steering Committee (\u201cISSC\u201d), employing a risk-based\nmethodology designed to safeguard the security, confidentiality, integrity, and availability of its information. The ISSC is tasked with developing an effective\ncyber strategy, establishing policies, and managing cyber risks within the organization. The Former Manager\u2019s Chief Financial Officer and General Counsel,\nalong with the Chief Operating Officer, Chief Human Resources Officer, Chief Compliance Officer, Chief Technology Officer, Chief Information Security\nOfficer and Chief of Intelligence collaborate with officers and individuals at the Company to formulate, implement, and enforce these policies. They help\nensure that the ISSC considers best practices in its decision-making, and convenes quarterly or as needed to assess cybersecurity issues and supervise\nmatters related to information security, fraud, vendors, data protection, and privacy risks. The Former Manager\u2019s Chief Technology Officer and Chief\nInformation Security Officer have extensive knowledge and skills, and collectively bring decades of experience in the cybersecurity industry.\nTo help identify and assess risks, we and our Former Manager engage third-party advisors, leveraging standards such as the National Institute of Standards\nand Technology security framework (\u201cNIST\u201d). The results of these assessments inform the development of cybersecurity controls and risk mitigation\nstrategies, which are then implemented throughout the Company.\nWe have taken proactive measures intended to minimize the likelihood of successful cyberattacks, including the establishment of incident response\nprocedures designed to address potential cyber threats that may arise. These response procedures are structured with the aim to identify, analyze, contain,\nand remediate any cyber incidents that occur. We also have risk management processes to oversee and help identify risks from cybersecurity threats\nassociated with our use of third-party providers.\nTo date, cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected and we believe are not reasonably\nlikely to affect the Company, including its business strategy, results of operations or financial condition. Refer to the risk factor captioned \u201cA cyberattack that\nbypasses our information technology (\u201cIT\u201d), security systems or the IT security systems of our third-party providers, causing an IT security breach, may lead\nto a disruption of our IT systems and\n\n\n\n\n 26\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 28 of 100\n\n\nthe loss of business information which may hinder our ability to conduct our business effectively and may result in lost revenues and additional costs.\u201d in Part\nI, Item 1A. \u201cRisk Factors\u201d for additional description of cybersecurity risks and potential related impacts on the Company.\nGovernance\nMaterial risks are identified and prioritized by management, and material risks are discussed periodically or as needed with the Board of Directors. The\nBoard of Directors regularly reviews information regarding the Company\u2019s credit, liquidity and operations, including risks and contingencies associated with\neach area, including cybersecurity. In addition to the formal compliance program, the Board of Directors encourages management to promote a corporate\nculture that incorporates risk management into the Company\u2019s corporate strategy and day-to-day business operations.\nItem 2. Properties\nWe lease space for our offices in New York, Florida, Dubai, Ireland, Singapore and Wales, respectively, and we own and/or lease maintenance facilities in\nFlorida and Canada for our Aerospace Products business. We believe that our office facilities and properties are suitable and adequate for our business as it\nis contemplated to be conducted.\nItem 3. Legal Proceedings\nWe are and may become involved in legal proceedings, including but not limited to regulatory investigations and inquiries, in the ordinary course of our\nbusiness. Although we are unable to predict with certainty the eventual outcome of any litigation, regulatory investigation or inquiry, in the opinion of\nmanagement, we do not expect our current and any threatened legal proceedings to have a material adverse effect on our business, financial position or\nresults of operations. Given the inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a\nmaterial adverse effect on our financial results.\nItem 4. Mine Safety Disclosures\nNot applicable.\n\n\n\n\n 27\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 29 of 100\n\n PART II\nItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities\nOur ordinary shares are listed on The Nasdaq Global Select Market under the ticker symbol \u201cFTAI\u201d. As of February 26, 2025, there were approximately 6\nrecord holders of our ordinary shares. This figure does not reflect the beneficial ownership of shares held in nominee name.\nAlthough we currently intend to continue to pay regular quarterly dividends to holders of our ordinary shares, we may change our dividend policy at any time\nand no assurances can be given that any future dividends will be paid or, if paid, as to the amounts or timing. The declaration and payment of dividends to\nholders of our ordinary shares will be at the discretion of our board of directors in accordance with applicable law after taking into account various factors,\nincluding actual results of operations, liquidity and financial condition, net cash provided by operating activities, restrictions imposed by applicable law, our\ntaxable income, our operating expenses and other factors our board of directors deem relevant. In addition, our existing indebtedness does, and our future\nindebtedness may, limit our ability to pay dividends on our ordinary and preferred shares.\nOn February 26, 2025, our Board of Directors declared a cash dividend on our ordinary shares of $0.30 per share for the quarter ended December 31, 2024,\npayable on March 24, 2025 to the holders of record on March 14, 2025.\nNonqualified Stock Option and Incentive Award Plan\nIn 2015, in connection with our IPO, we established a Nonqualified Stock Option and Incentive Award Plan (\u201cIncentive Plan\u201d) referred to then as the Fortress\nTransportation and Infrastructure Investors LLC Nonqualified Stock Option and Incentive Award Plan, which provides for the ability to award equity\ncompensation awards in the form of stock options, stock appreciation rights, restricted stock, and performance awards to eligible employees, consultants,\ndirectors, and other individuals who provide services to us, each as determined by the Compensation Committee of the Board of Directors. On November\n10, 2022, in connection with the Merger, the Incentive Plan was assumed by FTAI Aviation Ltd. and renamed the FTAI Aviation Ltd. Nonqualified Stock\nOption and Incentive Award Plan, and on February 23, 2023, the Incentive Plan was amended to provide for the ability to award equity compensation awards\nin the form of restricted stock units in addition to the other forms of award described above. As of December 31, 2024, the Incentive Plan provides for the\nissuance of up to 28.3 million shares.\n\n\n\n\n 28\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 30 of 100\n\nPerformance Graph\nThe following graph compares the cumulative total return for our ordinary shares (share price change plus reinvested dividends) with the comparable return\nof the following indices: S&P Mid Cap 400, Russell 2000 and Dow Jones US Aerospace. We replaced the Dow Jones US Transportation Services Index with\nthe Dow Jones US Aerospace Index for purposes of the stock performance graph, as we believe this index is a more relevant benchmark to measure our\nperformance and the Dow Jones US Transportation index was discontinued.\nThe graph assumes an investment of $100 in our ordinary shares and in each of the indices on December 31, 2019, and that all dividends were reinvested.\nThe past performance of our shares is not an indication of future performance.\n\n COMPARISON OF CUMULATIVE TOTAL RETURN*\n Among FTAI Aviation Ltd., the S&P Midcap 400 Index, the Russell 2000 Index and the Dow Jones US Aerospace\n\n\n\n\n*$100 each invested on December 31, 2019 in stock and index, including reinvestment of dividends. Fiscal year ending December 31.\n\n\n(in whole dollars) December 31,\nIndex 2019 2020 2021 2022 2023 2024\nFTAI Aviation Ltd. $ 100.00 $ 136.34 $ 177.66 $ 132.45 $ 373.16 $ 1174.37\nS&P Midcap 400 100.00 113.66 141.80 123.28 143.54 163.54\nRussell 2000 100.00 119.96 137.74 109.59 128.14 142.93\nDow Jones US Aerospace 100.00 81.90 88.84 94.58 110.18 127.99\n\n\n\n\n 29\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 31 of 100\n\n\nItem 6. [Reserved]\n\n\n\nItem 7. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations\nThe following Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations (\u201cMD&A\u201d) is intended to help you understand FTAI\nAviation Ltd. Our MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes, and with Part I, Item 1A,\n\u201cRisk Factors\u201d and \u201cForward-Looking Statements\u201d included elsewhere in this Annual Report on Form 10-K.\nA discussion of our cash flows for 2024 compared to 2023 is included in our Annual Report on Form 10-K for the year ended December 31, 2024, under Part\nII, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.\nOverview\nWe own, lease and sell aviation equipment. We also develop and manufacture through a joint venture, and repair and sell, through our maintenance facilities\nand exclusivity arrangements, aftermarket components for aircraft engines. We target assets that, on a combined basis, generate strong cash flows with\npotential for earnings growth and asset appreciation. We believe that there is a large number of acquisition opportunities in our markets and that our\nexpertise and business and financing relationships, together with our access to capital, will allow us to take advantage of these opportunities. As of\nDecember 31, 2024, we had total consolidated assets of $4.0 billion and total equity of $81.4 million.\nInternalization of Management\nOn May 28, 2024, the Company entered into definitive agreements with the Former Manager and Master GP to internalize the Company\u2019s management\nfunction. As part of the termination of the Management Agreement, the Company (i) agreed to pay the Former Manager (for itself and on behalf of the Master\nGP, as applicable) the Cash Consideration, the compensation accrued and payable, but not yet paid, under the Management Agreement and the expenses\nthat were reimbursable, but not yet reimbursed, under the Management Agreement; (ii) issued to the Former Manager (for itself and on behalf of the Master\nGP, as applicable) the Share Consideration; (iii) purchased from Master GP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the\nCompany, in exchange for $30 thousand. Following the Internalization, the Company no longer pays management fees or incentive distributions to the\nFormer Manager and Master GP.\nIn connection with the termination of the Management Agreement, the Company also entered into a Transition Services Agreement with the Former\nManager. Under the Transition Services Agreement, the Former Manager was required to continue to provide the Company and its affiliates with all of the\nServices for a transition period until October 31, 2024, during which the Company procured replacements for the Services. The Services were provided to\nthe Company for a fee equal to the Former Manager\u2019s cost of providing the Services, including the allocated cost of, among other things, overhead,\nemployee wages and compensation, rent and related real estate expenses and actually incurred out-of-pocket expenses, plus a mark-up of ten percent\n(10%). The Company was required to use commercially reasonable efforts to make available to the Former Manager certain employees of the Company who\nwere previously employees of the Former Manager to provide the Reverse Services, subject to certain exceptions. In addition, the Former Manager is\nrequired to continue to provide the services that are reasonably required by the Company to prepare its quarterly and annual financial statements until May\n31, 2025. The Company is required to continue to provide the Reverse Services until the later to occur of the dissolution or sale of the entities receiving\nReverse Services. The Transition Services Agreement may be terminated earlier (x) by mutual agreement of the parties, (y) by either the Former Manager or\nthe Company in the event of a material breach by the non-terminating party that is not cured within thirty (30) days following written notification thereof, or (z)\nby the Former Manager if the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days.\nImpact of Russia\u2019s Invasion of Ukraine\nEconomic sanctions and export controls against Russia and Russia\u2019s aviation industry were imposed due to its invasion of Ukraine during the three months\nended March 31, 2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines. We determined\nthat it is unlikely that we will regain possession of the aircraft and engines that had not yet been recovered from Ukraine and Russia. As a result, we\nrecognized an impairment charge totaling $120.0 million, net of maintenance deposits for the year ended December 31, 2022, to write-off the entire carrying\nvalue of leasing equipment assets that we did not expect to recover from Ukraine and Russia. As of December 31, 2024, eight aircraft and seventeen\nengines were still located in Russia.\nOur lessees are required to provide insurance coverage with respect to leased aircraft and engines, and we are named as insureds under those policies in\nthe event of a total loss of an aircraft or engine. We also purchase insurance which provides us with coverage when our aircraft or engines are not subject to\na lease or where a lessee\u2019s policy fails to indemnify us. The insured value of the aircraft and engines that remain in Russia is $210.7 million. We intend to\npursue all of our claims under these policies. However, the timing and amount of any recoveries under these policies are uncertain.\nThe extent of the impact of Russia\u2019s invasion of Ukraine and the related sanctions on our results, including the ability for us to recover our leasing equipment\nin the region, will depend on future developments, including the duration of the conflict, sanctions and restrictions imposed by Russian and international\ngovernments, all of which remain uncertain.\n\n\n\n\n 30\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 32 of 100\n\n\nSpin-Off of FTAI Infrastructure Inc. (\u201cFTAI Infrastructure\u201d)\nOn August 1, 2022, Fortress Transportation and Infrastructure Investors LLC (\u201cwe\u201d, \u201cus\u201d, \u201cour\u201d, \u201cFTAI\u201d or the \u201cCompany\u201d pre-Merger, as defined below, and\nFTAI Aviation Ltd. post-Merger) effected a spin-off of the Company\u2019s infrastructure business held by FTAI Infrastructure (a wholly-owned subsidiary of the\nCompany) as a distribution of all of the shares owned by the Company of common stock of FTAI Infrastructure to the holders of the Company\u2019s ordinary\nshares as of July 21, 2022.\nFTAI Infrastructure is a corporation for U.S. federal income tax purposes and holds, among other things, the Company\u2019s previously held interests in the (i)\nJefferson Terminal business, (ii) Repauno business, (iii) Long Ridge investment, and (iv) Transtar business. FTAI Infrastructure retained all related project-\nlevel debt of those entities. In connection with the spin-off, FTAI Infrastructure paid a dividend of $730.3 million to the Company. The Company used these\nproceeds to repay all outstanding borrowings under its 2021 bridge loans, $200.0 million of its 6.50% senior unsecured notes due 2025, and approximately\n$175.0 million of the outstanding borrowings under its revolving credit facility. FTAI retained the aviation business and certain other assets, and FTAI\u2019s\nremaining outstanding corporate indebtedness.\nIn connection with the spin-off, the Company and the Former Manager assigned the Company\u2019s then-existing management agreement to FTAI Infrastructure,\nand FTAI Infrastructure and the Former Manager executed an amended and restated agreement. The Company and certain of its subsidiaries executed a\nnew management agreement with the Former Manager. The new management agreement has an initial term of six years. The Former Manager was entitled\nto a management fee and reimbursement of certain expenses on substantially similar terms as the previous arrangements with the Former Manager, which\nwere assigned to FTAI Infrastructure. Prior to the Merger described below, our Former Manager remained entitled to incentive allocations (comprised of\nincome incentive allocation and capital gains incentive allocation) on the same terms as they existed prior to spin-off. Following the Former Merger, the\nCompany entered into a Services and Profit Sharing Agreement (the \u201cServices and Profit Sharing Agreement\u201d), with a subsidiary of the Company and\nFortress Worldwide Transportation and Infrastructure Master GP LLC (\u201cMaster GP\u201d), pursuant to which Master GP is entitled to incentive payments on\nsubstantially similar terms as the previous arrangements.\nOn November 10, 2022, the Company completed the transactions set forth in the Agreement and Plan of Merger (the \u201cMerger\u201d) between Fortress\nTransportation and Infrastructure Investors LLC (\u201cFTAI\u201d) and FTAI Aviation Ltd. (\u201cFTAI Aviation\u201d) and certain other parties, with FTAI becoming a subsidiary\nof the company. As a result of the merger, the FTAI became a Cayman Islands exempted company. Upon merger completion, Fortress Transportation and\nInfrastructure Investors LLC public common shareholders\u2019 shares of the Company were exchanged automatically for shares of FTAI Aviation Ltd. without any\nfurther action from the shareholders.\nStrategic Capital Initiative\nOn December 30, 2024, the Company announced the launch of a Strategic Capital Initiative in collaboration with third-party institutional investors. The first\npartnership under the initiative (the \u201c2025 Partnership\u201d) will focus on acquiring 737NG and A320ceo aircraft. The Strategic Capital Initiative, and its related\npartnerships, will allow the Company to maintain an asset-light business model while the partnerships actively acquire on-lease narrowbody aircraft at scale.\nThe Company has agreed that the 2025 Partnership, and follow-on partnerships, will be the primary buyer of on-lease 737NG and A320ceo aircraft. The\nCompany will provide aircraft management services to the 2025 Partnership, and the Company will receive customary, market-based compensation for\nproviding such services. The Company has also committed to make a minority investment in the 2025 Partnership. The Company expects to provide aircraft\nmanagement services to, and make minority investments in, future partnerships.\nOperating Segments\nThe key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and\nservices. Our two reportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns and manages aviation\nassets, including aircraft and aircraft engines, which it leases and sells to lessees and customers. The Aerospace Products segment, through our\nmaintenance facilities, equity method investment and exclusivity arrangements, develops and manufactures, repairs/refurbishes and sells aircraft engines\nand aftermarket components for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines.\nCorporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, internalization fee and management fees and\nincentive compensation pursuant to the Management Agreement prior to the Internalization effective May 28, 2024. Additionally, Corporate and Other also\nincludes offshore energy related assets, which consist of equipment that support offshore oil and gas activities and production.\n\n\n\n\n 31\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 33 of 100\n\nResults of Operations\n\n\nAdjusted EBITDA (Non-GAAP)\nBesides net income (loss), the chief operating decision maker (\u201cCODM\u201d) utilizes Adjusted EBITDA as a key performance measure. Adjusted EBITDA is not a\nfinancial measure in accordance with U.S. generally accepted accounting principles (\u201cU.S. GAAP\u201d). This performance measure provides the CODM with the\ninformation necessary to assess operational performance and make resource and allocation decisions. We believe Adjusted EBITDA is a useful metric for\ninvestors and analysts for similar purposes of assessing our operational performance.\nAdjusted EBITDA is defined as net income (loss) attributable to shareholders from continuing operations, adjusted (a) to exclude the impact of provision for\n(benefit from) income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of\ndebt and preferred shares and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive\nallocations, depreciation and amortization expense, dividends on preferred shares and interest expense, internalization fee to affiliate, (b) to include the\nimpact of our pro-rata share of Adjusted EBITDA from unconsolidated entities and (c) to exclude the impact of equity in earnings (losses) of unconsolidated\nentities and the non-controlling share of Adjusted EBITDA, if any.\n\n\n\n\n 32\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 34 of 100\n\n\nThe following table presents our consolidated results of operations:\n\n Year Ended December 31, Change\n(in thousands) 2024 2023 2022 '24 vs '23 '23 vs '22\nRevenues\nLease income $ 255,338 $ 207,936 $ 179,314 $ 47,402 $ 28,622\nMaintenance revenue 200,809 191,347 148,846 9,462 42,501\nAsset sales revenue 192,176 303,141 183,535 (110,965) 119,606\nAerospace products revenue 1,079,821 454,970 178,515 624,851 276,455\nOther revenue 6,757 13,502 18,201 (6,745) (4,699)\nTotal revenues 1,734,901 1,170,896 708,411 564,005 462,485\n\nExpenses\nCost of sales 825,884 502,132 248,385 323,752 253,747\nOperating expenses 115,861 110,163 132,264 5,698 (22,101)\nGeneral and administrative 14,263 13,700 14,164 563 (464)\nAcquisition and transaction expenses 32,296 15,194 13,207 17,102 1,987\nManagement fees and incentive allocation to affiliate 8,449 18,037 3,562 (9,588) 14,475\nInternalization fee to affiliate 300,000 \u2014 \u2014 300,000 \u2014\nDepreciation and amortization 218,064 169,877 152,917 48,187 16,960\nAsset impairment 962 2,121 137,219 (1,159) (135,098)\nGain on sale of assets, net (18,705) \u2014 (77,211) (18,705) 77,211\nTotal expenses 1,497,074 831,224 624,507 665,850 206,717\n\n\nOther income (expense)\nEquity in losses of unconsolidated entities (2,200) (1,606) (369) (594) (1,237)\nInterest expense (221,721) (161,639) (169,194) (60,082) 7,555\nLoss on extinguishment of debt (17,101) \u2014 (19,859) (17,101) 19,859\nOther income 17,364 7,590 207 9,774 7,383\nTotal other expense (223,658) (155,655) (189,215) (68,003) 33,560\nIncome (loss) from continuing operations before income taxes 14,169 184,017 (105,311) (169,848) 289,328\nProvision for (benefit from) income taxes 5,487 (59,800) 5,300 65,287 (65,100)\n Net income (loss) from continuing operations 8,682 243,817 (110,611) (235,135) 354,428\n Net loss from discontinued operations, net of income taxes \u2014 \u2014 (101,416) \u2014 101,416\nNet income (loss) 8,682 243,817 (212,027) (235,135) 455,844\nLess: Net income (loss) attributable to non-controlling interest in\nconsolidated subsidiaries:\n Discontinued operations \u2014 \u2014 (18,817) \u2014 18,817\nLess: Dividends on preferred shares 32,763 31,795 27,164 968 4,631\nLess: Loss on redemption of preferred shares 7,998 \u2014 \u2014 7,998 $ \u2014\nNet (loss) income attributable to shareholders $ (32,079) $ 212,022 $ (220,374) $ (244,101) $ 432,396\n\n\n\nThe following table sets forth a reconciliation of net (loss) income attributable to shareholders from continuing operations to Adjusted EBITDA:\n\n\n\n\n 33\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 35 of 100\n\n\n Year Ended December 31, Change\n(in thousands) 2024 2023 2022 '24 vs '23 '23 vs '22\nNet (loss) income attributable to shareholders from continuing\noperations $ (32,079) $ 212,022 $ (137,775) $ (244,101) $ 349,797\nAdd: Provision for (benefit from) income taxes 5,487 (59,800) 5,300 65,287 (65,100)\nAdd: Equity-based compensation expense 6,006 1,638 \u2014 4,368 1,638\nAdd: Acquisition and transaction expenses 32,296 15,194 13,207 17,102 1,987\nAdd: Losses on the modification or extinguishment of debt and\npreferred shares and capital lease obligations 25,099 \u2014 19,859 25,099 (19,859)\nAdd: Changes in fair value of non-hedge derivative instruments \u2014 \u2014 \u2014 \u2014 \u2014\nAdd: Asset impairment charges 962 2,121 137,219 (1,159) (135,098)\nAdd: Incentive allocations 7,456 17,116 3,489 (9,660) 13,627\nAdd: Depreciation & amortization expense (1) 262,031 213,641 190,031 48,390 23,610\nAdd: Interest expense and dividends on preferred shares 254,484 193,434 196,358 61,050 (2,924)\nAdd: Internalization fee to affiliate 300,000 \u2014 \u2014 300,000 \u2014\nAdd:\n(2) Pro-rata share of Adjusted EBITDA from unconsolidated entities\n (1,892) 310 40 (2,202) 270\nLess: Equity in losses of unconsolidated entities 2,200 1,606 369 594 1,237\nLess: Non-controlling share of Adjusted EBITDA \u2014 \u2014 \u2014 \u2014 \u2014\nAdjusted EBITDA (non-GAAP) $ 862,050 $ 597,282 $ 428,097 $ 264,768 $ 169,185\n\n__________________________________________________\n(1)\n Includes the following items for the years ended December 31, 2024, 2023 and 2022: (i) depreciation and amortization expense of $218,064, $169,877 and $152,917, (ii)\n lease intangible amortization of $15,597, $15,126 and $13,913 and (iii) amortization for lease incentives of $28,370, $28,638 and $23,201, respectively.\n(2) Includes the following items for the years ended December 31, 2024, 2023 and 2022: (i) net loss of $2,200, $1,606 and $369, (ii) depreciation and amortization expense of\n\n $308, $1,488 and $409 and (iii) acquisition and transaction expense of $0, $428 and $0, respectively.\nRevenues\n\nPresentation of aircraft and engine sales\nDuring the third quarter of 2022, we updated our corporate strategy based on the opportunities available in the market such that the sale of aircraft and\nengines is now an output of our recurring, ordinary activities. As a result of this update, the transaction price allocated to the sale of assets is included in\nRevenues in the Consolidated Statements of Operations beginning in the third quarter of 2022 and is accounted for in accordance with ASC 606. The sale of\nCFM56-7B, CFM56-5B and V2500 engines are included in the Aerospace Products Segment and the sale of aircraft and other engines are included in the\nAviation Leasing Segment. The corresponding net book values of the assets sold are recorded in Cost of sales in the Consolidated Statements of\nOperations beginning in the third quarter of 2022. Sales transactions of aircraft and engines prior to the third quarter of 2022 were accounted for in\naccordance with ASC 610-20, Gains and losses from the derecognition of nonfinancial assets and were included in Gain (loss) on sale of assets, net on the\nConsolidated Statements of Operations, as we were previously only occasionally selling these assets. Generally, assets sold were included in Leasing\nequipment, net, on the Consolidated Balance Sheets.\nComparison of the years ended December 31, 2024 and 2023\nTotal revenues increased by $564.0 million, driven by the following:\n \u2022 Aerospace products revenue increased by $624.9 million, primarily due to a $546.0 million increase in CFM56-7B, CFM56-5B and V2500 engine\n and module sales, a $28.5 million increase in parts inventory sales, and other revenues of $47.7 million from the QuickTurn and LMCES\n acquisitions.\n \u2022 Lease income increased by $47.4 million, primarily due to an increase in engine lease revenue of $37.3 million and an increase in aircraft lease\n revenue of $17.5 million, driven by an increased number of aircraft and engines on lease. This was partially offset by a decrease of $7.3 million in\n the Offshore Energy business driven by one of our vessels having fewer days on-hire in 2024 compared to 2023, as well as the sale of the two\n vessels during 2024.\n \u2022 Maintenance revenue increased by $9.5 million. Engine maintenance revenue increased by $43.2 million, driven by an increased number of\n engines on lease in 2024 as compared to 2023. This increase was partially offset by a decrease in aircraft maintenance revenue of $32.7 million,\n primarily due to $20.1 million of higher maintenance reserves taken into revenue in 2023, partially offset by an increased number of aircraft on lease\n in 2024.\n \u2022 Asset sales revenue decreased by $111.0 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft\n and engines. Specifically, three aircraft and 14 engines were sold in 2024 as compared to 13 aircraft and 41 engines sold in 2023.\n\n\n\n\n 34\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 36 of 100\n\n\n \u2022 Other revenue decreased by $6.7 million, primarily due to a decrease in assets with end-of-lease redelivery compensation. During 2024, one\n aircraft and three engines had end-of-lease redelivery compensation, as compared to eight aircraft and four engines in 2023.\nExpenses\nTotal expenses increased $665.9 million, driven by the following:\n \u2022 Cost of sales increased by $323.8 million, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory\n sales, and directly corresponds to components of increases in Aerospace products revenue over the same period. This was partially offset by a\n decrease of $69.9 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines, which is in\n line with an overall decrease in the corresponding asset sales revenue.\n \u2022 Internalization fee to affiliate increased by $300.0 million relating to the Internalization effective May 28, 2024.\n \u2022 Depreciation and amortization increased by $48.2 million, primarily driven by an increase in the number of assets owned and on lease, partially\n offset by an increase in the number of aircraft redelivered.\n \u2022 Acquisition and transaction expenses increased by $17.1 million, primarily due to higher professional fees incurred in evaluating and completing\n strategic transactions and fees associated with the Internalization and the acquisition of LMCES in Q3 2024.\n \u2022 Operating expenses increased by $5.7 million, primarily due to the acquisition of LMCES in Q3 2024.\n \u2022 Gain on sale of assets, net increased $18.7 million driven by the sale of two vessels within the Offshore Energy business during the fourth quarter\n of 2024.\n \u2022 Management fees and incentive allocation to affiliate decreased by $9.6 million, due to a decrease in management and incentive fees to the Former\n Manager during 2024, with the Internalization effective May 28, 2024.\nOther income (expense)\nTotal other expense increased by $68.0 million due to the following:\n \u2022 Interest expense increased by $60.1 million, reflecting an increase in the average debt outstanding of approximately $779.3 million, primarily due to\n increases in (i) the Senior Notes due 2030 of $414.1 million, issued in November 2023 (ii) Senior Notes due 2031 of $525.0 million, issued in April\n 2024 (iii) Senior Notes due 2032 of $466.7 million, issued in June 2024, (iv) Senior Notes due 2033 of $124.4 million, issued in October 2024,\n partially offset by decreases in the (v) Senior Notes due 2025 of $489.6 million, which were redeemed in April 2024, (vi) Senior Notes due 2027 of\n $189.8 million, which were fully redeemed in October 2024, and the (vii) Revolving Credit Facility of $70.4 million.\n \u2022 Loss on extinguishment of debt increased by $17.1 million, primarily due to the redemption of the Senior Notes due 2025 and Senior Notes due\n 2027.\n \u2022 Other income increased by $9.8 million, primarily driven by a $10.8 million insurance settlement received within our Aviation Leasing Segment.\nProvision for (benefit from) income taxes\n\nThe Provision for income taxes increased $65.3 million, primarily due to the benefit from income taxes recorded in 2023 in connection with a tax law change\nin Bermuda as well as the increase in income from leasing and Aerospace Products activities in jurisdictions subject to taxes. As the company\u2019s operations\nin these areas grew, so did the corresponding tax obligations, resulting in a higher provision for income taxes. This increase was partially offset by the tax\nbenefit from the Internalization fee paid to the affiliate.\nNet income (loss) from continuing operations\nNet income from continuing operations decreased by $235.1 million, primarily due to the changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased by $264.8 million, primarily due to the changes noted above.\n\n\n\nComparison of the years ended December 31, 2023 and 2022\nTotal revenues increased by $462.5 million, driven by the following:\n\n\n\n\n 35\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 37 of 100\n\n\n \u2022 Aerospace products revenue increased by $276.5 million, primarily due to a $213.0 million increase in CFM56-7B, CFM56-5B and V2500 engines\n and module sales, a $44.7 million increase in parts inventory sales, $16.7 million increase due to engine management contracts, and other sales\n revenue of $2.0 million from the QuickTurn acquisition. See above discussion regarding presentation of asset sales.\n \u2022 Asset sales revenue increased by $119.6 million, primarily due to an overall increase in the number of material sales transactions of commercial\n aircraft and engines. Specifically, 13 aircraft and 41 engines were sold in 2023 as compared to eight aircraft and 71 engines sold in 2022. See\n above discussion regarding presentation of asset sales.\n \u2022 Maintenance revenue increased $42.5 million. Engine maintenance revenue increased by $26.5 million, driven by an increased number of engines\n on lease in 2023 as compared to 2022. Aircraft maintenance revenue increased $16.0 million primarily due to $20.1 million of maintenance\n reserves taken into revenue due to the early redelivery of five aircraft, partially offset by less aircraft on lease.\n \u2022 Lease income increased by $28.6 million, primarily due to an increase in engine lease revenue of $19.7 million, driven by an increased number of\n engines on lease, partially offset by an increase in the number of engines redelivered. An increase of $7.4 million in the Offshore Energy business\n due to one of our vessel being on-hire longer in 2023 compared to 2022, and with a charterer at higher rates.\n \u2022 Other revenue decreased by $4.7 million, primarily due to a decrease in assets with end-of-lease redelivery compensation. During 2023, eight\n aircraft and four engines had end-of-lease redelivery compensation, as compared to 18 aircraft and one engine in 2022.\nExpenses\nTotal expenses increased by $206.7 million, driven by the following:\n \u2022 Cost of sales increased by $253.7 million, primarily due to an increase of $170.8 million in our Aerospace Products segment, primarily due to\n increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory sales, and directly corresponds to components of\n increases in Aerospace products revenue over the same period. An increase of $82.9 million in the Aviation Leasing segment primarily due to an\n overall increase in the number of material sales transactions of commercial aircraft and engines, as well as the gross presentation of asset sales\n revenues and related costs of sales as described above.\n \u2022 Gain on sale of assets, net decreased by $77.2 million, primarily due to the change in presentation of asset sales recorded during 2022. See above\n discussion regarding presentation of asset sales and impact on Gain on sale of assets, net.\n \u2022 Depreciation and amortization increased by $17.0 million, primarily driven by an increase in the number of assets owned and on lease, partially\n offset by an increase in the number of aircraft redelivered and parted out into our engine leasing pool.\n \u2022 Management fees and incentive allocation to affiliate increased by $14.5 million, primarily due to a $13.6 million increase in incentive fee due to the\n Former Manager driven by an increase in net income.\n \u2022 Asset impairment decreased by $135.1 million, primarily due to the 2022 write down of aircraft and engines located in Russia and Ukraine that were\n deemed not recoverable. See Note 6 to the consolidated financial statements for additional information.\n \u2022 Operating expenses decreased by $22.1 million, primarily due to the following:\n \u2022 a decrease of $43.4 million in the Aviation Leasing segment primarily as a result of a $41.4 million decrease in provision for credit losses\n as a result of the sanctions imposed on Russian airlines in 2022, a $2.5 million decrease in shipping and storage fees and repairs and\n maintenance expenses, partially offset by a $1.2 million increase in insurance expense.\n \u2022 an increase of $12.8 million in the Offshore Energy business which reflects increases in offshore crew expenses of $2.1 million, project\n costs of $3.9 million and other operating expenses of $1.3 million for one of our vessels driven by increased cost of operations based on\n the operating location of the vessel, as well as increased number of days on-hire. Additionally, repairs and maintenance expense\n increased $0.6 million due to repairs on one of our vessels.\n \u2022 an increase of $8.5 million in the Aerospace Products segment primarily due to a $7.2 million increase in commission expenses due to the\n increase in sales from the used material program as well as $1.2 million increase in shipping and storage fees as operations continued to\n ramp-up in 2023.\nOther income (expense)\nTotal other expense decreased by $33.6 million, due to the following:\n \u2022 Loss on extinguishment of debt of $19.9 million was recognized during 2022. This loss was related to the pay-down of the 2021 Bridge Loan, issued\n in December 2021 and February 2022, and the partial redemption of Senior Notes due 2025.\n\n\n\n 36\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 38 of 100\n\n\n \u2022 Interest expense decreased $7.6 million, which reflects a decrease in the average outstanding debt of approximately $183.8 million primarily due to\n decreases in (i) the 2021 Bridge Loans of $178.3 million and (ii) the Senior Notes due 2025 of $116.7 million, which were partially redeemed in\n August 2022, partially offset by increases in (iii) the Revolving Credit Facility of $28.7 million and (iv) the Senior Notes due 2030 of $82.8 million,\n which were issued in November 2023.\n \u2022 Other income increased $7.4 million primarily driven by a $5.3 million gain on consolidation of investment in connection with the QuickTurn\n acquisition within our Aerospace Products Segment and $1.0 million of interest income from the Company\u2019s investments in money market funds.\nProvision for (benefit from) income taxes\nThe benefit from income taxes increased $65.1 million primarily due to the Company establishing a deferred tax asset of $72.2 million in connection with a\ntax law change in Bermuda, which was recorded as a benefit from income taxes during the fourth quarter of 2023. See Note 12 to the consolidated financial\nstatements for additional information. The benefit was offset by a $7.1 million increase from income taxes primarily attributable to an increase in income\ngenerated from operating activities in jurisdictions subject to taxes. As the Company\u2019s operations in these areas grew, so did the corresponding tax\nobligations, resulting in a higher provision for income taxes.\nNet income (loss) from continuing operations\nNet income from continuing operations increased by $354.4 million, primarily due to the changes noted above.\nNet loss from discontinued operations\nNet loss from discontinued operations decreased by $101.4 million for the year ended December 31, 2023, compared to the prior year as these businesses\nhave spun off and there is no corresponding activity in the current period.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased by $169.2 million, primarily due to the changes noted above.\nAviation Leasing Segment\nAs of December 31, 2024, in our Aviation Leasing segment, we own and manage 421 aviation assets, consisting of 109 commercial aircraft and 312\nengines, including eight aircraft and seventeen engines that were still located in Russia.\nAs of December 31, 2024, 94 of our commercial aircraft and 181 of our engines were leased to operators or other third parties. Aviation assets currently off\nlease are either undergoing repair and/or maintenance, being prepared to go on lease or held in short term storage awaiting a future lease. Our aviation\nequipment was approximately 76% utilized during the three months ended December 31, 2024, based on the percent of days on-lease in the quarter\nweighted by the monthly average equity value of our aviation leasing equipment, excluding airframes. Our aircraft currently have a weighted average\nremaining lease term of 47 months, and our engines currently on-lease have an average remaining lease term of 22 months. The table below provides\nadditional information on the assets in our Aviation Leasing segment, including transfers which involve aircraft breakdowns, engine transfers from leasing\nequipment to inventory for manufacturing and sales, and engine transfers from inventory to leasing equipment for rebuilding and sales:\n\nAviation Assets Widebody Narrowbody Total\nAircraft\nAssets at January 1, 2024 5 91 96\nPurchases \u2014 50 50\nSales \u2014 (3) (3)\nTransfers \u2014 (34) (34)\nAssets at December 31, 2024 5 104 109\n\n\nEngines\nAssets at January 1, 2024 32 235 267\nPurchases 4 134 138\nSales (13) (1) (14)\nTransfers \u2014 (79) (79)\nAssets at December 31, 2024 23 289 312\n\n\n\n\n 37\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 39 of 100\n\nThe following table presents our results of operations for our Aviation Leasing segment:\n\n Year Ended December 31, Change\n(in thousands) 2024 2023 2022 '24 vs '23 '23 vs '22\nRevenues\nLease income $ 234,411 $ 179,704 $ 159,068 $ 54,707 $ 20,636\nMaintenance revenue 200,809 191,347 148,846 9,462 42,501\nAsset sales revenue 192,176 303,141 183,535 (110,965) 119,606\nOther revenue 1,041 7,419 11,499 (6,378) (4,080)\nTotal revenues 628,437 681,611 502,948 (53,174) 178,663\n\n\nExpenses\nCost of sales 151,977 221,852 138,904 (69,875) 82,948\nOperating expenses 35,495 37,876 81,232 (2,381) (43,356)\nAcquisition and transaction expenses 9,740 7,150 1,923 2,590 5,227\nDepreciation and amortization 201,497 158,354 144,258 43,143 14,096\nAsset impairment 962 2,121 137,219 (1,159) (135,098)\nGain on sale of assets, net \u2014 \u2014 (59,048) \u2014 59,048\nTotal expenses 399,671 427,353 444,488 (27,682) (17,135)\n\n\nOther income (expense)\nEquity in (losses) earnings of unconsolidated entities (207) (148) 740 (59) (888)\nOther income 14,669 1,300 246 13,369 1,054\nTotal other income 14,462 1,152 986 13,310 166\nIncome before income taxes 243,228 255,410 59,446 (12,182) 195,964\nProvision for (benefit from) income taxes 32,979 (36,193) 2,502 69,172 (38,695)\nNet income attributable to shareholders $ 210,249 $ 291,603 $ 56,944 $ (81,354) $ 234,659\n\n\n\n\n 38\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 40 of 100\n\nThe following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:\n\n Year Ended December 31, Change\n(in thousands) 2024 2023 2022 '24 vs '23 '23 vs '22\nNet income attributable to shareholders $ 210,249 $ 291,603 $ 56,944 $ (81,354) $ 234,659\nAdd: Provision for (benefit from) income taxes 32,979 (36,193) 2,502 69,172 (38,695)\nAdd: Equity-based compensation expense 584 337 \u2014 247 337\nAdd: Acquisition and transaction expenses 9,740 7,150 1,923 2,590 5,227\nAdd: Losses on the modification or extinguishment of debt and\npreferred shares and capital lease obligations \u2014 \u2014 \u2014 \u2014 \u2014\nAdd: Changes in fair value of non-hedge derivative instruments \u2014 \u2014 \u2014 \u2014 \u2014\nAdd: Asset impairment charges 962 2,121 137,219 (1,159) (135,098)\nAdd: Incentive allocations \u2014 \u2014 \u2014 \u2014 \u2014\nAdd: Depreciation and amortization expense (1) 245,464 202,118 181,372 43,346 20,746\nAdd: Interest expense and dividends on preferred shares \u2014 \u2014 \u2014 \u2014 \u2014\nAdd:\n(2) Pro-rata share of Adjusted EBITDA from unconsolidated entities\n (123) 104 925 (227) (821)\nLess: Equity in losses (earnings) of unconsolidated entities 207 148 (740) 59 888\nLess: Non-controlling share of Adjusted EBITDA \u2014 \u2014 \u2014 \u2014 \u2014\nAdjusted EBITDA (non-GAAP) $ 500,062 $ 467,388 $ 380,145 $ 32,674 $ 87,243\n\n __________________________________________________\n(1)\n Includes the following items for the years ended December 31, 2024, 2023 and 2022: (i) depreciation expense of $201,497, $158,354 and $144,258, (ii) lease intangible\n amortization of $15,597, $15,126 and $13,913 and (iii) amortization for lease incentives of $28,370, $28,638 and $23,201, respectively.\n(2)\n Includes the following items for the years ended December 31, 2024, 2023 and 2022: (i) net (loss) income of $(207), $(148) and $740 and (ii) depreciation and amortization of\n $84, $252 and $185, respectively.\n\n\n\nComparison of the years ended December 31, 2024 and 2023\nRevenues\nTotal revenues decreased by $53.2 million, driven by the following:\n \u2022 Asset sales revenue decreased by $111.0 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft\n and engines. Specifically, three aircraft and 14 engines were sold in 2024 as compared to 13 aircraft and 41 engines sold in 2023.\n \u2022 Other revenue decreased by $6.4 million, primarily due to a decrease in end-of-lease redelivery compensation. During 2024, one aircraft and three\n engines had end-of-lease redelivery compensation, as compared to eight aircraft and four engines in 2023.\n \u2022 Lease income increased by $54.7 million, due to an increase in engine lease revenue of $37.3 million and an increase in aircraft lease revenue of\n $17.5 million, driven by an increased number of engines and aircraft on lease.\n \u2022 Maintenance revenue increased by $9.5 million. Engine maintenance revenue increased by $43.2 million, driven by an increased number of\n engines on lease in 2024 as compared to 2023. This increase was partially offset by a decrease in aircraft maintenance revenue of $32.7 million,\n primarily due to $20.1 million of higher maintenance reserves taken into revenue in 2023, partially offset by an increased number of aircraft on lease\n in 2024.\nExpenses\nTotal expenses decreased by $27.7 million, driven by the following:\n\n\n\n\n 39\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 41 of 100\n\n\n \u2022 Cost of sales decreased by $69.9 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and\n engines and is in line with an overall decrease in the corresponding asset sales revenue. Specifically, three aircraft and 14 engines were sold in\n 2024 compared to 13 aircraft and 41 engines sold in 2023.\n \u2022 Operating expenses decreased by $2.4 million, primarily driven by a decrease in bad debt expense of $5.9 million, partially offset by increases in\n legal fees of $2.7 million and repairs and maintenance expense of $1.0 million.\n \u2022 Depreciation and amortization expense increased by $43.1 million, driven by an increase in the number of assets owned and on lease, partially\n offset by an increase in the number of aircraft redelivered and parted out into our engine leasing pool.\n \u2022 Acquisition and transaction expenses increased by $2.6 million, primarily due to higher legal fees incurred in evaluating and completing strategic\n transactions.\nOther income (expense)\nTotal other income increased by $13.3 million primarily driven by a $10.8 million insurance settlement as well as a $3.9 million increase in interest income\nearned on financing receivables during 2024.\nProvision for (benefit from) income taxes\nThe Provision for income taxes increased by $69.2 million, primarily due to the benefit from income taxes recorded in 2023 in connection with a tax law\nchange in Bermuda as well as the increase in income from leasing activities in jurisdictions subject to taxes. As the company\u2019s operations in these areas\ngrew, so did the corresponding tax obligations, resulting in a higher provision for income taxes.\nNet income\nNet income decreased by $81.4 million, primarily due to the changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased by $32.7 million, primarily due to the changes noted above.\nComparison of the years ended December 31, 2023 and 2022\nRevenues\nTotal revenues increased by $178.7 million, driven by the following:\n \u2022 Asset sales revenue increased by $119.6 million, primarily due to an increase in the number of material sales transactions of commercial aircraft\n and engines. Specifically, 13 aircraft and 41 engines were sold in 2023 as compared to eight aircraft and 71 engines sold in 2022. See above\n discussion regarding presentation of asset sales.\n \u2022 Maintenance revenue increased by $42.5 million. Engine maintenance revenue increased by $26.5 million, driven by an increased number of\n engines on lease in 2023 as compared to 2022. Aircraft maintenance revenue increased $16.0 million, primarily due to $20.1 million of higher\n maintenance reserves taken into revenue due to the early redelivery of five aircraft, partially offset by less aircraft on lease.\n \u2022 Lease income increased by $20.6 million, primarily due to an increase in engine lease revenue of $19.7 million, driven by an increased number of\n engines on lease, partially offset by an increase in the number of engines redelivered.\n \u2022 Other revenue decreased $4.1 million primarily due to a decrease in end-of-lease redelivery compensation. During 2023, eight aircraft and four\n engines had end-of-lease redelivery compensation, as compared to 18 aircraft and one engine in 2022.\nExpenses\nTotal expenses decreased by $17.1 million, driven by the following:\n \u2022 Asset impairment decreased by $135.1 million, primarily due to the 2022 write down of aircraft and engines located in Russia and Ukraine that were\n deemed not recoverable. See Note 6 to the consolidated financial statements for additional information.\n \u2022 Operating expenses decreased by $43.4 million, primarily driven by the $41.4 million decrease in provision for credit losses as a result of the\n sanctions imposed on Russian airlines in 2022, a $2.5 million decrease in shipping and storage fees and repairs and maintenance expenses,\n partially offset by a $1.2 million increase in insurance expense.\n \u2022 Cost of sales increased by $82.9 million, primarily due to an overall increase in the number of material sales transactions of commercial aircraft and\n engines, as well as the gross presentation of asset sales revenues and related costs of sales as described above. Specifically, 13 aircraft and 41\n engines were sold in 2023 as compared to eight aircraft and 71 engines sold in 2022.\n \u2022 Gain on sale of assets, net decreased by $59.0 million, due to the change in presentation of asset sales recorded during 2022. See above\n discussion regarding presentation of asset sales and impact on Gain on sale of assets, net.\n\n\n\n\n 40\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 42 of 100\n\n\n \u2022 Depreciation and amortization expense increased by $14.1 million, driven by an increase in the number of assets owned and on lease, partially\n offset by an increase in the number of aircraft redelivered and parted out into our engine leasing pool.\n \u2022 Acquisition and transaction expense increased by $5.2 million, driven by higher costs associated with the acquisition of aviation leasing equipment.\nProvision for (benefit from) income taxes\nThe benefit from income taxes increased $38.7 million primarily due to the Company establishing a deferred tax asset of $46.6 million in connection with a\ntax law change in Bermuda, which was recorded as a benefit from income taxes during the fourth quarter of 2023. See Note 12 to the consolidated financial\nstatements for additional information. The benefit was offset by a $7.9 million increase from income taxes primarily attributable to an increase in income\ngenerated from leasing activities in jurisdictions subject to taxes. As the Company\u2019s operations in these areas grew, so did the corresponding tax obligations,\nresulting in a higher provision for income taxes.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased by $87.2 million, primarily due to the changes noted above.\n\n\n\nAerospace Products Segment\nThe Aerospace Products segment, through our maintenance facilities, equity method investment and exclusivity arrangements, develops and manufactures,\nrepairs/refurbishes and sells aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines.\nOur engine, module and parts sales are facilitated through a dedicated commercial maintenance program, designed to focus on modular and parts repair\nand refurbishment of CFM56-7B, CFM56-5B and V2500 engines. In September 2024, we acquired LMCES to further enhance this business and establish\npermanent engine and module manufacturing capabilities. Refer to Note 4 \u201cAcquisition of Lockheed Martin Commercial Engine Solutions\u201d, for additional\ninformation. In addition, other serviceable used modules and parts are sold through our exclusive partnership, who is responsible for the teardown, repair,\nmarketing and sales of parts from our CFM56 engine pool. In December 2023, we acquired the remaining interest in Quick Turn Engine Center LLC or\n\u201cQuickTurn\u201d (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. Refer to Note 5 \u201cAcquisition of\nQuickTurn\u201d, for additional information. We also hold a 25% interest in the Advanced Engine Repair JV which focuses on developing new cost savings\nprograms for engine repairs.\nThe following table presents our results of operations:\n\n Year Ended December 31, Change\n(in thousands) 2024 2023 2022 '24 vs '23 '23 vs '22\nAerospace products revenue $ 1,079,821 $ 454,970 $ 178,515 $ 624,851 $ 276,455\n\n\nExpenses\nCost of sales 673,907 280,280 109,481 393,627 170,799\nOperating expenses 23,818 20,459 11,967 3,359 8,492\nAcquisition and transaction expenses 4,906 1,722 243 3,184 1,479\nDepreciation and amortization 6,630 661 258 5,969 403\nGain on sale of assets, net \u2014 \u2014 (18,163) \u2014 18,163\nTotal expenses 709,261 303,122 103,786 406,139 199,336\n\n\nOther income (expense)\nEquity in losses of unconsolidated entities (1,993) (1,458) (1,109) (535) (349)\nOther income \u2014 5,347 \u2014 (5,347) 5,347\nTotal other (expense) income (1,993) 3,889 (1,109) (5,882) 4,998\nIncome before income taxes 368,567 155,737 73,620 212,830 82,117\nProvision for (benefit from) income taxes 22,221 (24,440) 2,961 46,661 (27,401)\nNet income attributable to shareholders $ 346,346 $ 180,177 $ 70,659 $ 166,169 $ 109,518\n\n\n\n\n 41\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 43 of 100\n\n\nThe following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:\n\n Year Ended December 31, Change\n(in thousands) 2024 2023 2022 '24 vs '23 '23 vs '22\nNet income attributable to shareholders $ 346,346 $ 180,177 $ 70,659 $ 166,169 $ 109,518\nAdd: Provision for (benefit from) income taxes 22,221 (24,440) 2,961 46,661 (27,401)\nAdd: Equity-based compensation expense 309 225 \u2014 84 225\nAdd: Acquisition and transaction expenses 4,906 1,722 243 3,184 1,479\nAdd: Losses on the modification or extinguishment of debt and\npreferred shares and capital lease obligations \u2014 \u2014 \u2014 \u2014 \u2014\nAdd: Changes in fair value of non-hedge derivative instruments \u2014 \u2014 \u2014 \u2014 \u2014\nAdd: Asset impairment charges \u2014 \u2014 \u2014 \u2014 \u2014\nAdd: Incentive allocations \u2014 \u2014 \u2014 \u2014 \u2014\nAdd: Depreciation and amortization expense 6,630 661 258 5,969 403\nAdd: Interest expense and dividends on preferred shares \u2014 \u2014 \u2014 \u2014 \u2014\nAdd:\n(1) Pro-rata share of Adjusted EBITDA from unconsolidated entities\n (1,769) 206 (885) (1,975) 1,091\nLess: Equity in losses of unconsolidated entities 1,993 1,458 1,109 535 349\nLess: Non-controlling share of Adjusted EBITDA \u2014 \u2014 \u2014 \u2014 \u2014\nAdjusted EBITDA (non-GAAP) $ 380,636 $ 160,009 $ 74,345 $ 220,627 $ 85,664\n\n__________________________________________________\n(1)\n Includes the following items for the years ended December 31, 2024, 2023 and 2022: (i) net loss of $1,993, $1,458 and $1,109 (ii) depreciation and amortization of $224,\n $1,236 and $224 and (iii) acquisition and transaction expense of $0, $428, $0, respectively.\n\n\nComparison of the years ended December 31, 2024 and 2023\nRevenues\nTotal Aerospace products revenue increased by $624.9 million, primarily due to a $546.0 million increase in CFM56-7B, CFM56-5B and V2500 engine and\nmodule sales, a $28.5 million increase in parts inventory sales, and other revenues of $47.7 million from the QuickTurn and LMCES acquisitions.\nExpenses\nTotal expenses increased by $406.1 million, due to the following:\n \u2022 Cost of sales increased by $393.6 million, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory\n sales, and directly corresponds to components of increases in Aerospace products revenue over the same period.\n \u2022 Depreciation and amortization increased by $6.0 million due to the acquisitions of LMCES in Q3 2024 and QuickTurn in Q4 2023.\n \u2022 Operating expenses increased by $3.4 million, primarily due to the acquisition of LMCES in Q3 2024.\n \u2022 Acquisition and transaction expenses increased by $3.2 million, primarily driven by higher professional fees incurred in evaluating and completing\n strategic transactions.\nProvision for (benefit from) income taxes\nThe Provision for income taxes increased by $46.7 million, primarily due to the benefit from income taxes recorded in 2023 in connection with a tax law\nchange in Bermuda as well as the increase in income from Aerospace Products activities in jurisdictions subject to taxes. As the company\u2019s operations in\nthese areas grew, so did the corresponding tax obligations, resulting in a higher provision for income taxes.\nNet income\nNet income increased by $166.2 million, primarily due to the changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased by $220.6 million, primarily due to the changes noted above.\n\n\n\n\n 42\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 44 of 100\n\n\nComparison of the years ended December 31, 2023 and 2022\nRevenues\nTotal Aerospace products revenue increased by $276.5 million, primarily due to a $213.0 million increase in CFM56-7B, CFM56-5B and V2500 engine and\nmodule sales, a $44.7 million increase in parts inventory sales, $16.7 million increase in revenue from engine management contracts, and other revenues of\n$2.0 million from the QuickTurn acquisition. See above discussion regarding presentation of asset sales.\nExpenses\nTotal expenses increased by $199.3 million, primarily due to the following:\n \u2022 Cost of sales increased by $170.8 million, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory\n sales, and directly corresponds to components of increases in Aerospace products revenue over the same period and the gross presentation\n described above.\n \u2022 Gain on sale of assets, net decreased by $18.2 million, primarily due to the change in presentation of asset sales recorded during 2022. See above\n discussion regarding presentation of asset sales and impact on Gain on sale of assets, net.\n \u2022 Operating expenses increased by $8.5 million, primarily due to a $7.2 million increase in commission expenses due to the increase in sales from\n the used material program as well as a $1.2 million increase in shipping and storage fees as operations continued to ramp-up in 2023.\nOther income (expense)\nTotal other income increased $5.0 million, which primarily reflects an increase of $5.3 million in gain on consolidation of investment in connection with the\nQuickTurn acquisition, offset by an increase of $0.3 million in our proportionate share of unconsolidated entities\u2019 net loss.\nProvision for (benefit from) income taxes\nThe benefit from income taxes increased $27.4 million primarily due to the Company establishing a deferred tax asset of $25.6 million in connection with a\ntax law change in Bermuda, which was recorded as a benefit from income taxes during the fourth quarter of 2023. See Note 12 to the consolidated financial\nstatements for additional information.\nNet income\nNet income increased by $109.5 million, primarily due to the changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased by $85.7 million, primarily due to the changes noted above.\n\n\n\n\n 43\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 45 of 100\n\n\nCorporate and Other\nThe following table presents our results of operations:\n\n Year Ended December 31, Change\n(in thousands) 2024 2023 2022 '24 vs '23 '23 vs '22\nRevenues\nLease income $ 20,927 $ 28,232 $ 20,246 $ (7,305) $ 7,986\nOther revenue 5,716 6,083 6,702 (367) (619)\nTotal revenues 26,643 34,315 26,948 (7,672) 7,367\n\n\nExpenses\nOperating expenses 56,548 51,828 39,065 4,720 12,763\nGeneral and administrative 14,263 13,700 14,164 563 (464)\nAcquisition and transaction expenses 17,650 6,322 11,041 11,328 (4,719)\nManagement fees and incentive allocation to affiliate 8,449 18,037 3,562 (9,588) 14,475\nInternalization fee to affiliate 300,000 \u2014 \u2014 300,000 \u2014\nDepreciation and amortization 9,937 10,862 8,401 (925) 2,461\nGain on sale of assets, net (18,705) \u2014 \u2014 (18,705) \u2014\nTotal expenses 388,142 100,749 76,233 287,393 24,516\n\n\nOther income (expense)\nLoss on extinguishment of debt (17,101) \u2014 (19,859) (17,101) 19,859\nInterest expense (221,721) (161,639) (169,194) (60,082) 7,555\nOther income (expense) 2,695 943 (39) 1,752 982\nTotal other expense (236,127) (160,696) (189,092) (75,431) 28,396\nLoss before income taxes (597,626) (227,130) (238,377) (370,496) 11,247\n(Benefit from) provision for income taxes (49,713) 833 (163) (50,546) 996\nNet loss (547,913) (227,963) (238,214) (319,950) 10,251\nLess: Dividends on preferred shares 32,763 31,795 27,164 968 4,631\nLess: Loss on redemption of preferred shares 7,998 \u2014 \u2014 7,998 \u2014\nNet loss attributable to shareholders from continuing operations $ (588,674) $ (259,758) $ (265,378) $ (327,948) $ 5,620\n\n\n\n\n 44\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 46 of 100\n\n\nThe following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:\n\n Year Ended December 31, Change\n(in thousands) 2024 2023 2022 '24 vs '23 '23 vs '22\nNet loss attributable to shareholders from continuing operations $ (588,674) $ (259,758) $ (265,378) $ (328,916) $ 5,620\nAdd: (Benefit from) provision for income taxes (49,713) 833 (163) (50,546) 996\nAdd: Equity-based compensation expense 5,113 1,076 \u2014 4,037 1,076\nAdd: Acquisition and transaction expenses 17,650 6,322 11,041 11,328 (4,719)\nAdd: Losses on the modification or extinguishment of debt and\npreferred shares and capital lease obligations 25,099 \u2014 19,859 25,099 (19,859)\nAdd: Changes in fair value of non-hedge derivative instruments \u2014 \u2014 \u2014 \u2014 \u2014\nAdd: Asset impairment charges \u2014 \u2014 \u2014 \u2014 \u2014\nAdd: Incentive allocations 7,456 17,116 3,489 (9,660) 13,627\nAdd: Depreciation and amortization expense 9,937 10,862 8,401 (925) 2,461\nAdd: Interest expense and dividends on preferred shares 254,484 193,434 196,358 61,050 (2,924)\nAdd: Internalization fee to affiliate 300,000 \u2014 \u2014 300,000 \u2014\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated entities \u2014 \u2014 \u2014 \u2014 \u2014\nLess: Equity in (earnings) losses of unconsolidated entities \u2014 \u2014 \u2014 \u2014 \u2014\nLess: Non-controlling share of Adjusted EBITDA \u2014 \u2014 \u2014 \u2014 \u2014\nAdjusted EBITDA (non-GAAP) $ (18,648) $ (30,115) $ (26,393) $ 11,467 $ (3,722)\n\n\nComparison of the years ended December 31, 2024 and 2023\nRevenues\nTotal revenues decreased by $7.7 million, primarily due to a $7.3 million decrease in the Lease income. Lease income declined primarily due to one of our\nvessels in the Offshore Energy business having fewer days on-hire in 2024 compared to 2023, as well as the sale of the two vessels during 2024.\nExpenses\nTotal expenses increased by $287.4 million, due to the following:\n \u2022 Internalization fee to affiliate increased by $300.0 million for the Internalization effective May 28, 2024.\n \u2022 Acquisition and transaction expenses increased by $11.3 million, primarily due to higher legal and other professional fees incurred for the\n Internalization on May 28, 2024 and the acquisition of LMCES on September 9, 2024.\n \u2022 Gain on sale of assets, net, increased $18.7 million due to the sale of the two vessels within the Offshore Energy business.\n \u2022 Management fees and incentive allocation to affiliate decreased by $9.6 million, due to a decrease in management and incentive fees to the Former\n Manager during 2024, with the Internalization effective May 28, 2024, as compared to fees paid during the year ended 2024 compared to 2023.\nOther income (expense)\nTotal other expense increased by $75.4 million, due to the following:\n \u2022 Interest expense increased by $60.1 million, reflecting an increase in the average debt outstanding of approximately $779.3 million, primarily due to\n increases in (i) the Senior Notes due 2030 of $414.1 million, issued in November 2023 (ii) Senior Notes due 2031 of $525.0 million, issued in April\n 2024 (iii) Senior Notes due 2032 of $466.7 million, issued in June 2024, (iv) Senior Notes due 2033 of $124.4 million, issued in October 2024,\n partially offset by decreases in the (v) Senior Notes due 2025 of $489.6 million, which were redeemed in April 2024, (vi) Senior Notes due 2027 of\n $189.8 million, which were fully redeemed in October 2024, and the (vii) Revolving Credit Facility of $70.4 million.\n \u2022 Loss on extinguishment of debt increased by $17.1 million, driven by the redemption of Senior Notes due 2025 and a redemption of Senior Notes\n due 2027.\n \u2022 Other income increased by $1.8 million, driven by interest income generated from the Company\u2019s investments in money market funds.\n\n\n\n\n 45\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 47 of 100\n\n\n(Benefit from) provision for income taxes\nThe benefit from income taxes increased by $50.5 million. This increase was primarily attributable to a substantial tax benefit arising from the Internalization\nfee paid to the affiliate. The fee provided a favorable impact on the company's overall tax position.\nNet loss\nNet loss increased by $320.0 million, primarily due to the changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased by $11.5 million, primarily due to the changes noted above.\nComparison of the years ended December 31, 2023 and 2022\nRevenues\nTotal revenues increased by $7.4 million, primarily due to an increase in the Offshore Energy business, as one of our vessels was on-hire longer in 2023\ncompared to 2022, and with a charterer at higher rates.\nExpenses\nTotal expenses increased by $24.5 million, due to the following:\n \u2022 Management fees and incentive allocation to affiliate increased by $14.5 million, primarily due to a $13.6 million increase in incentive fee due to the\n Former Manager driven by an increase in net income.\n \u2022 Operating expenses increased by $12.8 million, primarily due to increases in the Offshore Energy business, driven by increases in offshore crew\n expenses of $2.1 million, project costs of $3.9 million and other operating expenses of $1.3 million for one of our vessels. The increase in the other\n operating expenses were driven by the operational location of the vessel, as well as the increased number of days on-hire. Additionally, repairs and\n maintenance expense increased $0.6 million due to repairs on one of our vessels.\n \u2022 Depreciation and amortization increased by $2.5 million, primarily due to new assets being placed into service in the Offshore Energy business.\n \u2022 Acquisition and transaction expenses decreased $4.7 million, primarily due to lower professional fees related to strategic transactions.\nOther income (expense)\nTotal other expense decreased by $28.4 million, due to the following:\n \u2022 Loss on extinguishment of debt decreased by $19.9 million driven by the 2022 pay-down of the 2021 Bridge Loans and the partial redemption of the\n Senior Notes due 2025.\n \u2022 Interest expense decreased $7.6 million, which reflects a decrease in the average outstanding debt of approximately $183.8 million primarily due to\n decreases in (i) the 2021 Bridge Loans of $178.3 million and (ii) the Senior Notes due 2025 of $116.7 million, which were partially redeemed in\n August 2022, partially offset by increases in (iii) the Revolving Credit Facility of $28.7 million and (iv) the Senior Notes due 2030 of $82.8 million,\n which were issued in November 2023.\nNet loss\nNet loss decreased by $10.3 million, primarily due to the changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA decreased $3.7 million, primarily due to the changes noted above.\n\n\n\n\n 46\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 48 of 100\n\n\nTransactions with Affiliates and Affiliated Entities\nPrior to May 28, 2024, FTAI Aviation Ltd. operated under the Management Agreement with the Former Manager, and the Master GP, each an affiliate of\nFortress. For their services, the Former Manager was entitled to management fees and the Master GP was entitled to certain incentive allocations, both\ndefined in, and in accordance with the terms of, the Management Agreement. On May 28, 2024, the Company entered into the Internalization Agreement,\npursuant to which the Management Agreement was terminated effective May 28, 2024 (the \u201cEffective Date\u201d), except that certain indemnification and other\nobligations survive, and the Company internalized its management functions (such transactions, the \u201cInternalization\u201d). As a result of the Internalization, the\nCompany ceased to be externally managed and operates as an internally managed company. In connection with the termination of the Management\nAgreement, the Company (i) agreed to pay the Former Manager (for itself and on behalf of the Master GP, as applicable) $150.0 million (the \u201cCash\nConsideration\u201d), the compensation accrued and payable, but not yet paid, under the Management Agreement, and the expenses that were reimbursable, but\nnot yet reimbursed, under the Management Agreement; (ii) issued to the Former Manager (for itself and on behalf of the Master GP, as applicable) 1,866,949\nordinary shares of the Company (the \u201cShare Consideration\u201d); and (iii) purchased from Master GP all of its partnership interests in FTAI Aviation Holdco Ltd.,\na subsidiary of the Company, in exchange for $30 thousand. In addition, the Former Manager repaid to the Company certain annual bonus payments due to\ncertain employees of the Former Manager or its affiliates who provide services to the Company with respect to the 2024 calendar year on a pro rata basis.\nThe Company financed the cash payments through one or more debt financings, along with cash on hand.\nPotential conflicts of interest may arise with respect to our decisions regarding how to allocate investment opportunities between us and partnerships in our\nStrategic Capital Initiative. Allocating investment opportunities appropriately frequently involves significant and subjective judgments. Investors in our\nStrategic Capital Initiative and our shareholders may perceive conflicts of interest regarding such investment decisions, which could harm our reputation with\nsuch investors and our shareholders. See \u201cRisks Related to Our Business-Our Strategic Capital Initiative involves certain risks which could adversely affect\nour business, prospects, financial condition, results of operations and cash flows.\u201d\nGeographic Information\nPlease refer to Note 14 of our consolidated financial statements included in Item 8 in this Annual Report on Form 10-K for a report, by geographic area for\neach segment, of revenues from our external customers and lessees, for the years ended December 31, 2024, 2023 and 2022, as well as a report of our\ntotal property, plant and equipment as of December 31, 2024 and 2023.\nLiquidity and Capital Resources\nOn October 9, 2024, we issued $500.0 million aggregate principal amount of senior unsecured notes due 2033. Using a portion of the net proceeds, the\nCompany redeemed the remaining $130.5 million aggregate principal amount of Senior Notes due 2027, plus accrued and unpaid interest. The Company\nused the remaining net proceeds to pay down in full the Company\u2019s Revolving Credit Facility, with any excess proceeds intended for general corporate\npurposes, including funding acquisitions and investments.\nWe believe we have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate\nliquidity and ensure that our business can continue to operate during various environments. This includes limiting discretionary spending across the\norganization and re-prioritizing our investments as necessary. On December 30, 2024, we announced the launch of a Strategic Capital Initiative in\ncollaboration with third-party institutional investors. The Strategic Capital Initiative, and its related partnerships, will allow us to maintain an asset-light\nbusiness model while the partnerships actively acquire on-lease narrowbody aircraft at scale. We have agreed that the related partnerships will be the\nprimary buyer of on-lease 737NG and A320ceo aircraft. We expect to provide aircraft management services to the related partnerships for which the\nCompany will receive customary, market-based compensation. The Company also expects to make minority investment in the related partnerships.\nOur principal uses of liquidity have been and continue to be (i) acquisitions of aircraft and engines, (ii) dividends to our ordinary and preferred shareholders,\n(iii) expenses associated with our operating activities, and (iv) debt service obligations associated with our investments. In the future, instead of acquiring on-\nlease aircraft directly, as part of the Strategic Capital Initiative, we will invest in the related partnerships and such partnerships will acquire on-lease aircraft.\n \u2022 Cash used for the purpose of making investments was $1,526.2 million, $861.5 million and $831.5 million during the years ended December 31,\n 2024, 2023, and 2022, respectively.\n \u2022 Distributions to shareholders, including cash dividends, were $154.3 million, $151.6 million and $155.6 million during the years ended\n December 31, 2024, 2023 and 2022, respectively.\n \u2022 Uses of liquidity associated with our operating expenses are captured on a net basis in our cash flows from operating activities. Uses of liquidity\n associated with our debt obligations are captured in our cash flows from financing activities.\n\n\n\n 47\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 49 of 100\n\n\nOur principal sources of liquidity to fund these uses have been and continue to be (i) revenues from our aviation assets (including finance lease collections\nand maintenance reserve collections) net of operating expenses, (ii) proceeds from borrowings or the issuance of securities and (iii) proceeds from asset\nsales.\n \u2022 Cash flows from operating activities, plus the principal collections on finance leases and maintenance reserve collections were $(136.5) million,\n $163.0 million and $29.4 million during the years ended December 31, 2024, 2023, and 2022, respectively.\n \u2022 During the year ended December 31, 2024, additional borrowings were obtained in connection with the (i) Senior Notes due 2033 of $500.0 million,\n (ii) Senior Notes due 2032 of $800.0 million, (iii) Senior Notes due 2031 of $700.0 million and (iv) Revolving Credit Facility of $745.0 million. We\n made total principal repayments of (i) $650.0 million related to the Senior Notes due 2025, (ii) $745.0 million relating to the Revolving Credit Facility\n and (iii) $400.0 million related to the Senior Notes due 2027.\n During the year ended December 31, 2023, additional borrowings were obtained in connection with the (i) Revolving Credit Facility of $455.0 million\n and (ii) Senior Notes Due 2030 of $500.0 million. We made total principal repayments of $605.0 million relating to the Revolving Credit Facility.\n During the year ended December 31, 2022, additional borrowings were obtained in connection with the (i) 2021 Bridge Loans of $239.5 million (ii)\n Revolving Credit Facility of $565.0 million and (iii) EB-5 Loan Agreement of $9.5 million. We made total principal repayments of (i) $604.5 million\n relating to the Revolving Credit Facility, (ii) $340.0 million related to the 2021 Bridge Loans and (iii) $200.0 million related to the Senior Notes due\n 2025.\n \u2022 Proceeds from the sale of assets were $969.3 million, $477.9 million and $414.2 million during the years ended December 31, 2024, 2023, and\n 2022, respectively.\n \u2022 Proceeds from the issuance of preferred shares, net of underwriters discount and issuance costs, were $61.7 million during the year ended\n December 31, 2023. There were no issuances of preferred shares during the years ended December 31, 2024 and 2022. In October 2024, the\n Company redeemed in full the outstanding Series A preferred shares at a redemption price equal to $25.00 per share in cash, plus $1.6 million of\n accumulated and unpaid distributions thereon to, but not including, the redemption date of October 29, 2024.\nOn May 28, 2024, we entered into definitive agreements with the Former Manager and Master GP to internalize our management function. As part of the\ntermination of the Management Agreement, we agreed to pay $150.0 million to the Former Manager. Following the internalization of management on May\n28, 2024, we no longer pay a management fee or incentive distribution to the Former Manager or Master GP. Consequently, we have assumed general and\nadministrative, and compensation and benefit expenses directly. We anticipate a savings in operation costs as a result of the Internalization.\nWe are currently evaluating several potential transactions and related financings, including, but not limited to, certain additional debt and equity financings,\nwhich could occur within the next 12 months. None of these potential transactions, negotiations, or financings are definitive or included within our planned\nliquidity needs. We cannot assure if or when any such transaction will be consummated or the terms of any such transaction or related financing.\nHistorical Cash Flow\nThe following table presents our historical cash flow from both continuing and discontinued operations:\n Year Ended December 31,\n(in thousands) 2024 2023 2022\nCash flow data:\nNet cash used in operating activities $ (187,956) $ 128,982 $ (20,657)\nNet cash used in investing activities (469,498) (373,349) (411,253)\nNet cash provided by financing activities 681,814 282,208 44,914\n\nComparison of the years ended December 31, 2024 and 2023\nNet cash used in operating activities increased $316.9 million, which primarily reflects (i) a decrease in our Net income of $235.1 million and increases in (ii)\nChanges in working capital of $178.5 million and (iii) Gain on sale of assets of $217.2 million, partially offset by certain adjustments to reconcile net income\nto cash used in operating activities including increases in (iv) Non-cash termination fee to affiliate (issuance of ordinary shares) of $150.0 million, (v)\nDeferred income taxes of $61.7 million, (vi) Depreciation and amortization of $48.2 million, a decrease in (vii) Security deposits and maintenance claims\nincluded in earnings of $23.8 million, an increase in (viii) Loss on extinguishment of debt of $17.1 million and a decrease in (ix) Other of $6.4 million\nNet cash used in investing activities increased $96.1 million primarily due to increases in (i) Acquisition of leasing equipment of $397.6 million, (ii) Deposits\nfor leasing equipment of $134.4 million, (iii) Acquisition of business, net of cash acquired of $118.0 million and (iv) Investments in financing receivables of\n$66.9 million, partially offset by higher (v) Proceeds from sale of assets of $491.4 million and (vi) Proceeds (refunds) from deposits on sale of leasing\nequipment of $78.4 million, and decreases in (vii) Acquisition of lease intangibles of $24.1 million, (viii) Investment in unconsolidated entities of $19.5 million\nand (ix) Investment in promissory notes of $11.5 million.\n\n\n\n\n 48\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 50 of 100\n\n\nNet cash provided by financing activities increased $399.6 million primarily due to increases in (i) Proceeds from debt of $1,630.2 million and (ii) Receipt of\nmaintenance deposits under operating lease agreements of $19.0 million, partially offset by increases in (iii) Repayment of debt of $1,067.3 million and (iv)\nRedemption of preferred shares of $105.4 million, a decrease in (v) Proceeds from issuance of preferred shares, net of underwriter's discount and issuance\ncosts of $61.7 million, and increases in (vi) Release of maintenance deposits under operating lease agreements of $6.9 million and (vii) Payment of deferred\nfinancing costs of $5.2 million.\nCash Flows of Discontinued Operations\nThe cash flows related to discontinued operations have not been segregated and are included in the Consolidated Statements of Cash Flows for all periods\npresented. Cash used in operating activities from discontinued operations were $63.9 million for the year ended December 31, 2022. Cash used in investing\nactivities from discontinued operations were $136.3 million for the year ended December 31, 2022.\nThe absence of cash flows from discontinued operations is not expected to adversely affect our liquidity or our ability to fund capital expenditures or working\ncapital needs.\nContractual Obligations\nOur material cash requirements include the following contractual and other obligations:\nDebt Obligations\u2014As of December 31, 2024, we had outstanding principal and interest payment obligations of $3.5 billion and $1.4 billion through the\nmaturity date of the debt, respectively, of which only interest payments of $229.8 million are due in the next twelve months. See Note 9 to the consolidated\nfinancial statements for additional information about our debt obligations.\nLease Obligations\u2014As of December 31, 2024, we had outstanding operating and finance lease obligations of $37.5 million, of which, $2.9 million is due in\nthe next twelve months.\nOther Cash Requirements\u2014In addition to our contractual obligations, we pay quarterly cash dividends on our ordinary shares and preferred shares, which\nare subject to change at the discretion of our Board of Directors. During 2024, we declared cash dividends of $121.6 million and $32.8 million on our ordinary\nshares and preferred shares, respectively.\nWe expect to meet our future short-term liquidity requirements through cash on hand, unused borrowing capacity or future financings and net cash provided\nby our current operations. We expect that our operating subsidiaries will generate sufficient cash flow to cover operating expenses and the payment of\nprincipal and interest on our indebtedness as they become due. We may elect to meet certain long-term liquidity requirements or to continue to pursue\nstrategic opportunities through utilizing cash on hand, cash generated from our current operations and the issuance of securities in the future. Management\nbelieves adequate capital and borrowings are available from various sources to fund our commitments to the extent required.\nCritical Accounting Estimates and Policies\nThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported\namounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported\namounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 2 to the consolidated financial\nstatements describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.\nOperating Leases\u2014We lease equipment pursuant to operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line\nbasis over the term of the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured. When collectability is not\nreasonably assured, the lessee is placed on non-accrual status and revenue is recognized when cash payments are received.\nGenerally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee\u2019s\nutilization of the leased asset or at the end of the lease. Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs\nand other operating expenses throughout the term of the lease. These periodic maintenance payments accumulate over the term of the lease to fund major\nmaintenance events, and we are contractually obligated to return maintenance payments to the lessee up to the cost of maintenance paid by the lessee. In\nthe event the total cost of maintenance events over the term of a lease is less than the cumulative maintenance payments, we are not required to return any\nunused or excess maintenance payments to the lessee.\nMaintenance payments received for which we expect to repay to the lessee are presented as Maintenance Deposits in our Consolidated Balance Sheets. All\nexcess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance revenue. Estimates in recognizing\nrevenue include mean time between removal, projected costs for engine maintenance and forecasted utilization of aircraft which are affected by historical\nusage patterns and overall industry, market and economic conditions. Significant changes to these estimates could have a material effect on the amount of\nrevenue recognized in the period.\nFor purchase and lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based on the relative\nfair value of the aircraft and lease. The fair value of the lease may include a lease premium or discount, which is recorded as a favorable or unfavorable\nlease intangible.\n\n\n\n\n 49\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 51 of 100\n\n\nAsset sales revenue\u2014Asset sales revenue primarily consists of the transaction price related to the sale of aircraft and aircraft engines from our Aviation\nLeasing segment. From time to time, the Company may also assign the related lease agreements to the customer as part of the sale of these assets. We\nroutinely sell leasing equipment to customers and such transactions are considered recurring and ordinary in nature to our business. As such, these sales\nare accounted for within the scope of ASC 606. Revenue is recognized when a performance obligation is satisfied by transferring control over an asset to a\ncustomer. Revenue is recorded with corresponding costs of sales, presented on a gross basis in the Consolidated Statements of Operations. See Note 14\nfor additional information.\nMaintenance Payments\u2014Typically, under an operating lease of aircraft, the lessee is responsible for performing all maintenance and is generally required\nto make maintenance payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft or engine. These\nmaintenance payments are based on hours or cycles of utilization or on calendar time, depending on the component, and are generally required to be made\nmonthly in arrears. If a lessee is making monthly maintenance payments, we would typically be obligated to reimburse the lessee for costs they incur for\nheavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific\nmaintenance event, usually shortly following the completion of the relevant work.\nWe record the portion of maintenance payments paid by the lessee that are expected to be reimbursed as maintenance deposits in the Consolidated\nBalance Sheets. Reimbursements made to the lessee upon the receipt of evidence of qualifying maintenance work are recorded against the maintenance\ndeposit liability.\nIn certain acquired leases, we or the lessee may be obligated to make a payment to the other party at lease termination based on redelivery conditions\nstipulated at the inception of the lease. When the lessee is required to return the aircraft in an improved maintenance condition, we record a maintenance\nright asset, as a component of other assets in the Consolidated Balance sheets, for the estimated value of the end-of-life maintenance payment at\nacquisition. We recognize payments received as end-of-lease compensation adjustments, within lease income or as a reduction to the maintenance right\nasset, when payment is received or collectability is assured. In the event we are required to make payments at the end of the lease for redelivery conditions,\namounts are accrued as additional maintenance liability and expensed when we are obligated and can reasonably estimate such payments.\nLeasing Equipment and Depreciation\u2014Leasing equipment is stated at cost (inclusive of capitalized acquisition costs, where applicable) and depreciated\nusing the straight-line method, over estimated useful lives, to estimated residual values which are summarized as follows:\n Asset Range of Estimated Useful Lives Residual Value Estimates\nAircraft 25 years from date of manufacture Generally not to exceed 15% of manufacturer\u2019s list\n price when new\nAircraft engines 2 - 6 years, based on maintenance adjusted service Sum of engine core salvage value plus the estimated\n life fair value of life limited parts\nImpairment of Long-Lived Assets\u2014We perform a recoverability assessment of each of our long-lived assets whenever events or changes in\ncircumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not\nlimited to, a significant lease restructuring or early lease termination; significant traffic decline; a significant change in market conditions; or the introduction of\nnewer technology and the length of time an asset is off lease related to leasing equipment or engines. When performing a recoverability assessment, we\nmeasure whether the estimated future undiscounted net cash flows expected to be generated by the asset exceeds its net book value. The undiscounted\ncash flows consist of cash flows from currently contracted leases and contracts, future projected leases, transition costs, estimated down time and estimated\nresidual or scrap values. In the event that an asset does not meet the recoverability test, the carrying value of the asset will be adjusted to fair value resulting\nin an impairment charge.\nManagement develops the assumptions used in the recoverability analysis based on its knowledge of active contracts, current and future expectations of the\nglobal demand for a particular asset and historical experience in the leasing markets, as well as information received from third party industry sources. The\nfactors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in contracted lease rates, residual\nvalues, economic conditions, technology, demand for a particular asset type and other factors.\nRecent Accounting Pronouncements\nPlease see Note 2 to our consolidated financial statements included elsewhere in this filing for recent accounting pronouncements.\n\n\n\nItem 7A. Quantitative and Qualitative Disclosures About Market Risk\nMarket risk represents the risk of changes in value of a financial instrument, caused by fluctuations in interest rates and foreign exchange rates. Changes in\nthese factors could cause fluctuations in our results of operations and cash flows. We are exposed to the market risks described below.\n\n\n\n 50\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 52 of 100\n\n\nInterest Rate Risk\nInterest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Interest rate risk\nis highly sensitive to many factors, including the U.S. government\u2019s monetary and tax policies, global economic factors and other factors beyond our control.\nWe are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate\nexposure relates to our term loan arrangements.\nOur borrowing agreements generally require payments based on a variable interest rate index, such as SOFR. Therefore, to the extent our borrowing costs\nare not fixed, increases in interest rates may reduce our net income by increasing the cost of our debt without any corresponding increase in rents or cash\nflow from our leases. We may elect to manage our exposure to interest rate movements through the use of interest rate derivatives (interest rate swaps and\ncaps).\nThe following discussion about the potential effects of changes in interest rates is based on a sensitivity analysis, which models the effects of hypothetical\ninterest rate shifts on our financial condition and results of operations. Although we believe a sensitivity analysis provides the most meaningful analysis\npermitted by the rules and regulations of the SEC, it is constrained by several factors, including the necessity to conduct the analysis based on a single point\nin time and by the inability to include the extraordinarily complex market reactions that normally would arise from the market shifts modeled. Although the\nfollowing results of a sensitivity analysis for changes in interest rates may have some limited use as a benchmark, they should not be viewed as a forecast.\nThis forward-looking disclosure also is selective in nature and addresses only the potential interest expense impacts on our financial instruments and, in\nparticular, does not address the mark-to-market impact on our interest rate derivatives, if any. It also does not include a variety of other potential factors that\ncould affect our business as a result of changes in interest rates.\nAs of December 31, 2024, assuming we do not hedge our exposure to interest rate fluctuations related to our outstanding floating rate debt, a hypothetical\n100-basis point increase/decrease in our variable interest rate on our borrowings would not have increased or decreased interest expense over the next 12\nmonths.\n\n\n\n\n 51\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 53 of 100\n\nItem 8. Financial Statements and Supplementary Data\n\nIndex to Financial Statements:\nConsolidated Financial Statements of FTAI Aviation Ltd.:\n Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 53\n Consolidated Balance Sheets as of December 31, 2024 and 2023 55\n Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 56\n Consolidated Statements of Comprehensive Income (loss) for the years ended December 31, 2024, 2023 and 2022 57\n Consolidated Statement of Changes in Equity for the years ended December 31, 2024, 2023 and 2022 58\n Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 59\n Notes to Consolidated Financial Statements 61\n\n\n\n\n 52\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 54 of 100\n\n\n Report of Independent Registered Public Accounting Firm\nTo the Shareholders and the Board of Directors of FTAI Aviation Ltd.\nOpinion on the Financial Statements\nWe have audited the accompanying consolidated balance sheets of FTAI Aviation Ltd. (the Company) as of December 31, 2024 and 2023, the related\nconsolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended\nDecember 31, 2024, and the related notes (collectively referred to as the \u201cconsolidated financial statements\u201d). In our opinion, the consolidated financial\nstatements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and\nits cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.\nWe also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's\ninternal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control\u2014Integrated Framework issued by the\nCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 3, 2025 expressed an unqualified\nopinion thereon.\nBasis for Opinion\nThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company\u2019s financial\nstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the\nCompany in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the\nPCAOB.\nWe conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable\nassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing\nprocedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond\nto those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits\nalso included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the\nfinancial statements. We believe that our audits provide a reasonable basis for our opinion.\nCritical Audit Matter\nThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required\nto be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our\nespecially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the\nconsolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the\ncritical audit matter or on the accounts or disclosures to which it relates.\n\n\n\n Recognition of Maintenance Revenue for Aircraft Leases\n\n\nDescription of the As described in Note 2 to the consolidated financial statements, the Company recognizes maintenance revenue for aircraft leases\nMatter related to the portion of maintenance payments received from lessees that are not expected to be reimbursed for major maintenance\n events. Maintenance revenue totaled $200.8 million for the year ended December 31, 2024, a portion of which relates to maintenance\n revenue for aircraft leases.\n\n Auditing maintenance revenue for aircraft leases was challenging due to the estimation involved in the Company\u2019s complex modeling\n process. The estimation is sensitive to certain assumptions in the model such as the mean time between removal (MTBR) and\n forecasted utilization of the aircraft, which are affected by historical usage patterns and market conditions. Significant changes to the\n MTBR assumption could have a material effect on the amount of maintenance revenue on lease aircraft recognized in the period.\n\n\n\n\n 53\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 55 of 100\n\n\nHow We Addressed We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company\u2019s process\nthe Matter in Our for recognizing maintenance revenue for aircraft leases, including controls over management\u2019s review of the estimated timing of major\nAudit maintenance events as described above.\n\n To test maintenance revenue for aircraft leases, we performed audit procedures that included, among others, assessing the\n Company\u2019s revenue recognition methodology and testing the MTBR assumption described above for a sample of aircraft. For\n example, we compared the MTBR assumption to data provided by a third-party specialist, assessed the accuracy of the historical\n usage patterns and the calculation of the forecasted utilization, and assessed the Company\u2019s retrospective review of timing of\n estimated maintenance events to actual results to assess the historical accuracy of the MTBR assumption. We also involved our\n valuation specialists to assist in our evaluation of the appropriateness of the market conditions used in developing the MTBR\n assumption.\n\n\n\n\n/s/ Ernst & Young LLP\n\n\n\n\nWe have served as the Company\u2019s auditor since 2016.\n\n\nNew York, New York\nMarch 3, 2025\n\n\n\n\n 54\n\fFTAI AVIATION LTD.\nCONSOLIDATEDCase 1:25-cv-00541-JAV\n BALANCE SHEETS Document 70-4 Filed 11/20/25 Page 56 of 100\n(Dollars in thousands, except share and per share data)\n\n\n\n December 31,\n Notes 2024 2023\nAssets\n Current Assets\n Cash and cash equivalents 2 $ 115,116 $ 90,756\n Accounts receivable, net 150,823 115,156\n Inventory, net 2 551,156 316,637\n Other current assets 2 408,923 148,885\n Total current assets 1,226,018 671,434\n Leasing equipment, net 6 2,373,730 2,032,413\n Property, plant, and equipment, net 107,451 45,175\n Investments 7 19,048 22,722\n Intangible assets, net 8 42,205 50,590\n Goodwill 5 61,070 4,630\n Other non-current assets 2 208,430 137,721\nTotal assets $ 4,037,952 $ 2,964,685\n\n\nLiabilities\n Current Liabilities\n Accounts payable $ 69,119 $ 41,590\n Accrued liabilities 96,910 71,317\n Current maintenance deposits 2 62,552 39,455\n Current security deposits 2 18,100 17,735\n Other current liabilities 100,565 11,746\n Total current liabilities 347,246 181,843\n Long-term debt, net 9 3,440,478 2,517,343\n Non-current maintenance deposits 2 44,179 25,932\n Non-current security deposits 2 26,830 23,330\n Other non-current liabilities 97,851 40,354\nTotal liabilities $ 3,956,584 $ 2,788,802\n\n\nCommitments and contingencies 16\n\n\nEquity\nOrdinary shares ($0.01 par value per share; 2,000,000,000 shares authorized; 102,550,975 and\n100,245,905 shares issued and outstanding as of December 31, 2024 and 2023, respectively) $ 1,026 $ 1,002\nPreferred shares ($0.01 par value per share; 200,000,000 shares authorized; 11,740,000 and 15,920,000\nshares issued and outstanding as of December 31, 2024 and 2023, respectively) 117 159\nAdditional paid in capital 153,328 255,973\nAccumulated deficit (73,103) (81,785)\nShareholders' equity 81,368 175,349\nNon-controlling interest in equity of consolidated subsidiaries \u2014 534\nTotal equity $ 81,368 $ 175,883\nTotal liabilities and equity $ 4,037,952 $ 2,964,685\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n\n\n 55\n\fFTAI AVIATION LTD.\nCONSOLIDATEDCase 1:25-cv-00541-JAV\n STATEMENTS OF OPERATIONS Document 70-4 Filed 11/20/25 Page 57 of 100\n(Dollars in thousands, except share and per share data)\n\n\n Year Ended December 31,\n Notes 2024 2023 2022\nRevenues\nLease income $ 255,338 $ 207,936 $ 179,314\nMaintenance revenue 200,809 191,347 148,846\nAsset sales revenue 192,176 303,141 183,535\nAerospace products revenue 1,079,821 454,970 178,515\nOther revenue 6,757 13,502 18,201\nTotal revenues 1,734,901 1,170,896 708,411\n\nExpenses\nCost of sales 825,884 502,132 248,385\nOperating expenses 115,861 110,163 132,264\nGeneral and administrative 14,263 13,700 14,164\nAcquisition and transaction expenses 32,296 15,194 13,207\nManagement fees and incentive allocation to affiliate 13 8,449 18,037 3,562\nInternalization fee to affiliate 17 300,000 \u2014 \u2014\nDepreciation and amortization 6, 8 218,064 169,877 152,917\nAsset impairment 962 2,121 137,219\nGain on sale of assets, net (18,705) \u2014 (77,211)\nTotal expenses 1,497,074 831,224 624,507\n\nOther income (expense)\nEquity in losses of unconsolidated entities 7 (2,200) (1,606) (369)\nInterest expense (221,721) (161,639) (169,194)\nLoss on extinguishment of debt (17,101) \u2014 (19,859)\nOther income 17,364 7,590 207\nTotal other expense (223,658) (155,655) (189,215)\nIncome (loss) from continuing operations before income taxes 14,169 184,017 (105,311)\nProvision for (benefit from) income taxes 12 5,487 (59,800) 5,300\n Net income (loss) from continuing operations 8,682 243,817 (110,611)\n Net loss from discontinued operations, net of income taxes 3 \u2014 \u2014 (101,416)\nNet income (loss) 8,682 243,817 (212,027)\nLess: Net loss attributable to non-controlling interests in consolidated subsidiaries:\n Discontinued operations 3 \u2014 \u2014 (18,817)\nLess: Dividends on preferred shares 32,763 31,795 27,164\nLess: Loss on redemption of preferred shares 7,998 \u2014 \u2014\nNet (loss) income attributable to shareholders $ (32,079) $ 212,022 $ (220,374)\n\n(Loss) earnings per share:\nBasic 15\n Continuing operations $ (0.32) $ 2.12 $ (1.39)\n Discontinued operations $ \u2014 $ \u2014 $ (0.83)\nDiluted 15\n Continuing operations $ (0.32) $ 2.11 $ (1.39)\n Discontinued operations $ \u2014 $ \u2014 $ (0.83)\nWeighted average shares outstanding:\nBasic 101,538,835 99,908,214 99,421,008\nDiluted 101,538,835 100,425,777 99,421,008\n\n See accompanying notes to consolidated financial statements.\n\n\n\n 56\n\fFTAI AVIATION LTD.\nCONSOLIDATEDCase 1:25-cv-00541-JAV\n STATEMENTS Document\n OF COMPREHENSIVE 70-4\n INCOME (LOSS) Filed 11/20/25 Page 58 of 100\n(Dollars in thousands)\n\n\n Year Ended December 31,\n 2024 2023 2022\nNet income (loss) $ 8,682 $ 243,817 $ (212,027)\nOther comprehensive loss:\n Other comprehensive loss related to equity method investees, net in discontinued operations \u2014 \u2014 (182,963)\nComprehensive income (loss) 8,682 243,817 (394,990)\nComprehensive loss attributable to non-controlling interest:\n Discontinued operations \u2014 \u2014 (18,817)\nComprehensive income (loss) attributable to shareholders $ 8,682 $ 243,817 $ (376,173)\n\fCase 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25\n See accompanying notes to consolidated financial statements.\n Page 59 of 100\n\n\n 57\n\fFTAI AVIATION LTD.\nCONSOLIDATEDCase 1:25-cv-00541-JAV\n STATEMENT Document 70-4\n OF CHANGES IN EQUITY Filed 11/20/25 Page 60 of 100\n(Dollars in thousands)\n\n\n Non-Controlling\n Additional Accumulated Other Interest in Equity\n Ordinary Preferred Paid In Accumulated Comprehensive of Consolidated\n Shares(1) Shares(1) Capital Deficit Loss Subsidiaries Total Equity\nEquity - December 31, 2021 $ 992 $ 133 $ 1,411,940 $ (132,392) $ (156,381) $ (192) $ 1,124,100\n Net loss (193,210) (18,817) (212,027)\n Other comprehensive loss (182,963) (182,963)\nTotal comprehensive loss (193,210) (182,963) (18,817) (394,990)\nSpin-off of FTAI Infrastructure, Inc., net of\ndistributions (913,342) 339,344 12,817 (561,181)\nAcquisition of consolidated subsidiary 3,054 3,054\nSettlement of equity-based compensation (148) (148)\nContributions from non-controlling interest 1,187 1,187\nIssuance of ordinary shares 5 399 404\nDividends declared - ordinary shares (128,483) (128,483)\nDividends declared - preferred shares (27,164) (27,164)\nEquity-based compensation 2,623 2,623\nEquity - December 31, 2022 $ 997 $ 133 $ 343,350 $ (325,602) $ \u2014 $ 524 $ 19,402\n Net income 243,817 243,817\nTotal comprehensive loss 243,817 243,817\nContributions from non-controlling interest 10 10\nIssuance of ordinary shares 5 924 929\nDividends declared - ordinary shares (119,847) (119,847)\nIssuance of preferred shares 26 61,703 61,729\nDividends declared - preferred shares (31,795) (31,795)\nEquity-based compensation 1,638 1,638\nEquity - December 31, 2023 $ 1,002 $ 159 $ 255,973 $ (81,785) $ \u2014 $ 534 $ 175,883\n Net income 8,682 \u2014 8,682\nTotal comprehensive income 8,682 \u2014 \u2014 8,682\nPurchase of non-controlling interest (534) (534)\nRedemption of preferred shares (42) (97,313) (97,355)\nLoss on redemption of preferred shares (7,998) (7,998)\nDividends declared - ordinary shares (121,577) (121,577)\nDividends declared - preferred shares (32,763) (32,763)\nIssuance of ordinary shares 24 151,000 151,024\nEquity-based compensation 6,006 6,006\nEquity - December 31, 2024 $ 1,026 $ 117 $ 153,328 $ (73,103) $ \u2014 $ \u2014 $ 81,368\n\n________________________________________________\n(1)\n Common and Preferred Shares of Fortress Transportation and Infrastructure Investors LLC were exchanged for Ordinary and Preferred Shares of FTAI Aviation Ltd. when the\n Merger was completed on November 10, 2022.\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n\n\n 58\n\fFTAI AVIATION LTD.\nCONSOLIDATEDCase 1:25-cv-00541-JAV\n STATEMENTS OF CASH FLOWS Document 70-4 Filed 11/20/25 Page 61 of 100\n(Dollars in thousands)\n\n\n Year Ended December 31,\n 2024 2023 2022\nCash flows from operating activities:\nNet income (loss) $ 8,682 $ 243,817 $ (212,027)\nAdjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:\nEquity in losses of unconsolidated entities 2,200 1,606 46,971\nGain on sale of assets (377,909) (160,742) (141,677)\nSecurity deposits and maintenance claims included in earnings (16,783) (40,535) (41,845)\nLoss on extinguishment of debt 17,101 \u2014 19,859\nEquity-based compensation 6,006 1,638 2,623\nNon-cash termination fee to affiliate (issuance of ordinary shares) 150,000 \u2014 \u2014\nDepreciation and amortization 218,064 169,877 193,236\nAsset impairment 962 2,121 137,219\nDeferred income taxes (1,878) (63,626) 2,161\nChange in fair value of non-hedge derivatives \u2014 \u2014 (1,567)\nChange in fair value of guarantees 2,086 (1,807) \u2014\nAmortization of lease intangibles and incentives 43,967 43,764 37,135\nAmortization of deferred financing costs 11,458 8,860 19,018\nBad debt expense 2,784 6,583 47,975\nOther (273) (6,646) (1,010)\nChange in:\n Accounts receivable (41,196) (40,357) (65,969)\n Inventory (206,880) (31,884) (23,267)\n Other assets (14,372) (5,627) (23,037)\n Accounts payable and accrued liabilities 15,886 1,254 (19,599)\n Management fees payable to affiliate (5,507) 1,683 804\n Other liabilities (2,354) (997) 2,340\nNet cash (used in) provided by operating activities (187,956) 128,982 (20,657)\n\n\nCash flows from investing activities:\nInvestment in unconsolidated entities \u2014 (19,500) (7,344)\nPrincipal collections on finance leases 2,157 3,638 2,227\nPrincipal collections on notes receivable 4,930 4,875 \u2014\nAcquisition of business, net of cash acquired (147,624) (29,632) (3,819)\nAcquisition of leasing equipment (1,147,341) (749,780) (638,329)\nInvestments in financing receivables (66,858) \u2014 \u2014\nAcquisition of property, plant and equipment (9,220) (6,148) (144,196)\nAcquisition of lease intangibles 3,168 (20,964) (31,127)\nInvestment in promissory notes \u2014 (11,500) \u2014\nDeposits for acquisitions of leasing equipment (158,297) (23,937) (6,671)\nProceeds from sale of assets 969,280 477,886 408,937\nProceeds from sale of property, plant and equipment \u2014 \u2014 5,289\nProceeds from deposits on sale of leasing equipment 79,777 1,413 3,780\nReturn of deposits for acquisition of leasing equipment 530 300 \u2014\nNet cash used in investing activities $ (469,498) $ (373,349) $ (411,253)\n\n\n See accompanying notes to consolidated financial statements.\n\n\n\n 59\n\fFTAI AVIATION LTD.\nCONSOLIDATEDCase 1:25-cv-00541-JAV\n STATEMENTS OF CASH FLOWS Document 70-4 Filed 11/20/25 Page 62 of 100\n(Dollars in thousands)\n\n\n Year Ended December 31,\n 2024 2023 2022\nCash flows from financing activities:\nProceeds from debt $ 2,581,819 $ 951,665 $ 813,980\nRepayment of debt (1,672,304) (605,000) (1,144,529)\nPayment of deferred financing costs (17,356) (12,180) (18,607)\nReceipt of security deposits under operating lease agreements 8,104 9,927 3,882\nReturn of security deposits under operating lease agreements (421) (2,385) (2,141)\nReceipt of maintenance deposits under operating lease agreements 49,333 30,354 47,846\nRelease of maintenance deposits under operating lease agreements (7,134) (275) (1,471)\nProceeds from issuance of ordinary shares, net of underwriter's discount \u2014 5 \u2014\nRedemption of preferred shares (105,353) \u2014 \u2014\nProceeds from issuance of preferred shares, net of underwriter's discount and issuance costs \u2014 61,729 \u2014\nCapital contributions from non-controlling interests \u2014 10 1,187\nDividend from spin-off of FTAI Infrastructure, net of cash transferred \u2014 \u2014 500,562\nSettlement of equity-based compensation \u2014 \u2014 (148)\nPurchase of non-controlling interest shares (534) \u2014 \u2014\nCash dividends - ordinary shares (121,577) (119,847) (128,483)\nCash dividends - preferred shares (32,763) (31,795) (27,164)\nNet cash provided by financing activities 681,814 282,208 44,914\n\n\nNet increase (decrease) in cash and cash equivalents and restricted cash 24,360 37,841 (386,996)\nCash and cash equivalents and restricted cash, beginning of period 90,906 53,065 440,061\nCash and cash equivalents and restricted cash, end of period $ 115,266 $ 90,906 $ 53,065\n\n\nSupplemental disclosure of cash flow information:\nCash paid for interest, net of capitalized interest $ 222,122 $ 150,622 $ 185,144\nCash paid for taxes 5,655 1,393 3,279\n\n\nSupplemental disclosure of non-cash investing and financing activities\n(see Note 2 for additional non-cash information):\nReceipt of notes receivable in connection with the sale of leasing equipment $ 88,271 46,654 16,463\nAcquisition of leasing equipment in accrued liabilities (22,119) (8,962) (15,570)\nReceipt of leasing equipment in settlement of accounts receivable \u2014 (14,250) \u2014\nPurchase deposits reclassified to leasing equipment from other assets upon acquisition (19,608) (6,371) (13,658)\nDecrease in leasing equipment for engines provided to aircraft lessees in lieu of cash reimbursements of\nmaintenance deposits \u2014 10,970 6,108\nAccounts receivable settled with security deposits (4,808) (6,050) (13,461)\nAccounts receivable settled with maintenance deposits (45,719) (1,856) (9,358)\nNon-cash change in equity method investment \u2014 \u2014 (182,963)\nConversion of interests in unconsolidated entities \u2014 \u2014 (21,302)\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n\n\n 60\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 63 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n\n1. ORGANIZATION\nFTAI Aviation Ltd. (\u201cwe\u201d, \u201cus\u201d, \u201cour\u201d or the \u201cCompany\u201d) is a Cayman Islands exempted company which through its subsidiaries owns, leases, and sells\naviation equipment and also develops and manufactures, through a joint venture, and repairs and sells, through our maintenance facilities and exclusivity\narrangements, aftermarket components for aircraft engines. We have two reportable segments, (i) Aviation Leasing and (ii) Aerospace Products (see Note\n14).\nPrior to May 28, 2024, FTAI Aviation Ltd. operated under a management agreement (the \u201cManagement Agreement\u201d) with FIG LLC (the \u201cFormer Manager\u201d),\nand Fortress Worldwide Transportation and Infrastructure Master GP LLC (the \u201cMaster GP\u201d), each an affiliate of Fortress Investment Group LLC (\u201cFortress\u201d).\nFor their services, the Former Manager was entitled to management fees and the Master GP was entitled to certain incentive allocations, both defined in,\nand in accordance with the terms of, the Management Agreement. On May 28, 2024, the Company entered into an Internalization Agreement with the\nFormer Manager and the Master GP (the \u201cInternalization Agreement\u201d), pursuant to which the Management Agreement was terminated effective May 28,\n2024 (the \u201cEffective Date\u201d), except that certain indemnification and other obligations survive, and the Company internalized its management functions (such\ntransactions, the \u201cInternalization\u201d). As a result of the Internalization, the Company ceased to be externally managed and operates as an internally managed\ncompany. In connection with the termination of the Management Agreement, the Company (i) agreed to pay the Former Manager (for itself and on behalf of\nthe Master GP, as applicable) $150.0 million (the \u201cCash Consideration\u201d), the compensation accrued and payable, but not yet paid, under the Management\nAgreement, and the expenses that were reimbursable, but not yet reimbursed, under the Management Agreement; (ii) issued to the Former Manager (for\nitself and on behalf of the Master GP, as applicable) 1,866,949 ordinary shares of the Company (the \u201cShare Consideration\u201d); and (iii) purchased from Master\nGP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the Company, in exchange for $30 thousand. In addition, the Former Manager\nrepaid to the Company certain annual bonus payments due to certain employees of the Former Manager or its affiliates who provide services to the\nCompany with respect to the 2024 calendar year on a pro rata basis. The Company financed the cash payments through one or more debt financings, along\nwith cash on hand.\nOn May 28, 2024, the Company also entered into a Transition Services Agreement (the \u201cTransition Services Agreement\u201d) with the Former Manager. Under\nthe Transition Services Agreement, the Former Manager was required to continue to provide the Company and its affiliates with all of the services provided\nby the Former Manager to the Company and its affiliates immediately prior to May 28, 2024 (the \u201cServices\u201d) for a transition period until October 31, 2024,\nduring which the Company procured replacements for the Services. The Services were provided to the Company for a fee equal to the Former Manager\u2019s\ncost of providing the Services, plus a mark-up of ten percent (10%). In addition, the Former Manager is required to continue to provide the services that are\nreasonably required by the Company to prepare its quarterly and annual financial statements until May 31, 2025. The Transition Services Agreement may be\nterminated earlier (x) by mutual agreement of the parties, (y) by either the Former Manager or the Company in the event of a material breach by the non-\nterminating party that is not cured within thirty (30) days following written notification thereof, or (z) by the Former Manager if the Company fails to pay any\nundisputed sum overdue and payable for a period of at least thirty (30) days.\n\n\n\n2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\nBasis of Accounting\u2014The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles\n(\u201cU.S. GAAP\u201d) and include the accounts of us and our subsidiaries.\nPrinciples of Consolidation\u2014We consolidate all entities in which we have a controlling financial interest and control over significant operating decisions.\nThe ownership interest of other investors in the Company\u2019s consolidated subsidiaries is recorded as non-controlling interest.\nWe use the equity method of accounting for investments in entities in which we exercise significant influence, but which do not meet the requirements for\nconsolidation. Under the equity method, we record our proportionate share of the underlying net income (loss) of these entities as well as the proportionate\ninterest in adjustments to other comprehensive income (loss).\nUse of Estimates\u2014The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that\naffect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and\nthe reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.\nRestructuring Charges\u2014The termination of the Management Agreement was a material change in the management structure of the business and is\naccounted for under ASC 420, Exit or Disposal Cost Obligations. The termination fee payment to the Former Manager under the Internalization Agreement is\nrecorded within Internalization Fee to Affiliate. See Note 17 for additional discussion of the restructuring charges related to the Internalization.\nReclassifications\u2014Certain amounts from prior periods in the Company\u2019s consolidated financial statements have been reclassified to align with the\npresentation in the current period.\n\n\n\n\n 61\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 64 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nRisks and Uncertainties\u2014In the normal course of business, we encounter several significant types of economic risk including credit, market, and capital\nmarket risks. Credit risk is the risk of the inability or unwillingness of a lessee or customer to make contractually required payments or to fulfill its other\ncontractual obligations. Market risk reflects the risk of a downturn or volatility in the underlying industry segments in which we operate, which could adversely\nimpact the pricing of the services offered by us or a lessee\u2019s or customer\u2019s ability to make payments, increase the risk of unscheduled lease terminations and\ndepress lease rates and the value of our leasing equipment or operating assets. Capital market risk is the risk that we are unable to obtain capital at\nreasonable rates to fund the growth of our business or to refinance existing debt facilities. We, through our subsidiaries, also conduct operations outside of\nthe United States; such international operations are subject to the same risks as those associated with our United States operations as well as additional\nrisks, including unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially adverse tax consequences\nand the burden of complying with foreign laws. We do not have significant exposure to foreign currency risk as all of our leasing arrangements are\ndenominated in U.S. dollars.\nCash and Cash Equivalents\u2014We consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash\nequivalents.\nInventory, net\u2014We hold aircraft engines, engine modules, spare parts and used material inventory for sale. Additionally, at time inventory is transferred to\nleasing equipment in connection with a rebuilt engine or engine repair. Inventory is carried at the lower of cost or net realizable value on our consolidated\nbalance sheets.\nProperty, Plant and Equipment, Leasing Equipment and Depreciation\u2014Property, plant and equipment and leasing equipment are stated at cost\n(inclusive of capitalized acquisition costs, where applicable) and depreciated using the straight-line method, over its estimated useful lives, to estimated\nresidual values which are summarized as follows:\n Asset Range of Estimated Useful Lives Residual Value Estimates\nAircraft 25 years from date of manufacture Generally not to exceed 15% of manufacturer\u2019s list\n price when new\nAircraft engines 2 - 6 years, based on maintenance adjusted service Sum of engine core salvage value plus the estimated\n life fair value of life limited parts\nAviation tooling and equipment 3 - 6 years from date of purchase Scrap value at end of useful life\nBuildings and improvements 40 to 50 years Scrap value at end of useful life\nMachinery and equipment 6 - 23 years Scrap value at end of useful life\nFurniture and fixtures 3 - 6 years from date of purchase None\nComputer hardware and software 2 - 5 years from date of purchase None\nLand N/A N/A\nConstruction in progress N/A N/A\nOther 5 - 7 years N/A\n\nMajor improvements and modifications incurred in connection with the acquisition of property, plant and equipment and leasing equipment that are required\nto get the asset ready for initial service are capitalized and depreciated over the remaining life of the asset. Project costs of major additions and betterments,\nincluding capitalizable engineering costs and other costs directly related to the development or construction of a project, are capitalized and depreciation\ncommences once it is placed into service for leasing equipment and once it is ready for service for property, plant and equipment. Interest costs directly\nrelated to and incurred during the construction period of property, plant and equipment are capitalized.\nWe review our depreciation policies on a regular basis to determine whether changes have taken place that would suggest that a change in our depreciation\npolicies, useful lives of our equipment, or the assigned residual values is warranted.\nFor planned major maintenance or component overhaul activities for aviation equipment off lease, the cost of such major maintenance or component\noverhaul event is capitalized and depreciated on a straight-line basis over the period until the next maintenance or component overhaul event is required.\nMajor maintenance and overhauls of the Company\u2019s maintenance repair facilities and related equipment that extend the life of the asset are capitalized and\ndepreciated over the expected period until the next anticipated major maintenance or overhaul.\nUpon retirement or disposal of property, plant and equipment, the cost and related accumulated depreciation are removed from the account, and the\nresulting gains or losses, if any, are recorded.\nIn accounting for leasing equipment, we make estimates about the expected useful lives, residual values and the fair value of acquired in-place leases and\nacquired maintenance liabilities (for aviation equipment). In making these estimates, we rely upon observable market data for the same or similar types of\nequipment and, in the case of aviation equipment, our own estimates with respect to a lessee\u2019s anticipated utilization of the aircraft or engine. When we\nacquire leasing equipment subject to an in-place lease, determining the fair value of the in-place lease requires us to make assumptions regarding the\ncurrent fair values of leases for identical or similar equipment, in order to determine if the in-place lease is within a fair value range of current lease\n\n\n\n\n 62\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 65 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nrates. If a lease is below or above the range of current lease rates, the resulting lease discount or premium is recognized as a lease intangible and amortized\ninto lease income over the remaining term of the lease.\nCapitalized Interest\u2014The interest cost associated with major development and construction projects are capitalized and included in the cost of the project.\nInterest capitalization ceases once a project is substantially complete or no longer undergoing construction activities to prepare it for its intended use. We\ncapitalized interest of $0.2 million, $0.7 million and $2.7 million during the years ended December 31, 2024, 2023 and 2022, respectively.\nRepairs and Maintenance\u2014Repair and maintenance costs that do not extend the lives of the assets are expensed as incurred. Our repairs and\nmaintenance expense was $9.8 million, $7.7 million and $7.2 million during the years ended December 31, 2024, 2023 and 2022, respectively, and are\nincluded in Operating expenses.\nImpairment of Long-Lived Assets\u2014We perform a recoverability assessment of each of our long-lived assets whenever events or changes in\ncircumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not\nlimited to, a significant lease restructuring or early lease termination; significant traffic decline; a significant change in market conditions; the introduction of\nnewer technology and the length of time an asset is off lease related to leasing equipment, engines or for manufacturing equipment; a significant decrease in\nmarket value; adverse changes in use or condition; legal or regulatory changes; or cash flow reductions.\nIf a quantitative recoverability assessment is determined to be needed, we measure whether the estimated future undiscounted net cash flows expected to\nbe generated by the asset exceeds its net book value. The undiscounted cash flows consist of cash flows of the asset or asset group. For long lived assets,\nthe undiscounted cash flows consist of cash flows from currently contracted leases and contracts, future projected leases, transition costs, estimated down\ntime and estimated residual or scrap values for leasing equipment or operating cash flows for manufacturing equipment, and maintenance and operating\ncosts. In the event that an asset does not meet the recoverability test, the carrying value of the asset will be adjusted to fair value resulting in an impairment\ncharge.\nManagement develops the assumptions used in the recoverability analysis based on its knowledge of active contracts, current and future expectations of the\nglobal demand for a particular asset and historical experience in the leasing markets, information received from third party industry sources, usage\nassumptions, asset lifespan for leasing equipment, and expected operating income and costs associated with operating and maintaining the manufacturing\nasset. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in contracted lease rates,\nresidual values, economic conditions, technology, demand for a particular asset type and other factors, expected income and operating costs, maintenance\nand repairs, capital expenditures, and duration of the cash flows.\nRecoverability of Goodwill\u2014Goodwill is not amortized but rather is tested at least annually during the fourth quarter for impairment, or more often if events\nor circumstances indicate the carrying value of an asset may not be recoverable.\nWe assess the recoverability of goodwill using a qualitative evaluation or a quantitative test to determine whether it is more likely than not that the fair value\nof a reporting unit is less than its carrying amount, including goodwill. The determination of fair value requires management to make assumptions and to\napply judgment to estimate industry and economic factors and the profitability of future business strategies. The Company conducts impairment testing\nbased on current business strategy in light of present industry and economic conditions, as well as future expectations.\nWe performed a qualitative assessment for our goodwill impairment test for the year ended December 31, 2024. No impairment was recorded as a result of\nthese tests for the years ended December 31, 2024, 2023 and 2022, respectively.\nSecurity Deposits\u2014Our operating leases generally require the lessee to pay a security deposit or provide a letter of credit. Security deposits are held until\nspecified return dates stipulated in the lease or lease expiration.\nMaintenance Payments\u2014Typically, under an operating lease of aircraft, the lessee is responsible for performing all maintenance and is generally required\nto make maintenance payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft or engine. These\nmaintenance payments are based on hours or cycles of utilization or on calendar time, depending on the component, and are generally required to be made\nmonthly in arrears. If a lessee is making monthly maintenance payments, we would typically be obligated to reimburse the lessee for costs they incur for\nheavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific\nmaintenance event, usually shortly following the completion of the relevant work.\nWe record the portion of maintenance payments paid by the lessee that are expected to be reimbursed as maintenance deposit liabilities in the Consolidated\nBalance Sheets. Reimbursements made to the lessee upon the receipt of evidence of qualifying maintenance work are recorded against the maintenance\ndeposit liability.\n\n\n\n\n 63\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 66 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nIn certain acquired leases, we or the lessee may be obligated to make a payment to the other party at lease termination based on redelivery conditions\nstipulated at the inception of the lease. When the lessee is required to return the aircraft in an improved maintenance condition, we record a maintenance\nright asset, as a component of other assets, for the estimated value of the end-of-life maintenance payment at acquisition. We recognize payments received\nas end-of-lease compensation adjustments, within lease income or as a reduction to the maintenance right asset, when payment is received or collectability\nis assured. In the event we are required to make payments at the end of the lease for redelivery conditions, amounts are accrued as additional maintenance\nliability and expensed when we are obligated and can reasonably estimate such payments.\nLease Incentives and Amortization\u2014Lease incentives, which include lease acquisition costs related to reconfiguration of the aircraft cabin, other lessee\nspecific modifications and other direct costs, are capitalized and amortized as a reduction of lease income over the primary term of the lease, assuming no\nlease renewals.\nIntangibles and amortization\u2014Intangibles include the value of acquired favorable and unfavorable leases and are included in Intangible assets, net.\n\nIn accounting for acquired leasing equipment, we make estimates about the fair value of the acquired leases. In determining the fair value of these leases,\nwe make assumptions regarding the current fair values of leases for identical or similar equipment in order to determine if the acquired lease is within a fair\nvalue range of current lease rates. If a lease is below or above the range of current lease rates, the resulting lease discount or premium is recognized as a\nlease intangible and amortized into lease income over the remaining term of the lease. Acquired lease intangibles are amortized on a straight-line basis over\nthe remaining lease terms, which collectively had a weighted-average remaining amortization period of approximately 45 months as of December 31, 2024,\nand are recorded as a component of revenues.\nDeferred Financing Costs\u2014Costs incurred in connection with obtaining long term financing are capitalized and amortized to interest expense over the term\nof the underlying loans. Unamortized deferred financing costs of $55.5 million and $33.2 million as of December 31, 2024 and 2023, respectively, are\nincluded in Long-term debt, net.\nWe also have unamortized deferred revolver fees related to our revolving debt of $8.2 million and $5.1 million as of December 31, 2024 and 2023,\nrespectively, which are included in Other non-current assets.\nAmortization expense was $11.5 million, $8.9 million and $17.0 million for the years ended December 31, 2024, 2023 and 2022, respectively, and is included\nin Interest expense.\nDiscontinued Operations\u2014A disposal of an entity or component of an entity is reported in discontinued operations if the disposal represents a strategic\nshift that has or will have a material impact on our operations and financial results. See Note 3 for additional information related to our discontinued\noperations.\nRevenues\u2014Revenues are within the scope of ASC 842, Leases, and ASC 606, Revenue from contracts with customers, unless otherwise noted. We have\nelected to exclude sales and other similar taxes from revenues.\nDuring the third quarter of 2022, we updated our corporate strategy based on the opportunities available in the market such that the sale of aircraft and\nengines is now an output of our recurring, ordinary activities. As a result of this update, the transaction price allocated to the sale of assets is included in\nAsset sales revenue beginning in the third quarter of 2022 and are accounted for in accordance with ASC 606. The corresponding net book values of the\nassets sold are recorded in Cost of sales beginning in the third quarter of 2022. Sales transactions of aircraft and engines prior to the third quarter of 2022\nwere accounted for in accordance with ASC 610-20, Gains and losses from the derecognition of nonfinancial assets and were included in Gain on sale of\nassets, net, as we were previously only occasionally selling these assets. Generally, assets sold were under leasing arrangements prior to sales and are\nincluded in Leasing equipment, net.\nOperating Leases\u2014We lease equipment pursuant to operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line\nbasis over the term of the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured. When collectability is not\nreasonably assured, the lessee is placed on non-accrual status and revenue is recognized when cash payments are received.\nGenerally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee\u2019s\nutilization of the leased asset or at the end of the lease. Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs\nand other operating expenses throughout the term of the lease. These periodic maintenance payments accumulate over the term of the lease to fund major\nmaintenance events, and we are contractually obligated to return maintenance payments to the lessee up to the cost of maintenance events paid by the\nlessee. In the event the total cost of maintenance events over the term of a lease is less than the cumulative maintenance payments, we are not required to\nreturn any unused or excess maintenance payments to the lessee.\nMaintenance payments received for which we expect to repay to the lessee are presented as current and non-current Maintenance deposits in our\nConsolidated Balance Sheets. All excess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance\nrevenue on our Consolidated Statements of Operations. Estimates in recognizing revenue include mean time between removal, projected costs for engine\nmaintenance and forecasted utilization of aircraft which are affected by historical usage patterns and overall industry, market and economic conditions.\nSignificant changes to these estimates could have a material effect on the amount of revenue recognized in the period.\n\n\n\n\n 64\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 67 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nFinance Leases\u2014From time to time we enter into finance lease arrangements that include a lessee obligation to purchase the leased equipment at the end\nof the lease term, a bargain purchase option, or provides for minimum lease payments with a present value that equals or exceeds substantially all of the fair\nvalue of the leased equipment at the date of lease inception. Net investment in finance leases represents the minimum lease payments due from lessee, net\nof unearned income. The lease payments are segregated into principal and interest components similar to a loan. Unearned income is recognized on an\neffective interest method over the lease term and is recorded as lease income. The principal component of the lease payment is reflected as a reduction to\nthe net investment in finance leases. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured,\nthe lessee is placed on non-accrual status and revenue is recognized when cash payments are received.\nAsset sales revenue\u2014Asset sales revenue primarily consists of the transaction price related to the sale of aircraft and aircraft engines from our Aviation\nLeasing segment. From time to time, the Company may also assign the related lease agreements to the customer as part of the sale of these assets. We\nroutinely sell leasing equipment to customers and such transactions are considered recurring and ordinary in nature to our business. As such, these sales\nare accounted for within the scope of ASC 606. Revenue is recognized gross when a performance obligation is satisfied by transferring control over an asset\nto a customer along with corresponding costs of sales.\nAerospace products revenue\u2014Aerospace products revenue primarily consists of the transaction price related to the sale of CFM56-7B, CFM56-5B and\nV2500 engines, engine modules, spare parts and used material inventory, and are accounted for within the scope of ASC 606. Revenue is recognized gross\nwhen a performance obligation is satisfied by transferring control over the related asset to a customer along with corresponding costs of sales. Aerospace\nproducts revenue also consists of engine management service contracts, where the Company has a stand-ready obligation to provide replacement CFM56-\n7B and CFM56-5B engines to customers as they become unserviceable during the contract term. The Company recognizes revenue over time using a\nstraight-line attribution method and the costs related to fulfilling the performance obligation are expensed as incurred.\nLeasing Arrangements\u2014At contract inception, we evaluate whether an arrangement is or contains a lease for which we are the lessee (that is,\narrangements which provide us with the right to control a physical asset for a period of time). Operating lease right-of-use (\u201cROU\u201d) assets are included in\nOther non-current assets and lease liabilities are included in Other current and non-current liabilities. Finance lease ROU assets are recognized in Other\nnon-current assets and lease liabilities are recognized in Other current and non-current liabilities.\nAll lease liabilities are measured at the present value of the unpaid lease payments, discounted using our incremental borrowing rate based on the\ninformation available at commencement date of the lease. ROU assets, for both operating and finance leases, are initially measured based on the lease\nliability, adjusted for prepaid rent and lease incentives. Operating lease ROU assets are subsequently measured at the carrying amount of the lease liability\nadjusted for prepaid or accrued lease payments and lease incentives. The finance lease ROU assets are subsequently amortized using the straight-line\nmethod.\nOperating lease expenses are recognized on a straight-line basis over the lease term. With respect to finance leases, amortization of the ROU asset is\npresented separately from interest expense related to the finance lease liability and is recorded in Operating expenses. Variable lease payments, which are\nprimarily based on usage, are recognized when the associated activity occurs.\nWe have elected to combine lease and non-lease components for all lease contracts where we are the lessee. Additionally, for arrangements with lease\nterms of 12 months or less, we do not recognize ROU assets, and lease liabilities and lease payments are recognized on a straight-line basis over the lease\nterm with variable lease payments recognized in the period in which the obligation is incurred.\nConcentration of Credit Risk\u2014We are subject to concentrations of credit risk with respect to amounts due from customers and lessees. We attempt to limit\nour credit risk by performing ongoing credit evaluations. No single customer or lessee accounted for greater than 10% of total revenue during the years\nended December 31, 2024, 2023 and 2022.\n\nAs of December 31, 2024 and 2023 no single customer or lessee accounted for greater than 10% of total accounts receivable, net.\nWe maintain cash and restricted cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial\ninstitutions. We monitor the financial condition of these institutions and have not experienced any losses associated with these accounts.\nAllowance for Doubtful Accounts\u2014We determine the allowance for doubtful accounts based on our assessment of the collectability of our leasing\nreceivables on a lessee-by-lessee basis. Bad debt expense is included in Operating expenses. Receivables are written off after all reasonable means to\ncollect the full amount have been exhausted. The activity in the allowance for doubtful accounts is as follows:\n\n\n\n 65\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 68 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n December 31,\n 2024 2023 2022\nAllowance at beginning of period $ 72,163 $ 65,580 $ 17,703\n Bad debt expense 2,784 6,583 47,877\nAllowance at end of period $ 74,947 $ 72,163 $ 65,580\n\n\nEconomic sanctions and export controls against Russia and Russia\u2019s aviation industry were imposed due to its invasion of Ukraine during the first quarter of\n2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines and our allowance for doubtful\naccounts at December 31, 2024 includes all accounts receivable exposure to Russian and Ukrainian lessees.\nComprehensive Income (Loss)\u2014Our comprehensive income (loss) represents net income (loss) adjusted for comprehensive loss related to cash flow\nhedges of our equity method investees of discontinued operations.\nOther Current Assets\u2014Other current assets are summarized as follows:\n\n December 31,\n 2024 2023\nNotes receivable $ 165,338 $ 102,304\nPrepaid expenses including prepayments for maintenance that has not yet been incurred 87,323 7,617\nPurchase deposits 83,229 23,937\nFinancing receivable resulting from failed sale-leaseback transactions 32,486 \u2014\nMaintenance right assets \u2014 6,716\nOther 40,547 8,311\nOther current assets $ 408,923 $ 148,885\n\n\nOther Non-Current Assets\u2014Other non-current assets are summarized as follows:\n December 31,\n 2024 2023\nLease incentives $ 56,812 $ 43,453\nDeferred tax assets 42,893 72,185\nFinancing receivable resulting from failed sale-leaseback transactions 28,412 \u2014\nMaintenance right assets 25,907 9,628\nOther 54,406 12,455\nOther non-current assets $ 208,430 $ 137,721\n\n\nDividends\u2014Dividends are recorded if and when declared by the Board of Directors. The Board of Directors declared cash dividends of $1.20, $1.20 and\n$1.26 per ordinary share during each of the years ended December 31, 2024, 2023 and 2022, respectively.\nAdditionally, the Board of Directors declared cash dividends on the Series A Preferred Shares of $1.55, $2.06 and $2.06 per share for the years ended\nDecember 31, 2024, 2023, and 2022, respectively, the Series B Preferred Shares of $2.00, $2.00 and $2.00 per share for the years ended December 31,\n2024, 2023 and 2022, respectively, the Series C Preferred Shares of $2.06, $2.06, $2.06 per share for the year ended December 31, 2024, 2022 and 2021,\nrespectively, and the Series D Preferred Shares of $2.38 and $1.78 per share for the year ended December 31, 2024 and 2023.\nCash Flow Presentation\u2014Included in net cash (used in) provided by operating activities are inflows from the sale of engine modules and parts that were on\nengines originally purchased and reported as Leasing equipment. The purchase of the original engine was reported as an outflow in net cash used in\ninvesting activities at the time of purchase through the Acquisition of leasing equipment line item. As part of the Aerospace products business, the Company\nbreaks down generally unserviceable engines with the intent to manufacture modules and parts for creation and sale of new assets. To manufacture the\nmodules and parts and bring them into a salable condition, the Company spends significant costs, often over multiple reporting periods, for new inventory\nand capitalizable labor (e.g., engineering) that are included in net cash (used in) provided by operating activities as components of the changes in the related\nworking capital accounts.\nTherefore, when the costs to manufacture the assets are greater than (predominant to) the estimated value transferred from Leasing equipment into\ninventory, the related cash receipt has been recorded as an inflow in net cash (used in) provided by operating activities.\n\n\n\n\n 66\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 69 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nAdditionally, the Company buys inventory from third parties with the intent to use the parts in the manufacturing of the items discussed above, which is\nreported as an outflow in net cash (used in) provided by operating activities. When rebuilding whole engines for resale, for which the cash inflow upon sale is\nreported as a cash inflow from investing activities, the Company will transfer modules and parts needed (those purchased from third parties as well as parts\nfrom engines previously transferred to inventory from leasing equipment and rebuilt as discussed above) in the rebuild from inventory to leasing equipment.\nWith respect to purchases of aircraft and engines, when the expected predominant source of cash inflows from the acquired leasing equipment at the time of\nacquisition is from leasing activities, the related cash outflow is reported as outflows in net cash used in investing activities. When the expected predominant\nsource of cash inflows is from sales transactions, the related cash outflow is reported as outflows in net cash (used in) provided by operating activities.\nThe cash and noncash related activities described above during the years ended December 31, 2024, 2023 and 2022 are detailed below:\n Year Ended December 31,\n(in thousands) 2024 2023 2022\n\n\nCost of modules and parts sold sourced from engines originally within leasing equipment $ 38,300 $ 41,167 $ 36,946\nTransfers of engines from leasing equipment to inventory for manufacturing and sale 239,462 178,740 127,349\nTransfers of inventory to leasing equipment for rebuilding and sale of engines (223,129) (78,788) (89,041)\nTotal outflows related to manufacturing modules and parts - included in net cash (used in)\nprovided by operating activities (345,821) (138,045) (101,249)\nCash received for assets sold sourced from leasing equipment - inflow included in cash (used in)\nprovided by operating activities 76,157 94,222 43,859\nCash received for sales of leasing equipment that include components sourced from inventory -\ninflow included in cash used in investing activities 436,217 79,474 118,735\nCash paid for engine and aircraft inventory - outflow included in cash provided by (used in)\noperating activities (8,280) \u2014 \u2014\n\nRecent Accounting Pronouncements\u2014In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable\nSegment Disclosures. This ASU modifies the disclosure and presentation requirements of reportable segments. The new guidance requires the disclosure of\nsignificant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit\nand loss. In addition, the new guidance enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment\nmeasures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure\nrequirements. This standard is effective retrospectively for all public entities for fiscal years beginning after December 15, 2023, and interim periods within\nfiscal years beginning after December 15, 2024, with early adoption permitted. We adopted this guidance in the fourth quarter of 2024, and it did not have a\nmaterial impact on our consolidated financial statements and related disclosures.\nUnadopted Accounting Pronouncements\u2014In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax\nDisclosures. This ASU enhances the transparency and decision usefulness of income tax disclosures by expanding the disclosures of an entity\u2019s income tax\nrate reconciliation and disaggregation of income taxes paid and income tax expense. Under the new guidance, public business entities must annually\ndisclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, if the effect of\nthose reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (loss) by the applicable statutory income\ntax rate. This standard is effective prospectively for all public entities for annual periods beginning after December 15, 2024, with early adoption and\nretrospective application permitted. We are currently assessing the impact this guidance will have on our consolidated financial statements and related\ndisclosures.\nIn March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concept Statements. This ASU\namends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to\nall reporting entities within the scope of the affected accounting guidance. Generally, the amendments in ASU 2024-02 are not intended to result in\nsignificant accounting changes for most entities. ASU 2024-02 is effective January 1, 2025 and we are currently assessing the impact this guidance will have\non our consolidated financial statements and related disclosures.\nIn November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic\n220-40): Disaggregation of Income Statement Expenses. In January 2025, the FASB issued Clarifying the Effective Date (\u201cASU 2025-01\u201d) to add some\nclarity around the effective date of the guidance. This ASU requires disaggregated information for specified categories of expenses, including inventory\npurchases, employee compensation, depreciation, amortization, and depletion, to be presented in certain expense captions on the face of the income\nstatement. This standard is effective for annual periods beginning after December 15, 2026, and interim periods beginning after\n\n\n\n 67\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 70 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nDecember 15, 2027, with early adoption and either prospective or retrospective application permitted. We are currently assessing the impact this guidance\nwill have on our consolidated financial statements and related disclosures.\n\n\n\n3. DISCONTINUED OPERATIONS\nFTAI Infrastructure Inc. (\u201cFTAI Infrastructure\u201d) Spin-Off\nOn April 28, 2022, the Board of Directors of the Company unanimously approved the previously announced spin-off of the Company\u2019s infrastructure business\nheld by FTAI Infrastructure (a wholly owned subsidiary of the Company). The spin-off was effected as a distribution of all of the shares owned by the\nCompany of common stock of FTAI Infrastructure to the holders of the Company\u2019s ordinary shares as of July 21, 2022. The distribution was completed on\nAugust 1, 2022. Under ASC 205-20, Presentation of Financial Statements \u2013 Discontinued Operations, the spin-off met the criteria to be reported as a\ndiscontinued operation. Therefore, FTAI Infrastructure is presented as a discontinued operation within the Company\u2019s financial statements for all periods\nprior to August 1, 2022.\nFTAI Infrastructure is a corporation for U.S. federal income tax purposes and holds, among other things, the Company\u2019s previously held interests in the (i)\nJefferson Terminal business, (ii) Repauno business, (iii) Long Ridge investment, and (iv) Transtar business. FTAI Infrastructure retained all related project-\nlevel debt of those businesses. In connection with the spin-off, FTAI Infrastructure paid a dividend of $730.3 million to the Company. The Company used\nthese proceeds to repay all outstanding borrowings under its 2021 bridge loans, $200.0 million of its 6.50% senior unsecured notes due 2025, and\napproximately $175.0 million of the outstanding borrowings under its revolving credit facility. FTAI retained the aviation business and certain other assets,\nand FTAI\u2019s remaining outstanding corporate indebtedness.\nIn connection with the spin-off, the Company and the Former Manager assigned the Company\u2019s then-existing management agreement to FTAI Infrastructure,\nand FTAI Infrastructure and the Former Manager executed an amended and restated agreement.\nCritical Accounting Policies\nRevenue Recognition\nRevenues of discontinued operations consist of the following revenue streams:\nTerminal Services Revenues\u2014Terminal services are provided to customers for the receipt and redelivery of various commodities. These revenues relate to\nperformance obligations that are recognized over time using the right to invoice practical expedient, i.e., invoiced as the services are rendered and the\ncustomer simultaneously receives and consumes the benefit over the contract term. The Company\u2019s performance of service and right to invoice corresponds\nwith the value delivered to our customers. Revenues are typically invoiced and paid on a monthly basis.\nRail Revenues\u2014Rail revenues generally consist of the following performance obligations: industrial switching, interline services, demurrage and storage.\nSwitching revenues are derived from the performance of switching services, which involve the movement of cars from one point to another within the limits of\nan individual plant, industrial area, or a rail yard. Switching revenues are recognized as the services are performed, and the services are generally\ncompleted on the same day they are initiated.\nInterline revenues are derived from transportation services for railcars that originate or terminate at our railroads and involve one or more other carriers. We\nrecord revenue related to interline traffic for transportation service segments provided by carriers along railroads that are not owned or controlled by us on a\nnet basis. Interline revenues are recognized as the transportation movements occur.\nAncillary services revenue primarily relates to demurrage and storage services. Demurrage represents charges assessed by railroads for the detention of\ncars by shippers or receivers of freight beyond a specified free time and is recognized on a per day basis. Storage services revenue is earned for the\nprovision of storage of shippers\u2019 railcars and is generally recognized on a per day, per car basis, as the storage services are provided.\nLease Income\u2014Lease income consists of rental income from tenants for storage space. Lease income is recognized on a straight-line basis over the terms\nof the relevant lease agreement.\nOther Revenue\u2014Other revenue primarily consists of revenue related to the handling, storage and sale of raw materials. Revenues for the handling and\nstorage of raw materials relate to performance obligations that are recognized over time using the right to invoice practical expedient, i.e., invoiced as the\nservices are rendered and the customer simultaneously receives and consumes the benefit over the contract term. Our performance of service and right to\ninvoice corresponds with the value delivered to our customers. Revenues for the sale of raw materials relate to contracts that contain performance\nobligations to deliver the product over the term of the contract. The revenues are recognized when the control of the product is transferred to the customer,\nbased on the volume delivered and the price within the contract. Other revenues are typically invoiced and paid on a monthly basis.\n\n\n\n\n 68\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 71 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nAdditionally, other revenue consists of revenue related to derivative trading activities and also includes revenue related to providing roadside assistance\nservices to customers in the intermodal and over-the-road trucking industries. Revenue is recognized when a performance obligation is satisfied by\ncompleting a repair service at a point in time. Revenues are typically invoiced for each repair and generally have 30-day payment terms.\nIntangibles and amortization\nIntangibles included the value of existing customer relationships acquired in connection with the acquisition of Jefferson Terminal and Transtar.\nCustomer relationship intangible assets were amortized on a straight-line basis over their useful lives as the pattern in which the asset\u2019s economic benefits\nare consumed cannot reliably be determined. Customer relationship intangible assets have useful lives ranging from 5 to 15 years, no estimated residual\nvalue, and amortization was recorded as a component of Depreciation and amortization.\nFinancial Information of Discontinued Operations\nThe following table presents the significant components of net loss from discontinued operations:\n\n Year Ended\n December 31, 2022\nRevenues\nTotal revenues $ 140,009\nExpenses\nCost of sales 12,732\nOperating expense 92,478\nGeneral and administrative expenses 2,694\nAcquisition and transaction expenses 13,971\nManagement fees and incentive allocation to affiliate 8,134\nDepreciation and amortization 40,319\nInterest expense 15,105\nTotal expenses 185,433\nEquity in losses of unconsolidated entities (46,600)\nGain on sale of assets, net 258\nOther (expense) income (1,423)\nTotal other expense (47,765)\nLoss before income taxes (93,189)\nProvision for (benefit from) income taxes 8,227\nNet loss from discontinued operations, net of income taxes (101,416)\nLess: Net loss attributable to non-controlling interests in consolidated subsidiaries (18,817)\nNet loss attributable to shareholders $ (82,599)\n\n\nThe cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows for the year\nended December 31, 2022. The following table summarizes depreciation and amortization, capital expenditures, and other significant operating and\ninvesting noncash items of discontinued operations for each period presented:\n\n\n\n\n 69\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 72 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n Year Ended December\n 31, 2022\nOperating activities:\nEquity in losses of unconsolidated entities $ 46,601\nDepreciation and amortization 40,319\nEquity-based compensation 2,623\nInvesting activities:\nAcquisition of property, plant and equipment $ (129,920)\nAcquisition of business, net of cash acquired (3,819)\nInvestment in unconsolidated entities (7,954)\nProceeds from sale of property, plant and equipment 5,289\nNon-cash change in equity method investment (182,963)\nConversion of interests in unconsolidated entities (21,302)\n\nThe Company accounted for Long Ridge Terminal LLC, included in discontinued operations for the year ended December 31, 2022 included above, using\nthe equity method of accounting. Summarized financial data for Long Ridge Terminal LLC are shown in the following table.\n\nIncome Statement 2022\nTotal revenues $ 15,199\n\n\nExpenses\nOperating expenses 36,693\nDepreciation and amortization 29,381\nInterest expense 30,622\nTotal expenses 96,696\nTotal other expense (234)\nNet loss $ (81,731)\n\n\n\n\n4. ACQUISITION OF LOCKHEED MARTIN COMMERCIAL ENGINE SOLUTIONS\nOn September 9, 2024, the Company, through its subsidiary FTAIC Aviation Inc. (\u201cFTAIC\u201d) created on April 25, 2024, acquired certain assets and assumed\ncertain liabilities of Lockheed Martin Commercial Engine Solutions (\u201cLMCES\u201d) from Lockheed Martin Canada for total consideration of $170.0 million.\nLMCES is a 526,000-square-foot aircraft engine maintenance repair facility located in Montr\u00e9al, Quebec. We acquired LMCES to further enhance our\nMaintenance, Repair, and Exchange business and establish permanent engine and module manufacturing capabilities in Canada. The facility operates\nwithin our Aerospace Products segment, providing extensive engine and piece-part repair capabilities for the CFM56 engines. See Note 14 for additional\ninformation. The results of operations of LMCES have been included in the Company\u2019s results since the effective date of the acquisition. In connection with\nthe acquisition, we recorded $6.9 million of acquisition and transaction expense during the year ended December 31, 2024.\nThe acquisition of LMCES was accounted for as a business combination and, as such, the following fair values were assigned to assets acquired and\nliabilities assumed based on the Company\u2019s estimates and assumptions and are preliminary. The significant assumptions used to estimate the fair values of\nthe property, plant, and equipment and inventory included replacement cost estimates and market data for similar assets where available. The consideration\npaid and final valuation and related allocation of the purchase price is subject to change as additional information is received and will be completed no later\nthan 12 months after the closing date. The final acquisition accounting adjustments may be materially different and may include (i) changes in fair values of\nproperty, plant and equipment and associated salvage values; (ii) changes in fair values of inventory; (iii) changes in goodwill; (iv) changes due to net\nworking capital adjustments; and (v) changes to other assets and other liabilities.\n\n\n\n\n 70\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 73 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nSubsequent to the acquisition, in the quarter ended December 31, 2024, measurement period adjustments as of the acquisition date were made to decrease\naccounts receivable by $1.5 million, decrease inventory by $21.5 million, increase other current assets by $4.1 million, increase property, plant and\nequipment by $1.0 million, increase other non-current assets by $0.1 million, decrease accounts payable by $0.4 million, decrease accrued liabilities by\n$0.1 million, decrease other current liabilities by $5.0 million, increase other non-current liabilities by $1.5 million an increase in total consideration\ntransferred of $15.8 million. These adjustments resulted in an increase to goodwill of $29.6 million.\n\n\n\nThe following table summarizes the preliminary allocation of the net assets acquired:\n\n September 9, 2024\nFair value of assets acquired:\n Current Assets\n Accounts receivable $ 10,758\n Inventory 25,947\n Other current assets 6,795\n Total current assets 43,500\n Property, plant, and equipment 72,414\n Leasing equipment 5,675\n Other non-current assets 10,270\nTotal assets 131,859\nFair value of liabilities assumed:\n Current Liabilities\n Accounts payable 7,669\n Accrued liabilities 1,692\n Other current liabilities 5,130\n Total current liabilities 14,491\n Other non-current liabilities 14,347\nTotal liabilities 28,838\nGoodwill (1) 56,476\nNet assets acquired (2) $ 159,497\n\n________________________________________________________\n(1) Goodwill is primarily attributable to the assembled workforce of FTAIC and the synergies expected to be achieved. This goodwill is assigned to the Aerospace Products\n\nsegment and is deductible for income tax purposes.\n(2)\n Total consideration is calculated as cash paid, adjusted for the settlement of pre-existing relationships. Cash consideration is also preliminary, as it is subject to net working\ncapital adjustments.\n\n\n\n\n 71\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 74 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table presents preliminary fair values of the components of property, plant and equipment acquired and their estimated useful lives:\n Estimated useful life in Estimated Fair\n years value\nBuildings and improvements 25 $ 40,953\nMachinery and equipment 2 - 21 30,660\nOther N/A 801\nTotal $ 72,414\n\nThe unaudited financial information in the table below summarizes the combined results of operations of FTAI and LMCES on a pro forma basis. These pro\nforma results were based on estimates and assumptions which we believe are reasonable. The pro forma adjustments are primarily comprised of the\nfollowing:\n \u2022 The allocation of the purchase price and related adjustments, including adjustments to depreciation and amortization expense related to the fair\n value of property, plant and equipment;\n \u2022 Associated tax-related impacts of adjustments.\nThe following unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that\nwould have been achieved if the acquisition had taken place as of January 1, 2023.\n\n Year ended December 31,\n 2024 2023\nTotal revenue $ 1,782,339 $ 1,257,302\nNet (loss) income attributable to shareholders $ (35,850) $ 211,582\n\n\n\n\n5. ACQUISITION OF QUICKTURN\nOn December 1, 2023, we completed the acquisition of the remaining equity interest of Quick Turn Engine Center LLC (\u201cQuickTurn\u201d) from Unical Aviation\nInc. (\u201cUnical\u201d) for total cash consideration of $30.3 million to obtain full ownership.\nWe acquired QuickTurn to better position the Company to have tighter integration over the development and delivery of aerospace products. QuickTurn is a\nhospital maintenance and testing facility dedicated to the CFM56 engine located in Miami, Florida that operates within our Aerospace Products segment.\nThe results of operations at QuickTurn have been included in the Consolidated Statements of Operations beginning on the acquisition date.\nThe acquisition of QuickTurn was accounted for as a business combination and, as such, the following fair values were assigned to assets acquired and\nliabilities assumed based on management\u2019s estimates and assumptions. The significant assumptions used to estimate the fair value of the property, plant,\nand equipment included replacement cost estimates and market data for similar assets where available. The significant assumptions used to estimate the\nvalue of the customer relationship intangible assets included the discount rate and future revenues and operating expenses.\n\n\n\n\n 72\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 75 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table summarizes the allocation of the net assets acquired:\n\n December 1, 2023\nFair value of assets acquired:\n Current Assets\n Cash and cash equivalents $ 518\n Restricted cash 150\n Accounts receivable 5,133\n Inventory 9,332\n Other current assets 2,889\n Total current assets 18,022\n Property, plant, and equipment 30,559\n Intangible assets 2,377\n Other non-current assets 1,412\nTotal assets 52,370\nFair value of liabilities assumed:\n Current Liabilities\n Accounts payable 3,424\n Accrued liabilities 571\n Other current liabilities 1,475\n Total current liabilities 5,470\n Other non-current liabilities 934\nTotal liabilities 6,404\nGoodwill (1) 4,630\nNet assets acquired $ 50,596\n\n________________________________________________________\n(1) Goodwill is primarily attributable to the assembled workforce of QuickTurn and the synergies expected to be achieved. This goodwill is assigned to the Aerospace Products\n\n segment and is deductible for income tax purposes.\n\n\n\n6. LEASING EQUIPMENT, NET\nLeasing equipment, net is summarized as follows:\n December 31,\n 2024 2023\nLeasing equipment $ 2,963,452 $ 2,574,394\nLess: Accumulated depreciation (589,722) (541,981)\nLeasing equipment, net $ 2,373,730 $ 2,032,413\n\n\nDue to specific transactions, we identified certain assets in our leasing equipment portfolio with indicators of impairment. As a result, we adjusted the\ncarrying value of these assets to fair value and recognized transactional impairment charges of $1.0 million and $2.1 million, net of redelivery compensation,\nfor the years ended December 31, 2024 and 2023, respectively. We recognized an impairment charge totaling $120.0 million, net of maintenance deposits,\nto write-off the entire carrying value of leasing equipment assets that we did not expect to recover from Ukraine and Russia during the year ended December\n31, 2022.\nIn the fourth quarter of 2024, the Company completed the sale of the two vessels included within Corporate and Other. We sold the two offshore vessels for\ntotal proceeds of $142.6 million and the book value was $123.9 million. This transaction resulted in a gain of $18.7 million and is reflected in the Gain on sale\nof assets, net, for the year ended December 31, 2024.\nDepreciation expense for leasing equipment is summarized as follows:\n\n Year Ended December 31,\n 2024 2023 2022\nDepreciation expense for leasing equipment $ 211,047 $ 168,901 $ 152,378\n\n\n\n\n 73\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 76 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n7. INVESTMENTS\nThe following table presents the ownership interests and carrying values of our investments:\n\n Carrying Value\n Investment Ownership Percentage December 31, 2024 December 31, 2023\nAdvanced Engine Repair JV Equity method 25% $ 19,048 $ 21,040\n\nFalcon MSN 177 LLC Equity method 50% \u2014 1,682\n $ 19,048 $ 22,722\n\n\nWe did not recognize any other-than-temporary impairments for the year ended December 31, 2024.\nThe following table presents our proportionate share of equity in (losses) income:\n\n Year Ended December 31,\n 2024 2023 2022\nAdvanced Engine Repair JV $ (1,993) $ 833 $ (1,110)\nFalcon MSN 177 LLC (207) (148) 741\nQuick Turn Engine Center LLC \u2014 (2,291) \u2014\nTotal $ (2,200) $ (1,606) $ (369)\n\n\nEquity Method Investments\nAdvanced Engine Repair JV\nIn December 2016, we invested $15 million for a 25% interest in an advanced engine repair joint venture. This joint venture is focused on developing new\ncost savings programs for engine repairs.\nIn August 2019, we expanded the scope of our joint venture and invested an additional $13.5 million and maintained a 25% interest. We exercise significant\ninfluence over this investment and account for this investment as an equity method investment.\nFalcon MSN 177 LLC\nSince November 2021, we owned a 50% interest in Falcon MSN 177 LLC (\u201cFalcon\u201d), an entity that consists of one Dassault Falcon 2000 aircraft. Falcon\nleases the aircraft to charter operators on aircraft, crew maintenance, and insurance contracts. We accounted for our investment in Falcon as an equity\nmethod investment as we have significant influence through our interest.\nOn May 3, 2024, we purchased the remaining interest from S7 Aerospace for total cash consideration of $0.8 million and it is now a consolidated subsidiary.\nQuick Turn Engine Center LLC\nOn January 4, 2023, we invested $19.5 million for a 50% interest (45% pro rata distribution of income until return of the JV partner\u2019s initial investment) in\nQuick Turn Engine Center LLC (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. We account for our\ninvestment in QuickTurn as an equity method investment as we have significant influence through our interest.\nOn December 1, 2023, we purchased the remaining interest in QuickTurn.\n\n\n\n\n 74\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 77 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n8. INTANGIBLE ASSETS AND LIABILITIES, NET\nOur intangible assets and liabilities, net are summarized as follows:\n December 31, 2024 December 31, 2023\nIntangible assets\nAcquired favorable lease intangibles $ 70,375 $ 68,041\nLess: Accumulated amortization (29,664) (19,347)\nAcquired favorable lease intangibles, net 40,711 48,694\nAcquired customer relationships 1,907 1,907\nLess: Accumulated amortization (413) (11)\nAcquired customer relationships, net 1,494 1,896\nTotal intangible assets, net $ 42,205 $ 50,590\n\n\nIntangible liabilities\nAcquired unfavorable lease intangibles $ 13,767 $ 3,151\nLess: Accumulated amortization (1,259) (1,389)\nAcquired unfavorable lease intangibles, net $ 12,508 $ 1,762\n\n\nIntangible liabilities relate to unfavorable lease intangibles and are included as a component of Other non-current liabilities.\nAmortization of intangible assets and liabilities is recorded as follows:\n\n Year Ended December 31,\n Classification in Consolidated Statements of\n Operations 2024 2023 2022\nLease intangibles Lease income $ 15,597 $ 15,126 $ 13,913\nCustomer relationships Depreciation and amortization 403 11 \u2014\nTotal $ 16,000 $ 15,137 $ 13,913\n\n\n\n\nAs of December 31, 2024, estimated net annual amortization of intangibles is as follows:\n\n2025 $ 12,278\n2026 8,643\n2027 3,599\n2028 3,947\n2029 899\nThereafter 331\nTotal $ 29,697\n\n\n\n\n 75\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 78 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n9. DEBT, NET\nOur debt, net is summarized as follows:\n December 31, 2024 December 31, 2023\n Outstanding\n Borrowings Stated Interest Rate Maturity Date Outstanding Borrowings\nLoans payable\n (i) Base Rate + 1.75%; or\nRevolving Credit Facility (1) \u2014 (ii) Adjusted Term SOFR Rate + 2.75% 5/22/27 \u2014\nTotal loans payable \u2014 \u2014\nBonds payable\nSenior Notes due 2025 (2) \u2014 6.50% 10/1/25 652,043\nSenior Notes due 2027 \u2014 9.75% 8/1/27 400,000\nSenior Notes due 2028 (3) 1,001,382 5.50% 5/1/28 1,001,746\nSenior Notes due 2030 (4) 497,071 7.88% 12/1/30 496,704\nSenior Notes due 2031 700,000 7.00% 5/1/31 \u2014\nSenior Notes due 2032 800,000 7.00% 6/15/32 \u2014\nSenior Notes due 2033 (5) 497,551 5.88% 4/15/33 \u2014\nTotal bonds payable 3,496,004 2,550,493\nDebt 3,496,004 2,550,493\nLess: Debt issuance costs (55,526) (33,150)\nTotal debt, net $ 3,440,478 $ 2,517,343\n\n\nTotal debt due within one year $ \u2014 $ \u2014\n______________________________________________________________________________________\n(1) Requires a quarterly commitment fee at a rate of 0.50% on the average daily unused portion, as well as customary letter of credit fees and agency fees.\n(2) Includes an unamortized discount of $866 at December 31, 2023 and an unamortized premium of $2,908 at December 31, 2023.\n\n(3)\n Includes an unamortized premium of $1,382 and $1,746 at December 31, 2024 and 2023, respectively.\n(4)\n Includes unamortized discount of $2,929 and $3,296 at December 31, 2024 and 2023, respectively.\n(5)\n Includes an unamortized discount of $2,449 at December 31, 2024.\nRevolving Credit Facility\u2014On May 23, 2024, the Company amended and restated its Revolving Credit Facility by executing a Third Amended and\nRestated Credit Agreement (the \u201cRevolver Amendment\u201d). The Revolver Amendment provides for revolving loans to be made available to the Company in an\naggregate principal amount of up to $400.0 million, of which up to $25.0 million may be utilized for the issuance of letters of credit.\nSenior Notes due 2031\u2014On April 11, 2024, we issued $700.0 million aggregate principal amount of senior unsecured notes due 2031 (the \u201cSenior Notes\ndue 2031\u201d). The Senior Notes due 2031 bear interest at a rate of 7.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each\nyear, commencing on November 1, 2024. Using a portion of the net proceeds, the Company completed a cash tender offer for $324.6 million aggregate\nprincipal amount of 2025 Notes validly tendered on April 11, 2024. Holders whose notes were accepted for purchase received equal consideration per\n$1,000 principal amount of 2025 Notes, plus accrued and unpaid interest to, but not including, April 11, 2024. The Company used the remaining net\nproceeds to redeem the remaining $325.4 million aggregate principal amount of Senior Notes due 2025, plus accrued and unpaid interest, and recognized a\nloss on extinguishment of debt of $2.7 million. The remaining net proceeds were used for general corporate purposes, including the funding of acquisitions\nand investments.\nSenior Notes due 2032\u2014On June 17, 2024, we issued $800.0 million aggregate principal amount of senior unsecured notes due 2032 (the \u201cSenior Notes\ndue 2032\u201d). These notes bear interest at a rate of 7.00% per annum, payable semi-annually in arrears on June 15 and December 15 of each year,\ncommencing on December 15, 2024. The Company utilized the net proceeds from the issuance for several purposes: (i) to fully repay outstanding amounts\nunder our Revolving Credit Facility provided under the Revolver Amendment, without reduction in commitments, (ii) to fund the cash termination fee for the\npreviously announced management Internalization described in Note 12, (iii) to complete a cash tender offer for up to $300.0 million in aggregate principal\namount of Senior Notes due 2027 validly tendered on June 18, 2024, plus accrued and unpaid interest, and recognized a loss on extinguishment of debt of\n$11.2 million, (iv) to cover fees and expenses related to the aforementioned transactions, and (v) for general corporate purposes.\n\n\n\n\n 76\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 79 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nSenior Notes due 2033\u2014On October 9, 2024, we issued $500.0 million aggregate principal amount of senior unsecured notes due 2033 (the \u201cSenior Notes\ndue 2033\u201d). The Senior Notes due 2033 bear interest at a rate of 5.875% per annum, payable semi-annually in arrears on April 15 and October 15 of each\nyear, commencing on April 15, 2025. Using a portion of the net proceeds, the Company redeemed the remaining $130.5 million aggregate principal amount\nof Senior Notes due 2027, plus accrued and unpaid interest, and recognized a loss on extinguishment of debt of $3.2 million. The Company used the\nremaining net proceeds to pay down in full the Company\u2019s Revolving Credit Facility, with any excess proceeds intended for general corporate purposes,\nincluding funding acquisitions and investments.\nWe were in compliance with all debt covenants as of December 31, 2024.\n\nAs of December 31, 2024, scheduled principal repayments under our debt agreements for the next five years and thereafter are summarized as follows:\n\n 2025 2026 2027 2028 2029 Thereafter Total\nRevolving Credit Facility \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nSenior Notes due 2025 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nSenior Notes due 2027 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nSenior Notes due 2028 \u2014 \u2014 \u2014 1,000,000 \u2014 \u2014 1,000,000\nSenior Notes due 2030 \u2014 \u2014 \u2014 \u2014 \u2014 500,000 500,000\nSenior Notes due 2031 \u2014 \u2014 \u2014 \u2014 \u2014 700,000 700,000\nSenior Notes due 2032 \u2014 \u2014 \u2014 \u2014 \u2014 800,000 800,000\nSenior Notes due 2033 \u2014 \u2014 \u2014 \u2014 \u2014 500,000 500,000\nTotal principal payments on loans and\nbonds payable $ \u2014 $ \u2014 $ \u2014 $ 1,000,000 $ \u2014 $ 2,500,000 $ 3,500,000\n\n\n\n\n10. FAIR VALUE MEASUREMENTS\n\nFair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and\nminimize use of unobservable inputs. These inputs are prioritized as follows:\n\u2022 Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.\n\u2022 Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets\n or liabilities or market corroborated inputs.\n\u2022 Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market\n participants price the asset or liability.\nThe valuation techniques that may be used to measure fair value are as follows:\n\u2022 Market approach\u2014Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.\n\u2022 Income approach\u2014Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those\n future amounts.\n\u2022 Cost approach\u2014Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).\nOur cash and cash equivalents and restricted cash consist largely of demand deposit accounts with maturities of 90 days or less when purchased that are\nconsidered to be highly liquid. These instruments are valued using inputs observable in active markets for identical instruments and are therefore classified\nas Level 1 within the fair value hierarchy.\nExcept as discussed below, our financial instruments other than cash and cash equivalents and restricted cash consist principally of accounts receivable,\nnotes receivable, accounts payable and accrued liabilities, security deposits, maintenance deposits and management fees payable, whose fair values\napproximate their carrying values based on an evaluation of pricing data, vendor quotes, and historical trading activity or due to their short maturity profiles,\nwhich are classified on the balance sheet.\n\n\n\n\n 77\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 80 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe fair values of our bonds payable are presented in the table below and classified as Level 2 within the fair value hierarchy:\n\n December 31, 2024\nSenior Notes due 2025 \u2014\nSenior Notes due 2027 \u2014\nSenior Notes due 2028 980,140\nSenior Notes due 2030 526,380\nSenior Notes due 2031 713,923\nSenior Notes due 2032 816,904\nSenior Notes due 2033 483,100\nThe Company has contingent obligations under ASC 460, Guarantees, in connection with certain sales of aircraft on lease, which are measured at fair value.\nThe guarantees are valued at $8.9 million and $6.8 million as of December 31, 2024 and December 31, 2023, respectively, and are reflected as a\ncomponent of Other non-current liabilities. The fair values of the guarantees, which were first recorded in 2022, are determined based on the estimated\ncondition of the engines at the end of each lease term and the estimated cost of replacement and applicable discount rates and are classified as Level 3.\nDuring the year ended December 31, 2024, the Company recorded a $2.1 million increase related to the change in fair value, which is recorded in Asset\nsales revenue. During the year ended December 31, 2023, the Company recorded a $4.8 million increase in guarantees related to the sale of seven aircraft\nand a $1.8 million decrease related to the change in fair value, which is recorded in Asset sales revenue. During the year ended December 31, 2022, the\nCompany recorded $3.8 million in guarantees related to the sale of four aircraft, which is recorded in Asset sale revenue. During the years ended December\n31, 2024, 2023 and 2022, there were no significant transfers into or out of Level 3.\nGiven variability in the condition of the engines at the end of the lease terms, which range from 3 to 8 years, the maximum potential amount of undiscounted\nfuture payments that could be required under the guarantees at December 31, 2024 was $37.2 million, which is not reasonably expected.\nWe measure the fair value of certain assets on a non-recurring basis when U.S. GAAP requires the application of fair value, including events or changes in\ncircumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include intangible assets,\nproperty, plant and equipment and leasing equipment. We record such assets at fair value when it is determined the carrying value may not be recoverable.\nFair value measurements for assets subject to impairment tests are based on an income approach which uses Level 3 inputs, which include our\nassumptions as to future cash flows from operation of the leasing and eventual sale of assets.\n\n\n\n11. EQUITY-BASED COMPENSATION\nWe have a Nonqualified Stock Option and Incentive Award Plan (\u201cIncentive Plan\u201d) which provides for the ability to award equity compensation awards in the\nform of stock options to eligible employees, consultants, directors, and other individuals who provide services to us, each as determined by the\nCompensation Committee of the Board of Directors.\nAs of December 31, 2024, the Incentive Plan provides for the issuance of up to 28.3 million shares. Equity-based compensation expense is reported within\nOperating expenses in the Consolidated Statements of Operations.\nUnvested equity-based awards are subject to forfeiture. The Company\u2019s accounting policy is to record the impact of forfeitures when they occur.\nStock Options\nIn connection with our equity offerings (see Note 15 for details), we granted options to the Former Manager related to ordinary shares. The fair value of these\noptions were recorded as an increase in equity with an offsetting reduction of capital proceeds received.\nAdditionally, the Company granted options to select employees of FTAI Aviation LLC (a wholly owned subsidiary of the Company) related to 60,000 ordinary\nshares at an exercise price of $79.13, which had a grant date fair value of $2.1 million. The assumptions used in valuing the options were: a 4.52% risk-free\nrate, a 1.50% dividend yield, a 43.00% volatility and a 6.8 year term.\nThe following table presents information related to the options granted related to our shares:\n\n\n\n\n 78\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 81 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n\n Year Ended December 31,\n 2024 2023 2022\nNumber of options 60,000 248,947 \u2014\nFair value ($ millions) $2.1 $2.1 $\u2014\nRanges\n The expected share volatility is based on an\n assessment of the volatility of our publicly\nExpected volatility traded ordinary shares 43.00 % - 43.00 % 37.88 % - 37.88 % \u2014% - \u2014%\n The risk-free rate is determined using the\n implied yield currently available on U.S.\n government bonds with a term consistent\nRisk free interest rate with the expected term on the date of grant. 4.52 % - 4.52 % 3.47 % - 3.47 % \u2014% - \u2014%\n The expected dividend yield is based on\n management\u2019s current expected dividend\nExpected dividend yield rate. 1.50 % - 1.50 % 6.26 % - 6.26 % \u2014% - \u2014%\n Expected term used represents the period of\n time the options granted are expected to be\nExpected term outstanding. 6.8 years 10 years 0 years\n\nRestricted Shares\nDuring the year ended December 31, 2024 we issued the following restricted shares of the Company to select employees and officers of FTAI Aviation LLC:\nIn May 2024, we issued restricted shares to (i) select officers with a grant date fair value of $5.5 million, vesting over 3.0 years and (ii) select employees with\na grant date fair value of $5.7 million, vesting over 4.0 years.\nIn September 2024, we issued restricted shares to select employees with a grant date fair value of $0.8 million, vesting over 3.0 years.\nAll awards are subject to continued employment, with compensation expense recognized ratably over the vesting periods. The fair value was based on the\nclosing price of FTAI Aviation Ltd.\u2019s ordinary shares on the respective grant dates. The unrecognized compensation expense of restricted shares is expected\nto be recognized over a weighted-average period of 2.6 years.\nPerformance Shares\nIn November 2024, we granted up to 1,000,000 shares of performance shares to certain employees of the Company for which the ultimate number of units\nthat will vest are determined based on the achievement of market conditions at the end of the stated performance period. The awards which are to be\nearned is based on the \u201cPerformance Level\u201d of the Company\u2019s Compound Annualized Total Shareholder Return (\u201cCAGR\u201d) for the Performance Period. The\nPerformance Period is measured from November 5, 2024 through November 5, 2027. The number of shares earned could range from 0% to a maximum of\n100%. The Earned Units from the Performance-based Awards become exercisable in three equal installments over a two-year period beginning with the\ncompletion of the Performance Period. The three equal installments of Earned Units vest on (i) November 5, 2027, (ii) November 5, 2028, and (iii) November\n5, 2029. Compensation expense for the units is based on the estimated value of the awards on the grant date, and is recognized over the period from the\ngrant date through the expected vest dates of each vesting condition.\nThe grant date fair value was $48.1 million and was determined using the Monte Carlo simulation, assuming a Geometric Brownian Motion (GBM) to model\nvarious simulation paths, which relies on highly subjective assumptions, including simulated share prices and simulated vesting percentages to simulate\npayoff paths. Key assumptions in this method include the historical and implied equity volatility, an implied volatility weight, and the risk-free rate of returns.\nThe valuation model assumes dividends are immediately reinvested.\n\nAs of December 31, 2024, there was $46.2 million in unrecognized compensation cost related to unvested performance shares. This cost is expected to be\nrecognized over a weighted-average period of 3.8 years.\n\n\n\n\n 79\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 82 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe Consolidated Statements of Operations includes the following expense related to our equity-based compensation arrangements which are recorded in\nOperating expenses:\n\n\n December 31, Remaining Expense To Be\n Recognized, If All Vesting\n 2024 2023 2022 Conditions Are Met\nStock options $ 296 $ \u2014 $ \u2014 $ 1,778\nPerformance shares 1,954 \u2014 \u2014 46,156\nRestricted shares 3,756 1,638 \u2014 14,766\nTotal $ 6,006 $ 1,638 $ \u2014 $ 62,700\n\n\nThe tables below provide details on our stock options, performance shares, and restricted shares:\n\n Stock Options Performance Shares Restricted Shares\n Weighted Weighted\n Weighted Average Average Average\n Exercise/Issuance Grant date Issuance\n Options Price Shares fair value Shares Price\nOutstanding as of December 31, 2023 616,177 $ 23.78 \u2014 \u2014 365,000 24.03\n Granted 60,000 79.13 1,000,000 48.11 141,138 84.94\n Less: exercised / vested 563,834 23.20 \u2014 \u2014 \u2014\n Less: forfeited and canceled \u2014 \u2014 \u2014 25,000 24.03\nOutstanding as of December 31, 2024 112,343 1,000,000 481,138\n\n\n\n Stock Options Performance Shares Restricted Shares\nAs of December 31, 2024:\n Weighted average exercise / issuance price (per share) $ 52.70 48.11 $ 41.90\n Aggregate intrinsic value (in thousands) $ 10,262 N/A $ 20,159\n Weighted average remaining contractual term (in years) 4.8 3.8 2.6\n\n\n\n\n 80\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 83 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n12. INCOME TAXES\nThe domestic and foreign components of the Company\u2019s pre-tax income (loss) are as follows:\n\n Year Ended December 31,\n 2024 2023 2022\nPre-tax book income (loss)\n Domestic $ (259) $ (282) $ (247)\n Foreign 14,428 184,299 (105,064)\nTotal $ 14,169 $ 184,017 $ (105,311)\n\n\n\n\nThe current and deferred components of the provision for (benefit from) income taxes are as follows:\n Year Ended December 31,\n 2024 2023 2022\nCurrent:\n Cayman Islands $ \u2014 $ \u2014 $ \u2014\n Bermuda \u2014 \u2014 \u2014\n United States:\n Federal 847 935 522\n State and local 1,158 1,176 1,687\n Other Non-U.S. 1,604 1,715 443\nTotal current provision 3,609 3,826 2,652\nDeferred:\n Cayman Islands \u2014 \u2014 \u2014\n Bermuda 2,320 (72,185) \u2014\n United States:\n Federal 6,020 3,943 1,305\n State and local (616) (2) 242\n Other Non-U.S. (5,846) 4,618 1,101\nTotal deferred (benefit) provision 1,878 (63,626) 2,648\nProvision for (benefit from) income taxes:\n Continuing operations 5,487 (59,800) 5,300\n Discontinued operations \u2014 \u2014 8,227\nTotal $ 5,487 $ (59,800) $ 13,527\n\n\nThe Company is an exempted entity domiciled in the Cayman Islands where income taxes are not imposed. The Company is considered a Passive Foreign\nInvestment Company for U.S. income tax purposes and certain income taxes are imposed on our owners. Taxable income or loss generated by our\ncorporate subsidiaries is subject to U.S. federal, state and foreign corporate income tax in locations where they conduct business.\nHistorically, the Company\u2019s Bermuda operations have not been subject to Bermuda income tax. However, on December 27, 2023, the Government of\nBermuda enacted a 15% corporate income tax regime (the \u201cBermuda CIT\u201d) that applies to Bermuda businesses that are part of multinational enterprise\ngroups with annual revenue of \u20ac750 million or more and is effective for tax years beginning on or after January 1, 2025. As a result of the Bermuda CIT, the\nexemption of certain of the Company\u2019s Bermuda subsidiaries from Bermuda corporate income taxes will cease in 2025. The Company recorded the impact\nof this enactment in their provision for the year ended December 31, 2023.\nThe difference between our reported income tax rate and the Cayman Islands statutory rate of 0% is as follows:\n\n\n\n\n 81\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 84 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n\n Year Ended December 31,\n 2024 2023 2022\nIncome subject to tax in the United States 53.0 % 3.3 % (6.9)%\nForeign taxes 80.1 % (30.9)% 13.5 %\nChange in valuation allowance (94.4)% (4.9)% (11.6)%\nIncome tax rate 38.7 % (32.5)% (5.0)%\n\n\n\n\nSignificant components of our deferred tax assets and liabilities are as follows:\n\n December 31,\n 2024 2023\nDeferred tax assets:\n Net operating loss carryforwards $ 34,097 $ 38,911\n Interest expense 2,187 1,861\n Investment in partnerships \u2014 963\n Inventory 2,704 16,985\n Customer relationship intangibles 28,500 28,500\n Other 4,250 \u2014\nTotal deferred tax assets 71,738 87,220\n Less valuation allowance (5,228) (18,599)\nNet deferred tax assets 66,510 68,621\nDeferred tax liabilities:\n Fixed assets and goodwill (32,545) (8,186)\n Other (2,377) (63)\nNet deferred tax asset $ 31,588 $ 60,372\n\n\nDeferred tax assets and liabilities are reported net in Other non-current assets or Other non-current liabilities. In assessing the realizability of deferred tax\nassets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate\nrealization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become\ndeductible. We have analyzed our deferred tax assets and have determined, based on the weight of available evidence, that it is more likely than not that a\nsignificant portion will not be realized. Accordingly, valuation allowances have been recognized as of December 31, 2024, 2023 and 2022 of $5.2 million,\n$18.6 million and $27.6 million, respectively, related to certain deductible temporary differences and net operating loss carryforwards.\nA summary of the changes in the valuation allowance is as follows:\n\n December 31,\n 2024 2023 2022\nValuation allowance at beginning of period $ 18,599 $ 27,565 $ 9,142\n Change due to current year losses 885 855 22,094\n Change due to current year releases (14,256) (9,821) (3,671)\nValuation allowance at end of period $ 5,228 $ 18,599 $ 27,565\n\n\n\n\n 82\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 85 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nAs of December 31, 2024, certain of our corporate subsidiaries had U.S. federal net operating loss carryforwards of $6.0 million which can be carried forward\nindefinitely against future business income. As of December 31, 2024, we also had net operating loss carryforwards for Irish income tax purposes of $249.9\nmillion, which can be carried forward indefinitely against future business income, $1.8 million of net operating loss carryforwards for Malaysian income tax\npurposes, which will begin to expire in the year 2030, $1.3 million of net operating loss carryforward for Singaporean income tax purpose, which can be\ncarried forward indefinitely against the future business income and $2.5 million of net operating loss carryforward for Canadian income tax purpose, which\nwill begin to expire in the year 2044. The utilization of the net operating loss carryforwards to reduce future income taxes will depend on the relevant\ncorporate subsidiary's ability to generate sufficient taxable income prior to the expiration of the carryforward period, if any. In addition, the maximum annual\nuse of net operating loss carryforwards may be limited after certain changes in share ownership.\nThe Organization for Economic Cooperation and Development (\u201cOECD\u201d) is coordinating negotiations among more than 140 countries with the goal of\nachieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%.\nWhile certain jurisdictions in which the Company operates have adopted the relevant legislation effective for tax years beginning on or after January 1, 2024,\nthe Company was not subject to any changes in their income tax provision for the year ended December 31, 2024. For the period ended December 31,\n2025, the Company expects to be subject to a minimum global effective tax rate in certain jurisdictions. The Company continues to monitor developments\nand evaluate the impacts of these new rules and will present any impacts in the December 31, 2025 financial statements.\nAs of December 31, 2024, the Company has not accrued taxes on $44.8 million of foreign earnings which are permanently reinvested outside the domicile.\nThe Company expects that taxes associated with any future repatriation of these earnings to be $2.2 million.\nAs of and for the period ended December 31, 2024, we had not established a liability for uncertain tax positions as no such positions existed. In general, our\ntax returns and the tax returns of our corporate subsidiaries are subject to U.S. federal, state, local and foreign income tax examinations by tax authorities.\nGenerally, we are not subject to examination by taxing authorities for tax years prior to 2020. We do not believe that it is reasonably possible that the total\namount of unrecognized tax benefits will significantly change within 12 months of the reporting date.\n\n\n\n13. AFFILIATE TRANSACTIONS\n\nOn May 28, 2024, the Company entered into definitive agreements with the Former Manager and Master GP to internalize the Company\u2019s management\nfunction. As part of the termination of the Management Agreement, the Company (i) paid the Former Manager (for itself and on behalf of the Master GP, as\napplicable) the Cash Consideration, the compensation accrued and payable, but not yet paid, under the Management Agreement and the expenses that\nwere reimbursable, but not yet reimbursed, under the Management Agreement; (ii) issued to the Former Manager (for itself and on behalf of the Master GP,\nas applicable) the Share Consideration; and (iii) purchased from Master GP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the\nCompany, in exchange for $30 thousand. Following the Internalization, the Company no longer pays management fees or incentive distributions to the\nFormer Manager and Master GP.\n\nIn connection with the termination of the Management Agreement, the Company also entered into a Transition Services Agreement with the Former\nManager. Under the Transition Services Agreement, the Former Manager was required to continue to provide the Company and its affiliates with all of the\nServices for a transition period through October 31, 2024, during which the Company procured replacements for the Services. The Services were provided\nto the Company for a fee equal to the Former Manager\u2019s cost of providing the Services, plus a mark-up of ten percent (10%). In addition, the Former\nManager is required to continue to provide the services that are reasonably required by the Company to prepare its quarterly and annual financial statements\nuntil May 31, 2025. The Transition Services Agreement may be terminated earlier (x) by mutual agreement of the parties, (y) by either the Former Manager\nor the Company in the event of a material breach by the non-terminating party that is not cured within thirty (30) days following written notification thereof, or\n(z) by the Former Manager if the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days.\n\nPrior to the Internalization, the Former Manager was paid annual fees in exchange for advising us on various aspects of our business, formulating our\ninvestment strategies, arranging for the acquisition and disposition of assets, arranging for financing, monitoring performance, and managing our day-to-day\noperations, inclusive of all costs incidental thereto. In addition, the Former Manager was reimbursed for various expenses incurred by the Former Manager\non our behalf, including the costs of legal, accounting and other administrative activities. Additionally, we entered into certain incentive allocation\narrangements with Master GP, which owned approximately 0.01% of FTAI Aviation Holdco Ltd. (a wholly owned subsidiary of the Company).\n\nThe Former Manager was entitled to a management fee and reimbursement of certain expenses. The management fee was determined by taking the\naverage value of total equity (excluding non-controlling interests) determined on a consolidated basis in accordance with U.S. GAAP at the end of the two\nmost recently completed months multiplied by an annual rate of 1.50%, which was payable monthly in arrears in cash.\n\n\n\n\n 83\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 86 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nPrior to the Internalization and the termination of the Management Agreement on May 28, 2024, Master GP, was entitled to incentive allocations (comprised\nof income incentive allocation and capital gains incentive allocation, defined below). The income incentive allocation was calculated and distributable\nquarterly in arrears based on the pre-incentive allocation net income for the immediately preceding calendar quarter (the \u201cIncome Incentive Allocation\u201d). For\nthis purpose, pre-incentive allocation net income means, with respect to a calendar quarter, net income attributable to shareholders during such quarter\ncalculated in accordance with U.S. GAAP excluding our pro rata share of (1) realized or unrealized gains and losses, and (2) certain non-cash or one-time\nitems, and (3) any other adjustments as may be approved by our independent directors. Pre-incentive allocation net income did not include any Income\nIncentive Allocation or Capital Gains Incentive Allocation (described below) paid to Master GP during the relevant quarter.\n\nPrior to the Internalization, one of our subsidiaries allocated and distributed to Master GP an Income Incentive Allocation with respect to its pre-incentive\nallocation net income in each calendar quarter as follows: (1) no Income Incentive Allocation in any calendar quarter in which pre-incentive allocation net\nincome, expressed as a rate of return on the average value of our net equity capital (excluding non-controlling interests) at the end of the two most recently\ncompleted calendar quarters, does not exceed 2% for such quarter (8% annualized); (2) 100% of pre-incentive allocation net income with respect to that\nportion of such pre-incentive allocation net income, if any, that is equal to or exceeds 2% but does not exceed 2.2223% for such quarter; and (3) 10% of the\namount of pre-incentive allocation net income, if any, that exceeds 2.2223% for such quarter. These calculations were prorated for any period of less than\nthree months.\n\nPrior to the Internalization, Capital Gains Incentive Allocation was calculated and distributable in arrears as of the end of each calendar year and was equal\nto 10% of our pro rata share of cumulative realized gains from the date of the IPO through the end of the applicable calendar year, net of our pro rata share\nof cumulative realized or unrealized losses, the cumulative non-cash portion of equity-based compensation expenses and all realized gains upon which prior\nperformance-based Capital Gains Incentive Allocation payments were made to Master GP.\n\nThe following table summarizes the management fees, income incentive allocation and capital gains incentive allocation prior to the Internalization on May\n28, 2024:\n\n Year Ended December 31,\n 2024 2023 2022\nManagement fees $ 993 $ 921 $ 73\nIncome incentive allocation 7,456 17,116 3,489\nTotal $ 8,449 $ 18,037 $ 3,562\n\n\nWe paid all of our operating expenses, except those specifically required to be borne by the Former Manager under the Management Agreement. The\nexpenses required to be paid by us included, but were not limited to, issuance and transaction costs incident to the acquisition, disposition and financing of\nour assets, legal and auditing fees and expenses, the compensation and expenses of our independent directors, the costs associated with the establishment\nand maintenance of any credit facilities and other indebtedness of ours (including commitment fees, legal fees, closing costs, etc.), expenses associated with\nother securities offerings of ours, costs and expenses incurred in contracting with third parties (including affiliates of the Former Manager), the costs of\nprinting and mailing proxies and reports to our shareholders, costs incurred by the Former Manager or its affiliates for travel on our behalf, costs associated\nwith any computer software or hardware that was used by us, costs to obtain liability insurance to indemnify our directors and officers and the compensation\nand expenses of our transfer agent.\n\nWe paid or reimbursed the Former Manager and its affiliates for performing certain legal, accounting, due diligence tasks and other services that outside\nprofessionals or outside consultants otherwise would perform, provided that such costs and reimbursements were no greater than those which would be paid\nto outside professionals or consultants. The Former Manager was responsible for all of its other costs incident to the performance of its duties under the\nManagement Agreement, including compensation of the Former Manager\u2019s employees, rent for facilities and other \u201coverhead\u201d expenses; we did not\nreimburse the Former Manager for these expenses.\n\nThe following table summarizes our reimbursements to the Former Manager:\n\n Year Ended December 31,\n 2024 2023 2022\nClassification in the Consolidated Statements of Operations:\n General and administrative $ 6,788 $ 7,137 $ 6,891\n Acquisition and transaction expenses 2,137 678 1,144\nTotal $ 8,925 $ 7,815 $ 8,035\n\n\n\n\n 84\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 87 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nUpon the successful completion of an offering of our ordinary shares or other equity securities (including securities issued as consideration in an acquisition),\nwe granted the Former Manager options to purchase ordinary shares in an amount equal to 10% of the number of ordinary shares being sold in the offering\n(or if the issuance relates to equity securities other than our ordinary shares, options to purchase a number of ordinary shares equal to 10% of the gross\ncapital raised in the equity issuance divided by the fair market value of a ordinary share as of the date of issuance), with an exercise price equal to the\noffering price per share paid by the public or other ultimate purchaser or attributed to such securities in connection with an acquisition (or the fair market\nvalue of a ordinary share as of the date of the equity issuance if it relates to equity securities other than our ordinary shares). Any ultimate purchaser of\nordinary shares for which such options are granted may have been an affiliate of the Former Manager.\n\n\n\n14. SEGMENT INFORMATION\nThe key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and\nservices. Our two reportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns and manages aviation\nassets, including aircraft and aircraft engines, which it leases and sells to lessees. The Aerospace Products segment, through our maintenance facilities,\nequity method investment and exclusivity arrangements, develops and manufactures, repairs/refurbishes and sells aircraft engines and aftermarket\ncomponents for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines. During the fourth quarter of 2023, the Company changed the\ncomposition of its operating segments to include V2500 engines within the Aerospace Products segment. Prior periods have been restated to reflect the\nchange in accordance with the requirements of ASC 280, Segment Reporting. See Note 2 for additional information.\n\nCorporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, internalization fee and management fees and\nincentive compensation pursuant to the Management Agreement prior to the Internalization effective May 28, 2024. Additionally, Corporate and Other also\nincludes results from an offshore energy business, which consists of vessels and equipment that support offshore oil and gas activities and production which\nare typically subject to operating leases. We sold the two offshore vessels in 2024.\n\nThe accounting policies of the segments are the same as those described in the summary of significant accounting policies; however, financial information\npresented by segment includes the impact of intercompany eliminations. Our Chief Executive Officer is our Chief Operating Decision Maker (\u201cCODM\u201d).\nSegment information is presented in the same manner that our CODM reviews the operating results in assessing performance and allocating resources. The\nCODM evaluates performance for each reportable segment based on net income (loss) attributable to shareholders and is used to monitor budget vs. actual\nresults.\n\nThe CODM determined that segment asset information is not a key factor in measuring performance or allocating resources. Therefore, segment asset\ninformation is not included in the tables below as it is not provided to or reviewed by our CODM.\n\nThe following tables set forth certain information, which include all significant expenses reviewed by the CODM, for each reportable segment:\n\n\n\n\n 85\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 88 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nI. For the Year Ended December 31, 2024\n Year Ended December 31, 2024\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nRevenues\nLease income $ 234,411 $ \u2014 $ 20,927 $ 255,338\nMaintenance revenue 200,809 \u2014 \u2014 200,809\nAsset sales revenue 192,176 \u2014 \u2014 192,176\nAerospace products revenue \u2014 1,079,821 \u2014 1,079,821\nOther revenue 1,041 \u2014 5,716 6,757\nTotal revenues 628,437 1,079,821 26,643 1,734,901\n\nExpenses\nCost of sales 151,977 673,907 \u2014 825,884\nOperating expenses 35,495 23,818 56,548 115,861\nGeneral and administrative \u2014 \u2014 14,263 14,263\nAcquisition and transaction expenses 9,740 4,906 17,650 32,296\nManagement fees and incentive allocation to affiliate \u2014 \u2014 8,449 8,449\nInternalization fee to affiliate \u2014 \u2014 300,000 300,000\nDepreciation and amortization 201,497 6,630 9,937 218,064\nAsset impairment 962 \u2014 \u2014 962\nGain on sale of assets, net \u2014 \u2014 (18,705) (18,705)\nTotal expenses 399,671 709,261 388,142 1,497,074\n\nOther income (expense)\nEquity in losses of unconsolidated entities (207) (1,993) \u2014 (2,200)\nInterest expense \u2014 \u2014 (221,721) (221,721)\nLoss on extinguishment of debt \u2014 \u2014 (17,101) (17,101)\nOther income 14,669 \u2014 2,695 17,364\nTotal other income (expense) 14,462 (1,993) (236,127) (223,658)\nIncome (loss) from continuing operations before income taxes 243,228 368,567 (597,626) 14,169\nProvision for (benefit from) income taxes 32,979 22,221 (49,713) 5,487\nNet income (loss) from continuing operations 210,249 346,346 (547,913) 8,682\nLess: Dividends on preferred shares \u2014 \u2014 32,763 32,763\nLess: Loss on redemption of preferred shares \u2014 \u2014 7,998 7,998\nNet income (loss) attributable to shareholders from continuing operations $ 210,249 $ 346,346 $ (588,674) $ (32,079)\n\n\n\n\n 86\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 89 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nSummary information with respect to our geographic sources of revenue, based on location of customer and lessee, is as follows:\n\n Year Ended December 31, 2024\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nRevenues\nAfrica $ 4,643 $ 8,271 $ \u2014 $ 12,914\nAsia 135,579 178,252 26,643 340,474\nEurope 324,327 364,384 \u2014 688,711\nNorth America 108,426 504,936 \u2014 613,362\nSouth America 55,462 23,978 \u2014 79,440\nTotal revenues (1) $ 628,437 $ 1,079,821 $ 26,643 $ 1,734,901\n\n______________________________________________________\n(1) The United States, included in North America, and Ireland, included in Europe, represent 31% and 16% of total revenues, respectively, based on the location of our lessees.\n\nNo other country represents more than 10% of total revenues.\n\nPresented below are the contracted minimum future annual revenues to be received under existing operating leases as of December 31, 2024:\n December 31, 2024\n2025 $ 238,141\n2026 181,835\n2027 141,750\n2028 123,447\n2029 79,469\nThereafter 94,634\nTotal $ 859,276\n\n\n\n\n 87\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 90 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nII. For the Year Ended December 31, 2023\n Year Ended December 31, 2023\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nRevenues\nLease income $ 179,704 $ \u2014 $ 28,232 207,936\nMaintenance revenue 191,347 \u2014 \u2014 191,347\nAsset sales revenue 303,141 \u2014 \u2014 303,141\nAerospace products revenue \u2014 454,970 \u2014 454,970\nOther revenue 7,419 \u2014 6,083 13,502\nTotal revenues 681,611 454,970 34,315 1,170,896\n\nExpenses\nCost of sales 221,852 280,280 \u2014 502,132\nOperating expenses 37,876 20,459 51,828 110,163\nGeneral and administrative \u2014 \u2014 13,700 13,700\nAcquisition and transaction expenses 7,150 1,722 6,322 15,194\nManagement fees and incentive allocation to affiliate \u2014 \u2014 18,037 18,037\nDepreciation and amortization 158,354 661 10,862 169,877\nAsset impairment 2,121 \u2014 \u2014 2,121\nTotal expenses 427,353 303,122 100,749 831,224\n\nOther income (expense)\nEquity in losses of unconsolidated entities (148) (1,458) \u2014 (1,606)\nInterest expense \u2014 \u2014 (161,639) (161,639)\nOther income 1,300 5,347 943 7,590\nTotal other income (expense) 1,152 3,889 (160,696) (155,655)\nIncome (loss) from continuing operations before income taxes 255,410 155,737 (227,130) 184,017\n(Benefit from) provision for income taxes (36,193) (24,440) 833 (59,800)\nNet income (loss) from continuing operations 291,603 180,177 (227,963) 243,817\nLess: Dividends on preferred shares \u2014 \u2014 31,795 31,795\nNet income (loss) attributable to shareholders from continuing operations $ 291,603 $ 180,177 $ (259,758) $ 212,022\n\n\nSummary information with respect to our geographic sources of revenue, based on location of customer and lessee, is as follows:\n Year Ended December 31, 2023\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nRevenues\nAfrica $ 822 $ 875 $ \u2014 $ 1,697\nAsia 101,305 18,364 34,315 153,984\nEurope 244,055 120,439 \u2014 364,494\nNorth America 285,421 301,633 \u2014 587,054\nSouth America 50,008 13,659 \u2014 63,667\nTotal revenues (1) $ 681,611 $ 454,970 $ 34,315 $ 1,170,896\n\n______________________________________________________\n(1) The United States, included in North America, represents 47% of total revenues based on the location of our lessees. No other country represents more than 10% of total\n\nrevenues.\n\n\n\n\n 88\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 91 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nIII. For the Year Ended December 31, 2022\n Year Ended December 31, 2022\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nRevenues\nLease income $ 159,068 $ \u2014 $ 20,246 $ 179,314\nMaintenance revenue 148,846 \u2014 \u2014 $ 148,846\nAsset sales revenue 183,535 \u2014 \u2014 $ 183,535\nAerospace products revenue \u2014 178,515 \u2014 $ 178,515\nOther revenue 11,499 \u2014 6,702 $ 18,201\nTotal revenues 502,948 178,515 26,948 708,411\n\nExpenses\nCost of sales 138,904 109,481 \u2014 248,385\nOperating expenses 81,232 11,967 39,065 132,264\nGeneral and administrative \u2014 \u2014 14,164 14,164\nAcquisition and transaction expenses 1,923 243 11,041 13,207\nManagement fees and incentive allocation to affiliate \u2014 \u2014 3,562 3,562\nDepreciation and amortization 144,258 258 8,401 152,917\nAsset impairment 137,219 \u2014 \u2014 137,219\nGain on sale of assets, net (59,048) (18,163) \u2014 (77,211)\nTotal expenses 444,488 103,786 76,233 624,507\n\nOther income (expense)\nEquity in earnings (losses) of unconsolidated entities 740 (1,109) \u2014 (369)\nInterest expense \u2014 \u2014 (169,194) (169,194)\nLoss on extinguishment of debt \u2014 \u2014 (19,859) (19,859)\nOther income (expense) 246 \u2014 (39) 207\nTotal other income (expense) 986 (1,109) (189,092) (189,215)\nIncome (loss) from continuing operations before income taxes 59,446 73,620 (238,377) (105,311)\nProvision for (benefit from) income taxes 2,502 2,961 (163) 5,300\nNet income (loss) from continuing operations 56,944 70,659 (238,214) (110,611)\nLess: Dividends on preferred shares \u2014 \u2014 27,164 27,164\nNet income (loss) attributable to shareholders from continuing operations $ 56,944 $ 70,659 $ (265,378) $ (137,775)\n\n\nSummary information with respect to our geographic sources of revenue, based on location of customer and lessee, is as follows:\n\n\n\n\n 89\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 92 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n Year Ended December 31, 2022\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nRevenues\nAfrica $ 250 $ 1,615 $ \u2014 $ 1,865\nAsia 84,953 12,731 26,948 124,632\nEurope 130,128 37,495 \u2014 167,623\nNorth America 245,549 126,597 \u2014 372,146\nSouth America 42,068 77 \u2014 42,145\nTotal revenues (1) $ 502,948 $ 178,515 $ 26,948 $ 708,411\n\n________________________________________________________\n(1)\n The United States, included in North America, represents 44% of total revenues based on the location of our lessees. No other country represents more than 10% of total\nrevenues.\n\nIV. Location of long-lived assets\nThe following tables sets forth summarized geographic location of property, plant and equipment and leasing equipment, net:\n\n December 31, 2024 December 31, 2023\nProperty, plant and equipment and leasing equipment, net\nAfrica $ 37,369 $ 18,380\nAsia 596,547 478,120\nEurope 1,038,176 934,817\nNorth America 592,675 416,811\nSouth America 216,414 229,460\nTotal property, plant and equipment and leasing equipment, net $ 2,481,181 $ 2,077,588\n\n________________________________________________________\n(1) The United States, included in North America, and Italy, included in Europe, represent 17% and 12% of property, plant and equipment and leasing equipment, net as of\n\nDecember 31, 2024 and 2023, respectively. No other country represents more than 10% of property, plant and equipment and leasing equipment, net.\n\n\n\n\n 90\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 93 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n15. EARNINGS PER SHARE AND EQUITY\n\nBasic earnings per ordinary share (\u201cEPS\u201d) is calculated by dividing net income (loss) attributable to shareholders by the weighted average number of\nordinary shares outstanding, plus any participating securities. Diluted EPS is calculated by dividing net income attributable to shareholders by the weighted\naverage number of ordinary shares outstanding, plus any participating securities and potentially dilutive securities. Potentially dilutive securities are\ncalculated using the treasury stock method.\n\nThe calculation of basic and diluted EPS is presented below.\n\n Year Ended December 31,\n(in thousands, except share and per share data) 2024 2023 2022\n Net income (loss) from continuing operations $ 8,682 $ 243,817 $ (110,611)\n Net loss from discontinued operations, net of income taxes \u2014 \u2014 (101,416)\nNet income (loss) 8,682 243,817 (212,027)\nLess: Net loss attributable to non-controlling interests in consolidated subsidiaries:\n Continuing operations \u2014 \u2014 \u2014\n Discontinued operations \u2014 \u2014 (18,817)\nLess: Dividends on preferred shares 32,763 31,795 27,164\nLess: Loss on redemption of preferred shares 7,998 \u2014 \u2014\nNet (loss) income attributable to shareholders $ (32,079) $ 212,022 $ (220,374)\nWeighted Average Ordinary Shares Outstanding - Basic 101,538,835 99,908,214 99,421,008\nWeighted Average Ordinary Shares Outstanding - Diluted 101,538,835 100,425,777 99,421,008\n\n\n(Loss) earnings per share:\nBasic\n Continuing operations $ (0.32) $ 2.12 $ (1.39)\n Discontinued operations $ \u2014 $ \u2014 $ (0.83)\n\n\nDiluted\n Continuing operations $ (0.32) $ 2.11 $ (1.39)\n Discontinued operations $ \u2014 $ \u2014 $ (0.83)\n\nThe calculation of Diluted EPS excludes 0, 0 and 582,200 shares for the years ended December 31, 2024, 2023 and 2022, respectively, because the impact\nwould be anti-dilutive.\nOrdinary shares issued to certain directors as compensation were 6,148, 26,287 and 19,811 for the years ended December 31, 2024, 2023 and 2022,\nrespectively.\nOrdinary Shares\n\nIn May 2024, in connection with the Internalization and termination of the Management Agreement, the Company issued 1,866,949 ordinary shares, par\nvalue $0.01 per share, at a price of $80.34 per share, to its Former Manager.\nPreferred Shares\nIn March 2023, in a public offering, we issued 2,600,000 shares of 9.50% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares\n(\u201cSeries D Preferred Shares\u201d), par value $0.01 per share, with a liquidation preference of $25.00 per share for net proceeds before expenses of\n$63.0 million.\nIn October 2024, the Company redeemed in full the outstanding 4,180,000 8.25% Fixed-to-Floating Rate Series A Cumulative Perpetual Redeemable\nPreferred Shares at a redemption price equal to $25.00 per share in cash, plus $1.6 million of accumulated and unpaid distributions thereon to, but not\nincluding, the redemption date of October 29, 2024.\n\n\n\n\n 91\n\fFTAI AVIATION LTD.\n Case 1:25-cv-00541-JAV\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Document 70-4 Filed 11/20/25 Page 94 of 100\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n16. COMMITMENTS AND CONTINGENCIES\nIn the normal course of business, the Company and its subsidiaries may be involved in various claims, legal proceedings, or may enter into contracts that\ncontain a variety of representations and warranties and which provide general indemnifications. Within our offshore energy business, a lessee did not fulfill\nits obligation under its charter arrangement, therefore we are pursuing rights afforded to us under the charter and the range of potential losses against the\nobligation is $0.0 million to $3.3 million. Our maximum exposure under other arrangements is unknown as no additional claims have been made. We believe\nthe risk of loss in connection with such arrangements is remote.\nInternalization\u2014During the second quarter of 2024, the Company entered into the Internalization Agreement with the Former Manager and Master GP.\nPursuant to the Internalization Agreement, the Management Agreement was terminated effective May 28, 2024, except that certain indemnification and other\nobligations survive, and the Company was no longer required to pay management fees or incentive distributions with respect to any period thereafter. As a\nresult of the Internalization, the Company ceased to be externally managed and operates as an internally managed company. In connection with the\ntermination of the Management Agreement, the Company (i) agreed to pay the Former Manager (for itself and on behalf of the Master GP, as applicable) the\nCash Consideration, the compensation accrued and payable, but not yet paid, under the Management Agreement and the expenses that were reimbursable,\nbut not yet reimbursed, under the Management Agreement; (ii) issued to the Former Manager (for itself and on behalf of the Master GP, as applicable) the\nShare Consideration; and (iii) purchased from Master GP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the Company, in\nexchange for $30 thousand.\n\n\n\n17. RESTRUCTURING CHARGES\n\nIn connection with the Internalization and termination of the Management Agreement, the Company agreed to pay a total of $300.0 million to its Former\nManager (for itself and on behalf of the Master GP, as applicable). At closing, the Company issued 1,866,949 ordinary shares valued at $150.0 million. The\nremaining balance was paid in cash on June 17, 2024. The restructuring charge paid in connection with the Internalization and termination of the\nManagement Agreement is reflected in Internalization Fee to Affiliate expense in the Consolidated Statements of Operations for the year ended December\n31, 2024. See Note 13 for additional discussion. There were no restructuring charges recorded for the years ended December 31, 2023 and 2022.\n\n\n\n18. SUBSEQUENT EVENTS\nStrategic Capital Initiative\nOn December 30, 2024, the Company announced the launch of Strategic Capital Initiative, a new investment focused on acquiring 737NG and A320ceo\naircraft, allowing the Company to maintain an asset-light business model while the partnerships actively acquire on-lease narrowbody aircraft. The initial\ncapital call for this fund was made on December 31, 2024. As of December 31, 2024, no funds have been transferred under this capital call.\nSeries B Shares\nOn January 17, 2025, the Company issued the notice to redeem in full the outstanding 4,940,000 8.00% Fixed-to-Floating Rate Series B Cumulative\nPerpetual Redeemable Preferred Shares at a redemption price equal to $25.00 per share in cash, plus $2.4 million of accumulated and unpaid distributions\nthereon to, but not including, the redemption date of February 16, 2025.\nDividends\nOn February 26, 2025, our Board of Directors declared a cash dividend on our ordinary shares and eligible participating securities of $0.30 per share for the\nquarter ended December 31, 2024, payable on March 24, 2025 to the holders of record on March 14, 2025.\nAdditionally, on February 26, 2025, our Board of Directors declared cash dividends on the Series C Preferred Shares and Series D Preferred Shares of\n$0.52 and $0.59 per share, respectively, for the quarter ended December 31, 2024, payable on March 17, 2025 to the holders of record on March 10, 2025.\n\n\n\n\n 92\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 95 of 100\n\n\nItem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure\nNone.\nItem 9A. Controls and Procedures\nDisclosure Controls and Procedures\nAs of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the Company\u2019s\nmanagement, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in\nRule 13a-15(e) under the Securities Exchange Act of 1934 (the \u201cExchange Act\u201d)). Based upon that evaluation, the Company\u2019s Chief Executive Officer and\nChief Financial Officer have concluded that these disclosure controls and procedures were effective as of and for the period covered by this report.\nManagement's Annual Report on Internal Control over Financial Reporting\nOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial\nreporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external\npurposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures\nthat: pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and our dispositions of assets; provide\nreasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted\naccounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and\nprovide reasonable assurance regarding prevention or timely detection of unauthorized acquisition and use or disposition of our assets that could have a\nmaterial effect on the financial statements.\nBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of\neffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of\ncompliance with the policies or procedures may deteriorate.\nOn September 9, 2024, we completed the acquisition of Lockheed Martin Commercial Engine Solutions. Our management is in the process of reviewing the\noperations of LMCES and integrating its controls into our internal control structure. In accordance with SEC guidance permitting a company to exclude an\nacquired business from management\u2019s assessment of the effectiveness of internal control over financial reporting for the year in which the acquisition is\ncompleted, we have excluded LMCES from our assessment of the effectiveness of internal control over financial reporting as of December 31, 2024. LMCES\nrepresented 5.3% of our total assets and less than 1.2% of our total revenues as of and for the year ended December 31, 2024. See Note 4 to the\nconsolidated financial statements for additional information about the acquisition of LMCES.\nManagement assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, management\nused the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013).\nBased on management\u2019s assessment using this framework, management concluded that, as of December 31, 2024, our internal control over financial\nreporting was effective.\nThe effectiveness of the Company\u2019s internal control over financial reporting as of December 31, 2024 has been audited by Ernst & Young LLP, an\nindependent registered public accounting firm, as stated in their report included herein.\nChanges in Internal Control over Financial Reporting\nThere was no change in the Company\u2019s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during its most recent\nfiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.\n\n\n\n\n 93\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 96 of 100\n\n\n Report of Independent Registered Public Accounting Firm\nTo the Shareholders and the Board of Directors of FTAI Aviation Ltd.\nOpinion on Internal Control Over Financial Reporting\nWe have audited FTAI Aviation Ltd.\u2019s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control\u2014\nIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our\nopinion, FTAI Aviation Ltd. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024,\nbased on the COSO criteria.\nAs indicated in the accompanying Management\u2019s Annual Report on Internal Control over Financial Reporting, management\u2019s assessment of and conclusion\non the effectiveness of internal control over financial reporting did not include the internal controls of Lockheed Martin Commercial Engine Solutions, which is\nincluded in the 2024 consolidated financial statements of the Company and constituted 5.3% of total assets as of December 31, 2024 and 1.2% of total\nrevenues for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal\ncontrol over financial reporting of Lockheed Martin Commercial Engine Solutions.\nWe also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated\nbalance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss),\nchanges in equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated March 3,\n2025 expressed an unqualified opinion thereon.\nBasis for Opinion\nThe Company\u2019s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of\ninternal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our\nresponsibility is to express an opinion on the Company\u2019s internal control over financial reporting based on our audit. We are a public accounting firm\nregistered 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\napplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\nWe conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable\nassurance about whether effective internal control over financial reporting was maintained in all material respects.\nOur audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and\nevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered\nnecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.\nDefinition and Limitations of Internal Control Over Financial Reporting\nA company\u2019s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and\nthe preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company\u2019s internal control over\nfinancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect\nthe transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit\npreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are\nbeing made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding\nprevention or timely detection of unauthorized acquisition, use, or disposition of the company\u2019s assets that could have a material effect on the financial\nstatements.\nBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of\neffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of\ncompliance with the policies or procedures may deteriorate.\n\n\n\n/s/ Ernst & Young LLP\n\nNew York, New York\n\nMarch 3, 2025\n\n\n\n\n 94\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 97 of 100\n\n\nItem 9B. Other Information\nNone.\nItem 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections\nNot applicable.\n\n\n PART III\u2014OTHER INFORMATION\nItem 10. Directors, Executive Officers and Corporate Governance\nAny information required by this Item 10 is incorporated by reference to our definitive proxy statement for the 2025 annual meeting of shareholders to be filed\nwith the SEC pursuant to Regulation 14A within 120 days after the fiscal year ended December 31, 2024 (our \u201cDefinitive Proxy Statement\u201d) under the\nheadings \u201cProposal No. 1 Election of Directors\u201d, \u201cExecutive Officers\u201d and if applicable, \u201cDelinquent Section 16(a) Reports.\u201d\nWe maintain a Public Company Insider Trading Compliance Policy that applies to members of our Board of Directors, our officers and all other employees,\nwhich we believe is reasonably designed to promote compliance with applicable insider trading laws,rules and regulations and listing standards. Our Public\nCompany Insider Trading Compliance Policy is filed as\nExhibit 19.1 to this Annual Report.\nItem 11. Executive Compensation\nThe information required by this Item 11 is incorporated by reference to our Definitive Proxy Statement under the headings \u201cExecutive and Manager\nCompensation\u201d and \u201cCompensation Committee Report.\u201d\nItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters\nThe following table summarizes the total number of outstanding securities in the Incentive Plan and the number of securities remaining for future issuance,\nas well as the weighted average strike price of all outstanding securities as of December 31, 2024.\n\n Equity Compensation Plan Information\n Number of securities to be issued Weighted-average exercise price of Number of securities remaining available\n upon exercise of outstanding options, outstanding options, warrants, and for future issuance under equity\nPlan category warrants, and rights rights compensation plans (1)\nEquity compensation plans approved by\nsecurity holders 112,343 $ 52.70 28,254,370\nEquity compensation plans not approved\nby security holders \u2014 \u2014 \u2014\nTotal 112,343 28,254,370\n______________________________________________________________________________________\n\n(1) Excludes 15,000 stock options and 189,492 ordinary shares issued to directors as compensation.\n\n\nThe additional information required by this Item 12 is incorporated by reference to our Definitive Proxy Statement under the heading \u201cSecurity Ownership of\nManagement and Certain Beneficial Owners.\u201d See also \u201cNonqualified Stock Option and Incentive Award Plan\u201d in Part II, Item 5, \u201cMarket for Registrant\u2019s\nCommon Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities\u201d which is incorporated herein by reference.\nItem 13. Certain Relationships and Related Transactions, and Director Independence\nThe information required by this Item 13 is incorporated by reference to our Definitive Proxy Statement under the headings \u201cProposal No. 1 Election of\nDirectors\u2014Determination of Director Independence\u201d and \u201cCertain Relationships and Related Transactions.\u201d\nItem 14. Principal Accountant Fees and Services\nThe information required by this Item 14 is incorporated by reference to our Definitive Proxy Statement under the heading \u201cProposal No. 2 Approval of\nAppointment of Ernst & Young LLP as Independent Registered Public Accounting Firm\u2014Principal Accountant Fees and Services.\u201d\n\n\n\n\n 95\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 98 of 100\n\n\n\n\n PART IV\nItem 15. Exhibits\n Exhibit No. Description\n 2.1 Agreement and Plan of Merger, dated as of August 12, 2022, by and among, FTAI, the Company and FTAI Aviation Merger Sub LLC (incorporated by\n reference to Annex A to FTAI\u2019s Registration Statement on Form S-4, filed on October 11, 2022).\n 2.2 Separation and Distribution Agreement, dated as of August 1, 2022, between FTAI Infrastructure Inc. and the Company (incorporated by reference to\n Exhibit 2.1 of the Company\u2019s Current Report on Form 8-K, filed on August 1, 2022).\n 3.1 Amended and Restated Memorandum and Articles of Association of the Company (incorporated by reference to Exhibit 3.1 of the Company\u2019s Current\n Report on Form 8-K, filed on November 14, 2022).\n 3.2 Share Designation with respect to the 8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares (included as part of\n Exhibit 3.1 hereto).\n 3.3 Share Designation with respect to the 9.500% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation Ltd.\n (incorporated by reference to Exhibit 4.1 of the Company\u2019s Registration Statement on Form 8-A, filed on March 15, 2023).\n 3.4 Form of Certificate representing the 8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation Ltd.\n (included as part of Exhibit 3.1 hereto).\n 3.5 Form of certificate representing the 9.500% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation Ltd.\n (incorporated by reference to Exhibit 4.2 of the Company\u2019s Registration Statement on Form 8-A, filed on March 15, 2023).\n 4.1 Indenture, dated April 12, 2021, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s 5.50% senior\n unsecured notes due 2028 (incorporated by reference to Exhibit 4.1 to the Company\u2019s Current Report on Form 8-K, filed on April 12, 2021).\n 4.2 Form of global note representing the Company\u2019s 5.50% senior unsecured notes due 2028 (included in Exhibit 4.1 of the Company\u2019s Current Report on\n Form 8-K, filed on April 12, 2021).\n 4.3 First Supplemental Indenture, dated as of September 24, 2021, between the Company and U.S. Bank National Association, as trustee, relating to the\n Company\u2019s 5.50% senior unsecured notes due 2028 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n September 24, 2021).\n 4.4 2028 Notes Guarantee, dated November 10, 2022 (incorporated by reference to Exhibit 4.3 of the Company\u2019s Current Report on Form 8-K, filed on\n November 14, 2022).\n 4.5 Indenture, dated November 21, 2023, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s 7.875% senior\n unsecured notes due 2030 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on November 22, 2023).\n 4.6 Form of global note representing the Company\u2019s 7.875% senior unsecured notes due 2030 (included in Exhibit 4.1 of the Company\u2019s Current Report on\n Form 8-K, filed on November 22, 2023).\n 4.7 Indenture, dated April 11, 2024, among Fortress Transportation and Infrastructure Investors LLC, the Company as guarantor, and U.S. Bank Trust\n Company, National Association, as trustee, relating to the Company\u2019s 7.000% senior unsecured notes due 2031 (incorporated by reference to Exhibit\n 4.1 of the Company\u2019s Current Report on Form 8-K, filed on April 11, 2024).\n 4.8 Form of global note representing the Company\u2019s 7.000% senior unsecured notes due 2031 (included in Exhibit 4.1 of the Company\u2019s Current Report on\n Form 8-K, filed on April 11, 2024).\n 4.9 Indenture, dated as of June 17, 2024, among Fortress Transportation and Infrastructure Investors LLC, FTAI Aviation Ltd. as guarantor, and U.S. Bank\n Trust Company, National Association, as trustee relating to the Company\u2019s 7.000% senior unsecured notes due 2032 (incorporated by reference to\n Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on June 17, 2024).\n 4.10 Form of global note representing the Company\u2019s 7.000% senior unsecured notes due 2032 (included in Exhibit 4.1 of the Company\u2019s Current Report on\n Form 8-K, filed on June 17, 2024).\n 4.11 Indenture, dated as of October 9, 2024, among Fortress Transportation and Infrastructure Investors LLC, FTAI Aviation Ltd. as guarantor, and U.S.\n Bank Trust Company, National Association, as trustee relating to the Company\u2019s 5.875% senior unsecured notes due 2033 (incorporated by reference\n to Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on October 9, 2024).\n 4.12 Form of global note representing the Company\u2019s 5.875% senior unsecured notes due 2033 (included in Exhibit 4.1 of the Company\u2019s Current Report on\n Form 8-K, filed on October 9, 2024).\n 4.13 Description of Securities Registered under Section 12 of the Exchange Act.\n\u2020 10.1 FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan, dated as of February 23, 2023 (incorporated in Exhibit 10.4 of the Company\u2019s\n Annual Report on Form 10-K, filed on February 27, 2023).\n\u2020 10.2 Form of FTAI Aviation Ltd. Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.6 to the Company\u2019s Registration\n Statement on Form S-4, filed on October 4, 2022).\n\u2020 10.3 Form of Director Award Agreement pursuant to the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Plan (incorporated by reference to\n Exhibit 10.7 to the Company\u2019s Registration Statement on Form S-4, filed on October 4, 2022).\n\u2020 10.4 Form of Non-Director Award Agreement under the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan (incorporated by reference to\n Exhibit 10.8 to the Company\u2019s Registration Statement on Form S-4, filed on October 4, 2022).\n\u2020 10.5 Form of Restricted Stock Unit Award Agreement under the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan (incorporated in\n Exhibit 10.5 of the Company\u2019s Quarterly Report on Form 10-Q, filed on August 9, 2024).\n\n\n\n\n 96\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 99 of 100\n\n\n Exhibit No. Description\n 10.6 Trademark License Agreement, dated as of August 1, 2022, between Fortress Transportation and Infrastructure Investors LLC and FTAI Infrastructure\n Inc. (incorporated by reference to Exhibit 10.3 of the Company\u2019s Current Report on Form 8-K, filed on August 1, 2022).\n* 10.7 Third Amended and Restated Credit Agreement, dated as of May 22, 2024, between the Company, the lenders and issuing banks from time to time\n party thereto and JPMorgan Chase Bank, N.A., as administrative agent. (incorporated by reference to Exhibit 10.7 of the Company\u2019s Quarterly Report\n on Form 10-Q, filed on August 9, 2024.\n 10.8 Revolver Guarantee, dated November 10, 2022 (incorporated by reference to Exhibit 4.4 of the Company\u2019s Current Report on Form 8-K, filed on\n November 14, 2022).\n* 10.9 Internalization Agreement, dated May 28, 2024, by and among FTAI Aviation Ltd., FIG LLC and Fortress Worldwide Transportation and Infrastructure\n Master GP LLC (incorporated by reference to Exhibit 10.1 of the Company\u2019s Current Report on Form 8-K, filed on May 28, 2024).\n* 10.10 Transition Services Agreement, dated May 28, 2024, by and between FTAI Aviation Ltd. and FIG LLC (incorporated by reference to Exhibit 10.2 of the\n Company\u2019s Current Report on Form 8-K, filed on May 28, 2024).\n\u2020 10.11 Letter Agreement, dated May 27, 2024, by and among FTAI Aviation LLC, FTAI Aviation Ltd. and Joseph P. Adams, Jr. (incorporated by reference to\n Exhibit 10.11 of the Company\u2019s Quarterly Report on Form 10-Q, filed on August 9, 2024).\n\u2020 10.12 Letter Agreement, dated May 27, 2024, by and among FTAI Aviation LLC, FTAI Aviation Ltd. and Eun (Angela) Nam (incorporated by reference to\n Exhibit 10.12 of the Company\u2019s Quarterly Report on Form 10-Q, filed on August 9, 2024).\n 19.1 FTAI Aviation Ltd. Public Company Insider Trading Compliance Policy.\n 21.1 Subsidiaries of FTAI Aviation Ltd.\n 23.1 Consent of Independent Registered Public Accounting Firm.\n 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\n 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\n 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\n 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\n 97.1 FTAI Aviation Ltd. Clawback Policy effective as of December 1, 2023 (incorporated by reference to Exhibit 97.1 of the Company\u2019s Annual Report on\n Form 10-K, filed on February 26, 2024).\n 101 The following financial information from the Company\u2019s Annual Report on Form 10-K for the year ended December 31, 2024, formatted in iXBRL (Inline\n Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements\n of Comprehensive Income (Loss); (iv) Consolidated Statements of Changes in Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to\n Consolidated Financial Statements.\n 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).\n\u2020 Management contracts and compensatory plans or arrangements.\n* Certain schedules or similar attachments to this exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K.\n\nItem 16. Form 10-K Summary\nNone.\n\n\n\n\n 97\n\f Case 1:25-cv-00541-JAV Document 70-4 Filed 11/20/25 Page 100 of 100\n\n SIGNATURES\n\nPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned\nthereunto duly authorized:\n\nFTAI AVIATION LTD.\nBy: /s/ Joseph P. Adams, Jr. Date: March 3, 2025\n Joseph P. Adams, Jr.\n Chairman and Chief Executive Officer\n\n\n\n\nPursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of\nthe Registrant and in the capacities and on the dates indicated.\nBy: /s/ Joseph P. Adams, Jr. Date: March 3, 2025\n Joseph P. Adams, Jr.\n Chairman and Chief Executive Officer\n\n\nBy: /s/ Eun (Angela) Nam Date: March 3, 2025\n Eun (Angela) Nam\n Chief Financial Officer and Chief Accounting Officer\n\n\nBy: /s/ Paul R. Goodwin Date: March 3, 2025\n Paul R. Goodwin\n Director\n\n\nBy: /s/ Judith A. Hannaway Date: March 3, 2025\n Judith A. Hannaway\n Director\n\n\nBy: /s/ A. Andrew Levison Date: March 3, 2025\n A. Andrew Levison\n Director\n\n\nBy: /s/ Ray M. Robinson Date: March 3, 2025\n Ray M. Robinson\n Director\n\n\nBy: /s/ Martin Tuchman Date: March 3, 2025\n Martin Tuchman\n Director\n\n\n\n\n 98\n\f","ocr_status":1,"date_upload":"2026-05-12T04:15:27.050134-07:00","document_number":"70","attachment_number":4,"pacer_doc_id":"127038602948","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit D - 2024 Form 10-K","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874405/","id":478874405,"tags":[],"absolute_url":"/docket/69558488/70/5/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.449882-07:00","date_modified":"2026-05-14T07:09:28.954199-07:00","sha1":"3874275d13e7d23b38042e4aa35f1ac1e0ea5e65","page_count":17,"file_size":414448,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.5.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.5.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 1 of 17\n\n\n\n\n Exhibit E\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 2 of 17\n\n\n\n\nFTAI Aviation Ltd. NasdaqGS:FTAI\nFQ3 2024 Earnings Call Transcripts\nThursday, October 31, 2024 1:00 PM GMT\nS&P Global Market Intelligence Estimates\n -FQ3 2024- -FQ4 2024- -FY 2024- -FY 2025-\n\n CONSENSUS ACTUAL SURPRISE CONSENSUS CONSENSUS CONSENSUS\n\n EPS (GAAP) 0.78 0.76 (2.56 %) 0.82 (0.41) 4.36\n\n Revenue (mm) 420.44 465.79 10.79 452.17 1637.80 1926.65\nCurrency: USD\nConsensus as of Oct-28-2024 8:49 AM GMT\n\n\n\n\n - EPS (GAAP) -\n\n CONSENSUS ACTUAL SURPRISE\n\n FQ4 2023 0.43 1.09 153.49 %\n\n FQ1 2024 0.39 0.31 (20.51 %)\n\n FQ2 2024 0.46 (2.26) NM\n\n FQ3 2024 0.78 0.76 (2.56 %)\n\n\n\n\nCOPYRIGHT \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved 1\nspglobal.com/marketintelligence\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 3 of 17\nContents\n\n\n\n\nTable of Contents\n\nCall Participants .................................................................................. 3\nPresentation .................................................................................. 4\nQuestion and Answer .................................................................................. 6\n\n\n\n\nCOPYRIGHT \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved 2\nspglobal.com/marketintelligence\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 4 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\n\nCall Participants\nEXECUTIVES\n\nAlan John Andreini\nInvestor Relations\n\nDavid Moreno\nChief Operating Officer\n\nEun Nam\nCFO & Chief Accounting Officer\n\nJoseph P. Adams\nChairman & CEO\n\nANALYSTS\n\nAndre Madrid\nBTIG, LLC, Research Division\n\nBrandon Robert Oglenski Sheila Karin Kahyaoglu\nBarclays Bank PLC, Research Jefferies LLC, Research Division\nDivision\n Stephen Trent\nGiuliano Jude Anderes Bologna Citigroup Inc., Research Division\nCompass Point Research &\nTrading, LLC, Research Division\n\nHillary Cacanando\nDeutsche Bank AG, Research\nDivision\n\nJason Thomas Holcomb\nMorgan Stanley, Research Division\n\nJoshua Ward Sullivan\nThe Benchmark Company, LLC,\nResearch Division\n\nKenneth George Herbert\nRBC Capital Markets, Research\nDivision\n\nLouis Harold Raffetto\nWolfe Research, LLC\n\n\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 3\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 5 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\n\nPresentation\nOperator\nGood day, and thank you for standing by. Welcome to the Q3 2024 FTAI Aviation Earnings Conference Call.\n[Operator Instructions] Please be advised that today's conference is being recorded. I would now like to\nhand the conference over to your first speaker today, Alan Andreini, Investor Relations. Please go ahead.\nAlan John Andreini\nInvestor Relations\nThank you, Liz. I would like to welcome you all to the FTAI Aviation Third Quarter 2024 Earnings Call.\nJoining me here today are Joe Adams, our Chief Executive Officer; Angela Nam, our Chief Financial Officer;\nand David Moreno, our Chief Operating Officer.\n\nWe have posted an investor presentation and our press release on our website, which we encourage you\nto download if you have not already done so. Also, please note that this call is open to the public in listen-\nonly mode and is being webcast.\n\nIn addition, we will be discussing some non-GAAP financial measures during the call today, including\nEBITDA. The reconciliation of those measures to the most directly comparable GAAP measures can be\nfound in the earnings supplement.\n\nBefore I turn the call over to Joe, I would like to point out that certain statements made today will be\nforward-looking statements, including regarding future earnings. These statements, by their nature, are\nuncertain and may differ materially from actual results.\n\nWe encourage you to review the disclaimers in our press release and investor presentation regarding non-\nGAAP financial measures and forward-looking statements and to review the risk factors contained in our\nquarterly report filed with the SEC. Now, I would like to turn the call over to Joe.\nJoseph P. Adams\nChairman & CEO\nThank you, Alan. To start today, I'm pleased to announce our 38th dividend as a public company and our\n53rd consecutive dividend since inception. The dividend of $0.30 per share will be paid on November 25\nbased on a shareholder record date of November 14.\n\nNow, let's turn to the numbers. The key metric for us is adjusted EBITDA. We continued our strong\nperformance with adjusted EBITDA of $232 million in Q3 2024 which is up 8% compared to $213.9 million\nin Q2 of this year and up 50% compared to $154.2 million in Q3 of 2023.\n\nDuring the third quarter, the $232 million EBITDA number was comprised of $136.4 million from our\nLeasing segment, $101.8 million from our Aerospace Products segment and negative $6.2 million from\nCorporate and Other.\n\nTurning now to leasing. Leasing had another great quarter, posting approximately $136 million of EBITDA.\nThe pure leasing component of that number came in at $122 million for Q3 versus $112 million in Q2 of\n2024 and $102 million in Q3 2023.\n\nAdditionally, we sold $20.7 million book value of assets for a gain of $14.3 million and have more sales\ncoming in the final quarter of this year. With continuing high demand for assets, we remain confident in\ngenerating $500 million in leasing EBITDA in 2024, including $50 million in gains on asset sales.\n\nAerospace Products had yet another excellent quarter with $101.8 million in EBITDA and an overall\nEBITDA margin of 34%, which is up 12% compared to $91.2 million in Q2 of this year and up 135%\ncompared to $43.3 million in Q3 2023.\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 4\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 6 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\nWe're seeing tremendous growth in adoption and usage of our aerospace products and are increasing our\n2024 estimated EBITDA to $360 million to $375 million, up from our previous estimate of $325 million to\n$350 million.\n\nOverall, we now expect annual aviation EBITDA for 2024 to be between $860 million to $875 million, not\nincluding corporate and other, up from $825 million to $850 million that we guided to last quarter. With\nthat, let me turn the call back over to Alan.\nAlan John Andreini\nInvestor Relations\nThank you, Joe. Liz, you may now open the call to Q&A.\n\n\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 5\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 7 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\n\nQuestion and Answer\nOperator\n[Operator Instructions] Our first question comes from Sheila Kahyaoglu with Jefferies.\nSheila Karin Kahyaoglu\nJefferies LLC, Research Division\nCongrats on a great quarter. Maybe if we could just level set the playing field here. We often hear from\ninvestors the idea that FTAI is only capitalizing on the short-term bottlenecks in the aftermarket. Take the\nslower growth we've seen reported from some of the larger OEMs on their shop visits as an example, this\nquarter or their aftermarket.\n\nWhen we get to a more normalized world in hopefully a few years' time, what does FTAI's business model\nlook like? And what's your vision? And how do you think about the duration of the CFM56 platform, Joe?\nJoseph P. Adams\nChairman & CEO\nSure. Great. We think about that all the time also, we are happy that we're in an environment that's\nso supportive of our business model. And we think it really increases the rate at which we can convert\ncustomers to adopting a new way of doing things.\n\nAnd so, as we have worked with many airlines and we're increasing every quarter the number of new\ncustomers, we have seen no evidence that once people use our products or change the way they think\nabout engine maintenance, which is letting us do it instead of them doing it.\n\nWe've seen no evidence of anybody wanting to go back to the old way of doing it once the situation\nnormalizes. And the reason is we're providing a tangible cost savings and time savings benefit to the\ncustomers. And it's not like they would 3 years from now, wake up and say, let's go back to the old way of\nspending more money on engine maintenance.\n\nSo, we don't see any evidence that people will revert, And so this quarter, we'll have the highest number\nof new customers that will convert to using our products, and David will talk more about that. And so, we\nsee the universe expanding as word-of-mouth spreads and more customers tell other people, hey, this is\ngreat, you should try it.\n\nBut more often now today, the question we get is not the original question we got, is this a good product\nand can I save money? It's if I go with you, how can I be sure that you'll be able to supply me the engines\nI need. And that's what we hear more now from the customer, which is a great, it's a great development.\nIt's like I get it, I buy that you have a great product now. Can you make sure that I will always have\nengines available.\n\nAnd so, to that end, the acquisition we made of the Montreal facility, which we now call FTAI Canada really\nplays nicely into that because if you look back at 2023, for example, we were producing about 30 modules\nper quarter during that period. We increased that in the first half of 2024 to about 50 modules per quarter.\n\nSince we took ownership in the third quarter, we've now increased that production rate to about 75\nmodules per quarter. And we expect in 2025 that we will be up to about 100 modules per quarter at that\nfacility, and we're well on our way to doing that.\n\nSo, we obviously invite customers to go visit, come and see what we do. We've changed a lot of the things\nthat a typical MR would do, and we've made it much more of a manufacturing production line. We've\nspecialized employees. We've ordered a lot of parts so that we are not at the risk of any supply chain\ndisruptions.\n\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 6\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 8 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\nSo, we can take people through the facility and say, this is where your engines are going to come from.\nAnd we've got a lot of them, and we have a lot of activity. And so, that's a point of resistance we love to\nbe able to try to sell through because you've got people almost on the finish line.\n\nAnd so, we believe very strongly that the conversion makes sense for people. We believe that it's very\nsticky once you do get people converted. And then the only question left is, how long do you think people\nwill fly CFM56 engines? And we've obviously made a bet that we think it's a long time, but anybody can\nhave a view on that, but we think that that's the easiest of the points to get comfortable with.\nSheila Karin Kahyaoglu\nJefferies LLC, Research Division\nI have a lot more questions, but I'll just stick to one more, if it's okay, Joe. You mentioned you onboarded,\nI think, the most customers you've ever onboarded this quarter, and they're continuing to want more. So,\nhow do you think about how that discussion goes when they do convert or how many customers did you\nhave joined? And when they do first start with you, what are the number of modules they start with? And\nhow do you see them ramping?\nDavid Moreno\nChief Operating Officer\nSheila, this is David. I'll take that question. So, this quarter was a record quarter for new customers. We\nonboarded 19 new customers.\n\nTypically, a new customer places an order between 1 to 2 modules. And as you can imagine, the first sale\nis usually the toughest sale with a new customer because once you kind of go through the process, they\nunderstand the time saving cost savings. And, as Joe mentioned, it's a very sticky product.\n\nAt the same time, we also are starting to see strong repeat customers. Come in and request about 5 to 10\nmodules at a time. That's typically what a repeat customer will do. And what actually happens in practice\nis, they open up and they provide a full schedule of shop visits for the next 5 years. Our demand on that\nproduct is even-driven, meaning we want to know the shop visits.\n\nWe want to match the modules with the shop visits. And once they convert to a repeat customer, we kind\nof have those discussions of understanding the fleet, their fleet plans, and how to maximize their cost\nsavings and timing.\n\nAn additional thing that we've done also is, we're getting a lot of demand for field service. So, what we've\nbeen doing in the past is, we've been distributing modules on field with a lot of third-party field service\nteam.\n\nWe're getting customers who want us to do everything, the full white glove service. So, at QuickTurn,\nwhich is now FTAI USA, we built a field service team that now is being deployed worldwide to actually do\nthe installation and to offer the complete service. So, we're very excited about offering that service, and\nwe think that's going to improve the overall experience even further and drive further repeat business.\nOperator\nOur next question comes from Jason Holcomb with Morgan Stanley.\nJason Thomas Holcomb\nMorgan Stanley, Research Division\nJoseph, on the V2500, in the past, you've mentioned you would induct around 40 engines this year. Can\nyou provide an update on how that is progressing? Are any engines beginning to come out of the shop\nyet? And then maybe if you could touch on the customer demand you've been seeing for the V2500.\nYou've called out LATAM Airlines in the past, but are there any other large customer agreements we should\nbe thinking about?\nDavid Moreno\nChief Operating Officer\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 7\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 9 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\nThank you, Jason. I can take this. This is David. So, on the MRE, we're very excited with the progress so\nfar on the V2500. On the production side, as we mentioned, the engines are in the shop.\n\nWe're experiencing turnaround times that are on target, so 90 to 120 days. And those engines now have\nprovided a strong pipeline that are 100% committed to customers. So, those engines are coming out of\nshop.\n\nThe LATAM program has now officially started. So, we've started exchanging engines today. Additionally,\nwe've secured 2 large North American airlines on MRE for about 20-plus engines in the next few years.\n\nSo that's, we're very excited about that and further growing that business. Those should be strong\ncontributors starting next quarter or Q4 2024 and more even in 2025. I think we're seeing a tremendous\nopportunity worldwide in many different regions. So, we're hoping to expand into Asia sometime very soon\non a new deal as well.\nJason Thomas Holcomb\nMorgan Stanley, Research Division\nIf I can maybe just ask a quick follow-up. Are you guys able to share with us kind of the number of CFM56\nmodules you've sold during the quarter and just sort of provide an update on that side?\nJoseph P. Adams\nChairman & CEO\nNo, we've stopped providing that level of detail. We think it's commercially not a great idea. And so we\nthink we give enough information without that.\nOperator\nOur next question comes from Josh Sullivan with The Benchmark Company.\nJoshua Ward Sullivan\nThe Benchmark Company, LLC, Research Division\nWith Chromalloy announcing it's now received FAA approval for the V2500 blade recently, what do you\nthink the implications for the industry and then are going to be?\nJoseph P. Adams\nChairman & CEO\nWell, I would take it as a positive. When you think about the most complex part of the entire engine, it's\nthe high-pressure turbine blades. And the fact that got approved and is evidence that the FAA is confident\nthey have an extremely rigorous process as we all know, and it's been a great track record of success in\nthe U.S. and worldwide.\n\nAnd getting that approved is a great sign for future parts, including the CFM56 parts that we're working\non. So, I take it as a great step and the process is working as it did before COVID, and it's working now\npost-COVID.\nJoshua Ward Sullivan\nThe Benchmark Company, LLC, Research Division\nAnd do you think lessors will be willing to use the product?\nJoseph P. Adams\nChairman & CEO\nWell, we're a lessor. I can't speak for everyone else. But I think we use data when we make decisions and\nour data we have evidence that many of the parts perform extremely well and they cost less. So, we kind\nof just think about that when we make decisions about what we do.\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 8\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 10 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\n[Technical Difficulty] It seems the operator lost connection. So we're waiting for reconnection. Sorry about\nthat.\nHillary Cacanando\nDeutsche Bank AG, Research Division\nIt's Hillary from Deutsche Bank ready to ask a question.\n\nYes. Sorry, I couldn't hear you. Congrats on a great quarter. So, Joe, in the Aerospace segment, the\nEBITDA margin was 34% versus 37% last quarter. So, I was wondering if you could just provide a little\nmore details around that.\nJoseph P. Adams\nChairman & CEO\nYes. This is the first quarter that we incorporated FTAI Canada in the numbers. And there are some legacy\ncontracts for third parties that we inherited when we acquired the company and that had a negative effect\nbecause there are low or no margin contracts that are running off.\n\nAnd so, if you adjust for that, that would have normalized the margin at 200 to 300 basis points higher\nthan the number we reported. And those contracts have a very short life. So, we expect there'll be some\nimpact in Q4, and then we'll be finished with that by the end of the year. So, it was just an impact from\nthe acquisition that we had to assume those obligations, but they're running off.\nHillary Cacanando\nDeutsche Bank AG, Research Division\nSo, then I guess as a follow-up, when those contracts roll off at the end of the year, will you be expanding\nyour capacity, I guess, when those roll off? And then when you said earlier that you could do 100 modules\nper quarter in 2025, are you including potential additional capacity available when those contracts roll off?\nOr would that be additional 100 modules that you referred to earlier?\nJoseph P. Adams\nChairman & CEO\nYes. We're gaining on our productivity for the CFM56 by taking employees who are doing other things at\nthe facility that we didn't need them to do and repurposing or giving them CFM56-oriented jobs. So, we're\nable to increase the productivity that I mentioned, the 30 to 50 to 75 to 100 with essentially the same\nworkforce.\nSo, you're tripling more or less tripling our productivity with a very similar headcount. So, as I mentioned\nearlier, I mean, it was a massively underutilized facility from our point of view, and we're able to take the\nhighest return anywhere in the company that we could get is focusing on increasing the productivity there,\nwhich we're doing and it's well underway even though we're only a month into it.\nHillary Cacanando\nDeutsche Bank AG, Research Division\nWithin that 100 modules number, you are assuming that you'll be using the employees that were working\non those contracts and repurposing them to your modules on the modules?\nJoseph P. Adams\nChairman & CEO\nYes.\nOperator\nAnd to everyone, I do apologize for the interruption earlier, and we will proceed with our Q&A. And we'll\ntake our next question from Giuliano Bologna from Compass Point.\nGiuliano Jude Anderes Bologna\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 9\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 11 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\nCompass Point Research & Trading, LLC, Research Division\nCongratulations on another incredible quarter outperformance. Something I was curious about was you've\nobviously done an incredible job on the product segment, continuing to scale and grow the platform.\nI'm curious where you see a lot of the growth coming from at this point? And if there's been any kind of\ndistribution between new customer growth or volume growth and how those trends have continued to\nevolve.\nJoseph P. Adams\nChairman & CEO\nYes. It is more organic growth. As we've said, we're focusing on the 2 largest engine markets in the world.\nIt virtually every airline in the world operates a V25 or CFM56 engine. And we're still under 5% market\nshare.\n\nSo, our focus is organic growth. And, as I mentioned, as an example, with using the facility FTAI Canada,\nwe're able to triple the productivity with the same number of people. So, the organic growth opportunity\nfor us is right in front of us, and it's extraordinary. And so, we're not really focusing on anything other\nthan that.\nOperator\nOur next question will come from Ken Herbert from RBC Capital Markets.\nKenneth George Herbert\nRBC Capital Markets, Research Division\nMaybe, Joe, just to start off or David, obviously, you called out you're not seeing any supply chain issues\nin terms of executing some of the business today on the parts side. It seems to be a major issue for the\nindustry. Can you talk a little bit about how you've effectively managed to derisk, it sounds like your\nCFM56 and now V25 availability to parts and the extended lead times there that a lot of other MRO shops\ncontinue to talk about?\nJoseph P. Adams\nChairman & CEO\nYes. And you probably noticed our working capital number increased by roughly about $120 million from\nQ2 to Q3. And there's 2 reasons for that. One is we picked up about $50 million of inventory with the FTAI\nCanada acquisition.\nSecondly, we are purchasing a lot of parts to be able to enable our ramp-up in productivity. As I\nmentioned, the 30 to 50, the 75 to 100, the best way to avoid supply chain disruptions is to preorder and\nhave a lot of inventory. And so, there might be other ways, but that is the route we've chosen. We think it\nhas a very high return on capital.\n\nCustomers are very focused on the question, as I mentioned earlier, is we get the most often is, can you\nactually get me the engines that I need? And how can I be sure of that? And so, we're buying more parts\nas an insurance policy effectively. And we think it's low-cost insurance and high payoffs. So, that's part of\nthe thought process. And I think we're well prepared going into 2025 to be able to really execute as the\nbest we can.\nKenneth George Herbert\nRBC Capital Markets, Research Division\nAnd then since the LatAm deal, which I think obviously was playing out very well for you, what's the\npipeline look like of other potential opportunities of that size? Or should we be thinking maybe smaller\nopportunities? Or are there still some perhaps chunkier opportunities out there as we think about exiting\nthis year and '25?\nDavid Moreno\nChief Operating Officer\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 10\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 12 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\nHi, Ken, this is David. I'll take that question. So, we're seeing many similar opportunities of that size,\nlet's say, 20 to 30 airplanes that again, the real thesis around is not that the airline wants to raise capital\nthrough a sale leaseback as they don't want to do maintenance, right? So that's really the thesis. So,\nwe're actively working those programs, and we expect to have some advancement probably this quarter in\nQ4 of this year.\nOperator\nOur next question will come from Brandon Oglenski from Barclays.\nBrandon Robert Oglenski\nBarclays Bank PLC, Research Division\nCongrats on a good quarter. Joe, I think you mentioned pipeline or backlog in the release last night.\nCan you maybe give us some idea of how much contractual business you are attracting in the products\nsegment?\n\nAnd then maybe longer term as well, how sustainable is your margin profile in the business? Because if we\njust simply look at other MRO providers, obviously, a totally different profit profile.\nDavid Moreno\nChief Operating Officer\nBrandon, this is David. I can take that question. So, as far as backlog, the way that we think about that\nis that's heavily correlated with the repeat customers. Today, on average, about 66% of our volume is on\nrepeat customers. The more that you engage customers by nature, you're going to have a higher volume.\nWe expect that to continue to grow.\n\nAnd, as I mentioned earlier, right, what we're working with is airline scheduling. So, we're working on\ntrying to understand when events are coming in, which gives us extreme visibility into future quarters and\nfuture years as far as engines and module matches. So, we feel very good about, as the business grows,\nwe're going to get more and more visibility long term on backlog.\n\nThe second question as far as margin, right? Again, we expect margins to continue to increase inherently\nas the business grows. The reason for that is the same dynamic is that the manufacturer is going to be\nincreasing pricing year-over-year. So, inherently, that is the pricing umbrella that we operate under.\n\nAnd then the second piece is we're focused on driving costs down every year or every quarter more and\nmore. So, we're rolling in new repairs. We're thinking about creative ways to use assets to drive further\nvalue. So, our entire business is focused on driving costs down. And that's why we feel very good about\nour margin expansion.\nJoseph P. Adams\nChairman & CEO\nSo, when you think about the difference between our business and an MRO business, one of the big\ndifferences is that we own the engine, and we own and work on our own engines.\n\nWe don't do work on other people's engines. So, the typical traditional MRO model is to get a customer to\nput their engine in your shop and then you mark up labor and parts and supply that engine back to them.\nAnd in many cases, you might expand the work scope, so you get a little bit more money. But that's a\nvery different business. And what we've done is said, we don't want to do any third-party business. We\nonly want to work on our own engines.\n\nWe want to streamline that. We want to have the single work scope. We want to be able to run it like a\nmanufacturing operation as efficiently as possible and high volume. So, it's a different construct.\n\nAnd, as I've said many times, the key difference is that it's our engine. We own it. We build it, we put it on\nthe shelf. Airline comes in and our pitch is like, do you want it or not? So, don't tell me what work scope\nyou want to do or how you want to rearrange it. It's there, it's available. They're very fungible. So, it's\nyour call.\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 11\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 13 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\nBrandon Robert Oglenski\nBarclays Bank PLC, Research Division\nAnd then I guess on the capital side, maybe this is one for Angela, but where do you see funding needs\nfor the business now that you guys did some transactions here in the third quarter? And I think you have\nsome offshore assets as well in the leasing business. Can you maybe give an outlook for them?\nJoseph P. Adams\nChairman & CEO\nSo on the offshore, we're, I would say, very close on the sales, both those vessels, which it's not 100%\ndone, so I don't want to jinx it, but I would be very surprised if it didn't close in the fourth quarter. And it's\non target with previous guidance we've given about the dollar amount. So, we expect that to be concluded\nthis year.\n\nAnd then on other capital needs, Angela can add that.\nEun Nam\nCFO & Chief Accounting Officer\nYes. On other capital needs, one of the redemptions that are coming up is on our Series B preferred, which\nreset to our floating rate on December 15. So, that's something that we'll be looking to redeem similarly\nas we did for our Series A this quarter.\nSo, besides that and continue to finish our plan on the V2500 engine purchases through the end of the\nyear, we don't have any other big purchases that we need capital for yet.\nBrandon Robert Oglenski\nBarclays Bank PLC, Research Division\nAnd our next maturity isn't until 2028.\nEun Nam\nCFO & Chief Accounting Officer\nThat's right.\nOperator\nOur next question will come from Myles Walton from Wolfe Research.\nLouis Harold Raffetto\nWolfe Research, LLC\nWe've got Lou on for Myles. Joe, can you give us an idea of the average green time on the engines you've\nbeen buying and if it's the same as the last couple of years? Is there also any difference between the\nCFM56 and the B2500?\nJoseph P. Adams\nChairman & CEO\nDavid will answer that.\nDavid Moreno\nChief Operating Officer\nSure. So, the way that we invest in engines is we're looking at value on a cost per cycle basis. So I'd say\nthe composition of engines that we acquire today are a little different than they were 2 years ago. Right\nnow, we're focused on acquiring assets that need shop visits.\n\nSo, assets that are completely run out that we can add value and then we can offer them for exchange or\nfor lease. So, we're really targeting value-add activity on the engine side. As you can imagine, green time\nis more expensive today than it was, let's say, 2 years ago. So, that's really the focus.\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 12\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 14 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\nThe V2500 is also a very tight engine as well. So, same strategy at the moment is we're buying run-out\nengines to refurbish those engines and offer them for programs. So that's really the focus at the moment.\nLouis Harold Raffetto\nWolfe Research, LLC\nAnd maybe just a follow-up on that and an earlier question on the V2500, you mentioned sort of the\nMRE and everything going on there. I'm just curious, are you guys doing the work there sort of through\nthe MRE sort of the original MRE? Or is it really all being done by Pratt at this point with the relationship\nthere?\nJoseph P. Adams\nChairman & CEO\nYes. So the way I divide the responsibility up is 3 things. First is acquiring the runout engine. Second is\ndoing the performance restoration. And then third is taking it to market for sale lease or exchange. We\ndo #1 and #3. And under the Pratt program, Pratt manages #2, and they put all new parts, rebuild the\nengine to a full 20,000 cycles.\n\nThere are certain other upgrades of thrust and potential from Select One from pre-select to Select One\nthat are available. So, in that Pratt contract, there are things they could do that no one else could do that\nwe saw a lot of value in. So, at this point, #2 is managed by Pratt. We have had discussions with Pratt\nabout potentially having Montreal, FTAI Canada become a V2500 shop, but we don't have a conclusion on\nthat. We would like to ultimately have that capability in Montreal, but that's something we haven't finalized\nthe discussion on yet.\nLouis Harold Raffetto\nWolfe Research, LLC\nJust one quick follow-up. I guess PMA was originally $15 million to $20 million in this year. Not sure if\nthat's still included or sort of been pushed. Just a way to think about that for 2025 at this point?\nDavid Moreno\nChief Operating Officer\nWe're probably going to come up short on that this year, given that we don't have approvals yet. So, I\nwould say that we might have missed on that one.\nLouis Harold Raffetto\nWolfe Research, LLC\nAnd nothing on '25 yet, I guess, to think about?\nJoseph P. Adams\nChairman & CEO\nWe have not given real guidance on 2025 at this point. So, that's something we'll consider early next year.\nOperator\nAnd our next question will come from Stephen Trent from Citi.\nStephen Trent\nCitigroup Inc., Research Division\nJust some quick ones for you. Could you sort of give us an update where you are with respect to insurance\nsettlements as some of your competitors seem to be moving ahead in the court. So, would just love to\nhear how that's going.\nJoseph P. Adams\nChairman & CEO\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 13\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 15 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\nYes. So I divide it into 3 different lawsuits, if you to use the word. The first one, we have an agreed deal\nwith the counterparty. That's the smallest one. It's probably about $10 million to $11 million, which we\nthink will close here shortly. The second one is our umbrella contingent policy, and we've had some, I\nwould say, some overtures of discussing potential settlements on that one.\n\nAnd then the third one is the all-risk policies that are being run through on the London court cases, which\nwill probably be the last to settle. But there are individual insurers are discussing early settlements, and\nit typically starts to happen around the time when you get in front of the court house and you're facing\npotentially a bad outcome so that the insurers they realize they've run out the clock as far as they can,\nand now it's time to move on.\nSo, we do see that coming and how much of that we'll get in 2025, it's hard to forecast at this point, but\nI do expect ultimately total recoveries in the neighborhood of about $150 million, which is all net income\nto us since we have written all of that off. So, I think we'll ultimately get there, and it's starting to move in\nthat direction.\nStephen Trent\nCitigroup Inc., Research Division\nAnd one more kind of quick one for you. I mean, over the last year and change, your stock has done\nso well. And have you given any thought to entertaining the idea of a stock split? And I know the retail\nshareholder might not be your #1 priority, but just thinking about high level how you may reach out to\nthese other elements of the market that may book at today's price per share.\nJoseph P. Adams\nChairman & CEO\nYes. I've had 1 or 2 people recently bring that up, and it's something I hadn't really looked at for a while\nand so I've asked people for any data they might have to support whether that's something that increases\nenhances value. And if we can sort of get something that convinces us that it's a good idea, we'll consider\nit.\n\nBut so far, what I've seen didn't seem very conclusive, but I'm open anytime anyone wants to present\nsomething which says they can make our stock go up, I'm open to talking about it.\nOperator\nAnd we'll take our last question from Andre Madrid from BTIG.\nAndre Madrid\nBTIG, LLC, Research Division\nEarlier, you spoke about the rising demand for field services. Could you maybe explain the margin\ndifferential there, if any, between field and non-field? And is there any read on how much of the broader\nmix this could become the AP mix?\nDavid Moreno\nChief Operating Officer\nSure. This is David. I can take that question. So, the way to think about field service is it's an additional\ndistribution channel to move velocity on modules. I would think about it less as a margin play, although\nthe margin is quite good because it's just labor in this scenario. But typically, a field service event is about\n$50,000 to $70,000.\n\nSo, they're small dollars. But what it does do is it enhances the entire module experience where you can\nline up the module, you can line up the team and you can go execute that immediately, which really helps\nairlines that are in a pinch and able to bring back an aircraft really back into service very quickly. So, I\nwould think about it more as an instrument to increase velocity of modules versus, let's say, an individual\nmargin play.\nAndre Madrid\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 14\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 16 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\nBTIG, LLC, Research Division\nAnd then I know you outlined previously about $60 million to $80 million in maintenance CapEx moving\nforward. But where exactly is this being deployed? And what are the priorities there?\nJoseph P. Adams\nChairman & CEO\nThat's a number that we invest to keep our engines in our leasing portfolio in service. So, when an engine\nneeds a performance restoration or a shop visit in our leasing portfolio, that's what we spend annually to\nkeep those engines flying.\nAndre Madrid\nBTIG, LLC, Research Division\nAnd one more, if I could squeeze in. I mean I know we were talking about the B-25 PMA part from\nChromalloy that got approved and the read-through from that. But I feel like we kind of danced around\nit and didn't really necessarily attack the conversation of when you guys are expecting. I know it said\nthrough end of '24, but could you give any color there if it's sooner as opposed to later?\nDavid Moreno\nChief Operating Officer\nI love the use of the word attack. No, we don't give guidance on expectations of when parts will be\napproved. We've only said that we're very pleased with the progress that's been made, and we are happy\nwith the product itself, but we don't specifically forecast when approvals will be obtained.\nOperator\nAnd that does conclude our question-and-answer session for today's conference. I'd now like to turn the\nconference back over to Alan Andreini for any closing remarks.\nAlan John Andreini\nInvestor Relations\nThank you, Crystal, and thank you all for participating in today's conference call. We look forward to\nupdating you after Q4.\nOperator\nThank you. This does conclude today's conference call. Thank you for your participation. You may now\ndisconnect. Everyone, have a wonderful day.\n\n\n\n\nCopyright \u00a9 2024 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 15\n\f Case 1:25-cv-00541-JAV Document 70-5 Filed 11/20/25 Page 17 of 17\nFTAI AVIATION LTD. FQ3 2024 EARNINGS CALL | OCT 31, 2024\n\n\n\nCopyright \u00a9 2024 by S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved.\n\nThese materials have been prepared solely for information purposes based upon information generally available to the public\nand from sources believed to be reliable. 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All Rights reserved.\nspglobal.com/marketintelligence 16\n\f","ocr_status":2,"date_upload":"2026-05-12T04:15:25.823683-07:00","document_number":"70","attachment_number":5,"pacer_doc_id":"127038602949","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit E - 3Q24 Earnings Call Transcript","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874406/","id":478874406,"tags":[],"absolute_url":"/docket/69558488/70/6/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.462312-07:00","date_modified":"2026-05-14T07:11:04.977454-07:00","sha1":"0288454a9f46b3fe93ee82dc149560807120c9e1","page_count":16,"file_size":452493,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.6.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.6.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 1 of 16\n\n\n\n\n Exhibit F\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 2 of 16\n\n\n\n\nFTAI Aviation Ltd. NasdaqGS:FTAI\nFQ4 2022 Earnings Call Transcripts\nFriday, February 24, 2023 1:00 PM GMT\nS&P Global Market Intelligence Estimates\n -FQ4 2022- -FQ1 2023- -FY 2022- -FY 2023-\n\n CONSENSUS ACTUAL SURPRISE CONSENSUS CONSENSUS ACTUAL SURPRISE CONSENSUS\n\n EPS (GAAP) 0.53 0.20 (62.26 %) 0.42 (1.09) (2.22) NM 1.98\n\n Revenue\n 213.29 274.29 28.60 196.43 694.74 708.41 1.97 851.23\n (mm)\nCurrency: USD\nConsensus as of Feb-13-2023 1:18 AM GMT\n\n\n\n\n - EPS (GAAP) -\n\n CONSENSUS ACTUAL SURPRISE\n\n FQ1 2022 (0.11) (2.30) NM\n\n FQ2 2022 0.15 0.11 (26.67 %)\n\n FQ3 2022 0.32 (0.23) NM\n\n FQ4 2022 0.53 0.20 (62.26 %)\n\n\n\n\nCOPYRIGHT \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved 1\nspglobal.com/marketintelligence\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 3 of 16\nContents\n\n\n\n\nTable of Contents\n\nCall Participants .................................................................................. 3\nPresentation .................................................................................. 4\nQuestion and Answer .................................................................................. 6\n\n\n\n\nCOPYRIGHT \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved 2\nspglobal.com/marketintelligence\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 4 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\n\nCall Participants\nEXECUTIVES\n\nAlan John Andreini\nInvestor Relations\n\nEun Nam\nCFO & Chief Accounting Officer\n\nJoseph P. Adams\nChairman & CEO\n\nANALYSTS\n\nBrian J. Mckenna\nJMP Securities LLC, Research\nDivision\n\nDavid Michael Zazula\nBarclays Bank PLC, Research\nDivision\n Sherif Ehab Elmaghrabi\nFrank Galanti BTIG, LLC, Research Division\nStifel, Nicolaus & Company,\nIncorporated, Research Division\n\nGiuliano Jude Anderes Bologna\nCompass Point Research &\nTrading, LLC, Research Division\n\nHillary Cacanando\nDeutsche Bank AG, Research\nDivision\n\nJoshua Ward Sullivan\nThe Benchmark Company, LLC,\nResearch Division\n\nKristine Tan Liwag\nMorgan Stanley, Research Division\n\nRobert James Dodd\nRaymond James & Associates,\nInc., Research Division\n\n\n\n\nCopyright \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 3\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 5 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\n\nPresentation\nOperator\nGood day and thank you for standing by. Welcome to the Q4 2022 FTAI Aviation Earnings Conference Call.\n[Operator Instructions] Please be advised that today's conference is being recorded.\n\nI would now like to hand the conference over to your speaker today, Alan Andreini, Head of Investor\nRelations. Please go ahead.\nAlan John Andreini\nInvestor Relations\nThank you, Michelle. I would like to welcome you all to the FTAI fourth quarter and full year 2022 earnings\ncall. Joining me here today are Joe Adams, our Chief Executive Officer; and Angela Nam, our Chief\nFinancial Officer. We have posted an investor presentation and our press release on our website, which\nwe encourage you to download if you have not already done so. Also, please note that this call is open\nto the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP\nfinancial measures during the call today, including EBITDA. The reconciliation of those measures to the\nmost directly comparable GAAP measures can be found in the earnings supplement.\nBefore I turn the call over to Joe, I would like to point out that certain statements made today will be\nforward-looking statements, including regarding future earnings. These statements by their nature are\nuncertain and may differ materially from actual results. We encourage you to review the disclaimers in\nour press release and investor presentation regarding non-GAAP financial measures and forward-looking\nstatements and to review the risk factors contained in our quarterly report filed with the SEC.\n\nNow I would like to turn the call over to Joe.\nJoseph P. Adams\nChairman & CEO\nThank you, Alan. To start today, I'm pleased to announce our 31st dividend as a public company and our\n46th consecutive dividend since inception. The dividend of $0.30 per share will be paid on March 22 based\non a shareholder record date of March 10. Now let's turn to the numbers. The key metric for us is adjusted\nEBITDA. We ended the year strongly with adjusted EBITDA of $123.5 million in Q4 2022, which is up 13%\ncompared to $108.9 million in Q3 2022 and up 22% compared to $101.4 million in Q4 of 2021. During\nthe fourth quarter, the $123.5 million EBITDA number was comprised of $110 million from our leasing\nsegment, $21.7 million from our aerospace products segment and negative $8.5 million from corporate\nand other. Now let's look at all of 2022 versus all of 2021. Adjusted EBITDA was $428.1 million in 2022,\nup 33% versus $322.8 million in 2021.\n\nNow turning to leasing. Leasing had a good quarter posting approximately $110 million of EBITDA. The\npure leasing component of $110 million of EBITDA came in at $85 million for Q4, up from $75 million\nin Q3. With strong demand for assets and the addition of new acquisitions in late 2022, we expect Q1\n2023 will continue to grow. We're very confident in leasing EBITDA of $350 million to $400 million for the\nyear excluding gains on asset sales. Part of the $110 million EBITDA for leasing came from gains on asset\nsales, which also performed well. We sold $102.6 million book value of assets for a gain of $25.7 million.\nAnd we remain comfortable assuming gains on asset sales continuing at approximately $25 million per\nquarter or $100 million for all of 2023.\n\nAerospace products had another good quarter with $22 million of EBITDA. We started these activities a\nlittle over a year ago and in the last 5 quarters have booked approximately $91 million of EBITDA without\nany contribution from PMA. We see tremendous potential and continue to feel good about generating\n$20 million to $30 million in quarterly EBITDA and think $100 million plus in 2023 EBITDA remains\nvery doable. We feel confident about this number because we're seeing a rapidly expanding backlog of\n\n\nCopyright \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 4\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 6 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\naerospace products business with other leasing companies, MROs or maintenance and repair organizations\nand airlines.\n\nWith that, let me turn the call back over to Alan.\nAlan John Andreini\nInvestor Relations\nThank you, Joe. Michelle, you may now open the call to Q&A.\n\n\n\n\nCopyright \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 5\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 7 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\n\nQuestion and Answer\nOperator\n[Operator Instructions] Our first question comes from Josh Sullivan with Benchmark.\nJoshua Ward Sullivan\nThe Benchmark Company, LLC, Research Division\nJust a question on engine availability particularly on the GE56, I think you sold 19 engines in the quarter,\npurchased 19. What was the mix there? And then what does the GE56 market look like and the constraints\nfor new engine supply?\nJoseph P. Adams\nChairman & CEO\nYes. It looks very good. The mix we buy is -- mostly what we're buying is CFM56 and a lot of what we're\nselling is Pratt 4000s, CF6-80s and RB211. So we've really been consciously shifting the mix towards\nCFM56 engines over the last couple of years. We have a little chart in the supplement, which I think shows\nhow much we've grown that to over -- we now have about 330 CFM56 engines between stand-alone\nengines and aircraft engines. And we continue I think going forward to see very good activity on being\nable to buy engines even in a pretty strong and hot market for aircraft engines.\nSo we now have a portfolio or we have negotiations ongoing for various acquisitions that total over 50\nengines. Some of them are coming from aircraft that were parked or had been with an airline that went\nbankrupt. Some are coming out of an airline that just had surplus spare engines. So it's a wide mix. And\nas I've always said you have the largest fleet of engines in the world, you have over 20,000 of these\nengines. We continue to believe we'll see numerous good opportunities to grow that number. Certainly I\nthink we'll definitely grow that number this year pretty materially.\nOperator\nOur next question comes from Kristine Liwag with Morgan Stanley.\nKristine Tan Liwag\nMorgan Stanley, Research Division\nJoe, I just want to follow up on PMA parts. Can you give us an update regarding certification progress and\nany feedback from the FAA you've received so far?\nJoseph P. Adams\nChairman & CEO\nSure. So nothing really new since the last time we spoke. But the first part that was approved, we've\ninstalled it in over 10 engines now and there's another airline that's put it in their fleet and operating.\nSo it's performing extremely well. So we'll continue to do that and grow that. The next 4 parts made\nsubstantial progress in terms of finalization of manufacturing design, production and testing. And so we\nexpect all 4 of those parts will be submitted for final approval this year around the middle of the year. So\nthey've all sort of are progressing on individual time lines, but they're all targeting that same goal. And so\nif history is a guide, we should have a full portfolio of products available for 2024, which is very exciting.\nKristine Tan Liwag\nMorgan Stanley, Research Division\nYes, that is. And then, Joe, can you just remind us once you get all these 5 PMA parts fully certified,\nhow much in dollar savings do you think you could extract from doing that versus buying from the OEM\ncatalogs in the aftermarket?\nJoseph P. Adams\n\nCopyright \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 6\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 8 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\nChairman & CEO\nIt's over $2 million per shop visit, our cost for those parts versus OEM list. And OEM list prices, as you're\nprobably aware, went up significantly last year on November 1. And that's today without further increases.\nIf you look forward over the next few years, you could very well -- if OEM list prices continue to go up high\nsingle digits, our inflation -- our escalator is capped at 3% so the gap will get bigger and bigger. If you\nlook out 4 or 5 years, it's over $3 million per shop visit.\nKristine Tan Liwag\nMorgan Stanley, Research Division\nGreat. Thanks for the update, Joe. And looking forward to see the announcements when you get them\ncertified.\nJoseph P. Adams\nChairman & CEO\nWe are too.\nOperator\nOur next question comes from Giuliano Bologna with Compass Point.\nGiuliano Jude Anderes Bologna\nCompass Point Research & Trading, LLC, Research Division\nIt's great to see some great performance on the operating side. One thing I was curious about moving to\nthe Module Factory, I was curious if there's a rough sense of how many modules you're able to sell in 2022\nand then to get a rough sense of how much that could grow in 2023?\nJoseph P. Adams\nChairman & CEO\nThat's a great question. So last year all of 2022 we sold 100 modules approximately and it was divided\namongst 25 different customers, unique customers. It was a mix of asset owners and airlines and MROs.\nSo it's a nice balance and sort of it touches the entire ecosystem of users of that engine, which is what\nwe've always liked. So if you think about it, 4 modules per customer is not a big number and it really\nrepresents a lot of these users were basically testing the product and trying it out to see if they like it. And\nso everyone that's been a customer of the Module Factory is becoming a repeat customer. So we haven't\nlost any customers and we're picking up new ones all the time.\n\nSo if you think we can grow 25 -- just rough math if we could grow 25 customers to 50 and we can\nincrease the number of modules per customer, the growth opportunity is right in line with what we've been\ntalking about in that you could see upwards of 200 to 400 modules in a year coming in the next few years.\nFor 2023 I would expect to see meaningful percentage growth. What that exactly is I would speculate\nsomewhere in the probably 150-plus range of modules this year and it could go higher than that. We're\nseeing very strong volumes and activity right now.\nGiuliano Jude Anderes Bologna\nCompass Point Research & Trading, LLC, Research Division\nThat's great. Then I guess looking at some of the numbers, it's not broken out perfectly. But based on\nthe aerospace products segment kind of implies you guys will generate somewhere in the range of say\n$500,000 per module in EBITDA and it seems like that could probably double to close to $1 million with\nPMA. I'd be curious obviously thinking about 150-plus, that can imply that you guys seriously get to $75\nmillion on the current run rate and PMA could help you double that number definitely the following year\nwithout any volume improvements from the number of modules. Is that a good way of thinking about the\neconomics and how that could contribute in '23 and beyond?\nJoseph P. Adams\nChairman & CEO\nCopyright \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 7\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 9 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\nYes. It's a good way of thinking about it. Even without meaningful growth in volume, we'll see big growth\nin income and EBITDA.\nGiuliano Jude Anderes Bologna\nCompass Point Research & Trading, LLC, Research Division\nThat's great. And then 1 last question around just kind of the core leasing EBITDA and the run rate. You\nguys obviously closed on a lot of acquisitions during the quarter and I'm assuming you [ didn't ] get a lot\nof contribution from those assets. And even in the past your target was trying to get to a run rate of $90\nmillion to $100 million per quarter for the kind of core leasing EBITDA. I'm curious kind of where you were\nactually in the quarter with the new acquisitions or where the run rate was, including the new acquisitions?\nJoseph P. Adams\nChairman & CEO\nWell, we're continuing and some of the assets we bought were off-lease so they don't necessarily\ncontribute immediately and we'll continue to do that because we see the best value in terms of purchase\nprices in off-leased assets. So you have to build in a little bit of time to get those up and running. And I\nwould say the market in general is really good for leasing. So airlines are announcing every day they're\nlooking for additional old generation or not new generation assets, the 737NGs and the A320 CO fleets are\nin tremendous demand because of delays with new manufacturing. So we're seeing very strong demand\nthat is really targeting second and third quarters of this year. I think that's when you'll see the biggest\ngrowth as people will be -- are lining up assets now to be able to put in their fleet in the second quarter\nand run very significant schedules in the third quarter. So I think it's shaping up very nicely.\nOperator\nOur next question comes from Hillary Cacanando with Deutsche Bank.\nHillary Cacanando\nDeutsche Bank AG, Research Division\nYour acquisition of iAero Thrust seems really well timed just given the current environment of tight supply\nand MRO supply constraints. Could you just go over how the integration process is going and some of the\nlonger-term strategic benefits of the acquisition that you're expecting?\nJoseph P. Adams\nChairman & CEO\nYes. So it's going great. It was very timely. We were fortunate to find the facility in Miami that had\nmaintenance capability for hospital and shop visits and a test cell. And the test cell, as I mentioned,\nthere's only 4 of them that are independent test cells in North American market and 1 of them is at\nLockheed Martin, which we also have a little bit of knowledge out as well. So the test cell is a tremendous\nasset for us and the business is -- there's probably 1 major customer in that facility that has over 30\nengines there. So that's a big opportunity for the business to ramp that up and grow that and also for\nus to do additional module swaps, which we are fully engaged on as we speak. We've also made some\nmanagement changes and hires that are terrific. We got some great people. And I think having a physical\nlocation for us that we can showcase our ability to store, do quick repairs and module swaps is a terrific\nmarketing tool. So we couldn't be any more excited about it.\nHillary Cacanando\nDeutsche Bank AG, Research Division\nGreat. And then I guess just regarding the supply chain issues. When you listen to conference calls from\nBoeing, Airbus, they're all talking about it. Just wanted to get like a high level view, like your view as\nwell of what is the problem and how long is this going to last? I mean do you see the supply chain issues\nlasting like well into next year or is this something that could be resolved this year? I know there's labor\nshortages, there's a whole bunch of issues that are contributing to it. But kind of your take on when do\nyou think this could end and if that does -- when it does end, what's FTAI's strategy kind of? I mean just\n\nCopyright \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 8\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 10 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\nobviously this is a fantastic environment, but once things start to be better for the other guys, will there\nbe kind of a strategic change for FTAI?\nJoseph P. Adams\nChairman & CEO\nYes. It's a great question and it's something we think about and talk about all the time and it has some\ntremendous benefits for us. But it's a complex problem and I don't think it's going to be solved very\nquickly and every week we seem to hear about a new problem that no one thought about the prior week.\nSo it's not slowing down, it's actually increasing. And the potential, many people are looking out to the\nsummer when you have a lot of activity that there could be some significant challenges with people to get\nairplanes in the air because they're waiting on 1 or 2 parts and that's a real issue. So I think it's -- you\nhear about it from every participant in the spaces. And we've seen it also in our used serviceable material\nbusiness where we sell used parts and there's particular parts that people just can't get or the lead time is\n8 weeks.\n\nAnd so that 1 single part could keep an engine in the shop for 8 weeks or could keep it from flying. So in\nthat event, part prices have doubled and in some cases are tripled just in a matter of weeks because it\ndoesn't matter the price. If you have an engine tied up for 2 months, the price of a part is irrelevant, you\nhave to pay whatever it takes. So I think it's getting potentially worse and it could be a critical -- it could\nbe a meaningful challenge for people this summer. But with us, I mean that's our whole pitch really is we\ncan get engines up quickly repaired. The QuickTurn concept is instead of sending a whole engine in and\nwaiting for repairs and parts, we could actually swap out a module and have that engine back in service in\n2 weeks. And so having repaired inventory on the shelf is part of our whole strategy and I think it's perfect\ntiming for that.\n\nI think the longer-term consequence of this is that we hear a lot of airlines realizing that they cannot rely\non a single supplier and be dependent upon a single supplier for anything. So again our business model is\nlike you don't have to, we'll back you up. We're actually offering in some cases where we have perpetual\npower deals where we lease aircraft and engines, we'll put a spare on the ground in the airlines hangar\nso they could have access to a spare in case anything goes wrong and have it immediately. So all these\nchallenges and all these things that are popping up, we have solutions and really we've gone from an\nenvironment where it felt like everything was working against us to where it feels now like everything is\nworking for us.\nOperator\nOur next question comes from Frank Galanti with Stifel.\nFrank Galanti\nStifel, Nicolaus & Company, Incorporated, Research Division\nJoe, I wanted to start on the leasing side. So when I look just sort of on a macro level based on IATA data,\ndomestic available seat kilometers are down still 16% from 2019 levels. And so to that point, there's still\na large area under the curve of engines or cycles that just weren't used due to the pandemic. Doesn't\nthat imply that there is a significant number of engines sitting on the sidelines that can sort of be used as\nincremental planes start flying again and shouldn't that ultimately push utilization down and yields down\nat least in the near term?\nJoseph P. Adams\nChairman & CEO\nNo. I mean first of all, I think that domestic narrowbody flying is globally at or above 2019 levels right\nnow. So I think that with China reopening, that has -- China was a big negative on that number globally.\nBut now that they've reopened, they're back to 2019 levels and actually I saw something that said\nFebruary schedules in China were like up 10% from 2019. So that market has snapped back and globally\nthe U.S. is above, I think United just said this week that they're planning to be above. The domestic\nbusiness is up 30% and corporate -- leisure business is up 30% and corporate is 100% of what it was pre-\nCOVID. So that's the first thing. There is still surplus aircraft that have been out of service and I think the\nCopyright \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 9\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 11 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\nnumber of -- I always look at the number of parked airplanes by type. So if you look at the 737 and A320,\nit's still a little bit above 10% and that's always been a key level. When you go below 10% and I think the\nlowest it's ever been is probably 3% or 4%, it starts to get very tight.\n\nSo we're still working through some of that and most of that has been A320s, which was caused by Europe\nI think being a little bit slower to recover in the travel market and being a heavy A320 fleet user. On the\nengine side, it's a very different dynamic because when COVID started, people stopped putting engines\nthrough shop visits. And so when you have engines that have green time, airline grabs those, puts them\non an airplane and flies them until they need a shop visit and then they park it.\n\nSo you don't have -- in particular if you look at the CFM56-7B market, which is the engine that flies on\nthe 737 fleet, there's virtually no availability right now for that engine. So all the green time was used up\nso even though there's engines parked or the aircraft parked, those parked aircraft might have had their\nengines removed months ago and flown. So it's a very -- that's 1 of the things I like about the engine\nmarket is it's self-correcting on supply very quickly and that once you stop doing shop visits, you use up a\nlot of capacity and the supply drops roughly 15%, 20% a year.\nFrank Galanti\nStifel, Nicolaus & Company, Incorporated, Research Division\nOkay. That's really helpful. Shifting over to aerospace. You've been out there talking about a 2- to 4-year\nplan on the aerospace business reaching $500 million of EBITDA. I think first, can you sort of lay that out\nwhat that plan is? But sort to my question, let's say we get to the end of that 4-year plan we get to 2027,\nwhy wouldn't you hit that $500 million target? Why wouldn't you get there?\nJoseph P. Adams\nChairman & CEO\nI think it's just execution. We have to execute otherwise the market is there and the market environment\nis very helpful for, as I mentioned, what our products are and what we can do for airlines to save them\nmoney. We basically provide airlines with cost savings and flexibility and so that to me, is a good product.\nIt's a differentiated product, no one else can offer it. So really it's just can we execute. In terms of the\ncomposition of the $500 million of EBITDA, what we talked about recently with you is that if we had 25\nModule Factory users last year each doing 4 modules per customer and we're able to double the number\nof customers to 50 and double the number of modules per customer to 8, that's 400 modules per year and\nwe're currently at 100 and we expect substantial growth this year.\n\nSo we're on a path that would sort of get there if we continue that. And then profitability, currently we're\nat about $0.5 million per module and we expect that to double with PMA availability next year so that gets\nyou $400 million of EBITDA from the Module Factory. We expect 50 or so teardowns a year through the\nAR and we generate about $1 million of profit per aircraft so that's $50 million and then we expect the JV\nwith Chromalloy to generate 50. So that would be the -- that's an aspiration. It's not a forecast, but it's\nsomething we think about a lot and we keep refining and we feel good about the ability to get there.\nOperator\nOur next question comes from Brian McKenna with JMP Securities.\nBrian J. Mckenna\nJMP Securities LLC, Research Division\nSo it's great to see the strong quarter of asset purchases within leasing. But can you give us an update\non where LOIs stand today? And then related, how should we think about the baseline level of gross asset\npurchases annually within the segment moving forward?\nJoseph P. Adams\nChairman & CEO\nYes. So on the second, I think we acquired over $600 million last year of new assets. Is that right, Angela?\nAnd we sold $250 million, $300 million?\nCopyright \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 10\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 12 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\nEun Nam\nCFO & Chief Accounting Officer\nAbout $250 million.\nJoseph P. Adams\nChairman & CEO\nSo that's in line with what we've been doing. The asset sales are a little bit higher and as we've talked,\nwe intend to recycle capital more than we probably did years ago. But I think $500 million to $600 million\nof new acquisitions and $200 million to call it $300 million of asset sales is a reasonable expectation and\nwe're starting off the year pretty strong. We don't -- we have a number of deals right now that we have\nverbal awards and handshakes and that are not fully documented, but that number totals a couple of\nhundred million and it's very much CFM56 focused. As a matter of fact, I think in total that's over 50\nCFM56 engines. So we could see a meaningful growth in the CFM56 engine count in the first half of this\nyear, which is great.\nBrian J. Mckenna\nJMP Securities LLC, Research Division\nGot it, helpful. And then congrats on the QuickTurn acquisition. I know it's small in the absolute, but there\nseems to be some pretty meaningful strategic benefits there. I'm curious though how are you thinking\nabout incremental strategic M&A from here? Is there any white space across your business that you\nwould look to fill via acquisitions or any M&A from here would really just be to expand into other adjacent\nbusinesses?\nJoseph P. Adams\nChairman & CEO\nWe look at the whole ecosystem of the engine and I think that the 1 area where we are currently focused\nis repairs. So when we teardown an engine, a lot of the parts before they can be put on a new airplane\nhave to be repaired and our spend last year was roughly $50 million so it's a pretty good amount of\nmoney. And so we're looking at the repair space and what repairs we do, what repairs other people do\nand what opportunities there might be for either M&A or organic development or just using our buying\npower to get better deals. So I'd say that's the current focus. But we are trying to be vertically integrated\nin every way we can on this engine and there's I think the size of the engine, the fact that it's a modular\nengine, the fact that the OEMs keep raising prices so nicely gives us -- it's just a huge opportunity.\nOperator\nOur next question comes from David Zazula with Barclays.\nDavid Michael Zazula\nBarclays Bank PLC, Research Division\nTo start off real quick, I was hoping you could provide an update on where you are with insurance\nrecovery, what you've recovered so far and what planes are still outstanding?\nJoseph P. Adams\nChairman & CEO\nYes. So a couple of things. The assets we had in Ukraine are 4 aircraft and an engine, we're starting to\nmove the engines out by truck. So we've begun the recovery on those assets and I expect that roughly\nwe'll get about $30 million of assets out this year and we haven't decided fully whether we're going to\nlease those or sell those. So I think that's a partial solution. I think our book value on those was about\n$30 million. Our insured value is $70 million.\n\nAnd on that front the insurers have, as you probably are aware of, continued to be very uncooperative. So\nvirtually every asset owner has filed lawsuits and we are not going to be different in that way, we're filing.\nWe have filed 1 suit already and we're preparing the papers on the second. So we'll see what the judges\n\nCopyright \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 11\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 13 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\nsay. Just it's been a bit frustrating that there is a lack of engagement by the insurers. But we believe\nthat the assets were wrongfully taken and if that's what insurance is meant to cover, then we'll ultimately\ncollect a meaningful amount of that. I think the total claim we filed is $270 million.\nDavid Michael Zazula\nBarclays Bank PLC, Research Division\nThat's helpful. And then, Joe, I mean earlier you talked I think about increased velocity of capital through\nthere. Hoping post the QuickTurn facility, you could unpack that a little bit and talk about how that\nacquisition might impact in a little more detail your capital velocity and intensity?\nJoseph P. Adams\nChairman & CEO\nWell, there's 2 areas for that. One is in the leasing segment, we've talked about selling more assets and\nrecycling the capital and in particular we've got 2 deals; 1 of which is fully closed, another which is in the\nprocess of closing; where we're selling the leased asset at a gain and retaining the engine management\nservices contract where we'll make about $1 million per aircraft per year for the maintenance of those\nengines. And so that's something we want to do more of and we have some other deals in the pipeline.\n\nSo in terms of the leasing portfolio, as I said, we've typically bought $500 million to $600 million of new\nassets a year and we expect to sell $200 million to $300 million of those each year. So that generates\ngains and it also allows us in some cases to keep the maintenance contract, which is a great outcome is to\nkeep the best part of the deal and make a gain. So that's on the leasing side and that will continue.\n\nAnd I think we've got a good sense of how to create value, how to buy things off-lease, put them on\nlease and then sell them. On the Module Factory, I think we currently operate with about $150 million of\ninventory and as we grow that business that was doing 100 modules last year, we expect that, that will\nturn significantly faster. So as we grow from 100 to 400, it's not going to go up 4x. It should go up very\nmodestly because we expect we can turn inventory.\n\nAs we get larger and create more options, we'll turn that inventory a lot faster. So I expect that if we\nwere to do 400 modules a year, our expectation is that we would need $200 million to $250 million of\ninventory to do that to support that and it is facilitated by QuickTurn having the ability to deliver. Swap a\nlow-pressure turbine or swap a fan in under 2 weeks is a product that no one has in the market today. No\none can do that.\nOperator\nOur next question comes from Sherif Elmaghrabi with BTIG.\nSherif Ehab Elmaghrabi\nBTIG, LLC, Research Division\nCould you talk a little bit about the different nature of shop visits at QuickTurn compared to the Montreal\nfacility? And more broadly, could you talk about why are hospital visits becoming more popular?\nJoseph P. Adams\nChairman & CEO\nSure. Good question. So what we do in Montreal at Lockheed Martin is performance restoration. And so if\nyou think about an engine, that engine is taken to rebuild that engine -- if it has say only a 1,000 cycles\nleft to fly or 100 cycles left or hour supply, you need to rebuild that to north of 10,000 cycles. In order to\ndo that, you literally have to take the entire engine apart and every piece is inspected either visually or\nby machine and some are replaced, some are repaired and then the whole engine gets reassembled and\nit takes months and it costs millions of dollars. The current OEM estimate on the CFM56 is $6 million for\nthat engine. This in many cases more than we paid for it in the first place. And that goes up every year\nbecause they raise the parts prices 10% or in the last year they raised all the life limited part prices 13%.\nSo that's what you do in Montreal and it has to be done every so often because you have regulations and\nlimits on how long an engine can go before it needs that to be done to it.\nCopyright \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 12\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 14 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\nThe second shop visit is -- and I recommend you go to our website quickturnengines.com and it lays\nout the hospital shop visit some of the things we do. And that's often case just something needs to be\nrepaired. A fan blade needs to be repaired, bearings need to be replaced, a low pressure turbine gearbox\nhas to be replaced and those repairs can be done very quickly and you could also do it with a module\nswap. If you had to replace just the fan, you could swap a new fan on and take the old fan off and do that\nin 5 to 10 days. And a lot of airlines have -- if they have a large fleet of CFM56 engines, they are expressly\ntrying to avoid that first shop visit that I described that takes months and cost millions of dollars. And in\nmany cases you can do that with hospital shop visits only repairing 1 section of the engine or bringing\n1 section of the engine up to a higher number of hours and cycles available and keep that engine flying\nlonger.\nAnd so the hospital shop visit market today is about 40% of all shop visits and it's projected over the next\n6 years to become about 60% of all shop visits. It partially happens as the fleet ages, people are more\ncannibalizing what they have and less doing full restorations in any event. So that's really the difference\nand that's what QuickTurn is focused on is that hospital shop visit market.\n\nThe other reason why it's helpful to have it in a separate facility is that if you run a big MRO shop and an\nengine comes in, your motivation or your inclination is to find lots of things to fix. So if you have an engine\nthat goes into an MRO, oftentimes you'll end up with a bill that's multiples of what you thought it was\ngoing to be because people find things. It's like if you took your car in and you didn't tell the mechanic\nto inspect the brakes, but they did anyway and they probably say you need a new pair of brakes and\nwho could say no. So it's better to have a hospital shop in a separate facility where the orientation and\nmotivation is to do what the customer wanted to have done and get it back in service quickly obviously\nsafely, but quickly.\nOperator\nOur next question comes from Robert Dodd with Raymond James.\nRobert James Dodd\nRaymond James & Associates, Inc., Research Division\nOn leverage if I can, obviously in the presentation I mean you point out that net debt to adjusted EBITDA\nis about 4.3x. You want to get it to 3x, 4x. It might be into that range by maybe Q1 or could be at the\nlower end of that range towards the end of the year even. As you said, you don't need a lot of extra\ncapacity for modules and you've got a lot of cash flow even after the dividend and after maintenance\nCapEx, et cetera. So what are the other options for you? I mean are you explicitly going to pay down debt,\ninvest even more in assets? But you already gave us some guidance on what you plan to do on that front.\nSo what's the thoughts on utilization of the cash flow that you're going to be generating this year given\nleverage is coming down on that?\nJoseph P. Adams\nChairman & CEO\nYes. So we've talked we do want to get the leverage to the point where we're a strong [ DD ] and I think\nif we achieve those numbers this year, we will achieve that goal. So that would accomplish that, which I\nthink is great. We are always looking for good assets to buy and CFM56s are, as you can tell, our passion.\nSo that could present opportunities for additional capital. Beyond that, I think we would look to dividends,\nshare repurchases and they're all in the mix.\nRobert James Dodd\nRaymond James & Associates, Inc., Research Division\nI mean on the prospect for say dividend versus buyback, how would you allocate? What would your\nthoughts be on the relative value of each of those to normalize the allocation priority if it gets to having\nthat much excess capital?\nJoseph P. Adams\nChairman & CEO\n\nCopyright \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 13\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 15 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\nWell, obviously it will be a function of the share price and what we think the prospects are for the business\ngoing forward. I think that, that will drive. The dividend, you know what you get. The share buyback is a\nfunction of the price.\nOperator\nAt this time, I show no further questions. I would now like to turn the conference back over to Alan\nAndreini for closing remarks.\nAlan John Andreini\nInvestor Relations\nThank you, Michelle, and thank you all for participating in today's conference call. We look forward to\nupdating you after Q1.\nOperator\nThis concludes today's conference call. Thank you for participating. You may now disconnect.\n\n\n\n\nCopyright \u00a9 2023 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 14\n\f Case 1:25-cv-00541-JAV Document 70-6 Filed 11/20/25 Page 16 of 16\nFTAI AVIATION LTD. FQ4 2022 EARNINGS CALL | FEB 24, 2023\n\n\n\nCopyright \u00a9 2023 by S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved.\n\nThese materials have been prepared solely for information purposes based upon information generally available to the public\nand from sources believed to be reliable. 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All Rights reserved.\nspglobal.com/marketintelligence 15\n\f","ocr_status":2,"date_upload":"2026-05-12T04:15:26.537454-07:00","document_number":"70","attachment_number":6,"pacer_doc_id":"127038602950","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit F - 4Q22 Earnings Call Transcript","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874407/","id":478874407,"tags":[],"absolute_url":"/docket/69558488/70/7/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.478984-07:00","date_modified":"2026-05-14T07:11:06.194036-07:00","sha1":"c922ff1ce71f39e01cc2e08f3b589553e5be9681","page_count":16,"file_size":550696,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.7.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.7.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 1 of 16\n\n\n\n\n Exhibit G\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 2 of 16\n\n\n\n\nFortress Transportation and Infrastructure\nInvestors LLC NasdaqGS:FTAI\nFQ3 2022 Earnings Call Transcripts\nFriday, October 28, 2022 12:00 PM GMT\nS&P Global Market Intelligence Estimates\n -FQ3 2022- -FQ4 2022- -FY 2022- -FY 2023-\n\n CONSENSUS ACTUAL SURPRISE CONSENSUS CONSENSUS CONSENSUS\n\n EPS (GAAP) 0.32 (0.23) NM 0.44 (0.66) NA\n\n Revenue (mm) 118.40 230.36 94.57 149.70 567.69 NA\nCurrency: USD\nConsensus as of Oct-28-2022 10:27 PM GMT\n\n\n\n\n - EPS (GAAP) -\n\n CONSENSUS ACTUAL SURPRISE\n\n FQ4 2021 0.03 (0.19) NM\n\n FQ1 2022 (0.11) (2.30) NM\n\n FQ2 2022 0.15 0.11 (26.67 %)\n\n FQ3 2022 0.32 (0.23) NM\n\n\n\n\nCOPYRIGHT \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved 1\nspglobal.com/marketintelligence\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 3 of 16\nContents\n\n\n\n\nTable of Contents\n\nCall Participants .................................................................................. 3\nPresentation .................................................................................. 4\nQuestion and Answer .................................................................................. 6\n\n\n\n\nCOPYRIGHT \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved 2\nspglobal.com/marketintelligence\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 4 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\n\nCall Participants\nEXECUTIVES\n\nAlan John Andreini\nInvestor Relations\n\nJoseph P. Adams\nChairman & CEO\n\nANALYSTS\n\nBrandon Robert Oglenski\nBarclays Bank PLC, Research Division\n\nBrian J. Mckenna\nJMP Securities LLC, Research Division\n\nFrank Galanti\nStifel, Nicolaus & Company,\nIncorporated, Research Division\n\nGiuliano Jude Anderes Bologna\nCompass Point Research & Trading,\nLLC, Research Division\n\nGregory Robert Lewis\nBTIG, LLC, Research Division\n\nHillary Cacanando\nDeutsche Bank AG, Research Division\n\nJoshua Ward Sullivan\nThe Benchmark Company, LLC,\nResearch Division\n\n\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 3\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 5 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\n\nPresentation\nOperator\nGood day, ladies and gentlemen, and thank you for standing by. Welcome to the Fortress Transportation and Infrastructure Investors\nLLC Third Quarter 2022 Earnings Conference Call. [Operator Instructions]\n\nAt this time, I would like to turn the conference over to your host, Mr. Alan Andreini. Sir, please begin.\nAlan John Andreini\nInvestor Relations\nThank you, Howard. I would like to welcome you all to the Fortress Transportation Infrastructure Third Quarter 2022 earnings call.\nJoining me here today are Joe Adams, the CEO of FTAI; and Angela Nam, the CFO of FTAI. We have posted an investor presentation\nand our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this\ncall is open to the public in listen-only mode and is being webcast.\n\nIn addition, we will be discussing some non-GAAP financial measures during the call today, including EBITDA. The reconciliation of\nthose measures to the most directly comparable GAAP measures can be found in the earnings supplement.\n\nBefore I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements,\nincluding regarding future earnings. These statements by their nature are uncertain and may differ materially from actual results. We\nencourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and\nforward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC.\n\nNow I would like to turn the call over to Joe.\nJoseph P. Adams\nChairman & CEO\nThanks, Alan. I'm pleased to announce our 30th dividend as a public company and our 45th consecutive dividend since inception. The\ndividend of $0.30 per share will be paid on November 28, based on a shareholder record date of November 14.\n\nAlso, please note FTAI successfully completed the spinoff of its infrastructure business on the 1st of August of this year. Historical\nfinancial condition and the results of operations related to the infrastructure business prior to the spinoff date have been disclosed\nunder Discontinued Operations within the consolidated financial statements.\n\nNow let's turn to the numbers. The key metric for us is adjusted EBITDA. Adjusted EBITDA was $108.9 million, down 24%\ncompared to $143.7 million in Q2 2022 and up 25% compared to $87.2 million in Q3 2021. The above numbers are for consolidated\nFTAI, which includes both leasing and aerospace products. Starting this quarter, we will be presenting leasing and aerospace products\nas separate segments going forward.\n\nLet's start with leasing. Leasing had a good quarter, posting approximately $96 million of EBITDA. The pure leasing component of\nthe $96 million of EBITDA came in at $75 million for Q3, down from $87 million in Q2 as expected. The principal reason for the\ndecline was due to the sale of approximately $145 million of book value of assets in Q2 and Q3 attributed to our cargo campaign sales\nin which we sold 5 aircraft and 30 engines. With very strong demand for assets and the addition of some new acquisitions, which we\nwill talk about later, we expect Q4 will rebound. And next year, 2023, we're very confident in leasing EBITDA of $350 million to\n$400 million for the year, excluding gains on asset sales.\n\nPart of the $96 million in EBITDA for leasing came from gains on asset sales, which also performed as expected. We sold $64.9\nmillion book value of assets for a gain of $20.6 million. We have more asset sales coming in Q4 to recycle capital invested in some\nof 2021's larger acquisitions. In addition, we'll continue to make freighter sales to capitalize on the continuing robust freighter market.\nWe're very comfortable assuming gains on asset sales continuing at approximately $25 million per quarter or $100 million for all of\n2023.\n\nAerospace products had another solid quarter with $19 million of EBITDA. We started these activities only a little over a year\nago, and in the last 4 quarters have booked approximately $70 million of EBITDA without any contribution from PMA. We see\ntremendous potential and feel good about generating $20 million to $30 million in quarterly EBITDA and think $100 million-plus in\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 4\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 6 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\n2023 EBITDA to be very doable. We feel confident about this number because we're seeing a rapidly expanding backlog of aerospace\nproducts business with other leasing companies, MROs, or maintenance repair organizations, and airlines.\nWith respect to Q4, we have begun closing the sale of $200 million in assets and have signed letters of intent to purchase $300 million\nin new assets also in Q4. The net pickup in leasing EBITDA from the new investments minus the give-up from the sales we estimate\nto be $40 million per annum or $10 million per quarter. Importantly, 2 of these asset sales involved FTAI retaining the engine services\ncontract on behalf of the buyer, which should generate $1 million per annum per aircraft or $10 million total per annum of aerospace\nEBITDA over the remaining lease term of approximately 8 years.\n\nAfter 3 years of macro trade headwinds, we now have macro factors that are greatly helping us. First, OEMs have instituted mostly\ndouble digit percentage price increases for parts effective this quarter. And parts price increases creates more opportunity for our cost\nsaving products to increase market share for us. And since service shop visits costs are predominantly parts, the replacement value of\nour engines goes up correspondingly.\n\nSecond, many airlines are trying to reduce expensive full engine restorations and instead increase module swaps and light shop visits\nthat do not require disassembly, which plays right to our strengths and into our products. Thirdly, delays in new aircraft deliveries\nare creating scarcity of 737NGs and A320 COs, which will drive strong demand for 737NGs, A320 COs and, importantly, CFM56\nengines for many years to come. And fourth, industry demand for travel has returned to almost pre-COVID levels.\nRegarding PMA, or parts manufacturing authorization, there's no change in our planning, which includes a full complement of airfoil\nparts becoming available throughout next year.\n\nIn summary, it feels like we are finally operating in an environment with strong tailwinds. We managed through the COVID\ndisruptions, followed by Russia-Ukraine, and will have our portfolio optimized by this year end. And with demand for air travel\nsurging globally, combined with proprietary cost-saving aerospace products, 2023 is shaping up to be an outstanding year.\n\nWith that, let me turn the call back to Alan.\nAlan John Andreini\nInvestor Relations\nThank you, Joe. Howard, you may now open the call to Q&A.\n\n\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 5\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 7 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\n\nQuestion and Answer\nOperator\n[Operator Instructions] Our first question or comment comes from the line of Giuliano Bologna from Compass Point.\nGiuliano Jude Anderes Bologna\nCompass Point Research & Trading, LLC, Research Division\nCongrats on another quarter, great quarter. I'd be curious, when I'm looking at some of the numbers that you just mapped out around\nasset sales and redeployment of capital into new assets that are happening during 4Q, you're selling a fair amount more assets than you\nsold in the last 2 quarters, and you've been able to recognize pretty impressive gains on sale that were even above the range during one\nof those quarters of the $20 million to $30 million range.\n\nIs it fair to assume that the combination of the large asset sales could move you towards the higher end of that $20 million to $30\nmillion range in 4Q? And then kind of as an add-on to that, with the EBITDA take-up and probably some lease-up demand in the\nportfolio, is it also fair to assume that you can get back within the, call it, $90 million to $100 million run rate during 2 for core\nleasing?\nJoseph P. Adams\nChairman & CEO\nYes. So I would say on the gains, yes, it's fair to assume that some of the asset sales we were targeting for Q2 got delayed and have\nbeen pushed in -- or targeted for Q3 got delayed and are pushed into Q4. So I do think there's upside over the sort of guided range\nwe have in Q4 just because of that, the sequencing and the timing. So it's shaping up to be a pretty good quarter from an asset sales\npoint of view. On the leasing side, as I indicated, we're very comfortable next year hitting the sort of $90 million to $100 million per\nquarter.\n\nThe Q4 will really be a function of the timing of closings and when those occur. So I think it's possible that we can get there. But in\ntoday's world, it seems like there's more delays than accelerations, and sort of every time you turn around, there's something about\na part not available or a maintenance shop can't get something delivered. And so I'm a little hesitant to promise on that just because\nwe're in a world [Technical Difficulty]\nGiuliano Jude Anderes Bologna\nCompass Point Research & Trading, LLC, Research Division\nHopefully -- the call may have cut out. Hopefully, it wasn't on my side. But if the others are still there and it's still working. I'd be\ncurious, I realize it's an imperfect science, but with the vote coming up on the merger that would effectively -- that would convert and\nremove the K-1. One of the topics that's come up in some discussions is index inclusion and how that could impact your shareholder\nbase. I'm curious if you've done any analysis around kind of the low end and the high end of the range of what index buying may need\nto happen on the back of converting into a PFIC.\nAlan John Andreini\nInvestor Relations\nJoe, are you there?\nJoseph P. Adams\nChairman & CEO\nIt's Joe. Could you hear me?\nAlan John Andreini\nInvestor Relations\nYes, we can hear you now. Sorry. Did you hear Giuliano's question?\nJoseph P. Adams\nChairman & CEO\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 6\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 8 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\nI did, yes. And I gave a long answer, which unfortunately it sounds like you didn't hear it. But I'll -- so in terms of asset sales, we have\npushed -- some of the deals we expected to close in Q3 got delayed and will end up closing in Q4. So we think there is upside to the\nsort of typical run rate of what we've been expecting on gain on sale. So I think that you're right. We should be at the high end of that\nnumber or potentially even above it, just given the sequence and closing deals is taking a little bit longer than we expect.\n\nIn terms of the leasing EBITDA, I said we're very comfortable with next year being in that $90 million to $100 million per quarter\nrange. But it's really a function of the timing of the closing of some of these new acquisitions. And in today's world, everything seems\nto take a little bit longer than expected. It's either a delay on a part or a delay on a maintenance shop which -- so I'm a little hesitant to\nbe able to predict Q4 yet given that item.\n\nNow ultimately, these supply chain disruptions are good for us because we have available equipment and engines other people don't.\nBut it is a reality of today's world that everything seems to be taking a little bit longer to get done. So I feel good about the total run\nrate once we get all the assets deployed. Q4 is a little bit variable. Definitely will be up. Question is whether we get to the $90 million\nor not for the quarter.\nAlan John Andreini\nInvestor Relations\nJoe, did you happen to hear Giuliano's second question relating to the indexes? Giuliano, if Joe didn't hear that, can you repeat it,\nplease?\nGiuliano Jude Anderes Bologna\nCompass Point Research & Trading, LLC, Research Division\nYes. I think it was when we lost you, so I'll re-ask those questions quickly. One of the questions that I was curious about was with\nthe vote approaching on November 9 for the reverse merger that will effectively change the corporate structure and remove the K-1\nand convert you guys to PFIC. I realize it's imperfect science, but one of the topics that's come up is index included and what that\ncould mean just from an index ownership perspective over time. And I'm curious if you've done any analysis or you have any sense\nof what kind of the low end or high end ranges for how the impact of special index buying from kind of a need to buy perspective as a\npercentage of the outcome to shares?\nJoseph P. Adams\nChairman & CEO\nYes. We have done some analysis, and we have a list of some potential funds that might -- we might get included in. And I think the\n-- historically, obviously well with Aircastle, which Aircastle was very successful at getting included and has a very similar corporate\nstructure to the one we're adopting. So that would bode well. But it is -- there is a qualitative element in all these applications, so we're\nnot totally sure. But I would say the range is probably between 10% and 30% of our total stock market capitalization should end up in\npassive funds.\nOperator\nOur next question or comment comes from the line of Hillary Cacanando from Deutsche Bank.\nHillary Cacanando\nDeutsche Bank AG, Research Division\nSo for the -- in terms of the insurance recovery, you have mentioned that you are expecting -- previously you had mentioned that\nyou're expecting partial recovery from your insurance claims this year. I just wanted to understand like how much of the -- is that still\nthe case? And if so, how much of the recovery relates to assets in Ukraine that actually may have been destroyed versus how much of\nthe recovery will be for planes that are still operational and still operating in Russia?\nJoseph P. Adams\nChairman & CEO\nYes. Happy to talk about insurance. Just to recap, we have about $290 million of insurance claims on our $125 million of book value\nof assets that we've filed. And really, as I mentioned before, we've broken it into 3 buckets of the different strategies with each one.\nThe first one is sort of -- I think that would be the most -- the first to pay is the contingent insurance coverage that we have. And that's\nabout $90 million, and it's covered mostly engines. The second is Ukraine, which is about $75 million.\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 7\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 9 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\nAnd the third is Russian assets airplanes, mostly airplanes that are lost in Russia, about $125 million. I would say we've made progress\non 2 of those 3 categories, namely the contingent coverage and the Ukraine assets. And progress means that we've had a good\ndialogue and we have a framework of a plan, but we don't have a sort of definitive -- enough of a definition of the plan for me to give\nyou a definitive time line, although I am optimistic that, that could -- those 2 buckets could resolve in the next 3 to 6 months is my\nhope.\n\nThe Ukrainian assets that we were thinking or destroyed may not be, and they may be in good shape as far as we can tell. We now\nhave people on the ground. And so we're working on various strategies with respect to those assets, either with insurance or without\ninsurance that we can monetize. But clearly, those are -- that's a priority for us to focus and work on those. And then the Russian\nassets is a bit frustrating. It's frustrating for the whole industry in that the insurance companies just refuse to engage. And I think you\nsaw AerCap and DAE have filed lawsuits.\n\nUltimately, the good news is that none of the participants are talking again about, well, we canceled the policy and you don't have\ncoverage. Or it's not a loss; it's all about sanctions and obfuscation that I think ultimately will -- they'll run out of excuses and room,\nand litigation forces the issue. So I think that will pay, as I've said from the very beginning, but I think it may take the longest of the 3.\nHillary Cacanando\nDeutsche Bank AG, Research Division\nOkay. Got it. And then my second question is, obviously we're seeing all these supply chain issues affecting the OEMs. And you've\nalso mentioned the cost, the increase in I guess price and cost escalation. So I was wondering if you could talk a little bit about the cost\nescalation that you're seeing on the engine side, and if we could actually see an impact, maybe like the benefit from the maintenance\nside of the business that you could actually like point to in terms of quantifying the benefit.\nJoseph P. Adams\nChairman & CEO\nYes. So all of our engine maintenance reserve payments are indexed to shop visit costs., and job visits costs are 90% parts. And so if\nthe parts prices just went up 10%, effectively you're getting a 10% increase in our maintenance reserve payments. And so that for the\nCFM, GE, Safran fleet that goes into effect November 1, we had a feeling that was coming. So we've been looking to acquire more\nengines this summer and add as much as we can. So we're -- I think we're well positioned in that. And then that should translate -- that\nwill translate into additional EBITDA for us starting then, starting November.\nOperator\nOur next question or comment comes from the line of Josh Sullivan from Benchmark Company.\nJoshua Ward Sullivan\nThe Benchmark Company, LLC, Research Division\nJust kind of following up on that question. As far as the process where FTAI retains the maintenance streams in some of these aircraft\nsales, which aircraft or customer types are most drawn to that arrangement? Or where should we see that process really gain some\ntraction?\nJoseph P. Adams\nChairman & CEO\nIt's all older CFM56 engines. And the way we're positioning ourselves in the market is our view is for CFM56 engines, the first 10\nto 12 years is covered by the OEM under power by our maintenance agreements for the most part. And so we're not going after that\nbusiness. It's not really available. But once the engine has passed maybe the second shoppers that are -- or looking at the second shop\nis about year 12 or 14, a lot of those maintenance contracts are up for bid and us to acquire. And so what we want to do is use our\nproducts and our services to be effectively the OEM for the second half of the life of that engine.\n\nAnd so that's the way we position ourselves with airlines and MRO shops is that we can take over your maintenance activity, much\nlike GE does on the front end. We can save you money, and we can totally derisk it for you because you won't have any negative\nsurprise events. You won't have any overruns or surprise expenses to deal with. And in the case of airlines that are looking to phase\nout the fleet, we can buy the fleet and then provide you a new engine whenever you want it. So we'll provide you liquidity, flexibility\nand cost savings.\n\nSo we're finding a very broad appeal for that pitch. It resonates with people, particularly accelerated by the fact that the prices just\nwent up, are going up 10%. And airlines are experiencing a lot of cost inflation, and they are looking for every potential way to do it.\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 8\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 10 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\nSo I think it is resonating. And I think all of that we're able to do before any incremental savings that might come from PMA, which\nwe expect next year will.\nJoshua Ward Sullivan\nThe Benchmark Company, LLC, Research Division\nGot it. No, that's helpful. And then maybe, could you just give us some general thoughts on the current leasing environment maybe by\ngeography? What are you seeing as far as duration or some of the other features on leases that might be changing in this environment?\nJoseph P. Adams\nChairman & CEO\nYes. So a lot of the airlines are now coming saying that they have new orders. They've built their fleet plan around receiving NEOs\nand MAX aircraft over the next couple of years, and they're seeing those delayed. So we're seeing airlines come saying, show me\nanything you have that in the NG and the CO range where I could add capacity in meaningful numbers. So it's a very, very strong\nenvironment. And they're willing to -- typically, those leases are 5 to 6 years in duration. You do from one D check to another. So the\nterm of the agreement is attractive, and the quantity that people are looking to get is very broad-based.\n\nSo I'd say obviously, the only market that is still relatively closed or constrained is China, but that's -- they're an outlier. Every other\nregion of the world is really robust. Latin America, as I mentioned previously, we've done a lot of business in Latin America. It's\nabove average growth rates. Middle East, Southeast Asia, very strong. And then Western Europe is -- was probably the latest to\nrecover because of omicron, but its capacity is coming back and being added there now again as well. So I think it's a very, very\nstrong market environment. Obviously, Russia's gone forever, which is about 5% of market, so it's not that material. But a very good\nglobal dynamic.\nOperator\nOur next question or comment comes from the line of Brandon Oglenski from Barclays.\nBrandon Robert Oglenski\nBarclays Bank PLC, Research Division\nJoe, appreciate the outlook here. Could you just run us through the set of asset sales and net additions to the portfolio closing out the\nyear? And then I guess the bigger question we're having -- I mean, the outlook here is pretty good, but your cash balance is a little bit\nlow. So how do you expect to manage through liquidity here in the next few quarters?\nJoseph P. Adams\nChairman & CEO\nYes. So I think we had about $70 million of cash at the end of Q3. When you look at the various asset sales and asset purchases, I\nthink we should end up the year potentially with sort of $50-ish million drawn on the revolver. So we have a $225 million revolver\nthat is undrawn at the moment. It's fully available. So that's how we're going to manage liquidity as we have done in the past. So\nmostly the pluses and minuses, we're adding $300 million of assets, and effectively cash flows will receive from the operations as well\nas the asset sales, it's pretty much -- pretty close to a wash. So we expect to end the year with very little -- with most of the revolver, if\nnot all of it, available going into next year.\nBrandon Robert Oglenski\nBarclays Bank PLC, Research Division\nAnd I guess, longer term, where do you want to see leverage on the portfolio, especially -- has that changed at all with higher interest\nrates as well?\nJoseph P. Adams\nChairman & CEO\nNot so much to the higher interest rates. What we've communicated to the rating agencies is that A, we want to be BB, and B, we want\nto manage debt to EBITDA under 5x. And if you look at our pro forma -- if we do $550 million to $600 million of EBITDA next year,\nwe'll be under 4x. And I think both agencies, Moody's, S&P and Fitch have all indicated if we do that, we would be either upgraded or\nsort of -- we'd be in the BB range, and that's kind of consistent with where we want to be. So I don't think it's necessarily interest rate\ndriven. We do have some opportunities now.\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 9\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 11 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\nAnd I think next year, we would look to as a priority to repay some debt with excess cash flow, so bring that net debt balance down\nand get even lower in terms of the debt to EBITDA and higher in terms of rating. So I think that's where we're leaning at the moment.\nAnd I think part of the program of selling assets and buying assets is to manage so that we're not necessarily adding a lot of capital at\nthis point. We're recycling and picking up EBITDA.\nBrandon Robert Oglenski\nBarclays Bank PLC, Research Division\nOkay. Appreciate that. And then on the greater than the $0.5 billion in EBITDA targets for next year, which I think you've reiterated\nhere, what type of portfolio utilization level do you think you need to achieve to get there?\nJoseph P. Adams\nChairman & CEO\nWell, the aircraft, I think generally, we've been over 90%, which I think we will be. We've had -- we still have some assets that\nwe've repositioned from Russia-Ukraine that are either to be sold or to be leased. And we added some aircraft like 737-800s this\nsummer, which we bought at a very attractive price off-lease. All of those are going on lease this month in October. 2 in October, 1\nin November. So those types of -- when I say the portfolio will be optimized by the end of the year, everything we're doing is to get\nassets redeployed from Russia-Ukraine, or cargo assets that we were targeting for sale, get those sold. So I think by the end of the\nyear, utilization should be -- for aircraft should be 90%-plus.\n\nEngines is always -- we've always targeted 50% to 75%. And effectively, utilization is really what drives it. It's the number of hours\nflown and the total amount of the portfolio. So we've been -- for instance, the last 2 quarters, we've acquired quite a lot of CFM56\nengines that are off-lease. So utilization hasn't really gone up in spite of a strong market environment because we've been adding to the\ndenominator. And we will keep doing that because we could see there was a price increase coming, and we also think the economics\nof those engines are extremely attractive. So we would add as many of those as we can. So I think that the target range is still the\nsame, 50% to 75% on engine utilization. And that's not what -- we don't really manage to that. We manage to sort of having the total\nEBITDA of the portfolio optimized.\nOperator\nOur next question or comment comes from the line of Brian Mckenna from JMP Securities.\nBrian J. Mckenna\nJMP Securities LLC, Research Division\nSo the business has clearly navigated some unexpected headwinds over the past couple of years. I'm curious, though, the backdrop\ntoday seems like it couldn't be better. But with the potential for a recession next year or maybe some pullback in related activity,\nwould you think about accelerating asset sales in the near term or slowing the pace of new investments in order to delever the business\neven more, that way you have more liquidity and excess capital to be more offensive in any slowdown?\nJoseph P. Adams\nChairman & CEO\nWell, we've been doing that this year. With the cargo sales, we consciously decided early this year that we felt like the cargo market\nis maybe as good as it gets, and we decided that it was better to be early than late. So I think that was a good decision. And we've\nsold probably $400 million of cargo assets to do -- to generate capital. But on the flip side, just sitting with cash, given the attractive\nenvironment in the CFM56 engine and the substantial competitive advantage we have, that didn't seem like a good idea either.\n\nAnd I think from our point of view, it feels like we already had recessions. We had 2 of them. And the economic -- potential economic\nrecession will have less impact on CFM56 demand than COVID did, for example. So we feel that there's -- even if there is an\neconomic slowdown globally, the demand for those assets and the travel recovery is sort of a bigger driver than the global economy.\nBrian J. Mckenna\nJMP Securities LLC, Research Division\nHelpful. And then I appreciate the color on the insurance claims. But if you were to see some windfall from these claims over the\nnext couple of quarters, I guess what's your #1 priority for that capital? Is it paying down some incremental debt, and if so, which\nmaturities would you look to pay down first? Would you even maybe dividend some of it back to shareholders, or would you put some\nof it into incremental asset purchases? Just curious how you're thinking about that.\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 10\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 12 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\nJoseph P. Adams\nChairman & CEO\nI think probably repayment of debt. And we'll look at all the various issues. I mean, we've debated as part of the dividend from the\ninfrastructure, we repaid the 2025s, which is the next maturity due. So we brought that down to $650 million. We could do more of\nthat. The other attractive investment would be the more expensive debt, which you can also -- that has more -- it's more accretive\nwhen you pay down the highest cost debt. So that -- I think those would be the 2 choices, but I think our focus would be to repay debt.\nOperator\nOur next question or comment comes from the line of Frank Galanti from Stifel.\nFrank Galanti\nStifel, Nicolaus & Company, Incorporated, Research Division\nThis is Frank. Can you hear me?\nJoseph P. Adams\nChairman & CEO\nYes.\nFrank Galanti\nStifel, Nicolaus & Company, Incorporated, Research Division\nGreat. I wanted to start on the module factory and around the competitive landscape there. I guess first, can you just sort of talk high\nlevel what the business provides from a customer's perspective? Like does it actually -- is it sort of a 2-year kick down the road from a\nmaintenance visit? And sort of how does that compare to a quick engine change? Just trying to think through where people find value\nin the module factory.\n\nAnd then I guess secondarily, who does this? Who do you see as your big competitors that you're going up against? Obviously with\nthe PMA parts and the used service and materials, there's going to be a cost advantage. But that's only minimal at this point with the\nPMA approval progress so far. So just sort of wanted to dig in on that business specifically.\nJoseph P. Adams\nChairman & CEO\nSure. So the customers for the module factory, I think you would sort of divide them into 2 different categories of how they see the\nbenefit. One would be optimizing. So you might have an LTT that needs a shop visit, but the rest of the engine doesn't. And so if you\ncan do a module swap and optimize the number of hours and cycles and match up that with the other parts of that engine, you can\nsignificantly reduce your maintenance cost because you don't have to put the whole engine through for a shop visit. And that was\nsimilar -- there's a cost savings and a benefit for that. And that was illustrated in the WestJet deal that we won with Lufthansa. So\nthat's one customer would be optimizing.\n\nThe second is avoiding that shop visit by doing engine -- module exchanges totally. So lots of airlines today, particularly as they look\nat their CFM56 suite are saying, what can I do to avoid a full restoration, meaning you have to induct the whole engine into an MRO\nshop, disassemble it, and then every part in that engine gets looked at and it often ends up in a significant increase in total cost.\nSo a module swap would allow you to exchange the fan or the LPT and put a new core in and keep the fan and the LPT and not\nhave to touch those. So that's the target market for that product and it's substantial. We've met with many airlines over the last 3 to 6\nmonths, and it's their stated goal was to try to reduce the number of full restorations they do. And modules fit perfectly into being able\nfor them to sort of achieve that objective.\n\nAnd so the question is, who does that? And so if you look at in the industry today, the big airlines that have their own MRO shop\ndo this internally. So it could be a Delta, United, American. They manage module exchanges right now in terms of their own fleet\nbecause they have enough airplanes and they have an MRO shop. The market that doesn't have access to that is all other airlines of\nwhich there are hundreds. And if you went out today and said, who can I buy a fan from or who can I buy an LPT from, it's no one but\nus. So we're the first to sort of create this storefront where people can do that. And it's very powerful for a lot of these airlines that are\njust learning about the opportunity.\n\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 11\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 13 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\nAnd so we're seeing airlines start with 1 or 2 modules, leasing companies that are trying to do it to minimize return compensation, and\nmaintenance shops who are trying to win business. So the entire ecosystem is open to this. And today, there's no one else offering this\nproduct. So we think it's very beneficial to the airlines, very beneficial in maintenance shops, beneficial to the whole industry, and it\nopens everybody up to have that capability.\nFrank Galanti\nStifel, Nicolaus & Company, Incorporated, Research Division\nOkay. Great. Yes. That's super helpful. Appreciate that. And then for my second question, I wanted to dig in on the PMA parts. And\nI apologize; you may have gone through this in the beginning of the call. I've got sick kids, so I was a little bit late getting on. But\ncan you sort of reiterate the time line on the remaining parts approval? And then specifically around the second part, obviously that's\nbeen delayed. What's changed from when you first kind of contemplated getting approval on that part relative today? Sort of walk us\nthrough why that's been so delayed.\nJoseph P. Adams\nChairman & CEO\nYes. I think, as I mentioned previously, there's 2 things going on. There's the natural process of design [Technical Difficulty].\nOperator\nLadies and gentlemen, please stand by. We lost connection. Go ahead, Mr. Adams.\nJoseph P. Adams\nChairman & CEO\nSo where did I drop off?\nFrank Galanti\nStifel, Nicolaus & Company, Incorporated, Research Division\nJust sort of the beginning of the PMA question.\nJoseph P. Adams\nChairman & CEO\nOkay. So there's a natural process in all of these where designs are tweaked and test results are come in and there's modifications\nmade, so that's part of the process that occurs in every one of these. So that's part of the delay. The second is FAA responsiveness and\nturnaround time. And the FAA has been unusually slow in terms of getting back to people with answers, responding, having the right\npeople in the meeting. They have personnel vacancies that have not been filled. So that part of it is out of our control and unusual. It's\nnever happened that way before. So all those are the 2 reasons for delays. But as I mentioned, all the parts and process are proceeding.\nThey're doing very well. And it's expected that all the remaining parts that are under development will be submitted for approval next\nyear in 2023.\nFrank Galanti\nStifel, Nicolaus & Company, Incorporated, Research Division\nOkay. That's helpful. And I got another question, if I could, around Chromalloy. Veritas is looking -- or is going to be buying that\ncompany. I just wanted to confirm that it's got no effect on FTAI from an operations perspective. And then sort of second around\nthat, and this is maybe a bit premature, but given where we stand or you guys stand in the PMA approval process, but can you sort\nof talk about sort of the duration of the competitive advantage with the PMA business? Because if the PMA business only is for the\nCFM56-7B/5B engine, what can FTAI do from a competitive advantage perspective kind of in the out years?\nJoseph P. Adams\nChairman & CEO\nYes. So I can confirm that there's no effect on the Chromalloy joint venture. There is no change in control provision, no termination\nright in the agreements, and we look forward to the -- working with Veritas. I think it's a very significant positive for Chromalloy.\nIt was a quite robust auction and price, which I think reflects very well on the quality of the management team and the future\nopportunities. So I think it's a positive from our point of view that the transaction happens, and we look forward to that.\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 12\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 14 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\nIn terms of duration, there is a -- we are focused on the CFM56 engine really exclusively. We started working with Chromalloy on\na CF6-80 engine, and we've had a great partnership on that. And we've been reducing our exposure in the CF6-80 engine, so that is\nbecoming more mature. So the sweet spot of the CFM56 engine from a number of shop visits point of view really runs from probably\n2023 to a minimum of 2030.\n\nAnd it might have been extended, I think, by these new delivery delays as well that are coming out. And also by the total maintenance\ncost of some of this new technology is still an unknown. So we feel very good about at least the next 6 to 7 years, having 3,000-plus\nshop visits a year, which is a huge, huge market opportunity. After 2030, I'm not quite sure yet. But I feel like we have a lot of time to\ncome up with some new ideas. We already have some ideas on the drawing board for next year in terms [Technical Difficulty].\nOperator\nPlease stand by.\nFrank Galanti\nStifel, Nicolaus & Company, Incorporated, Research Division\nNot sure if you had any additional -- you said you had something on the drawing board, but that sort of answers my question.\nAppreciate taking the questions.\nJoseph P. Adams\nChairman & CEO\nI'm back. Can you hear me?\nFrank Galanti\nStifel, Nicolaus & Company, Incorporated, Research Division\nYes, we can hear you. You had said something about we had things on the drawing board.\nJoseph P. Adams\nChairman & CEO\nYes. We have some ideas about other maintenance-related products that we're developing for next year. So I think it's not going to be\nstatic. We're not going to sit and wait until 2030 and do nothing.\nOperator\nWe have time for one more question. Our last question for today will come from the line of Mr. Greg Lewis from BTIG.\nGregory Robert Lewis\nBTIG, LLC, Research Division\nYes, Joe, I just had one question. Realizing that it's still early days. We got to get the C Corp conversion. But I guess, as we think\nabout this bigger picture, like right now, FTAI's clearly trading at a nice discount to its peers. I heard a lot about continuing to deploy\ncash for assets. You did touch on the dividend. I mean, at a certain point, do we need to start thinking about buying back the stock?\nJoseph P. Adams\nChairman & CEO\nSure. I think when we have the decision with excess cash flow, I think we're going to look at all 3 alternatives, which is pay down\ndebt, increase the dividend or buy back stock. So I don't have any preset answer to that. It'll be a function of what the outlook is, what\nthe opportunities are, where the various securities are trading. So we'll take a look at all of that.\nOperator\nThank you. At this time, I'd like to turn the conference back over to Mr. Andreini for any closing remarks.\nAlan John Andreini\nInvestor Relations\nThank you, Howard. Thank you all for participating in today's conference call. We look forward to updating you after Q4. Thank you.\nOperator\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 13\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 15 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\nLadies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect.\nEveryone, have a wonderful day. Speakers, stand by.\n\n\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 14\n\f Case 1:25-cv-00541-JAV Document 70-7 Filed 11/20/25 Page 16 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ3 2022 EARNINGS CALL OCT 28,\n2022\n\n\nCopyright \u00a9 2022 by S&P Global Market Intelligence, a division of S&P Global Inc. 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All Rights reserved.\nspglobal.com/marketintelligence 15\n\f","ocr_status":2,"date_upload":"2026-05-12T04:15:29.840205-07:00","document_number":"70","attachment_number":7,"pacer_doc_id":"127038602951","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit G - 3Q22 Earnings Call Transcript","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874408/","id":478874408,"tags":[],"absolute_url":"/docket/69558488/70/8/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.489836-07:00","date_modified":"2026-05-14T07:11:54.898996-07:00","sha1":"e91426da2340ef692c70bd54aaaa64211077ff87","page_count":96,"file_size":927049,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.8.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.8.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 1 of 96\n\n\n\n\n Exhibit H\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 2 of 96\n\n\n\n\n UNITED STATES SECURITIES AND EXCHANGE COMMISSION\n WASHINGTON, D.C. 20549\n FORM 10-K\n ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n For the fiscal year ended December 31, 2023\n OR\n \u2610 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n For the transition period from ____ to ____\n Commission file number 001-37386\n\n\n\n\n FTAI AVIATION LTD.\n (Exact name of registrant as specified in its charter)\n Cayman Islands XX-XXXXXXX\n (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)\n\n 1345 Avenue of the Americas, 45th Floor New York NY 10105\n (Address of principal executive offices) (Zip Code)\n\n (Registrant\u2019s telephone number, including area code) (212) 798-6100\n (Former name, former address and former fiscal year, if changed since last report) N/A\n\n\n\n Securities registered pursuant to Section 12(b) of the Act:\n Title of each class: Trading Symbol: Name of exchange on which registered:\n Ordinary shares, $0.01 par value per share FTAI The Nasdaq Global Select Market\n 8.25% Fixed-to-Floating Rate Series A Cumulative Perpetual\n Redeemable Preferred Shares FTAIP The Nasdaq Global Select Market\n 8.00% Fixed-to-Floating Rate Series B Cumulative Perpetual\n Redeemable Preferred Shares FTAIO The Nasdaq Global Select Market\n 8.25% Fixed-Rate Reset Series C Cumulative Perpetual\n Redeemable Preferred Shares FTAIN The Nasdaq Global Select Market\n 9.50% Fixed-Rate Reset Series D Cumulative Perpetual\n Redeemable Preferred Shares FTAIM The Nasdaq Global Select Market\n\n\n\nSecurities registered pursuant to Section 12(g) of the Act: None\nIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes \u2611 No \u2610\nIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes \u2610 No \u2611\nIndicate 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\n1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject\nto such filing requirements for the past 90 days. Yes \u2611 No \u2610\nIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule\n405 of Regulation S-T (\u00a7232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to\nsubmit such files). Yes \u2611 No \u2610\n\n\n\n 1\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 3 of 96\n\n\n\n\nIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting\ncompany, or an emerging growth company. See the definitions of \u201clarge accelerated filer,\u201d \u201caccelerated filer,\u201d \u201csmaller reporting company,\u201d and\n\u201cemerging growth company\u201d in Rule 12b-2 of the Exchange Act.\n\n Large accelerated filer \u00fe Accelerated filer\n Non-accelerated filer Smaller reporting company\n Emerging Growth Company\n\n\n\nIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with\nany new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. \u2610\nIndicate by check mark whether the registrant has filed a report on and attestation to its management\u2019s assessment of the effectiveness of its\ninternal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting\nfirm that prepared or issued its audit report. \u2611\nIf securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant\nincluded in the filing reflect the correction of an error to previously issued financial statements. \u2610\nIndicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based\ncompensation received by any of the registrant\u2019s executive officers during the relevant recovery period pursuant to \u00a7240.10D-1(b). \u2610\nIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes \u2610 No \u2611\nThe aggregate market value of the voting and non-voting ordinary equity of FTAI Aviation Ltd. held by non-affiliates as of the close of business as\nof June 30, 2023 was approximately $3.1 billion.\nThere were 100,245,905 ordinary shares outstanding at February 23, 2024.\n DOCUMENTS INCORPORATED BY REFERENCE\nPortions of the registrant's definitive proxy statement for the registrant's 2024 annual meeting, to be filed within 120 days after the close of the\nregistrant's fiscal year, are incorporated by reference into Part III of this Annual Report on Form 10-K.\n\n\n 2\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 4 of 96\n\n\n\n\n FTAI AVIATION LTD.\n INDEX TO FORM 10-K\n PART I\n Forward-Looking Statements 5\nItem 1. Business 6\nItem 1A. Risk Factors 11\nItem 1B. Unresolved Staff Comments 27\nItem 1C. Cybersecurity 28\nItem 2. Properties 28\nItem 3. Legal Proceedings 28\nItem 4. Mine Safety Disclosures 28\n PART II\nItem 5. Market for Registrant\u2019s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29\nItem 6. [Reserved] 31\nItem 7. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations 31\nItem 7A. Quantitative and Qualitative Disclosures About Market Risk 49\nItem 8. Consolidated Financial Statements of FTAI Aviation Ltd.: 50\n Report of Independent Registered Public Accounting Firm 51\n Consolidated Balance Sheets as of December 31, 2023 and 2022 53\n Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021 54\n Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 and 2021 55\n Consolidated Statement of Changes in Equity for the years ended December 31, 2023, 2022 and 2021 56\n Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 57\n Notes to Consolidated Financial Statements 59\n Note 1: Organization 59\n Note 2: Summary of Significant Accounting Policies 59\n Note 3: Discontinued Operations 64\n Note 4: Acquisition of QuickTurn 67\n Note 5: Leasing Equipment, net 69\n Note 6: Investments 69\n Note 7: Intangible Assets and Liabilities, net 71\n Note 8: Debt, net 72\n Note 9: Fair Value Measurements 73\n Note 10: Equity-Based Compensation 80\n Note 11: Income Taxes 76\n Note 12: Management Agreement and Affiliate Transactions 78\n Note 13: Segment Information 80\n Note 14: Earnings per Share and Equity 87\n Note 15: Commitments and Contingencies 88\n Note 16: Subsequent Events 88\nItem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 89\nItem 9A. Controls and Procedures 89\nItem 9B. Other Information 90\nItem 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 91\n PART III\nItem 10. Directors, Executive Officers and Corporate Governance 91\nItem 11. Executive Compensation 91\nItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 91\nItem 13. Certain Relationships and Related Transactions, and Director Independence 91\n\n\n\n\n 3\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 5 of 96\n\n\n\n\nItem 14. Principal Accountant Fees and Services 91\n PART IV\nItem 15. Exhibits 91\nItem 16. Form 10-K Summary 93\n Signatures 93\n\n\n\n\n 4\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 6 of 96\n\n\n\n\n FORWARD-LOOKING STATEMENTS AND RISK FACTORS SUMMARY\nThis report contains \u201cforward-looking statements\u201d within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking\nstatements are not statements of historical fact but instead are based on our present beliefs and assumptions and on information currently\navailable to us. You can identify these forward-looking statements by the use of forward-looking words such as \u201coutlook,\u201d \u201cbelieves,\u201d \u201cexpects,\u201d\n\u201cpotential,\u201d \u201ccontinues,\u201d \u201cmay,\u201d \u201cwill,\u201d \u201cshould,\u201d \u201ccould,\u201d \u201cseeks,\u201d \u201capproximately,\u201d \u201cpredicts,\u201d \u201cintends,\u201d \u201cplans,\u201d \u201cestimates,\u201d \u201canticipates,\u201d \u201ctarget,\u201d\n\u201cprojects,\u201d \u201ccontemplates\u201d or the negative version of those words or other comparable words. Any forward-looking statements contained in this\nreport are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available\nto us. The inclusion of this forward-looking information should not be regarded as a representation by us, that the future plans, estimates or\nexpectations contemplated by us will be achieved.\nSuch forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results,\nfinancial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our\nactual results to differ materially from those indicated in these statements. The following is a summary of the principal risk factors that make\ninvesting in our securities risky and may materially adversely affect our business, financial condition, results of operations and cash flows. This\nsummary should be read in conjunction with the more complete discussion of the risk factors we face, which are set forth in Item 1A. \u201cRisk\nFactors\u201d of this report. We believe that these factors include, but are not limited to:\n \u2022 changes in economic conditions generally and specifically in our industry sectors, and other risks relating to the global economy,\n including, but not limited to, the Russia-Ukraine conflict and any related responses or actions by businesses and governments\u037e\n \u2022 reductions in cash flows received from our assets, as well as contractual limitations on the use of our aviation assets to secure debt\n for borrowed money\u037e\n \u2022 our ability to take advantage of acquisition opportunities at favorable prices\u037e\n \u2022 a lack of liquidity surrounding our assets, which could impede our ability to vary our portfolio in an appropriate manner\u037e\n \u2022 the relative spreads between the yield on the assets we acquire and the cost of financing\u037e\n \u2022 adverse changes in the financing markets we access affecting our ability to finance our acquisitions\u037e\n \u2022 customer defaults on their obligations\u037e\n \u2022 our ability to renew existing contracts and enter into new contracts with existing or potential customers\u037e\n \u2022 the availability and cost of capital for future acquisitions\u037e\n \u2022 concentration of a particular type of asset or in a particular sector\u037e\n \u2022 competition within the aviation industry\u037e\n \u2022 the competitive market for acquisition opportunities\u037e\n \u2022 risks related to operating through joint ventures, partnerships, consortium arrangements or other collaborations with third parties\u037e\n \u2022 our ability to successfully integrate acquired businesses\u037e\n \u2022 obsolescence of our assets or our ability to sell, re-lease or re-charter our assets\u037e\n \u2022 exposure to uninsurable losses and force majeure events\u037e\n \u2022 the legislative/regulatory environment and exposure to increased economic regulation\u037e\n \u2022 exposure to the oil and gas industry\u2019s volatile oil and gas prices\u037e\n \u2022 difficulties in obtaining effective legal redress in jurisdictions in which we operate with less developed legal systems\u037e\n \u2022 our ability to maintain our exemption from registration under the Investment Company Act of 1940 and the fact that maintaining such\n exemption imposes limits on our operations\u037e\n \u2022 our ability to successfully utilize leverage in connection with our investments\u037e\n \u2022 foreign currency risk and risk management activities\u037e\n \u2022 effectiveness of our internal control over financial reporting\u037e\n \u2022 exposure to environmental risks, including natural disasters, increasing environmental legislation and the broader impacts of\n climate change\u037e\n \u2022 changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such\n changes\u037e\n \u2022 actions taken by national, state, or provincial governments, including nationalization, or the imposition of new taxes, could materially\n impact the financial performance or value of our assets\u037e\n \u2022 our dependence on our Manager and its professionals and actual, potential or perceived conflicts of interest in our relationship with\n our Manager\u037e\n\n\n\n 5\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 7 of 96\n\n\n\n\n \u2022 effects of the pending acquisition of SoftBank Group Corp\u2019s equity in Fortress Investment Group LLC (\u201cFortress\u201d) by certain members\n of management of Fortress and Mubadala Capital\u037e\n \u2022 volatility in the market price of our shares\u037e\n \u2022 the inability to pay dividends to our shareholders in the future\u037e and\n \u2022 other risks described in the \u201cRisk Factors\u201d section of this report.\nThese factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included\nin this report. The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We do\nnot undertake any obligation to publicly update or review any forward-looking statement except as required by law, whether as a result of new\ninformation, future developments or otherwise.\nIf one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may\nvary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue\nreliance on any of our forward-looking statements. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us\nto predict those events or how they may affect us.\n PART I\nItem 1. Business\nOur Company\nFTAI Aviation Ltd., a Cayman Islands exempted company, was formed on December 8, 2017 and is the surviving parent company upon\ncompletion of the transactions completed in that certain Agreement and Plan of Merger (the \u201cMerger\u201d) on November 10, 2022 between Fortress\nTransportation and Infrastructure Investors LLC and FTAI Aviation Ltd. and certain other parties thereto. Except as otherwise specified, \u201cwe\u201d, \u201cus\u201d,\n\u201cour\u201d, \u201cFTAI\u201d, \u201cFTAI Aviation\u201d or \u201cthe Company\u201d refer to us and our consolidated subsidiaries. Our business has been, and will continue to be,\nconducted through FTAI Aviation Holdco Ltd. (\u201cHoldco\u201d) for the purpose of acquiring, managing and disposing of transportation and\ntransportation-related equipment assets.\nWe are externally managed by FIG LLC (the \u201cManager\u201d), an affiliate of Fortress Investment Group LLC, which has a dedicated team of\nexperienced professionals focused on the acquisition of transportation and infrastructure assets since 2002. On May 22, 2023, Fortress and\nMubadala Investment Company, through its wholly owned asset management subsidiary Mubadala Capital (\u201cMubadala\u201d), announced that they\nhave entered into definitive agreements pursuant to which, among other things, certain members of Fortress management and affiliates of\nMubadala will acquire 100% of the equity of Fortress that is currently indirectly held by SoftBank Group Corp. (\u201cSoftBank\u201d). After the closing of the\ntransaction, Fortress will continue to operate as an independent investment manager under the Fortress brand, with autonomy over investment\nprocesses and decision making, personnel and operations.\nWe own and acquire high quality aviation equipment that is essential for the transportation of goods and people globally. Additionally, we own\nand lease offshore energy equipment. We target assets that, on a combined basis, generate strong cash flows with potential for earnings\ngrowth. We believe that there are a large number of acquisition opportunities in our markets and that our Manager\u2019s expertise and business and\nfinancing relationships, together with our access to capital, will allow us to take advantage of these opportunities. As of December 31, 2023, we\nhad total consolidated assets of $3.0 billion and total equity of $175.9 million.\nAs of December 31, 2023, our operations consisted of Aviation Leasing and Aerospace Products. Our Aviation Leasing business acquires\nassets that are designed to carry cargo or people. Aviation equipment assets are typically long-lived, moveable and leased by us on either\noperating leases or finance leases to companies that provide transportation services. Our leases generally provide for long-term contractual\ncash flow with high cash-on-cash yields and include structural protections to mitigate credit risk. Our Aerospace Products business develops\nand manufactures through a joint venture, and repairs and sells, through our maintenance facility and exclusivity arrangements, aftermarket\ncomponents for aircraft engines.\nOur Strategy\nIn general, we seek to own a diverse mix of high-quality aviation assets and equipment within our target sectors that generate predictable cash\nflows in markets that we believe provide the potential for strong long-term growth and attractive returns on deployed capital. We believe that by\ninvesting in a diverse mix of assets, we can select from among the best risk-adjusted investment opportunities.\nWe take a proactive investment approach by identifying key secular trends as they emerge within our target sectors and then pursuing what we\nbelieve are the most compelling opportunities within those sectors. We look for unique investments, including assets that are distressed or\nundervalued, or where we believe that we can add value through active management. We consider investments across the size spectrum,\nincluding smaller opportunities often overlooked by other investors, particularly where we believe we may be able to grow the investment over\ntime. We believe one of our strengths is our ability to create attractive follow-on investment opportunities and deploy incremental capital within\nour existing portfolio.\nWithin each sector, we consider investments in aviation and offshore assets, including equipment that we lease to operators. We believe that as\nowners of both aviation and offshore assets, we have access to more opportunities and can be a more attractive counterparty to the users of our\nassets. Our Manager has significant prior experience in all of our target sectors, as well as a network of industry relationships, that we believe\npositions us well to make successful acquisitions and to actively manage and\n\n\n\n 6\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 8 of 96\n\n\n\n\nimprove operations and cash flows of our existing and newly-acquired assets. These relationships include senior executives at lessors and\noperators, end users of aviation and offshore energy assets, as well as banks, lenders and other asset owners.\nAsset Acquisition Process\nOur strategy is to acquire assets that are essential to the transportation of goods and people globally. We acquire assets that are used by major\noperators of transportation networks. We seek to acquire assets and businesses that we believe operate in sectors with long-term\nmacroeconomic growth opportunities and that have significant cash flow and upside potential from earnings growth and asset appreciation.\nWe approach markets and opportunities by first developing an asset acquisition strategy with our Manager and then pursuing optimal\nopportunities within that strategy. In addition to relying on our own experience, we source new opportunities through our Manager\u2019s network of\nindustry relationships in order to find, structure and execute attractive acquisitions. These relationships include senior executives at industry\nleading operators, end users of the assets as well as banks, lenders and other asset owners. We believe that sourcing assets both globally\nand through multiple channels will enable us to find the most attractive opportunities. We are selective in the assets we pursue and efficient in\nthe manner in which we pursue them.\nOnce attractive opportunities are identified, our Manager performs detailed due diligence on each of our potential acquisitions. Due diligence on\neach of our assets always includes a comprehensive review of the asset itself as well as the industry and market dynamics, competitive\npositioning, and financial and operational performance. Where appropriate, our Manager conducts physical inspections, a review of the credit\nquality of each of our counterparties, the regulatory environment, and a review of all material documentation. In some cases, third-party\nspecialists are hired to physically inspect and/or value the target assets.\nWe and our Manager also spend a significant amount of time on structuring our acquisitions to minimize risks while also optimizing expected\nreturns. We employ what we believe to be reasonable amounts of leverage in connection with our acquisitions. In determining the amount of\nleverage for each acquisition, we consider a number of characteristics, including, but not limited to, the existing cash flow, the length of the lease\nor contract term, and the specific counterparty.\nManagement Agreement and Services and Profit Sharing Agreement\nOn July 31, 2022, in connection with our spin-off, we entered into a new management agreement with the Manager (the \u201cManagement\nAgreement\u201d), an affiliate of Fortress, pursuant to which the Manager is paid annual fees in exchange for advising us on various aspects of our\nbusiness, formulating our investment strategies, arranging for the acquisition and disposition of assets, arranging for financing, monitoring\nperformance, and managing our day-to-day operations, inclusive of all costs incidental thereto. On November 10, 2022, in connection with the\nclosing of the Merger, we entered into a Services and Profit Sharing Agreement, pursuant to which the Master GP is entitled to receive incentive\npayments on substantially similar terms as it was entitled to receive such payments prior to the Merger.\nPlease refer to Note 12 of our consolidated financial statements included in Item 8 in this Annual Report on Form 10-K for further details\nregarding our Management Agreement and Services and Profit Sharing Agreement.\n\n\n\n 7\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 9 of 96\n\n\n\n\nOur Portfolio\nWe own and acquire high quality aviation and offshore energy equipment that is essential for the transportation of goods and people globally.\nWe currently invest across two market sectors: aviation leasing and aerospace products. We target assets that, on a combined basis, generate\nstrong and stable cash flows with the potential for earnings growth and asset appreciation.\nAviation Leasing\nAs of December 31, 2023, in our Aviation Leasing segment, we own and manage 363 aviation assets, consisting of 96 commercial aircraft and\n267 engines, including eight aircraft and seventeen engines that were still located in Russia.\nAs of December 31, 2023, 76 of our commercial aircraft and 175 of our engines were leased to operators or other third parties. Aviation assets\ncurrently off lease are either undergoing repair and/or maintenance, being prepared to go on lease or held in short term storage awaiting a\nfuture lease. Our aviation equipment was approximately 77% utilized during the three months ended December 31, 2023, based on the percent\nof days on-lease in the quarter weighted by the monthly average equity value of our aviation leasing equipment, excluding airframes. Our aircraft\ncurrently have a weighted average remaining lease term of 47 months, and our engines currently on-lease have an average remaining lease\nterm of 16 months. The table below provides additional information on the assets in our Aviation Leasing segment:\n\n\nAviation Assets Widebody Narrowbody Total\nAircraft\nAssets at January 1, 2023 8 98 106\nPurchases - 40 40\nSales (2) (11) (13)\nTransfers (1) (36) (37)\nAssets at December 31, 2023 5 91 96\n\n\nEngines\nAssets at January 1, 2023 40 184 224\nPurchases 7 94 101\nSales (17) (24) (41)\nTransfers 2 (19) (17)\nAssets at December 31, 2023 32 235 267\n\nAerospace Products\nThe Aerospace Products segment develops and manufactures through a joint venture, and repairs and sells, through our maintenance facility\nand exclusivity arrangements, aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial\naircraft engines. Our engine and module sales are facilitated through The Module Factory, a dedicated commercial maintenance program,\ndesigned to focus on modular repair and refurbishment of CFM56-7B and CFM56-5B engines, performed by a third party. Used serviceable\nmaterial is sold through our exclusive partnership with AAR Corp, who is responsible for the teardown, repair, marketing and sales of spare\nparts from our CFM56 engine pool. We also hold a 25% interest in the Advanced Engine Repair JV which focuses on developing new cost\nsavings programs for engine repairs.\nCorporate and Other\nIn addition to the above investments, our Corporate and Other segment includes offshore energy related assets which consist of vessels and\nequipment that support offshore oil and gas activities and are typically subject to operating leases.\nAsset Management\nOur Manager actively manages and monitors our portfolios of assets on an ongoing basis, and in some cases engages third parties to assist\nwith the management of those assets. Our Manager frequently reviews the status of all of our assets, and in the case that any are returning from\nlease or undergoing repair, outlines our options, which may include the re-lease or sale of that asset. Our Manager plays a central role in\ndeveloping and executing operational, finance and business development strategies. On a periodic basis, our Manager discusses the status of\nour acquired assets with our board of directors.\nIn some situations, we may acquire assets through a joint venture entity or own a minority position in an investment entity. In such\ncircumstances, we will seek to protect our interests through appropriate levels of board representation, minority protections and other structural\nenhancements.\nWe and our Manager maintain relationships with operators worldwide and, through these relationships, hold direct conversations as to leasing\nneeds and opportunities. Where helpful, we reach out to third parties who assist in leasing our assets. As an example, we often partner with\nMaintenance, Repair and Overhaul (\u201cMRO\u201d) facilities in the aviation sector to lease engines and support airlines\u2019 fleet management needs.\nWhile we expect to hold our assets for extended periods of time, we and our Manager continually review our assets to assess\n\n\n\n 8\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 10 of 96\n\n\n\n\nwhether we should sell or otherwise monetize them. Aspects that will factor into this process include relevant market conditions, the asset\u2019s\nage, lease profile, relative concentration or remaining expected useful life.\nCredit Process\nWe and our Manager monitor the credit quality of our various lessees on an ongoing basis. This monitoring includes interacting with our\ncustomers regularly to monitor collections, review periodic financial statements and discuss their operating performance. Most of our lease\nagreements are written with conditions that require reporting on the part of our lessees, and we actively reach out to our lessees to maintain\ncontact and monitor their liquidity positions. Furthermore, many of our leases and contractual arrangements include credit enhancement\nelements that provide us with additional collateral or credit support to strengthen our credit position.\nWe are subject to concentrations of credit risk with respect to amounts due from customers on our direct finance leases and operating leases.\nWe attempt to limit credit risk by performing ongoing credit evaluations. See \u201cCustomers.\u201d\nCustomers\nOur customers primarily consist of global operators of transportation networks and global industrial companies, including airlines and offshore\nenergy service providers. We maintain ongoing relationships and discussions with our customers and seek to have consistent dialogue. In\naddition to helping us monitor the needs and quality of our customers, we believe these relationships help source additional opportunities and\ngain insight into attractive opportunities in the aviation and offshore energy sectors. A substantial portion of our revenue has historically been\nderived from a small number of customers. As of and for the year ended December 31, 2023, no customer accounted for more than 10% of our\nrevenue or total accounts receivable, net. We derive a significant percentage of our revenue within specific sectors from a limited number of\ncustomers. However, we do not think that we are dependent upon any particular customer, or that the loss of one or more of them would have a\nmaterial adverse effect on our business or the relevant segment, because of our ability to re-lease assets at similar terms following the loss of\nany such customer. See \u201cRisk Factors-Contractual defaults may adversely affect our business, prospects, financial condition, results of\noperations and cash flows by decreasing revenues and increasing storage, positioning, collection, recovery and lost equipment expenses.\u201d\nCompetition\nThe business of acquiring, managing and marketing aviation and offshore-equipment related assets is highly competitive. Market competition\nfor acquisition opportunities includes traditional aviation and offshore energy companies, commercial and investment banks, as well as a\ngrowing number of non-traditional participants, such as hedge funds, private equity funds, and other private investors.\nAdditionally, the markets for our products and services are competitive, and we face competition from a number of sources. These competitors\ninclude engine and aircraft parts manufacturers, aircraft and aircraft engine lessors, airline and aircraft services and repair companies, aircraft\nspare parts distributors, offshore services providers, maritime equipment lessors and other transportation equipment lessors and operators.\nWe compete with other market participants on the basis of industry knowledge, availability of capital, and deal structuring experience and\nflexibility, among other things. We believe our Manager\u2019s experience in the aviation and offshore industries and our access to capital, in addition\nto our focus on diverse asset classes and customers, provides a competitive advantage versus competitors that maintain a single sector focus.\nGovernmental Regulations\nWe are subject to federal, state, local and foreign laws and regulations relating to the protection of the environment, including those governing\nthe discharge of pollutants to air and water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated\nsites and noise and emission levels. Under some environmental laws in the United States and certain other countries, strict liability may be\nimposed on the owners or operators of assets, which could render us liable for environmental and natural resource damages without regard to\nnegligence or fault on our part. We could incur substantial costs, including cleanup costs, fines and third-party claims for property or natural\nresource damage and personal injury, as a result of violations of or liabilities under environmental laws and regulations in connection with our\nor our lessee\u2019s or charterer\u2019s current or historical operations. While we typically maintain liability insurance coverage and typically require our\nlessees to provide us with indemnity against certain losses, the insurance coverage is subject to large deductibles, limits on maximum\ncoverage and significant exclusions and may not be sufficient or available to protect against any or all liabilities and such indemnities may not\ncover or be sufficient to protect us against losses arising from environmental damage. In addition, changes to environmental standards or\nregulations in the industries in which we operate could limit the economic life of the assets we acquire or reduce their value, and also require us\nto make significant additional investments in order to maintain compliance.\nSustainability\nAs part of our strategy, we are focused on supporting the transition to a low-carbon economy and aim to provide sustainable aviation and\noffshore solutions by leveraging our Manager\u2019s expertise and business and financing relationships, as well as our access to capital. Certain of\nour current sustainability solutions and investments are highlighted below, and we expect to continue to explore additional sustainability-related\nopportunities.\nAerospace\n\n\n\n 9\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 11 of 96\n\n\n\n\nAs previously announced, in December 2021 we entered into an agreement with AAR CORP. (NYSE: AIR) to create Serviceable Engine Products,\nan exclusive seven-year CFM56 used serviceable material (\u201cUSM\u201d) partnership. The partnership aims to build USM inventory for the global\naviation aftermarket and our own consumption at The Module Factory\u2122, a dedicated commercial maintenance program, designed to focus on\nmodular repair and refurbishment of CFM56-7B and CFM56-5B engines, performed by a third party. Through its worldwide network, AAR is\nexpected to manage the teardown, repair, marketing and sales of spare parts from our CFM56 engine pool totaling over 200 engines and\ngrowing. We believe our partnership with AAR will help maximize the life of our engine assets and reduce our carbon footprint and\nenvironmental impact.\nHuman Capital Management\nOur Manager provides a management team and other professionals who are responsible for implementing our business strategy and\nperforming certain services for us, subject to oversight by our board of directors. As of December 31, 2023, we also have approximately 170\nemployees at certain subsidiaries across our business segments. We consider our relationship with our employees to be good and we focus\nheavily on employee engagement. We have invested substantial time and resources in building our team, and our human capital management\nobjectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees. To facilitate\nattraction and retention, we strive to create a diverse, inclusive, and safe workplace, with opportunities for our employees to grow and develop in\ntheir careers, supported by strong compensation and benefits programs.\nInsurance\nOur leases generally require that our customers carry physical damage and liability insurance providing primary insurance coverage for loss\nand damage to our assets as well as for related cargo and third parties while the assets are on lease. In addition, in certain cases, we maintain\ncontingent liability coverage for any claims or losses on our assets while they are on hire or otherwise in the possession of a third-party. Finally,\nwe procure insurance for our assets when they are not on hire or are otherwise under our control.\nConflicts of Interest\nAlthough we have established certain policies and procedures designed to mitigate conflicts of interest, there can be no assurance that these\npolicies and procedures will be effective in doing so. It is possible that actual, potential or perceived conflicts of interest could give rise to\ninvestor dissatisfaction, litigation or regulatory enforcement actions.\nOne or more of our officers and directors have responsibilities and commitments to entities other than us. In addition, we do not have a policy\nthat expressly prohibits our directors, officers, security holders or affiliates from engaging in business activities of the types conducted by us for\ntheir own account. See \u201cRisk Factors-Risks Related to Our Manager-There are conflicts of interest in our relationship with our Manager.\u201d\nOur key agreements, including our Management Agreement, the services and profit sharing agreement (the \u201cServices and Profit Sharing\nAgreement\u201d) with our subsidiary Fortress Transportation and Infrastructure Investors LLC and Fortress Worldwide Transportation and\nInfrastructure Master GP LLC (\u201cMaster GP\u201d) and our amended and restated memorandum and articles of association (as amended from time to\ntime, the \u2018\u2018Articles\u2019\u2019) were negotiated among related parties, and their respective terms, including fees and other amounts payable, may not be\nas favorable to us as terms negotiated on an arm\u2019s-length basis with unaffiliated parties. Our independent directors may not vigorously enforce\nthe provisions of our Management Agreement against our Manager. For example, our independent directors may refrain from terminating our\nManager because doing so could result in the loss of key personnel.\nWe may compete with entities affiliated with our Manager or Fortress for certain target assets. From time to time, affiliates of Fortress may focus\non investments in assets with a similar profile as our target assets that we may seek to acquire. These affiliates may have meaningful\npurchasing capacity, which may change over time depending upon a variety of factors, including, but not limited to, available equity capital and\ndebt financing, market conditions and cash on hand. Fortress has multiple existing and planned funds focused on investing in one or more of\nthe sectors in which we acquire assets, each with significant current or expected capital commitments. We may co-invest with these funds in\ncertain target assets. Fortress funds generally have a fee structure similar to ours, but the fees actually paid will vary depending on the size,\nterms and performance of each fund.\nOur Manager may determine, in its discretion, to make a particular acquisition through an investment vehicle other than us. Investment\nallocation decisions will reflect a variety of factors, such as a particular vehicle\u2019s availability of capital (including financing), investment objectives\nand concentration limits, legal, regulatory, tax and other similar considerations, the source of the opportunity and other factors that the Manager,\nin its discretion, deems appropriate. Our Manager does not have an obligation to offer us the opportunity to participate in any particular\ninvestment, even if it meets our asset acquisition objectives. In addition, employees of Fortress or certain of its affiliates-including personnel\nproviding services to or on behalf of our Manager-may perform services for Fortress affiliates that may acquire or seek to acquire aviation and\noffshore energy-related assets.\n\n\n\n 10\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 12 of 96\n\n\n\n\nWhere Readers Can Find Additional Information\nFTAI Aviation Ltd. is a Cayman Islands exempted company. Our principal executive offices are located at 1345 Avenue of the Americas, New York,\nNew York 10105. FTAI Aviation Ltd. files annual, quarterly and current reports, proxy statements and other information required by the Exchange\nAct, with the SEC. Our SEC filings are available to the public from the SEC\u2019s internet site at http://www.sec.gov.\nOur internet site is http://www.www.ftaiaviation.com. We will make available free of charge through our internet site our annual reports on Form\n10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and Forms 3, 4 and 5 filed on behalf of directors and\nexecutive officers and any amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after\nwe electronically file such material with, or furnish it to, the SEC. Also posted on our website in the \u2018\u2018Investor Center - Corporate Governance\u2019\u2019\nsection are charters for our Audit Committee, Compensation Committee, Nominating Committee, as well as our Corporate Governance\nGuidelines, Code of Ethics for our officers, and our Code of Business Conduct and Ethics governing our directors, officers and employees.\nInformation on, or accessible through, our website is not a part of, and is not incorporated into, this report.\nItem 1A. Risk Factors\nYou should carefully consider the following risks and other information in this Form 10-K in evaluating us and our shares. Any of the following\nrisks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely\naffect our results of operations or financial condition. The risk factors generally have been separated into the following categories: risks related to\nour business, risks related to our Manager, risks related to taxation and risks related to the Company\u2019s shares. However, these categories do\noverlap and should not be considered exclusive.\nRisks Related to Our Business\nUncertainty relating to macroeconomic conditions may reduce the demand for our assets, result in non-performance of contracts by our\nlessees or charterers, limit our ability to obtain additional capital to finance new investments, or have other unforeseen negative effects.\nUncertainty and negative trends in general economic conditions in the United States and abroad, including significant tightening of credit\nmarkets and commodity price volatility, historically have created difficult operating environments for owners and operators in the transportation\nindustries. Many factors, including factors that are beyond our control, may impact our operating results or financial condition and/or affect the\nlessees and charterers that form our customer base. For some years, the world has experienced weakened economic conditions and volatility\nfollowing adverse changes in global capital markets. Excess supply in oil and gas markets can put significant downward pressure on prices for\nthese commodities, and may affect demand for assets used in production, refining and transportation of oil and gas. In the past, a significant\ndecline in oil prices has led to lower offshore exploration and production budgets worldwide. These conditions have resulted in significant\ncontraction, deleveraging and reduced liquidity in the credit markets. A number of governments have implemented, or are considering\nimplementing, a broad variety of governmental actions or new regulations for the financial markets. In addition, limitations on the availability of\ncapital, higher costs of capital for financing expenditures or the desire to preserve liquidity, may cause our current or prospective customers to\nmake reductions in future capital budgets and spending.\nFurther, demand for our assets is related to passenger and cargo traffic growth, which in turn is dependent on general business and economic\nconditions. Global economic downturns could have an adverse impact on passenger and cargo traffic levels and consequently our lessees\u2019 and\ncharterers\u2019 business, which may in turn result in a significant reduction in revenues, earnings and cash flows, difficulties accessing capital and\na deterioration in the value of our assets. We have in the past been exposed to increased credit risk from our customers and third parties who\nhave obligations to us, which resulted in non-performance of contracts by our lessees and adversely impacted our business, financial condition,\nresults of operations and cash flows. We cannot assure you that similar loss events may not occur in the future.\nInstability in geographies where we have assets or where we derive revenue could have a material adverse effect on our business,\ncustomers, operations and financial results.\nEconomic, civil, military and political uncertainty exists and may increase in regions where we operate and derive our revenue. Various countries\nin which we operate are experiencing and may continue to experience military action and civil and political unrest. We have assets in the\nemerging market economies of Eastern Europe, including some assets in Russia. In late February 2022, Russian military forces launched\nsignificant military action against Ukraine. The conflict remains ongoing and sustained conflict and disruption in the region is likely. The impact\nto Russia and Ukraine, as well as actions taken by other countries, including new and stricter export controls and sanctions by Canada, the\nUnited Kingdom, the European Union, the U.S. and other countries and organizations against officials, individuals, regions, and industries in\nRussia and Ukraine, and each country\u2019s potential response to such sanctions, tensions and military actions, could have a material adverse\neffect on our business and delay or prevent us from accessing certain of our assets. We are actively monitoring the security of our remaining\nassets in the region.\nThe aviation industry has experienced periods of oversupply during which lease rates and asset values have declined, particularly during\nthe most recent economic downturn, and any future oversupply could materially adversely affect our results of operations and cash\nflows.\n\n\n\n 11\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 13 of 96\n\n\n\n\nThe oversupply of a specific asset is likely to depress the lease or charter rates for and the value of that type of asset and result in decreased\nutilization of our assets, and the industries in which we operate have experienced periods of oversupply during which rates and asset values\nhave declined, particularly during the most recent economic downturn. Factors that could lead to such oversupply include, without limitation:\n \u2022 general demand for the type of assets that we purchase\u037e\n \u2022 general macroeconomic conditions, including market prices for commodities that our assets may serve\u037e\n \u2022 geopolitical events, including war, prolonged armed conflict and acts of terrorism\u037e\n \u2022 outbreaks of communicable diseases and natural disasters\u037e\n \u2022 governmental regulation\u037e\n \u2022 interest rates\u037e\n \u2022 the availability of credit\u037e\n \u2022 potential reduced cash flows and financial condition, including potential liquidity restraints\u037e\n \u2022 restructurings and bankruptcies of companies in the industries in which we operate, including our customers\u037e\n \u2022 manufacturer production levels and technological innovation\u037e\n \u2022 manufacturers merging or exiting the industry or ceasing to produce certain asset types\u037e\n \u2022 retirement and obsolescence of the assets that we own\u037e\n \u2022 increases in supply levels of assets in the market due to the sale or merging of operating lessors\u037e and\n \u2022 reintroduction of previously unused or dormant assets into the industries in which we operate.\nThese and other related factors are generally outside of our control and could lead to persistence of, or increase in, the oversupply of the types\nof assets that we acquire or decreased utilization of our assets, either of which could materially adversely affect our results of operations and\ncash flow. In addition, aviation lessees may redeliver our assets to locations where there is oversupply, which may lead to additional\nrepositioning costs for us if we move them to areas with higher demand. Positioning expenses vary depending on geographic location,\ndistance, rates and other factors, and may not be fully covered by drop-off charges collected from the last lessees of the equipment or pick-up\ncharges paid by the new lessees. Positioning expenses can be significant if a large portion of our assets are returned to locations with weak\ndemand, which could materially adversely affect our business, prospects, financial condition, results of operations and cash flows.\nThe airline industry is heavily regulated, and if we fail to comply with applicable requirements, our results of operations could suffer.\nThe Federal Aviation Administration (\u201cFAA\u201d) and equivalent regulatory agencies have increasingly focused on the need to assure that airline\nindustry products are designed with sufficient cybersecurity controls to protect against unauthorized access or other unwanted compromise. A\nfailure to meet these evolving expectations could negatively impact sales into the industry and expose us to legal or contractual liability.\nGovernmental agencies throughout the world, including the FAA, prescribe standards and qualification requirements for aircraft components,\nincluding virtually all commercial airline and general aviation products. Specific regulations vary from country to country, although compliance\nwith FAA requirements generally satisfies regulatory requirements in other countries. If any material authorization or approval qualifying us to\nsupply our products is revoked or suspended, then sale of the product would be prohibited by law, which would have an adverse effect on our\nbusiness, financial condition and results of operations.\nFrom time to time, the FAA or equivalent regulatory agencies in other countries propose new regulations or changes to existing regulations,\nwhich often are more stringent than existing regulations. If such proposals are adopted and enacted, we may incur significant additional costs to\nachieve compliance, which could have a material adverse effect on our business, financial condition and results of operations.\nRecent trends by China\u2019s aviation authority to relax restrictions on airspace may be reversed, and anticipated new regulations loosening\nairspace restrictions may not materialize, which could impact sales prospects in China for our commercial aerospace businesses.\nThe retirement or prolonged grounding of commercial aircraft could reduce our revenues and the value of any related inventory.\nWe sell aircraft components and replacement parts. If aircraft or engines for which we offer aircraft components and replacement parts are\nretired or grounded for prolonged periods of time and there are fewer aircraft that require these components or parts, our revenues may decline\nas well as the value of any related inventory.\nContractual defaults may adversely affect our business, prospects, financial condition, results of operations and cash flows by\ndecreasing revenues and increasing storage, positioning, collection, recovery and lost equipment expenses.\nThe success of our business depends in large part on the success of the operators in the sectors in which we participate. Cash flows from our\nassets are substantially impacted by our ability to collect compensation and other amounts to be paid in respect of such assets from the\ncustomers with whom we enter into leases, charters or other contractual arrangements. Inherent in the nature of the leases, charters and other\narrangements for the use of such assets is the risk that we may not receive, or may\n\n\n\n 12\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 14 of 96\n\n\n\n\nexperience delay in realizing, such amounts to be paid. While we target the entry into contracts with credit-worthy counterparties, no assurance\ncan be given that such counterparties will perform their obligations during the term of the leases, charters or other contractual arrangements. In\naddition, when counterparties default, we may fail to recover all of our assets, and the assets we do recover may be returned in damaged\ncondition or to locations where we will not be able to efficiently lease, charter or sell them. In most cases, we maintain, or require our lessees to\nmaintain, certain insurances to cover the risk of damages or loss of our assets. However, these insurance policies may not be sufficient to\nprotect us against a loss.\nDepending on the specific sector, the risk of contractual defaults may be elevated due to excess capacity as a result of oversupply during the\nmost recent economic downturn. We lease assets to our customers pursuant to fixed-price contracts, and our customers then seek to utilize\nthose assets to transport goods and provide services. If the price at which our customers receive for their transportation services decreases as\na result of an oversupply in the marketplace, then our customers may be forced to reduce their prices in order to attract business (which may\nhave an adverse effect on their ability to meet their contractual lease obligations to us), or may seek to renegotiate or terminate their contractual\nlease arrangements with us to pursue a lower-priced opportunity with another lessor, which may have a direct, adverse effect on us. See \u201c-The\nindustries in which we operate have experienced periods of oversupply during which lease rates and asset values have declined, particularly\nduring the most recent economic downturn, and any future oversupply could materially adversely affect our results of operations and cash\nflows.\u201d Any default by a material customer would have a significant impact on our profitability at the time the customer defaulted, which could\nmaterially adversely affect our operating results and growth prospects. In addition, some of our counterparties may reside in jurisdictions with\nlegal and regulatory regimes that make it difficult and costly to enforce such counterparties\u2019 obligations.\nWe acquire a high concentration of a particular type of asset, or concentrate our investments in a particular sector, and our business,\nprospects, financial condition, results of operations and cash flows could be adversely affected by changes in market demand or\nproblems specific to that asset or sector.\nIf we acquire a high concentration of a particular asset, or concentrate our investments in a particular sector, and our business and financial\nresults could be adversely affected by sector-specific or asset-specific factors. If the market demand for a particular asset declines, it is\nredesigned or replaced by its manufacturer or it experiences design or technical problems, the value and rates relating to such asset may\ndecline, and we may be unable to lease such asset on favorable terms, if at all. Any decrease in the value and rates of our assets may have a\nmaterial adverse effect on our business, prospects, financial condition, results of operations and cash flows.\nWe operate in highly competitive markets.\nThe business of acquiring aviation assets is highly competitive. Market competition for opportunities includes traditional transportation\ncompanies, commercial and investment banks, as well as a growing number of non-traditional participants, such as hedge funds, private equity\nfunds and other private investors, including Fortress-related entities. Some of these competitors may have access to greater amounts of capital\nand/or to capital that may be committed for longer periods of time or may have different return thresholds than us, and thus these competitors\nmay have certain advantages not shared by us. In addition, competitors may have incurred, or may in the future incur, leverage to finance their\ndebt investments at levels or on terms more favorable than those available to us. Strong competition for investment opportunities could result in\nfewer such opportunities for us, as certain of these competitors have established and are establishing investment vehicles that target the same\ntypes of assets that we intend to purchase.\nIn addition, some of our competitors may have longer operating histories, greater financial resources and lower costs of capital than us, and\nconsequently, may be able to compete more effectively in one or more of our target markets. We likely will not always be able to compete\nsuccessfully with our competitors and competitive pressures or other factors may also result in significant price competition, particularly during\nindustry downturns, which could have a material adverse effect on our business, prospects, financial condition, results of operations and cash\nflows.\nCertain liens may arise on our assets.\nCertain of our assets are currently subject to liens under separate financing arrangements entered into by certain subsidiaries in connection\nwith acquisitions of assets. In the event of a default under such arrangements by the applicable subsidiary, the lenders thereunder would be\npermitted to take possession of or sell such assets. In addition, our currently owned assets and assets that we purchase in the future may be\nsubject to other liens based on the industry practices relating to such assets. Until they are discharged, these liens could impair our ability to\nrepossess, re-lease or sell our assets, and to the extent our lessees or charterers do not comply with their obligations to discharge any liens on\nthe applicable assets, we may find it necessary to pay the claims secured by such liens in order to repossess such assets. Such payments\ncould materially adversely affect our operating results and growth prospects.\nThe values of our assets may fluctuate due to various factors.\nThe fair market values of our assets may decrease or increase depending on a number of factors, including the prevailing level of charter or\nlease rates from time to time, general economic and market conditions affecting our target markets, type and age of assets, supply and demand\nfor assets, competition, new governmental or other regulations and technological advances, all of which could impact our profitability and our\nability to lease, develop, operate, or sell such assets. In addition, our assets depreciate as they age and may generate lower revenues and cash\nflows. We must be able to replace such older, depreciated assets with newer assets, or our ability to maintain or increase our revenues and\ncash flows will decline. In addition, if we\n\n\n\n 13\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 15 of 96\n\n\n\n\ndispose of an asset for a price that is less than the depreciated book value of the asset on our balance sheet or if we determine that an asset\u2019s\nvalue has been impaired, we will recognize a related charge in our consolidated statement of operations and such charge could be material.\nWe may not generate a sufficient amount of cash or generate sufficient free cash flow to fund our operations or repay our indebtedness.\nOur ability to make payments on our indebtedness as required depends on our ability to generate cash flow in the future. This ability, to a certain\nextent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we do not\ngenerate sufficient free cash flow to satisfy our debt obligations, including interest payments and the payment of principal at maturity, we may\nhave to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital\ninvestments or seeking to raise additional capital. We cannot provide assurance that any refinancing would be possible, that any assets could\nbe sold, or, if sold, of the timeliness and amount of proceeds realized from those sales, that additional financing could be obtained on\nacceptable terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then in effect.\nFurthermore, our ability to refinance would depend upon the condition of the finance and credit markets. Our inability to generate sufficient free\ncash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms or on a timely basis, would materially\naffect our business, financial condition and results of operations.\nOur use of joint ventures or partnerships, and our Manager\u2019s outsourcing of certain functions, may present unforeseen obstacles or\ncosts.\nWe have acquired and may in the future acquire interests in certain assets in cooperation with third-party partners or co-investors through jointly-\nowned acquisition vehicles, joint ventures or other structures. In these co-investment situations, our ability to control the management of such\nassets depends upon the nature and terms of the joint arrangements with such partners and our relative ownership stake in the asset, each of\nwhich will be determined by negotiation at the time of the investment and the determination of which is subject to the discretion of our Manager.\nDepending on our Manager\u2019s perception of the relative risks and rewards of a particular asset, our Manager may elect to acquire interests in\nstructures that afford relatively little or no operational and/or management control to us. Such arrangements present risks not present with\nwholly-owned assets, such as the possibility that a co-investor becomes bankrupt, develops business interests or goals that conflict with our\ninterests and goals in respect of the assets, all of which could materially adversely affect our business, prospects, financial condition, results of\noperations and cash flows.\nIn addition, our Manager expects to utilize third-party contractors to perform services and functions related to the operation and leasing of our\nassets. These functions may include billing, collections, recovery and asset monitoring. Because we and our Manager do not directly control\nthese third parties, there can be no assurance that the services they provide will be delivered at a level commensurate with our expectations, or\nat all. The failure of any such third-party contractors to perform in accordance with our expectations could materially adversely affect our\nbusiness, prospects, financial condition, results of operations and cash flows.\nWe are subject to the risks and costs of obsolescence of our assets.\nTechnological and other improvements expose us to the risk that certain of our assets may become technologically or commercially obsolete.\nFor example, as manufacturers introduce technological innovations and new types of aircraft, some of our assets could become less desirable\nto potential lessees. Such technological innovations may increase the rate of obsolescence of existing aircraft faster than currently anticipated\nby us. In addition, the imposition of increased regulation regarding stringent noise or emissions restrictions may make some of our aircraft less\ndesirable and less valuable in the marketplace. In our offshore energy business, development and construction of new, sophisticated, high-\nspecification assets could cause our assets to become less desirable to potential charterers, and insurance rates may also increase with the\nage of a vessel, making older vessels less desirable to potential charterers. Any of these risks may adversely affect our ability to lease, charter\nor sell our assets on favorable terms, if at all, which could materially adversely affect our operating results and growth prospects.\nThe inability to obtain certain components from suppliers could harm our business.\nOur business is affected by the availability and price of the component parts that we use to maintain our products or to manufacture products.\nOur ability to manage inventory and meet delivery requirements may be constrained by our suppliers\u2019 ability to adjust delivery of long-lead time\nproducts during times of volatile demand. The supply chains for our business could also be disrupted by external events such as natural\ndisasters, extreme weather events, pandemics, labor disputes, governmental actions and legislative or regulatory changes. As a result, our\nsuppliers may fail to perform according to specifications when required and we may be unable to identify alternate suppliers or to otherwise\nmitigate the consequences of their non-performance.\nTransitions to new suppliers may result in significant costs and delays, including those related to the required recertification of parts obtained\nfrom new suppliers with our customers and/or regulatory agencies. Our inability to fill our supply needs could jeopardize our ability to fulfill\nobligations under customer contracts, which could result in reduced revenues and profits, contract penalties or terminations, and damage to\ncustomer relationships. Further, increased costs of such components could reduce our profits if we were unable to pass along such price in-\ncreases to our customers.\nWe could be negatively impacted by environmental, social, and governance (ESG) and sustainability-related matters.\n\n\n\n 14\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 16 of 96\n\n\n\n\nGovernments, investors, customers, employees and other stakeholders are increasingly focusing on corporate ESG practices and disclosures,\nand expectations in this area are rapidly evolving. We have announced, and may in the future announce, sustainability-focused investments,\npartnerships and other initiatives and goals. These initiatives, aspirations, targets or objectives reflect our current plans and aspirations and are\nnot guarantees that we will be able to achieve them. Our efforts to accomplish and accurately report on these initiatives and goals present\nnumerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material negative impact, including on\nour reputation and stock price.\nIn addition, the standards for tracking and reporting on ESG matters are relatively new, have not been harmonized and continue to evolve. Our\nselection of disclosure frameworks that seek to align with various voluntary reporting standards may change from time to time and may result in\na lack of comparative data from period to period. Moreover, our processes and controls may not always align with evolving voluntary standards\nfor identifying, measuring, and reporting ESG metrics, our interpretation of reporting standards may differ from those of others, and such\nstandards may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In\nthis regard, the criteria by which our ESG practices and disclosures are assessed may change due to the quickly evolving landscape, which\ncould result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. The increasing attention to\ncorporate ESG initiatives could also result in increased investigations and litigation or threats thereof. If we are unable to satisfy such new\ncriteria, investors may conclude that our ESG and sustainability practices are inadequate. If we fail or are perceived to have failed to achieve\npreviously announced initiatives or goals or to accurately disclose our progress on such initiatives or goals, our reputation, business, financial\ncondition and results of operations could be adversely impacted.\nWe may be affected by fluctuating prices for fuel and energy.\nVolatility in energy prices could have a significant effect on a variety of items including, but not limited to, the economy and demand for\ntransportation services.\nInternational, political, and economic factors, events and conditions, including current sanctions against Russia related to its invasion of\nUkraine, affect the volatility of fuel prices and supplies. Weather can also affect fuel supplies and limit domestic refining capacity. A severe\nshortage of, or disruption to, domestic fuel supplies could have a material adverse effect on our results of operations, financial condition, and\nliquidity.\nOur assets generally require routine maintenance, and we may be exposed to unforeseen maintenance costs.\nWe may be exposed to unforeseen maintenance costs for our assets associated with a lessee\u2019s or charterer\u2019s failure to properly maintain the\nasset. We enter into leases and charters with respect to some of our assets pursuant to which the lessees are primarily responsible for many\nobligations, which generally include complying with all governmental requirements applicable to the lessee or charterer, including operational,\nmaintenance, government agency oversight, registration requirements and other applicable directives. Failure of a lessee or charterer to\nperform required maintenance during the term of a lease or charter could result in a decrease in value of an asset, an inability to re-lease or\ncharter an asset at favorable rates, if at all, or a potential inability to utilize an asset. Maintenance failures would also likely require us to incur\nmaintenance and modification costs upon the termination of the applicable lease or charter\u037e such costs to restore the asset to an acceptable\ncondition prior to re-leasing, charter or sale could be substantial. Any failure by our lessees or charterers to meet their obligations to perform\nrequired scheduled maintenance or our inability to maintain our assets could materially adversely affect our business, prospects, financial\ncondition, results of operations and cash flows.\nSome of our customers operate in highly regulated industries and changes in laws or regulations, including laws with respect to\ninternational trade, may adversely affect our ability to lease, charter or sell our assets.\nSome of our customers operate in highly regulated industries such as aviation and offshore energy. A number of our contractual arrangements-\nfor example, our leasing aircraft engines or offshore energy equipment to third-party operators-require the operator (our customer) to obtain\nspecific governmental or regulatory licenses, consents or approvals. These include consents for certain payments under such arrangements\nand for the export, import or re-export of the related assets. Failure by our customers or, in certain circumstances, by us, to obtain certain\nlicenses and approvals could negatively affect our ability to conduct our business. In addition, the shipment of goods, services and technology\nacross international borders subjects the operation of our assets to international trade laws and regulations. Moreover, many countries,\nincluding the United States, control the export and re-export of certain goods, services and technology and impose related export recordkeeping\nand reporting obligations. Governments also may impose economic sanctions against certain countries, persons and other entities that may\nrestrict or prohibit transactions involving such countries, persons and entities. If any such regulations or sanctions affect the asset operators that\nare our customers, our business, prospects, financial condition, results of operations and cash flows may be materially adversely affected.\n\n\n\n 15\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 17 of 96\n\n\n\n\nCertain of our assets are subject to purchase options held by the charterer or lessee of the asset which, if exercised, could reduce the\nsize of our asset base and our future revenues.\nWe have granted purchase options to the charterers and lessees of certain of our assets. The market values of these assets may change from\ntime to time depending on a number of factors, such as general economic and market conditions affecting the industries in which we operate,\ncompetition, cost of construction, governmental or other regulations, technological changes and prevailing levels of charter or lease rates from\ntime to time. The purchase price under a purchase option may be less than the asset\u2019s market value at the time the option may be exercised. In\naddition, we may not be able to obtain a replacement asset for the price at which the asset is sold. In such cases, our business, prospects,\nfinancial condition, results of operations and cash flows may be materially adversely affected.\nThe profitability of our offshore energy assets may be impacted by the profitability of the offshore oil and gas industry generally, which is\nsignificantly affected by, among other things, volatile oil and gas prices.\nDemand for assets in the offshore energy business and our ability to secure charter contracts for our assets at favorable charter rates following\nexpiry or termination of existing charters will depend, among other things, on the level of activity in the offshore oil and gas industry. The offshore\noil and gas industry is cyclical and volatile, and demand for oil-service assets depends on, among other things, the level of development and\nactivity in oil and gas exploration, as well as the identification and development of oil and gas reserves and production in offshore areas\nworldwide. The availability of high quality oil and gas prospects, exploration success, relative production costs, the stage of reservoir\ndevelopment, political concerns and regulatory requirements all affect the level of activity for charterers of oil-service vessels. Accordingly, oil and\ngas prices and market expectations of potential changes in these prices significantly affect the level of activity and demand for oil-service assets.\nOil and gas prices can be extremely volatile and are affected by numerous factors beyond our control, such as: worldwide demand for oil and\ngas\u037e costs of exploring, developing, producing and delivering oil and gas\u037e expectations regarding future energy prices\u037e the ability of the\nOrganization of Petroleum Exporting Countries (\u201cOPEC\u201d) to set and maintain production levels and impact pricing\u037e the level of production in non-\nOPEC countries\u037e governmental regulations and policies regarding development of oil and gas reserves\u037e local and international political,\neconomic and weather conditions\u037e domestic and foreign tax or trade policies\u037e political and military conflicts in oil-producing and other countries\u037e\nand the development and exploration of alternative fuels. Any reduction in the demand for our assets due to these or other factors could\nmaterially adversely affect our operating results and growth prospects.\nWe may not be able to renew or obtain new or favorable charters or leases, which could adversely affect our business, prospects,\nfinancial condition, results of operations and cash flows.\nOur operating leases are subject to greater residual risk than direct finance leases because we will own the assets at the expiration of an\noperating lease term and we may be unable to renew existing charters or leases at favorable rates, or at all, or sell the leased or chartered\nassets, and the residual value of the asset may be lower than anticipated. In addition, our ability to renew existing charters or leases or obtain\nnew charters or leases will also depend on prevailing market conditions, and upon expiration of the contracts governing the leasing or charter of\nthe applicable assets, we may be exposed to increased volatility in terms of rates and contract provisions. For example, we do not currently have\nlong-term charters for our construction support vessel and our ROV support vessel. Likewise, our customers may reduce their activity levels or\nseek to terminate or renegotiate their charters or leases with us. If we are not able to renew or obtain new charters or leases in direct\ncontinuation, or if new charters or leases are entered into at rates substantially below the existing rates or on terms otherwise less favorable\ncompared to existing contractual terms, or if we are unable to sell assets for which we are unable to obtain new contracts or leases, our\nbusiness, prospects, financial condition, results of operations and cash flows could be materially adversely affected.\nLitigation to enforce our contracts and recover our assets has inherent uncertainties that are increased by the location of our assets in\njurisdictions that have less developed legal systems.\nWhile some of our contractual arrangements are governed by New York law and provide for the non-exclusive jurisdiction of the courts located in\nthe state of New York, our ability to enforce our counterparties\u2019 obligations under such contractual arrangements is subject to applicable laws in\nthe jurisdiction in which enforcement is sought. While some of our existing assets are used in specific jurisdictions, transportation and aviation\nassets by their nature generally move throughout multiple jurisdictions in the ordinary course of business. As a result, it is not possible to\npredict, with any degree of certainty, the jurisdictions in which enforcement proceedings may be commenced. Litigation and enforcement\nproceedings have inherent uncertainties in any jurisdiction and are expensive. These uncertainties are enhanced in countries that have less\ndeveloped legal systems where the interpretation of laws and regulations is not consistent, may be influenced by factors other than legal merits\nand may be cumbersome, time-consuming and even more expensive. For example, repossession from defaulting lessees may be difficult and\nmore expensive in jurisdictions whose laws do not confer the same security interests and rights to creditors and lessors as those in the United\nStates and where the legal system is not as well developed. As a result, the remedies available and the relative success and expedience of\ncollection and enforcement proceedings with respect to the owned assets in various jurisdictions cannot be predicted. To the extent more of our\nbusiness shifts to areas outside of the United States and Europe, such as Asia and the Middle East, it may become more difficult and expensive\nto enforce our rights and recover our assets.\nOur international operations involve additional risks, which could adversely affect our business, prospects, financial condition, results of\noperations and cash flows.\nWe and our customers operate in various regions throughout the world. As a result, we may, directly or indirectly, be exposed to political and\nother uncertainties, including risks of:\n\n\n\n 16\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 18 of 96\n\n\n\n\n \u2022 terrorist acts, armed hostilities, war and civil disturbances\u037e\n \u2022 acts of piracy\u037e\n \u2022 potential cybersecurity attacks\u037e\n \u2022 significant governmental influence over many aspects of local economies\u037e\n \u2022 seizure, nationalization or expropriation of property or equipment\u037e\n \u2022 repudiation, nullification, modification or renegotiation of contracts\u037e\n \u2022 limitations on insurance coverage, such as war risk coverage, in certain areas\u037e\n \u2022 political unrest\u037e\n \u2022 foreign and U.S. monetary policy and foreign currency fluctuations and devaluations\u037e\n \u2022 the inability to repatriate income or capital\u037e\n \u2022 complications associated with repairing and replacing equipment in remote locations\u037e\n \u2022 import-export quotas, wage and price controls, imposition of trade barriers\u037e\n \u2022 U.S. and foreign sanctions or trade embargoes\u037e\n \u2022 restrictions on the transfer of funds into or out of countries in which we operate\u037e\n \u2022 compliance with U.S. Treasury sanctions regulations restricting doing business with certain nations or specially designated nationals\u037e\n \u2022 regulatory or financial requirements to comply with foreign bureaucratic actions\u037e\n \u2022 compliance with applicable anti-corruption laws and regulations\u037e\n \u2022 changing taxation policies, including confiscatory taxation\u037e\n \u2022 other forms of government regulation and economic conditions that are beyond our control\u037e and\n \u2022 governmental corruption.\nAny of these or other risks could adversely impact our customers\u2019 international operations which could materially adversely impact our operating\nresults and growth opportunities.\nWe may make acquisitions in emerging markets throughout the world, and investments in emerging markets are subject to greater risks\nthan developed markets and could adversely affect our business, prospects, financial condition, results of operations and cash flows.\nTo the extent that we acquire assets in emerging markets-which we may do throughout the world-additional risks may be encountered that could\nadversely affect our business. Emerging market countries have less developed economies and infrastructure and are often more vulnerable to\neconomic and geopolitical challenges and may experience significant fluctuations in gross domestic product, interest rates and currency\nexchange rates, as well as civil disturbances, government instability, nationalization and expropriation of private assets and the imposition of\ntaxes or other charges by government authorities. In addition, the currencies in which investments are denominated may be unstable, may be\nsubject to significant depreciation and may not be freely convertible or may be subject to the imposition of other monetary or fiscal controls and\nrestrictions.\nEmerging markets are still in relatively early stages of their development and accordingly may not be highly or efficiently regulated. Moreover,\nemerging markets tend to be shallower and less liquid than more established markets which may adversely affect our ability to realize profits\nfrom our assets in emerging markets when we desire to do so or receive what we perceive to be their fair value in the event of a realization. In\nsome cases, a market for realizing profits from an investment may not exist locally. In addition, issuers based in emerging markets are not\ngenerally subject to uniform accounting and financial reporting standards, practices and requirements comparable to those applicable to\nissuers based in more developed countries, thereby potentially increasing the risk of fraud and other deceptive practices. Settlement of\ntransactions may be subject to greater delay and administrative uncertainties than in developed markets and less complete and reliable\nfinancial and other information may be available to investors in emerging markets than in developed markets. In addition, economic instability in\nemerging markets could adversely affect the value of our assets subject to leases or charters in such countries, or the ability of our lessees or\ncharters, which operate in these markets, to meet their contractual obligations. As a result, lessees or charterers that operate in emerging\nmarket countries may be more likely to default under their contractual obligations than those that operate in developed countries. Liquidity and\nvolatility limitations in these markets may also adversely affect our ability to dispose of our assets at the best price available or in a timely\nmanner.\nAs we have and may continue to acquire assets located in emerging markets throughout the world, we may be exposed to any one or a\ncombination of these risks, which could adversely affect our operating results.\nWe are actively evaluating potential acquisitions of assets and operating companies in other aviation sectors which could result in\nadditional risks and uncertainties for our business and unexpected regulatory compliance costs.\nWhile our existing portfolio primarily consists of assets in the aviation sector, we are actively evaluating potential acquisitions of assets and\noperating companies in sectors of the aviation market in which we do not currently operate and we plan to be flexible as other attractive\nopportunities arise over time. To the extent we make acquisitions in other sectors, we will face numerous risks and uncertainties, including risks\nassociated with the required investment of capital and other resources and with combining or integrating operational and management\nsystems and controls. Entry into certain lines of business may subject us to new laws\n\n\n\n 17\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 19 of 96\n\n\n\n\nand regulations and may lead to increased litigation and regulatory risk. Many types of transportation assets, including certain aviation assets,\nare subject to registration requirements by U.S. governmental agencies, as well as foreign governments if such assets are to be used outside\nof the United States. Failing to register the assets, or losing such registration, could result in substantial penalties, forced liquidation of the\nassets and/or the inability to operate and, if applicable, lease the assets. We may need to incur significant costs to comply with the laws and\nregulations applicable to any such new acquisition. The failure to comply with these laws and regulations could cause us to incur significant\ncosts, fines or penalties or require the assets to be removed from service for a period of time resulting in reduced income from these assets. In\naddition, if our acquisitions in other sectors produce insufficient revenues, or produce investment losses, or if we are unable to efficiently\nmanage our expanded operations, our results of operations will be adversely affected, and our reputation and business may be harmed.\nThe agreements governing our indebtedness place restrictions on us and our subsidiaries, reducing operational flexibility and creating\ndefault risks.\nThe agreements governing our indebtedness, including, but not limited to, the indentures governing our senior unsecured notes due 2025,\n2027, 2028 and 2030 (\u201cSenior Notes\u201d) and the second amended and restated revolving credit facility entered into on September 20, 2022, as\namended by Amendment No. 1, dated as of November 22, 2022 (the \u201cRevolving Credit Facility\u201d), contain covenants that place restrictions on us\nand our subsidiaries. The indentures governing our Senior Notes and the Revolving Credit Facility restrict among other things, our and certain of\nour subsidiaries\u2019 ability to:\n \u2022 merge, consolidate or transfer all, or substantially all, of our assets\u037e\n \u2022 incur additional debt or issue preferred shares\u037e\n \u2022 make certain investments or acquisitions\u037e\n \u2022 create liens on our or our subsidiaries\u2019 assets\u037e\n \u2022 sell assets\u037e\n \u2022 make distributions on or repurchase our shares\u037e\n \u2022 enter into transactions with affiliates\u037e and\n \u2022 create dividend restrictions and other payment restrictions that affect our subsidiaries.\nThese covenants could impair our ability to grow our business, take advantage of attractive business opportunities, pay dividends on our\nordinary shares or successfully compete. A breach of any of these covenants could result in an event of default. Cross-default provisions in our\ndebt agreements could cause an event of default under one debt agreement to trigger an event of default under our other debt agreements.\nUpon the occurrence of an event of default under any of our debt agreements, the lenders or holders thereof could elect to declare all\noutstanding debt under such agreements to be immediately due and payable.\nTerrorist attacks or other hostilities could negatively impact our operations and our profitability and may expose us to liability and\nreputational damage.\nTerrorist attacks may negatively affect our operations. Such attacks have contributed to economic instability in the United States and elsewhere,\nand further acts of terrorism, violence or war could similarly affect world trade and the industries in which we and our customers operate. In\naddition, terrorist attacks or hostilities may directly impact airports or aircraft or our physical facilities or those of our customers. In addition, it is\nalso possible that our assets could be involved in a terrorist attack or other hostilities. The consequences of any terrorist attacks or hostilities\nare unpredictable, and we may not be able to foresee events that could have a material adverse effect on our operations. Although our lease and\ncharter agreements generally require the counterparties to indemnify us against all damages arising out of the use of our assets, and we carry\ninsurance to potentially offset any costs in the event that our customer indemnifications prove to be insufficient, our insurance does not cover\ncertain types of terrorist attacks, and we may not be fully protected from liability or the reputational damage that could arise from a terrorist attack\nwhich utilizes our assets.\nProjects in the aerospace products and services sector are exposed to a variety of unplanned interruptions which could cause our results\nof operations to suffer.\nProjects in the aerospace products and services sector are exposed to unplanned interruptions caused by breakdown or failure of equipment,\naging infrastructure, employee error or contractor or subcontractor failure, limitations that may be imposed by equipment conditions or\nenvironmental, safety or other regulatory requirements, fuel supply or fuel transportation reductions or interruptions, labor or legal disputes,\ndifficulties with the implementation or operation of information systems, power outages, pipeline or electricity line ruptures, catastrophic events,\nsuch as hurricanes, cyclones, earthquakes, landslides, floods, explosions, fires, or other disasters. Any equipment or system outage or\nconstraint can, among other things, reduce sales, increase costs and affect the ability to meet regulatory service metrics, customer expectations\nand regulatory reliability and security requirements. Operational disruption, as well as supply disruption, and increased government oversight\ncould adversely impact the cash flows available from these assets. In addition, the cost of repairing or replacing damaged assets could be\nconsiderable. Repeated or prolonged interruption may result in temporary or permanent loss of customers, substantial litigation or penalties for\nregulatory or contractual non-compliance, and any loss from such events may not be recoverable under relevant insurance policies. Although we\nbelieve that we are adequately insured against these types of events, no assurance can be given that the occurrence of any such event will not\nmaterially adversely affect us.\n\n\n\n 18\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 20 of 96\n\n\n\n\nOur leases and charters typically require payments in U.S. dollars, but many of our customers operate in other currencies\u037e if foreign\ncurrencies devalue against the U.S. dollar, our lessees or charterers may be unable to meet their payment obligations to us in a timely\nmanner.\nOur current leases and charters typically require that payments be made in U.S. dollars. If the currency that our lessees or charterers typically\nuse in operating their businesses devalues against the U.S. dollar, our lessees or charterers could encounter difficulties in making payments to\nus in U.S. dollars. Furthermore, many foreign countries have currency and exchange laws regulating international payments that may impede or\nprevent payments from being paid to us in U.S. dollars. Future leases or charters may provide for payments to be made in euros or other foreign\ncurrencies. Any change in the currency exchange rate that reduces the amount of U.S. dollars obtained by us upon conversion of future lease\npayments denominated in euros or other foreign currencies, may, if not appropriately hedged by us, have a material adverse effect on us and\nincrease the volatility of our earnings.\nOur inability to obtain sufficient capital would constrain our ability to grow our portfolio and to increase our revenues.\nOur business is capital intensive, and we have used and may continue to employ leverage to finance our operations. Accordingly, our ability to\nsuccessfully execute our business strategy and maintain our operations depends on the availability and cost of debt and equity capital.\nAdditionally, our ability to borrow against our assets is dependent, in part, on the appraised value of such assets. If the appraised value of such\nassets declines, we may be required to reduce the principal outstanding under our debt facilities or otherwise be unable to incur new\nborrowings.\nWe can give no assurance that the capital we need will be available to us on favorable terms, or at all. Our inability to obtain sufficient capital, or\nto renew or expand our credit facilities, could result in increased funding costs and would limit our ability to:\n \u2022 meet the terms and maturities of our existing and future debt facilities\u037e\n \u2022 purchase new assets or refinance existing assets\u037e\n \u2022 fund our working capital needs and maintain adequate liquidity\u037e and\n \u2022 finance other growth initiatives.\nIn addition, we conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under\nthe Investment Company Act of 1940 (the \u201cInvestment Company Act\u201d). As such, certain forms of financing such as finance leases may not be\navailable to us. Please see \u201c- If we are deemed an \u201cinvestment company\u201d under the Investment Company Act, it could have a material adverse\neffect on our business, prospects, financial condition, results of operations and cash flows.\u201d\nThe effects of various environmental regulations may negatively affect the industries in which we operate which could have a material\nadverse effect on our financial condition, results of operations and cash flows.\nWe are subject to federal, state, local and foreign laws and regulations relating to the protection of the environment, including those governing\nthe discharge of pollutants to air and water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated\nsites and noise and emission levels and greenhouse gas emissions. Legislative and regulatory measures currently under consideration or\nbeing implemented by government authorities to address climate change could require reductions in our greenhouse gas or other emissions,\nestablish a carbon tax or increase fuel or energy taxes. These legal requirements are expected to result in increased capital expenditures and\ncompliance costs, and could result in higher costs and may require us to acquire emission credits or carbon offsets. These costs and\nrestrictions could harm our business and results of operations by increasing our expenses or requiring us to alter our operations. The\ninconsistent international, regional and/or national requirements associated with climate change regulations also create economic and\nregulatory uncertainty.\nUnder some environmental laws in the United States and certain other countries, strict liability may be imposed on the owners or operators of\nassets, which could render us liable for environmental and natural resource damages without regard to negligence or fault on our part. We\ncould incur substantial costs, including cleanup costs, fines and third-party claims for property damage and personal injury, as a result of\nviolations of or liabilities under environmental laws and regulations in connection with our or our lessee\u2019s or charterer\u2019s current or historical\noperations, any of which could have a material adverse effect on our results of operations and financial condition. In addition, a variety of new\nlegislation is being enacted, or considered for enactment, at the federal, state and local levels relating to greenhouse gas emissions and\nclimate change. While there has historically been a lack of consistent climate change legislation, as climate change concerns continue to grow,\nfurther legislation and regulations are expected to continue in areas such as greenhouse gas emissions control, emission disclosure\nrequirements and building codes or other infrastructure requirements that impose energy efficiency standards. Government mandates,\nstandards or regulations intended to mitigate or reduce greenhouse gas emissions or projected climate change impacts could result in\nincreased energy and transportation costs, and increased compliance expenses and other financial obligations to meet permitting or\ndevelopment requirements that we may be unable to fully recover (due to market conditions or other factors), any of which could result in\nreduced profits and adversely affect our results of operations. While we typically maintain liability insurance coverage and typically require our\nlessees to provide us with indemnity against certain losses, the insurance coverage is subject to large deductibles, limits on maximum\ncoverage and significant exclusions and may not be sufficient or available to protect against any or all liabilities and such indemnities may not\ncover or be sufficient to protect us against losses arising from environmental damage. In addition, changes to environmental standards or\nregulations in the industries in which we operate could limit the\n\n\n\n 19\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 21 of 96\n\n\n\n\neconomic life of the assets we acquire or reduce their value, and also require us to make significant additional investments in order to maintain\ncompliance, which would negatively impact our cash flows and results of operations.\nThe discontinuation of the LIBOR benchmark interest rate may have an impact on our business.\nOn July 27, 2017, the U.K. Financial Conduct Authority (the \"FCA\"), which regulates LIBOR, announced that it will no longer persuade or compel\nbanks to submit rates for the calculation of LIBOR rates after 2021. On November 30, 2020, ICE Benchmark Administration, or the IBA, the\nadministrator of LIBOR, with the support of the United States Federal Reserve and the FCA, announced plans to consult on ceasing publication\nof LIBOR on December 31, 2021, for only the one-week and two-month LIBOR tenors, and on June 30, 2023, for all other LIBOR tenors. The U.S.\nFederal Reserve concurrently issued a statement advising banks to stop new LIBOR issuances by the end of 2021. The IBA ceased publication\nof one-week and two-month USD LIBOR settings after December 31, 2021, and the remaining USD LIBOR settings after June 30, 2023, other\nthan certain USD LIBOR settings that are expected to continue to be published under a synthetic methodology until September 2024.\nIn the United States, the Alternative Reference Rate Committee (\u201cARRC\u201d), a group of diverse private-market participants assembled by the\nFederal Reserve Board and the Federal Reserve Bank of New York, was tasked with identifying alternative reference rates to replace LIBOR. The\nSecured Overnight Finance Rate (\u201cSOFR\u201d) has emerged as the ARRC's preferred alternative rate for LIBOR. SOFR is a broad measure of the\ncost of borrowing cash overnight collateralized by Treasury securities in the repurchase agreement market. At this time, it is not possible to\npredict how markets will respond to SOFR or other alternative reference rates.\nA cyberattack that bypasses our information technology (\u201cIT\u201d), security systems or the IT security systems of our third-party providers,\ncausing an IT security breach, may lead to a disruption of our IT systems and the loss of business information which may hinder our ability\nto conduct our business effectively and may result in lost revenues and additional costs.\nParts of our business depend on the secure operation of our IT systems and the IT systems of our third-party providers to manage, process,\nstore, and transmit information associated with aircraft leasing. We have, from time to time, experienced threats to our data and systems,\nincluding malware and computer virus attacks. A cyberattack that bypasses our IT security systems or the IT security systems of our third-party\nproviders, causing an IT security breach, could adversely impact our daily operations and lead to the loss of sensitive information, including our\nown proprietary information and that of our customers, suppliers and employees. Such losses could harm our reputation and result in\ncompetitive disadvantages, litigation, regulatory enforcement actions, lost revenues, additional costs and liabilities. While we devote substantial\nresources to maintaining adequate levels of cyber-security, our resources and technical sophistication may not be adequate to prevent all types\nof cyberattacks.\nIf we are deemed an \u201cinvestment company\u201d under the Investment Company Act, it could have a material adverse effect on our business,\nprospects, financial condition, results of operations and cash flows.\nWe conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the\nInvestment Company Act. Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself\nout as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. Section 3(a)(1)\n(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of\ninvesting, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding\n40% of the value of the issuer\u2019s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Excluded\nfrom the term \u201cinvestment securities,\u201d among other things, are U.S. government securities and securities issued by majority-owned\nsubsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company for\ncertain privately-offered investment vehicles set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.\nWe are a holding company that is not an investment company because we are engaged in the business of holding securities of our wholly-\nowned and majority-owned subsidiaries, which are engaged in transportation and related businesses which lease assets pursuant to\noperating leases and finance leases. The Investment Company Act may limit our and our subsidiaries\u2019 ability to enter into financing leases and\nengage in other types of financial activity because less than 40% of the value of our and our subsidiaries\u2019 total assets (exclusive of U.S.\ngovernment securities and cash items) on an unconsolidated basis can consist of \u201cinvestment securities.\u201d\nIf we or any of our subsidiaries were required to register as an investment company under the Investment Company Act, the registered entity\nwould become subject to substantial regulation that would significantly change our operations, and we would not be able to conduct our\nbusiness as described in this report. We have not obtained a formal determination from the SEC as to our status under the Investment\nCompany Act and, consequently, any violation of the Investment Company Act would subject us to material adverse consequences.\nBecause we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability\nto protect your rights through the U.S. federal courts may be limited.\nWe are an exempted company incorporated under the laws of the Cayman Islands. As a result, it may be difficult for investors to effect service of\nprocess within the United States upon our directors or officers, or enforce judgments obtained in the United States courts against our directors\nor officers.\n\n\n\n 20\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 22 of 96\n\n\n\n\nOur corporate affairs are governed by our Articles, the Companies Act (As Revised) of the Cayman Islands (the \u2018\u2018Cayman Companies Act\u2019\u2019) and\nthe common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and\nthe fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman\nIslands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well\nas from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands.\nThe rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are different from what they would be\nunder statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of\nsecurities laws as compared to the United States, and certain states, such as Delaware, may have more fully developed and judicially\ninterpreted bodies of corporate law. In addition, Cayman Islands companies may not have standing to initiate a shareholders derivative action in\na federal court of the United States.\nWe have been advised by Maples and Calder (Cayman) LLP, our Cayman Islands legal counsel, that the courts of the Cayman Islands are\nunlikely (1) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the federal\nsecurities laws of the United States or any state\u037e and (2) in original actions brought in the Cayman Islands, to impose liabilities against us\npredicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by\nthose provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments\nobtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of\ncompetent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the\njudgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to\nbe enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes\nor a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or\nobtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards\nof punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if\nconcurrent proceedings are being brought elsewhere.\nAs a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by\nmanagement, members of the board of directors or controlling shareholders than they would as public shareholders of a United States\ncompany.\nRisks Related to Our Manager\nWe are dependent on our Manager and other key personnel at Fortress and may not find suitable replacements if our Manager terminates\nthe Management Agreement or if other key personnel depart.\nOur officers and other individuals who perform services for us are employees of our Manager or other Fortress entities. We are completely\nreliant on our Manager, which has significant discretion as to the implementation of our operating policies and strategies, to conduct our\nbusiness. We are subject to the risk that our Manager will terminate the Management Agreement and that we will not be able to find a suitable\nreplacement for our Manager in a timely manner, at a reasonable cost, or at all. Furthermore, we are dependent on the services of certain key\nemployees of our Manager and certain key employees of Fortress entities whose compensation is partially or entirely dependent upon the\namount of management fees earned by our Manager or the incentive payments distributed to Master GP and whose continued service is not\nguaranteed, and the loss of such personnel or services could materially adversely affect our operations. We do not have key man insurance for\nany of the personnel of the Manager or other Fortress entities that are key to us. An inability to find a suitable replacement for any departing\nemployee of our Manager or Fortress entities on a timely basis could materially adversely affect our ability to operate and grow our business.\nIn addition, our Manager may assign our Management Agreement to an entity whose business and operations are managed or supervised by\nMr. Wesley R. Edens, who is a principal and a member of the board of directors of Fortress, an affiliate of our Manager, and a member of the\nmanagement committee of Fortress since co-founding Fortress in May 1998. In the event of any such assignment to a non-affiliate of Fortress,\nthe functions currently performed by our Manager\u2019s current personnel may be performed by others. We can give you no assurance that such\npersonnel would manage our operations in the same manner as our Manager currently does, and the failure by the personnel of any such entity\nto acquire assets generating attractive risk-adjusted returns could have a material adverse effect on our business, financial condition, results of\noperations and cash flows.\nOn May 22, 2023, Fortress and Mubadala announced that they have entered into definitive agreements pursuant to which, among other things,\ncertain members of Fortress management and affiliates of Mubadala will acquire 100% of the equity of Fortress that is currently indirectly held by\nSoftBank. While Fortress\u2019s senior investment professionals are expected to remain at Fortress, including those individuals who perform\nservices for us, there can be no assurance that the transaction will not have an adverse impact on us or our relationship with our Manager.\nThere are conflicts of interest in our relationship with our Manager.\nOur Management Agreement and the Services and Profit Sharing Agreement and our Articles were negotiated among affiliated parties, and their\nterms, including fees and other amounts payable, may not be as favorable to us as if they had been negotiated with an unaffiliated third-party.\nThere are conflicts of interest inherent in our relationship with our Manager insofar as our Manager and its affiliates invest in aviation assets and\nwhose investment objectives overlap with our asset acquisition objectives. Certain opportunities appropriate\n\n\n\n 21\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 23 of 96\n\n\n\n\nfor us may also be appropriate for one or more of these other investment vehicles. Certain members of our board of directors and employees of\nour Manager who are our officers also serve as officers and/or directors of these other entities. For example, some of our directors and officers\nare also directors or officers of FTAI Infrastructure, Inc. (\u201cFTAI Infrastructure\u201d). Although we have the same Manager, we may compete with entities\naffiliated with our Manager or Fortress for certain target assets. From time to time, entities affiliated with or managed by our Manager or Fortress\nmay focus on investments in assets with a similar profile as our target assets that we may seek to acquire. These affiliates may have\nmeaningful purchasing capacity, which may change over time depending upon a variety of factors, including, but not limited to, available equity\ncapital and debt financing, market conditions and cash on hand. Fortress has multiple existing and planned funds focused on investing in one\nor more of our target sectors, each with significant current or expected capital commitments. We have previously purchased and may in the\nfuture purchase assets from these funds, and have previously co-invested and may in the future co-invest with these funds in aviation assets.\nFortress funds generally have a fee structure similar to ours, but the fees actually paid will vary depending on the size, terms and performance of\neach fund.\nOur Management Agreement generally does not limit or restrict our Manager or its affiliates from engaging in any business or managing other\noperating companies similar to us or pooled investment vehicles that invest in assets that meet our asset acquisition objectives. Our Manager\nhas also engaged in additional transportation and infrastructure related management with FTAI Infrastructure in our recent spin-off of our\ninfrastructure assets, and may be involved in other investment opportunities in the future, any of which may compete with us for investments or\nresult in a change in our current investment strategy. In addition, our Articles provide that if Fortress or an affiliate or any of their officers, directors\nor employees acquire knowledge of a potential transaction that could be a corporate opportunity, they have no duty, to the fullest extent permitted\nby law, to offer such corporate opportunity to us, our shareholders or our affiliates. In the event that any of our directors and officers who is also a\ndirector, officer or employee of Fortress or its affiliates acquires knowledge of a corporate opportunity or is offered a corporate opportunity,\nprovided that this knowledge was not acquired solely in such person\u2019s capacity as a director or officer of FTAI Aviation Ltd. and such person acts\nin good faith, then to the fullest extent permitted by law such person is deemed to have fully satisfied such person\u2019s fiduciary duties owed to us\nand is not liable to us if Fortress or its affiliates pursues or acquires the corporate opportunity or if such person did not present the corporate\nopportunity to us.\nThe ability of our Manager and its officers and employees to engage in other business activities, subject to the terms of our Management\nAgreement, may reduce the amount of time our Manager, its officers or other employees spend managing us. In addition, we may engage\n(subject to our strategy) in material transactions with our Manager or another entity managed by our Manager or one of its affiliates, which may\ninclude, but are not limited to, certain acquisitions, financing arrangements, purchases of debt, co-investments, consumer loans, servicing\nadvances and other assets that present an actual, potential or perceived conflict of interest. Our board of directors adopted a policy regarding the\napproval of any \u201crelated person transactions\u201d pursuant to which certain of the material transactions described above may require disclosure to,\nand approval by, the independent members of our board of directors. Actual, potential or perceived conflicts have given, and may in the future\ngive, rise to investor dissatisfaction, litigation or regulatory inquiries or enforcement actions. Appropriately dealing with conflicts of interest is\ncomplex and difficult, and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential, actual or\nperceived conflicts of interest. Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverse effect on\nour reputation, which could materially adversely affect our business in a number of ways, including causing an inability to raise additional funds,\na reluctance of counterparties to do business with us, a decrease in the prices of our equity securities and a resulting increased risk of litigation\nand regulatory enforcement actions.\nThe structure of our Manager\u2019s and Master GP\u2019s compensation arrangements may have unintended consequences for us. We have agreed to\npay our Manager a management fee and Master GP is entitled to receive incentive payments from the Company or its subsidiaries that are each\nbased on different measures of performance. Consequently, there may be conflicts in the incentives of our Manager to generate attractive risk-\nadjusted returns for us. In addition, because Master GP and our Manager are both affiliates of Fortress, the income incentive payment paid to\nMaster GP may cause our Manager to place undue emphasis on the maximization of earnings, including through the use of leverage, at the\nexpense of other objectives, such as preservation of capital, to achieve higher incentive payments. Investments with higher yield potential are\ngenerally riskier or more speculative than investments with lower yield potential. This could result in increased risk to the value of our portfolio of\nassets and our ordinary shares.\nOur directors have approved a broad asset acquisition strategy for our Manager and will not approve each acquisition we make at the\ndirection of our Manager. In addition, we may change our strategy without a shareholder vote, which may result in our acquiring assets\nthat are different, riskier or less profitable than our current assets.\n\n\n\n 22\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 24 of 96\n\n\n\n\nOur Manager is authorized to follow a broad asset acquisition strategy. We may pursue other types of acquisitions as market conditions evolve.\nOur Manager makes decisions about our investments in accordance with broad investment guidelines adopted by our board of directors.\nAccordingly, we may, without a shareholder vote, change our target sectors and acquire a variety of assets that differ from, and are possibly\nriskier than, our current asset portfolio. Consequently, our Manager has great latitude in determining the types and categories of assets it may\ndecide are proper investments for us, including the latitude to invest in types and categories of assets that may differ from those in our existing\nportfolio. Our directors will periodically review our strategy and our portfolio of assets. However, our board will not review or pre-approve each\nproposed acquisition or our related financing arrangements. In addition, in conducting periodic reviews, the directors will rely primarily on\ninformation provided to them by our Manager. Furthermore, transactions entered into by our Manager may be difficult or impossible to reverse by\nthe time they are reviewed by the directors even if the transactions contravene the terms of the Management Agreement. In addition, we may\nchange our asset acquisition strategy, including our target asset classes, without a shareholder vote.\nOur asset acquisition strategy may evolve in light of existing market conditions and investment opportunities, and this evolution may involve\nadditional risks depending upon the nature of the assets we target and our ability to finance such assets on a short or long-term basis.\nOpportunities that present unattractive risk-return profiles relative to other available opportunities under particular market conditions may\nbecome relatively attractive under changed market conditions and changes in market conditions may therefore result in changes in the assets\nwe target. Decisions to make acquisitions in new asset categories present risks that may be difficult for us to adequately assess and could\ntherefore reduce or eliminate our ability to pay dividends on our ordinary shares or have adverse effects on our liquidity or financial condition. A\nchange in our asset acquisition strategy may also increase our exposure to interest rate, foreign currency or credit market fluctuations. In\naddition, a change in our asset acquisition strategy may increase our use of non-match-funded financing, increase the guarantee obligations\nwe agree to incur or increase the number of transactions we enter into with affiliates. Our failure to accurately assess the risks inherent in new\nasset categories or the financing risks associated with such assets could adversely affect our results of operations and our financial condition.\nOur Manager will not be liable to us for any acts or omissions performed in accordance with the Management Agreement, including with\nrespect to the performance of our assets.\nPursuant to our Management Agreement, our Manager will not assume any responsibility other than to render the services called for thereunder\nin good faith and will not be responsible for any action of our board of directors in following or declining to follow its advice or recommendations.\nOur Manager, its members, managers, officers, employees, sub-advisers and any other person controlling or Manager, will not be liable to us or\nany of our subsidiaries, to our board of directors, or our or any subsidiary\u2019s shareholders or partners for any acts or omissions by our Manager,\nits members, managers, officers, employees, sub-advisers and any other person controlling or Manager, except liability to us, our shareholders,\ndirectors, officers and employees and persons controlling us, by reason of acts constituting bad faith, willful misconduct, gross negligence or\nreckless disregard of our Manager\u2019s duties under our Management Agreement. We will, to the full extent lawful, reimburse, indemnify and hold\nour Manager, its members, managers, officers and employees, sub-advisers and each other person, if any, controlling our Manager harmless of\nand from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including attorneys\u2019 fees)\nin respect of or arising from any acts or omissions of an indemnified party made in good faith in the performance of our Manager\u2019s duties under\nour Management Agreement and not constituting such indemnified party\u2019s bad faith, willful misconduct, gross negligence or reckless disregard\nof our Manager\u2019s duties under our Management Agreement.\nOur Manager\u2019s due diligence of potential asset acquisitions or other transactions may not identify all pertinent risks, which could\nmaterially affect our business, financial condition, liquidity and results of operations.\nOur Manager intends to conduct due diligence with respect to each asset acquisition opportunity or other transaction it pursues. It is possible,\nhowever, that our Manager\u2019s due diligence processes will not uncover all relevant facts, particularly with respect to any assets we acquire from\nthird parties. In these cases, our Manager may be given limited access to information about the asset and will rely on information provided by\nthe seller of the asset. In addition, if asset acquisition opportunities are scarce, the process for selecting bidders is competitive, or the\ntimeframe in which we are required to complete diligence is short, our ability to conduct a due diligence investigation may be limited, and we\nwould be required to make decisions based upon a less thorough diligence process than would otherwise be the case. Accordingly,\ntransactions that initially appear to be viable may prove not to be over time, due to the limitations of the due diligence process or other factors.\n\n\n\n 23\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 25 of 96\n\n\n\n\nRisks Related to Taxation\nWe expect the Company to be a passive foreign investment company (\u201cPFIC\u201d) and it could be a controlled foreign corporation (\u201cCFC\u201d) for\nU.S. federal income tax purposes, which may result in adverse tax considerations for U.S. shareholders.\nWe expect the Company to be treated as a PFIC and it could be treated as a CFC for U.S. federal income tax purposes. If you are a U.S. person\nand do not make a valid qualified electing fund (\u201cQEF\u201d) election with respect to us and each of our PFIC subsidiaries, then, unless we are a CFC\nand you own 10% or more of our shares (by vote or value), you would generally be subject to special deferred tax with respect to certain\ndistributions on our shares, any gain realized on a disposition of our shares, and certain other events. The effect of this deferred tax could be\nmaterially adverse to you. Alternatively, if you are such a shareholder and make a valid QEF election for us and each of our PFIC subsidiaries, or\nif we are a CFC and you own 10% or more of our shares (by vote or value), you will generally not be subject to those taxes, but could recognize\ntaxable income in a taxable year with respect to our shares in excess of any distributions that we make to you in that year, thus giving rise to so\ncalled \u201cphantom income\u201d and to a potential out-of-pocket tax liability. No assurances can be given that any given shareholder will be able to\nmake a valid QEF election with respect to us or our PFIC subsidiaries. See \u201cU.S. Federal Income Tax Considerations -Considerations for U.S.\nHolders-PFIC Status and Related Tax Considerations.\u201d\nAssuming we are a PFIC, distributions made by us to a U.S. person will generally not be eligible for taxation at reduced tax rates generally\napplicable to \u201cqualified dividends\u201d paid by certain U.S. corporations and \u201cqualified foreign corporations\u201d to individuals. The more favorable rates\napplicable to other corporate dividends could cause individuals to perceive investment in our shares to be relatively less attractive than\ninvestment in the shares of other corporations, which could adversely affect the value of our shares.\nInvestors should consult their tax advisors regarding the potential impact of these rules on their investment in us.\nTo the extent we recognize income treated as effectively connected with a trade or business in the United States, we would be subject to\nU.S. federal income taxation on a net income basis, which could adversely affect our business and result in decreased cash available for\ndistribution to our shareholders.\nIf we are treated as engaged in a trade or business in the United States, the portion of our net income, if any, that is \u201ceffectively connected\u201d with\nsuch trade or business would be subject to U.S. federal income taxation at maximum corporate rates, currently 21%. In addition, we may be\nsubject to an additional U.S. federal branch profits tax on our effectively connected earnings and profits at a rate of 30%. The imposition of such\ntaxes could adversely affect our business and would result in decreased cash available for distribution to our shareholders. Although we (or one\nor more of our non-U.S. corporate subsidiaries) are expected to be treated as engaged in a U.S. trade or business, it is currently expected that\nonly a small portion of our taxable income will be treated as effectively connected with such U.S. trade or business. However, no assurance can\nbe given that the amount of effectively connected income will not be greater than currently expected, whether due to a change in our operations\nor otherwise.\nIf there is not sufficient trading in our shares, or if 50% of our shares are held by certain 5% shareholders, we could lose our eligibility for\nan exemption from U.S. federal income taxation on rental income from our aircraft or ships used in \u201cinternational traffic\u201d and could be\nsubject to U.S. federal income taxation which would adversely affect our business and result in decreased cash available for distribution\nto our shareholders.\nWe expect that we will be eligible for an exemption under Section 883 of the Internal Revenue Code of 1986, as amended (the \u201cCode\u201d), which\nprovides an exemption from U.S. federal income taxation with respect to rental income derived from aircraft and ships used in international traffic\nby certain foreign corporations. No assurances can be given that we will continue to be eligible for this exemption as changes in our ownership\nor the amount of our shares that are traded could cause us to cease to be eligible for such exemption. To qualify for this exemption in respect of\nrental income, the lessor of the aircraft or ships must be organized in a country that grants a comparable exemption to U.S. lessors. The\nCayman Islands and the Marshall Islands grant such exemptions. Additionally, certain other requirements must be satisfied. We can satisfy\nthese requirements in any year if, for more than half the days of such year, our shares are primarily and regularly traded on a recognized\nexchange and certain shareholders, each of whom owns 5% or more of our shares (applying certain attribution rules), do not collectively own\nmore than 50% of our shares. Our shares will be considered to be primarily and regularly traded on a recognized exchange in any year if: (i) the\nnumber of trades in our shares effected on such recognized stock exchanges exceed the number of our shares (or direct interests in our\nshares) that are traded during the year on all securities markets\u037e (ii) trades in our shares are effected on such stock exchanges in more than de\nminimis quantities on at least 60 days during every calendar quarter in the year\u037e and (iii) the aggregate number of our shares traded on such\nstock exchanges during the taxable year is at least 10% of the average number of our shares outstanding in that class during that year. If we\nwere not eligible for the exemption under Section 883 of the Code, we expect that our U.S. source rental income would generally be subject to\nU.S. federal taxation, on a gross income basis, at a rate of not in excess of 4% as provided in Section 887 of the Code. If, contrary to\nexpectations, we or certain of our non-U.S. subsidiaries did not comply with certain administrative guidelines of the U.S. Internal Revenue\nService (the \u201cIRS\u201d), such that 90% or more of the U.S. source rental income of the Company or any of such subsidiaries were attributable to the\nactivities of personnel based in the United States (in the case of bareboat leases), or from \u201cregularly scheduled transportation\u201d as defined in\nsuch administrative guidelines (in the case of time charter leases), our, or such subsidiary\u2019s, U.S. source rental income would be treated as\nincome effectively connected with the conduct of a trade or business in the United States. In such case, such U.S. source rental income would\nbe subject to U.S. federal income taxation at the maximum corporate rate as well as state and local taxation. In addition, the Company or such\nsubsidiary would be subject to the U.S. federal branch profits tax on its effectively\n\n\n\n 24\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 26 of 96\n\n\n\n\nconnected earnings and profits at a rate of 30%. The imposition of such taxes could adversely affect our business and would result in\ndecreased cash available for distribution to our shareholders.\nWe or our subsidiaries may become subject to increased and/or unanticipated tax liabilities that may have a material adverse effect on\nour results of operations.\nSome of our subsidiaries are subject to income, withholding or other taxes in certain non-U.S. jurisdictions by reason of their jurisdiction of\nincorporation, activities and operations, where their assets are used or where the lessees of their assets (or others in possession of their\nassets) are located, and it is also possible that taxing authorities in any such jurisdictions could assert that we or our subsidiaries are subject to\ngreater taxation than we currently face or otherwise anticipate. Further, the Organisation for Economic Co-operation and Development (the\n\u201cOECD\u201d) is conducting a project focused on base erosion and profit shifting in international structures, which seeks to establish certain\ninternational standards for taxing the worldwide income of multinational companies. In addition, the OECD is working on a \u201cBEPS 2.0\u201d initiative,\nwhich is aimed at (i) shifting taxing rights to the jurisdiction of the consumer and (ii) ensuring all companies pay a global minimum tax. On\nOctober 8, 2021, the OECD announced an agreement among over 140 countries delineating an implementation plan, on December 20, 2021,\nthe OECD released model rules for the domestic implementation of a 15% global minimum tax, on December 15, 2022, the member states of\nthe European Union unanimously voted to adopt the OECD\u2019s minimum tax rules and phase them into national law, and on February 2, 2023 the\nOECD released technical guidance on the global minimum tax which was agreed by consensus of the BEPS 2.0 signatory jurisdictions.\nNumerous countries, including European Union member states, have enacted or are expected to enact minimum tax legislation to be effective\nas early as January 1, 2024, with additional elements of the minimum tax expected to be effective on or after January 1, 2025. Additionally, On\nDecember 27, 2023, Bermuda enacted a corporate tax regime with a 15% rate (the \u201cBermuda CIT\u201d) and with requirements similar to those of the\nOECD\u2019s minimum tax proposal. The Bermuda CIT will be effective for tax years beginning on or after January 1, 2025 (see footnote 11 to our\nconsolidated financial statements entitled \u201cIncome Taxes\u201d included elsewhere in this Annual Report). As a result of these developments, the tax\nlaws of certain countries in which we and our affiliates do business are expected to change (and could change on a retroactive basis) and\ncertain of such changes are expected to increase our liabilities for taxes (and possibly interest and penalties) and therefore could harm our\nbusiness, cash flows, results of operations and financial position. In addition, a portion of certain of our or our non-U.S. corporate subsidiaries\u2019\nincome is treated as effectively connected with a U.S. trade or business and is accordingly subject to U.S. federal income tax or may be subject\nto gross-basis U.S. withholding tax. It is possible that the IRS could assert that a greater portion of our or any such non-U.S. subsidiaries\u2019\nincome is effectively connected income that should be subject to U.S. federal income tax or subject to withholding tax.\nRisks Related to Our Shares\nThe market price and trading volume of our ordinary and preferred shares may be volatile, which could result in rapid and substantial\nlosses for our shareholders.\nThe market price of our ordinary and preferred shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading\nvolume in our ordinary and preferred shares may fluctuate and cause significant price variations to occur. If the market price of our ordinary or\npreferred shares declines significantly, you may be unable to resell your shares at or above your purchase price, if at all. The market price of our\nordinary and preferred shares may fluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price\nor result in fluctuations in the price or trading volume of our shares include:\n \u2022 a shift in our investor base\u037e\n \u2022 our quarterly or annual earnings, or those of other comparable companies\u037e\n \u2022 actual or anticipated fluctuations in our operating results\u037e\n \u2022 changes in accounting standards, policies, guidance, interpretations or principles\u037e\n \u2022 announcements by us or our competitors of significant investments, acquisitions or dispositions\u037e\n \u2022 the failure of securities analysts to cover our ordinary shares\u037e\n \u2022 changes in earnings estimates by securities analysts or our ability to meet those estimates\u037e\n \u2022 the operating and share price performance of other comparable companies\u037e\n \u2022 prevailing interest rates or rates of return being paid by other comparable companies and the market for securities similar to our\n preferred shares\u037e\n \u2022 additional issuances of preferred shares\u037e\n \u2022 whether we declare distributions on our preferred shares\u037e\n \u2022 overall market fluctuations\u037e\n \u2022 general economic conditions\u037e and\n \u2022 developments in the markets and market sectors in which we participate.\nStock markets in the United States have experienced extreme price and volume fluctuations. Market fluctuations, as well as general political and\neconomic conditions, such as acts of terrorism, prolonged economic uncertainty, a recession or interest rate or currency rate fluctuations, could\nadversely affect the market price of our ordinary and preferred shares.\nAn increase in market interest rates may have an adverse effect on the market price of our shares.\n\n\n\n 25\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 27 of 96\n\n\n\n\nOne of the factors that investors may consider in deciding whether to buy or sell our shares is our distribution rate as a percentage of our share\nprice relative to market interest rates. If the market price of our shares is based primarily on the earnings and return that we derive from our\ninvestments and income with respect to our investments and our related distributions to shareholders, and not from the market value of the\ninvestments themselves, then interest rate fluctuations and capital market conditions will likely affect the market price of our shares. For\ninstance, if market interest rates rise without an increase in our distribution rate, the market price of our shares could decrease, as potential\ninvestors may require a higher distribution yield on our shares or seek other securities paying higher distributions or interest. In addition, rising\ninterest rates would result in increased interest expense on our outstanding and future (variable and fixed) rate debt, thereby adversely affecting\ncash flows and our ability to service our indebtedness and pay distributions.\nWe are required by Section 404 of the Sarbanes-Oxley Act to evaluate the effectiveness of our internal controls, and the outcome of that\neffort may adversely affect our results of operations, financial condition and liquidity.\nAs a public company, we are required to comply with Section 404 (\u201cSection 404\u201d) of the Sarbanes-Oxley Act. Section 404 requires that we\nevaluate the effectiveness of our internal control over financial reporting at the end of each fiscal year and to include a management report\nassessing the effectiveness of our internal controls over financial reporting in our Annual Report on Form 10-K for that fiscal year. Section 404\nalso requires an independent registered public accounting firm to attest to, and report on, management\u2019s assessment of our internal controls\nover financial reporting. The outcome of our review and the report of our independent registered public accounting firm may adversely affect our\nresults of operations, financial condition and liquidity. During the course of our review, we may identify control deficiencies of varying degrees of\nseverity, and we may incur significant costs to remediate those deficiencies or otherwise improve our internal controls. As a public company, we\nare required to report control deficiencies that constitute a \u201cmaterial weakness\u201d in our internal control over financial reporting. If we discover a\nmaterial weakness in our internal control over financial reporting, our share price could decline and our ability to raise capital could be impaired.\nYour percentage ownership in us may be diluted in the future.\nYour percentage ownership in FTAI Aviation Ltd. may be diluted in the future because of equity awards granted and may be granted to our\nManager pursuant to the Management Agreement and the Incentive Plan. Since 2015, we granted our Manager an option to acquire 3,903,010\nordinary shares in connection with equity offerings. In the future, upon the successful completion of additional offerings of our ordinary shares or\nother equity securities (including securities issued as consideration in an acquisition), we will grant to our Manager options to purchase\nordinary shares in an amount equal to 10% of the number of ordinary shares being sold in such offerings (or if the issuance relates to equity\nsecurities other than our ordinary shares, options to purchase a number of ordinary shares equal to 10% of the gross capital raised in the equity\nissuance divided by the fair market value of an ordinary share as of the date of the issuance), with an exercise price equal to the offering price\nper share paid by the public or other ultimate purchaser or attributed to such securities in connection with an acquisition (or the fair market value\nof an ordinary share as of the date of the equity issuance if it relates to equity securities other than our ordinary shares), and any such offering or\nthe exercise of the option in connection with such offering would cause dilution.\nOur board of directors has adopted the Incentive Plan, which provides for the grant of equity-based awards, including restricted shares, stock\noptions, stock appreciation rights, performance awards, restricted share units, tandem awards and other equity-based and non-equity based\nawards, in each case to our Manager, to the directors, officers, employees, service providers, consultants and advisors of our Manager who\nperform services for us, and to our directors, officers, employees, service providers, consultants and advisors. We have initially reserved\n30,000,000 ordinary shares for issuance under the Incentive Plan. As of December 31, 2023, rights relating to 616,177 of our ordinary shares\nwere outstanding under the Incentive Plan. In the future on the date of any equity issuance by us during the remaining portion of the ten-year\nterm of the Incentive Plan (including in respect of securities issued as consideration in an acquisition), the maximum number of shares\navailable for issuance under the Plan will be increased to include an additional number of ordinary shares equal to ten percent (10%) of either\n(i) the total number of ordinary shares newly issued by us in such equity issuance or (ii) if such equity issuance relates to equity securities other\nthan our ordinary shares, a number of our ordinary shares equal to 10% of (A) the gross capital raised in an equity issuance of equity securities\nother than ordinary shares during the ten-year term of the Incentive Plan, divided by (B) the fair market value of an ordinary share as of the date of\nsuch equity issuance.\nSales or issuances of our ordinary shares could adversely affect the market price of our ordinary shares.\nSales of substantial amounts of our ordinary shares in the public market, or the perception that such sales might occur, could adversely affect\nthe market price of our ordinary shares. The issuance of our ordinary shares in connection with property, portfolio or business acquisitions or\nthe exercise of outstanding options or otherwise could also have an adverse effect on the market price of our ordinary shares.\n\n\n\n 26\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 28 of 96\n\n\n\n\nThe incurrence or issuance of debt, which ranks senior to our ordinary shares upon our liquidation, and future issuances of equity or\nequity-related securities, which would dilute the holdings of our existing ordinary shareholders and may be senior to our ordinary shares\nfor the purposes of making distributions, periodically or upon liquidation, may negatively affect the market price of our ordinary shares.\nWe have incurred and may in the future incur or issue debt or issue equity or equity-related securities to finance our operations, acquisitions or\ninvestments. Upon our liquidation, lenders and holders of our debt and holders of our preferred shares (if any) would receive a distribution of\nour available assets before ordinary shareholders. Any future incurrence or issuance of debt would increase our interest cost and could\nadversely affect our results of operations and cash flows. We are not required to offer any additional equity securities to existing ordinary\nshareholders on a preemptive basis. Therefore, additional issuances of ordinary shares, directly or through convertible or exchangeable\nsecurities warrants or options, will dilute the holdings of our existing ordinary shareholders and such issuances, or the perception of such\nissuances, may reduce the market price of our ordinary shares. Any preferred shares issued by us would likely have a preference on distribution\npayments, periodically or upon liquidation, which could eliminate or otherwise limit our ability to make distributions to ordinary shareholders.\nBecause our decision to incur or issue debt or issue equity or equity-related securities in the future will depend on market conditions and other\nfactors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. Thus,\nordinary shareholders bear the risk that our future incurrence or issuance of debt or issuance of equity or equity-related securities will adversely\naffect the market price of our ordinary shares.\nOur determination of how much leverage to use to finance our acquisitions may adversely affect our return on our assets and may reduce\nfunds available for distribution.\nWe utilize leverage to finance many of our asset acquisitions, which entitles certain lenders to cash flows prior to retaining a return on our\nassets. While our Manager targets using only what we believe to be reasonable leverage, our strategy does not limit the amount of leverage we\nmay incur with respect to any specific asset. The return we are able to earn on our assets and funds available for distribution to our\nshareholders may be significantly reduced due to changes in market conditions, which may cause the cost of our financing to increase relative\nto the income that can be derived from our assets.\nWhile we currently intend to pay regular quarterly dividends to our shareholders, we may change our dividend policy at any time.\nAlthough we currently intend to pay regular quarterly dividends to holders of our ordinary shares, we may change our dividend policy at any time.\nOur net cash provided by operating activities has been less than the amount of distributions to our shareholders. The declaration and payment\nof dividends to holders of our ordinary shares are at the discretion of our board of directors in accordance with applicable law after taking into\naccount various factors, including actual results of operations, liquidity and financial condition, net cash provided by operating activities,\nrestrictions imposed by applicable law, our taxable income, our operating expenses and other factors our board of directors deem relevant.\nThere can be no assurance that we will continue to pay dividends in amounts or on a basis consistent with prior distributions to our investors, if\nat all. Because we are a holding company and have no direct operations, we will only be able to pay dividends from our available cash on hand\nand any funds we receive from our subsidiaries. Our indirect intermediate holding company subsidiary FTAI LLC is currently, and may in the\nfuture be, subject to certain covenants included in its financing agreements that limit its ability to make distributions to us. In addition, our\nexisting indebtedness does, and our future indebtedness may, limit our ability to pay dividends on our ordinary and preferred shares. Moreover,\npursuant to the Services and Profit Sharing Agreement, Master GP is entitled to receive incentive payments before any amounts are distributed\nby us based both on our consolidated net income and capital gains income in each fiscal quarter and for each fiscal year, respectively.\nFurthermore, the terms of our preferred shares generally prevent us from declaring or paying dividends on or repurchasing our ordinary shares\nor other junior capital unless all accrued distributions on such preferred shares have been paid in full.\nAnti-takeover provisions in our Articles could delay or prevent a change in control.\nProvisions in our Articles may make it more difficult and expensive for a third party to acquire control of us even if a change of control would be\nbeneficial to the interests of our shareholders. For example, our Articles provides for a staggered board, requires advance notice for proposals\nby shareholders and nominations, places limitations on convening shareholder meetings, and authorizes the issuance of preferred shares that\ncould be issued by our board of directors to thwart a takeover attempt. The market price of our shares could be adversely affected to the extent\nthat provisions of our operating agreement discourage potential takeover attempts that our shareholders may favor.\nIf securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations\nregarding our ordinary shares, our share price and trading volume could decline.\nThe trading market for our ordinary shares are influenced by the research and reports that industry or securities analysts publish about us or our\nbusiness. If any of the analysts who cover us downgrades our ordinary units or publishes inaccurate or unfavorable research about our\nbusiness, our ordinary share price may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility\nin the financial markets, which in turn could cause our ordinary share price or trading volume to decline and our ordinary shares to be less\nliquid.\nItem 1B. Unresolved Staff Comments\nWe have no unresolved staff comments.\n\n\n\n 27\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 29 of 96\n\n\n\n\nItem 1C. Cybersecurity\nRisk Management and Strategy\nThe Company\u2019s cybersecurity is overseen by the Chief Executive Officer, who receives reports directly from other officers and individuals who\nperform services for the Company, including, but not limited to, the Manager\u2019s Information Security Steering Committee (\u201cISSC\u201d), employing a\nrisk-based methodology designed to safeguard the security, confidentiality, integrity, and availability of its information. The ISSC is tasked with\ndeveloping an effective cyber strategy, establishing policies, and managing cyber risks within the organization. The Manager\u2019s Chief Financial\nOfficer and General Counsel, along with the Chief Operating Officer, Chief Human Resources Officer, Chief Compliance Officer, Chief\nTechnology Officer, Chief Information Security Officer and Chief of Intelligence collaborate with the Company\u2019s Chief Financial Officer to\nformulate, implement, and enforce these policies. They help ensure that the ISSC considers best practices in its decision-making, and\nconvenes quarterly or as needed to assess cybersecurity issues and supervise matters related to information security, fraud, vendors, data\nprotection, and privacy risks.\nTo help identify and assess risks, we and our Manager engage third-party advisors, leveraging standards such as the National Institute of\nStandards and Technology security framework (\u201cNIST\u201d). The results of these assessments inform the development of cybersecurity controls and\nrisk mitigation strategies, which are then implemented throughout the Company.\nWe have taken proactive measures intended to minimize the likelihood of successful cyberattacks, including the establishment of incident\nresponse procedures designed to address potential cyber threats that may arise. These response procedures are structured with the aim to\nidentify, analyze, contain, and remediate any cyber incidents that occur. We also have risk management processes to oversee and help identify\nrisks from cybersecurity threats associated with our use of third-party providers.\nTo date, cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected and we believe are not\nreasonably likely to affect the Company, including its business strategy, results of operations or financial condition. Refer to the risk factor\ncaptioned \u201cA cyberattack that bypasses our information technology (\u201cIT\u201d), security systems or the IT security systems of our third-party providers,\ncausing an IT security breach, may lead to a disruption of our IT systems and the loss of business information which may hinder our ability to\nconduct our business effectively and may result in lost revenues and additional costs.\u201d in Part I, Item 1A. \u201cRisk Factors\u201d for additional description\nof cybersecurity risks and potential related impacts on the Company.\nGovernance\nMaterial risks are identified and prioritized by management, and material risks are discussed periodically or as needed with the Board of\nDirectors. The Board of Directors regularly reviews information regarding the Company\u2019s credit, liquidity and operations, including risks and\ncontingencies associated with each area, including cybersecurity. In addition to the formal compliance program, the Board of Directors\nencourages management to promote a corporate culture that incorporates risk management into the Company\u2019s corporate strategy and day-to-\nday business operations.\nItem 2. Properties\nAn affiliate of our Manager leases principal executive offices at 1345 Avenue of the Americas, New York, NY 10105. We also lease office space\nfrom an affiliate of our Manager in Ireland and Dubai. Additionally, our aviation leasing business and offshore energy business lease office\nspace in New York, Florida, Wales and Singapore, respectively, and we own and/or lease maintenance facilities in Florida and Canada for our\naerospace products business. We believe that our office facilities and properties are suitable and adequate for our business as it is\ncontemplated to be conducted.\nItem 3. Legal Proceedings\nWe are and may become involved in legal proceedings, including but not limited to regulatory investigations and inquiries, in the ordinary course\nof our business. Although we are unable to predict with certainty the eventual outcome of any litigation, regulatory investigation or inquiry, in the\nopinion of management, we do not expect our current and any threatened legal proceedings to have a material adverse effect on our business,\nfinancial position or results of operations. Given the inherent unpredictability of these types of proceedings, however, it is possible that future\nadverse outcomes could have a material adverse effect on our financial results.\nItem 4. Mine Safety Disclosures\nNot applicable.\n\n\n\n\n 28\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 30 of 96\n\n\n\n\n PART II\nItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities\nOur ordinary shares are listed on The Nasdaq Global Select Market under the ticker symbol \u201cFTAI\u201d. As of February 22, 2024, there were\napproximately 14 record holders of our ordinary shares. This figure does not reflect the beneficial ownership of shares held in nominee name.\nAlthough we currently intend to continue to pay regular quarterly dividends to holders of our ordinary shares, we may change our dividend policy\nat any time and no assurances can be given that any future dividends will be paid or, if paid, as to the amounts or timing. The declaration and\npayment of dividends to holders of our ordinary shares will be at the discretion of our board of directors in accordance with applicable law after\ntaking into account various factors, including actual results of operations, liquidity and financial condition, net cash provided by operating\nactivities, restrictions imposed by applicable law, our taxable income, our operating expenses and other factors our board of directors deem\nrelevant. In addition, our existing indebtedness does, and our future indebtedness may, limit our ability to pay dividends on our ordinary and\npreferred shares.\nOn February 22, 2024, our Board of Directors declared a cash dividend on our ordinary shares of $0.30 per share for the quarter ended\nDecember 31, 2023, payable on March 20, 2024 to the holders of record on March 8, 2024.\nNonqualified Stock Option and Incentive Award Plan\nIn 2015, in connection with our IPO, we established a Nonqualified Stock Option and Incentive Award Plan (\u201cIncentive Plan\u201d) referred to then as\nthe Fortress Transportation and Infrastructure Investors LLC Nonqualified Stock Option and Incentive Award Plan, which provides for the ability to\naward equity compensation awards in the form of stock options, stock appreciation rights, restricted stock, and performance awards to eligible\nemployees, consultants, directors, and other individuals who provide services to us, each as determined by the Compensation Committee of\nthe Board of Directors. On November 10, 2022, in connection with the Merger, the Incentive Plan was assumed by FTAI Aviation Ltd. and\nrenamed the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan, and on February 23, 2023, the Incentive Plan was amended\nto provide for the ability to award equity compensation awards in the form of restricted stock units in addition to the other forms of award\ndescribed above. As of December 31, 2023, the Incentive Plan provides for the issuance of up to 29.8 million shares.\n\n\n\n\n 29\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 31 of 96\n\n\n\n\nPerformance Graph\nThe following graph compares the cumulative total return for our ordinary shares (share price change plus reinvested dividends) with the\ncomparable return of three indices: S&P Mid Cap 400, Russell 2000, and Dow Jones US Transportation Services. The graph assumes an\ninvestment of $100 in our ordinary shares and in each of the indices on December 31, 2018, and that all dividends were reinvested. The past\nperformance of our shares is not an indication of future performance.\n\n COMPARISON OF CUMULATIVE TOTAL RETURN*\n Among FTAI Aviation Ltd., the S&P Midcap 400 Index, the Russell 2000 Index and the Dow Jones US Transportation\n Services Index\n\n\n\n\n*$100 each invested on December 31, 2018 in stock and index, including reinvestment of dividends. Fiscal year ending December 31.\n\n\n(in whole dollars) December 31,\nIndex 2018 2019 2020 2021 2022 2023\nFTAI Aviation Ltd. $ 100.00 $ 149.92 $ 204.40 $ 266.34 $ 198.57 $ 559.43\nS&P Midcap 400 100.00 126.20 143.44 178.95 155.58 181.15\nRussell 2000 100.00 125.52 150.58 172.90 137.56 160.85\nDow Jones US Transportation Services 100.00 135.60 162.47 243.23 148.16 194.36\n\n\n\n\n 30\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 32 of 96\n\n\n\n\nItem 6. [Reserved]\n\n\n\nItem 7. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations\nThe following Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations (\u201cMD&A\u201d) is intended to help you\nunderstand FTAI Aviation Ltd. Our MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes,\nand with Part I, Item 1A, \u201cRisk Factors\u201d and \u201cForward-Looking Statements\u201d included elsewhere in this Annual Report on Form 10-K.\nA discussion of our cash flows for 2022 compared to 2021 is included in our Annual Report on Form 10-K for the year ended December 31,\n2022, under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.\nOverview\nWe own, lease and sell aviation equipment. We also develop and manufacture through a joint venture, and repair and sell, through our\nmaintenance facility and exclusivity arrangements, aftermarket components for aircraft engines. Additionally, we own and lease offshore energy\nequipment. We target assets that, on a combined basis, generate strong cash flows with potential for earnings growth and asset appreciation.\nWe believe that there is a large number of acquisition opportunities in our markets and that our Manager\u2019s expertise and business and\nfinancing relationships, together with our access to capital, will allow us to take advantage of these opportunities. We are externally managed by\nFIG LLC (the \u201cManager\u201d), an affiliate of Fortress Investment Group LLC (\u201cFortress\u201d), which has a dedicated team of experienced professionals\nfocused on the acquisition of transportation assets since 2002. As of December 31, 2023, we had total consolidated assets of $3.0 billion and\ntotal equity of $175.9 million.\nImpact of Russia\u2019s Invasion of Ukraine\nEconomic sanctions and export controls against Russia and Russia\u2019s aviation industry were imposed due to its invasion of Ukraine during the\nthree months ended March 31, 2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with\nRussian airlines. We determined that it is unlikely that we will regain possession of the aircraft and engines that had not yet been recovered\nfrom Ukraine and Russia. As a result, we recognized an impairment charge totaling $120.0 million, net of maintenance deposits for the year\nended December 31, 2022, to write-off the entire carrying value of leasing equipment assets that we did not expect to recover from Ukraine and\nRussia. As of December 31, 2023, eight aircraft and seventeen engines were still located in Russia.\nOur lessees are required to provide insurance coverage with respect to leased aircraft and engines, and we are named as insureds under\nthose policies in the event of a total loss of an aircraft or engine. We also purchase insurance which provides us with coverage when our aircraft\nor engines are not subject to a lease or where a lessee\u2019s policy fails to indemnify us. The insured value of the aircraft and engines that remain\nin Russia is approximately $210.7 million. We intend to pursue all our claims under these policies. However, the timing and amount of any\nrecoveries under these policies are uncertain.\nThe extent of the impact of Russia\u2019s invasion of Ukraine and the related sanctions on our operational and financial performance, including the\nability for us to recover our leasing equipment in the region, will depend on future developments, including the duration of the conflict, sanctions\nand restrictions imposed by Russian and international governments, all of which remain uncertain.\nSpin-Off of FTAI Infrastructure Inc. (\u201cFTAI Infrastructure\u201d)\nOn August 1, 2022, Fortress Transportation and Infrastructure Investors LLC (\u201cwe\u201d, \u201cus\u201d, \u201cour\u201d, \u201cFTAI\u201d or the \u201cCompany\u201d pre-Merger, as defined\nbelow, and FTAI Aviation Ltd. post-Merger) effected a spin-off of the Company\u2019s infrastructure business held by FTAI Infrastructure (a wholly-\nowned subsidiary of the Company) as a distribution of all of the shares owned by the Company of common stock of FTAI Infrastructure to the\nholders of the Company\u2019s ordinary shares as of July 21, 2022.\nFTAI Infrastructure is a corporation for U.S. federal income tax purposes and holds, among other things, the Company\u2019s previously held interests\nin the (i) Jefferson Terminal business, (ii) Repauno business, (iii) Long Ridge investment, and (iv) Transtar business. FTAI Infrastructure\nretained all related project-level debt of those entities. In connection with the spin-off, FTAI Infrastructure paid a dividend of $730.3 million to the\nCompany. The Company used these proceeds to repay all outstanding borrowings under its 2021 bridge loans, $200.0 million of its 6.50%\nsenior unsecured notes due 2025, and approximately $175.0 million of the outstanding borrowings under its revolving credit facility. FTAI\nretained the aviation business and certain other assets, and FTAI\u2019s remaining outstanding corporate indebtedness.\nIn connection with the spin-off, the Company and the Manager assigned the Company\u2019s then-existing management agreement to FTAI\nInfrastructure, and FTAI Infrastructure and the Manager executed an amended and restated agreement. The Company and certain of its\nsubsidiaries executed a new management agreement with the Manager. The new management agreement has an initial term of six years. The\nManager is entitled to a management fee and reimbursement of certain expenses on substantially similar terms as the previous arrangements\nwith the Manager, which were assigned to FTAI Infrastructure. Prior to the Merger described below, our Manager remained entitled to incentive\nallocations (comprised of income incentive allocation and capital gains incentive allocation) on the same terms as they existed prior to spin-off.\nFollowing the Merger, the Company entered into a Services and Profit Sharing Agreement (the \u201cServices and Profit Sharing Agreement\u201d), with a\nsubsidiary of the Company and\n\n\n\n 31\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 33 of 96\n\n\n\n\nFortress Worldwide Transportation and Infrastructure Master GP LLC (\u201cMaster GP\u201d), pursuant to which Master GP is entitled to incentive\npayments on substantially similar terms as the previous arrangements.\nOn November 10, 2022, the Company completed the transactions set forth in the Agreement and Plan of Merger (the \u201cMerger\u201d) between Fortress\nTransportation and Infrastructure Investors LLC (\u201cFTAI\u201d) and FTAI Aviation Ltd. (\u201cFTAI Aviation\u201d) and certain other parties, with FTAI becoming a\nsubsidiary of the Company. As a result of the merger, the FTAI became a Cayman Islands exempted company. Upon merger completion,\nFortress Transportation and Infrastructure Investors LLC public common shareholders\u2019 shares of the Company were exchanged automatically\nfor shares of FTAI Aviation Ltd. without any further action from the shareholders.\nOperating Segments\n\nThe key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our\nproducts and services. Our two reportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns\nand manages aviation assets, including aircraft and aircraft engines, which it leases and sells to customers. The Aerospace Products segment\ndevelops and manufactures through a joint venture, repairs and sells, through our maintenance facility and exclusivity arrangements, aircraft\nengines and aftermarket components for aircraft engines. During the fourth quarter of 2023, the Company changed the composition of its\noperating segments to include product offerings for V2500 engines within the Aerospace Products segment. Prior periods have been restated to\nreflect the change in accordance with the requirements of ASC 280, Segment Reporting. See Note 2 for additional information.\n\nCorporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, and\nmanagement fees. Additionally, Corporate and Other also includes offshore energy related assets, which consist of vessels and equipment that\nsupport offshore oil and gas activities and production which are typically subject to operating leases.\nOur Manager\nOn May 22, 2023, Fortress and Mubadala Investment Company, through its wholly owned asset management subsidiary Mubadala Capital\n(\u201cMubadala\u201d), announced that they have entered into definitive agreements pursuant to which, among other things, certain members of Fortress\nmanagement and affiliates of Mubadala will acquire 100% of the equity of Fortress that is currently indirectly held by SoftBank Group Corp.\n(\u201cSoftBank\u201d). After the closing of the transaction, Fortress will continue to operate as an independent investment manager under the Fortress\nbrand, with autonomy over investment processes and decision making, personnel and operations.\n\nResults of Operations\nAdjusted EBITDA (Non-GAAP)\nThe chief operating decision maker (\u201cCODM\u201d) utilizes Adjusted EBITDA as the key performance measure. Adjusted EBITDA is not a financial\nmeasure in accordance with U.S. generally accepted accounting principles (\u201cU.S. GAAP\u201d). This performance measure provides the CODM with\nthe information necessary to assess operational performance and make resource and allocation decisions. We believe Adjusted EBITDA is a\nuseful metric for investors and analysts for similar purposes of assessing our operational performance.\nAdjusted EBITDA is defined as net income (loss) attributable to shareholders from continuing operations, adjusted (a) to exclude the impact of\nprovision for (benefit from) income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the\nmodification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset\nimpairment charges, incentive allocations, depreciation and amortization expense, dividends on preferred shares and interest expense, (b) to\ninclude the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities and (c) to exclude the impact of equity in earnings\n(losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA.\n\n\n\n\n 32\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 34 of 96\n\n\n\n\nThe following table presents our consolidated results of operations:\n\n\n\n Year Ended December 31, Change\n(in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21\nRevenues\nLease income $ 207,936 $ 179,314 $ 173,864 $ 28,622 $ 5,450\nMaintenance revenue 191,347 148,846 128,819 42,501 20,027\nAsset sales revenue 303,141 183,535 - 119,606 183,535\nAerospace products revenue 454,970 178,515 23,301 276,455 155,214\nOther revenue 13,502 18,201 9,599 (4,699) 8,602\nTotal revenues 1,170,896 708,411 335,583 462,485 372,828\n\nExpenses\nCost of sales 502,132 248,385 14,308 253,747 234,077\nOperating expenses 110,163 132,264 59,615 (22,101) 72,649\nGeneral and administrative 13,700 14,164 13,448 (464) 716\nAcquisition and transaction expenses 15,194 13,207 17,911 1,987 (4,704)\nManagement fees and incentive allocation to affiliate 18,037 3,562 684 14,475 2,878\nDepreciation and amortization 169,877 152,917 147,740 16,960 5,177\nAsset impairment 2,121 137,219 10,463 (135,098) 126,756\nInterest expense 161,639 169,194 155,017 (7,555) 14,177\nTotal expenses 992,863 870,912 419,186 121,951 451,726\n\nOther income (expense)\nEquity in losses of unconsolidated entities (1,606) (369) (1,403) (1,237) 1,034\nGain on sale of assets, net - 77,211 49,015 (77,211) 28,196\nLoss on extinguishment of debt - (19,859) (3,254) 19,859 (16,605)\nOther income (expense) 7,590 207 (490) 7,383 697\nTotal other income 5,984 57,190 43,868 (51,206) 13,322\nIncome (loss) from continuing operations before\nincome taxes 184,017 (105,311) (39,735) 289,328 (65,576)\n(Benefit from) provision for income taxes (59,800) 5,300 3,126 (65,100) 2,174\n Net income (loss) from continuing operations 243,817 (110,611) (42,861) 354,428 (67,750)\n Net loss from discontinued operations, net of income taxes - (101,416) (87,845) 101,416 (13,571)\nNet income (loss) 243,817 (212,027) (130,706) 455,844 (81,321)\nLess: Net income (loss) attributable to non-controlling interest in\nconsolidated subsidiaries:\n Continuing operations - - - - -\n Discontinued operations - (18,817) (26,472) 18,817 7,655\nLess: Dividends on preferred shares 31,795 27,164 24,758 4,631 2,406\nNet income (loss) attributable to shareholders $ 212,022 $ (220,374) $ (128,992) $ 432,396 $ (91,382)\n\n\n\n\n 33\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 35 of 96\n\n\n\n\nThe following table sets forth a reconciliation of net income (loss) attributable to shareholders from continuing operations to Adjusted EBITDA:\n\n Year Ended December 31, Change\n(in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21\nNet income (loss) attributable to shareholders from\ncontinuing operations $ 212,022 $ (137,775) $ (67,619) $ 349,797 $ (70,156)\nAdd: (Benefit from) provision for income taxes (59,800) 5,300 3,126 (65,100) 2,174\nAdd: Equity-based compensation expense 1,638 - - 1,638 -\nAdd: Acquisition and transaction expenses 15,194 13,207 17,911 1,987 (4,704)\nAdd: Losses on the modification or extinguishment of debt and\ncapital lease obligations - 19,859 3,254 (19,859) 16,605\nAdd: Changes in fair value of non-hedge derivative instruments - - - - -\nAdd: Asset impairment charges 2,121 137,219 10,463 (135,098) 126,756\nAdd: Incentive allocations 17,116 3,489 - 13,627 3,489\nAdd: Depreciation & amortization expense (1) 213,641 190,031 175,718 23,610 14,313\nAdd: Interest expense and dividends on preferred shares 193,434 196,358 179,775 (2,924) 16,583\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated\nentities (2) 310 40 (1,203) 270 1,243\nLess: Equity in losses of unconsolidated entities 1,606 369 1,403 1,237 (1,034)\nLess: Non-controlling share of Adjusted EBITDA - - - - -\nAdjusted EBITDA (non-GAAP) $ 597,282 $ 428,097 $ 322,828 $ 169,185 $ 105,269\n\n\n__________________________________________________\n\n(1)\n Includes the following items for the years ended December 31, 2023, 2022 and 2021: (i) depreciation and amortization expense of $169,877, $152,917 and\n $147,740, (ii) lease intangible amortization of $15,126, $13,913 and $4,993 and (iii) amortization for lease incentives of $28,638, $23,201 and $22,985,\n respectively.\n(2)\n Includes the following items for the years ended December 31, 2023, 2022 and 2021: (i) net loss of $1,606, $369 and $1,403, (ii) depreciation and amortization\n expense of $1,488, $409 and $200 and (iii) acquisition and transaction expense of $428, $0 and $0, respectively.\nRevenues\n\nPresentation of assets sales\nDuring the third quarter of 2022, we updated our corporate strategy based on the opportunities available in the market such that the sale of\naircraft and engines is now an output of our recurring, ordinary activities. As a result of this update, the transaction price allocated to the sale of\nassets is included in Revenues in the Consolidated Statement of Operations beginning in the third quarter of 2022 and is accounted for in\naccordance with ASC 606. The corresponding net book values of the assets sold are recorded in Cost of sales in the Consolidated Statement of\nOperations beginning in the third quarter of 2022. Sales transactions of aircraft and engines prior to the third quarter of 2022 were accounted for\nin accordance with ASC 610-20, Gains and losses from the derecognition of nonfinancial assets and were included in Gain (loss) on sale of\nassets, net on the Consolidated Statement of Operations, as we were previously only occasionally selling these assets. Generally, assets sold\nwere included in Leasing equipment, net, on the Consolidated Balance Sheets.\nComparison of the years ended December 31, 2023 and 2022\nTotal revenues increased $462.5 million, primarily due to an increase in Aerospace Products revenue, Asset sales revenue, maintenance\nrevenue and lease income.\nAerospace Products revenue increased $276.5 million driven by an increase in sales relating to the CFM56-7B, CFM56-5B and V2500 engines,\nengine modules, spare parts and used material inventory as operations continued to ramp-up in 2023. See above discussion regarding\npresentation of asset sales.\nAsset sales revenue increased $119.6 million primarily due to an increase in the sale of commercial aircraft and engines in our Aviation\nLeasing segment during 2023. See above discussion regarding presentation of asset sales.\nLease income increased $28.6 million primarily due to an increase in the number of aircraft and engines placed on lease during the year and\nan increase in the Offshore Energy business as one of our vessels was on-hire longer in 2023 compared to 2022 and at higher rates.\nMaintenance revenue increased $42.5 million primarily due to the recognition of maintenance deposits due to the early redelivery of five aircraft,\nan increase in the number of aircraft and engines placed on lease, higher aircraft and engine utilization and higher end-of-lease return\ncompensation.\n\n\n\n 34\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 36 of 96\n\n\n\n\nOther revenue decreased $4.7 million primarily due to a decrease in end-of-lease redelivery compensation.\nExpenses\nTotal expenses increased $122.0 million primarily due to higher (i) cost of sales, (ii) management fees and incentive allocation to affiliate and(iii)\ndepreciation and amortization, partially offset by lower (iv) asset impairment, (v) operating expenses and (vi) interest expense.\nCost of sales increased $253.7 million primarily as a result of an increase in asset sales and Aerospace Product sales and the gross\npresentation of Asset sales revenue and Aerospace products revenues as described above.\nManagement fees and incentive allocation to affiliate increased $14.5 million primarily due to an increase in incentive fee due to the Manager\ndriven by an increase in net income.\nDepreciation and amortization increased $17.0 million primarily driven by an increase in the number of assets owned and on lease, partially\noffset by an increase in the number of aircraft redelivered and parted out into our engine leasing pool.\nAsset impairment decreased $135.1 million primarily due to the 2022 write down of aircraft and engines located in Russia and Ukraine that\nwere deemed not recoverable. See Note 5 to the consolidated financial statements for additional information.\nOperating expenses decreased $22.1 million primarily due to:\n \u2022 an decrease of $43.4 million in the Aviation Leasing segment primarily as a result of decrease in provision for credit losses as a result\n of the sanctions imposed on Russian airlines in 2022, shipping and storage fees and repairs and maintenance expenses, partially\n offset by increases in insurance expenses.\n \u2022 an increase of $12.8 million in the Offshore Energy business which reflects increases in offshore crew expenses, project costs and\n other operating expenses as our vessels were on-hire longer in 2023 compared to 2022.\n \u2022 an increase of $8.5 million in the Aerospace Products segment primarily due to an increase in commission expenses due to the\n increase in sales from the used material program as well as an increase in shipping and storage fees as operations continued to\n ramp-up in 2023.\nInterest expense decreased $7.6 million, which reflects a decrease in the average outstanding debt of approximately $183.8 million primarily\ndue to decreases in (i) the 2021 Bridge Loans of $178.3 million and (ii) the Senior Notes due 2025 of $116.7 million, which were partially\nredeemed in August 2022, partially offset by increases in (iii) the Revolving Credit Facility of $28.7 million and (iv) the Senior Notes due 2030 of\n$82.8 million, which were issued in November 2023.\nOther income (expense)\nTotal other income decreased $51.2 million primarily due to (i) a decrease of $77.2 million in Gain on sale of assets, net in the Aviation Leasing\nand Aerospace Products segments due to the change in presentation of asset sales described above, partially offset by (ii) Loss on\nextinguishment of debt of $19.9 million recognized during 2022 related to the pay-down of the 2021 Bridge Loan issued in December 2021 and\nFebruary 2022 and the partial redemption of Senior Notes due 2025.\n(Benefit from) provision for income taxes\nThe benefit from income taxes increased $65.1 million primarily due to the Company establishing a deferred tax asset of $72.2 million in\nconnection with a tax law change in Bermuda, which was recorded as a benefit from income taxes during the fourth quarter of 2023. See Note 11\nto the consolidated financial statements for additional information.\nNet income (loss) from continuing operations\nNet income from continuing operations increased $354.4 million primarily due to the changes noted above.\nNet loss from discontinued operations\nNet loss from discontinued operations decreased $101.4 million for the year ended December 31, 2023, compared to the prior year as these\nbusinesses have spun off and there is no corresponding activity in the current period.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased $169.2 million primarily due to the changes noted above.\nComparison of the years ended December 31, 2022 and 2021\nTotal revenues increased $372.8 million, primarily due to an increase in Asset sales revenue, Aerospace Products revenue, maintenance\nrevenue and other revenue.\n\n\n\n 35\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 37 of 96\n\n\n\n\nAsset sales revenue increased $183.5 million primarily due to an increase in the sale of commercial aircraft and engines in our Aviation\nLeasing segment during 2022. See above discussion regarding presentation of asset sales.\nAerospace Products revenue increased $155.2 million driven by an increase in sales relating to the CFM56-7B, CFM56-5B and V2500 engines,\nengine modules, spare parts and used material inventory as operations ramped up in 2022. See above discussion regarding presentation of\nasset sales.\nMaintenance revenue increased $20.0 million primarily due to an increase in the number of aircraft and engines placed on lease, higher aircraft\nand engine utilization and higher end-of-lease return compensation, partially offset by a decrease in the recognition of maintenance deposits\ndue to the early redelivery of aircraft in the prior year and lower maintenance billings from early termination of aircraft leases with Russian\nairlines as a result of the sanctions imposed on Russian airlines during the first quarter of 2022.\nOther revenue increased $8.6 million primarily due to an increase in end-of lease redelivery compensation.\nLease income decreased $5.5 million primarily due to a $4.7 million decrease in the Aviation leasing segment driven by the early termination of\naircraft and engine leases as a result of the sanctions imposed on Russian airlines during the first quarter of 2022. Basic lease revenues from\nour owned aircraft and engines leased to Russian airlines was approximately $39.8 million for the year ended December 31, 2021. This\ndecrease is partially offset by an increase in the number of aircraft and engines placed on lease during the year, and a $10.1 million increase in\nthe Offshore Energy business as two of our vessels were on-hire longer in 2022 compared to 2021.\nExpenses\nTotal expenses increased $451.7 million primarily due to higher (i) cost of sales, (ii) asset impairment charges, (iii) operating expenses, (iv)\ninterest expense, (v) depreciation and amortization, and (vi) management fees and incentive allocation to affiliate partially offset by lower (vii)\nacquisition and transaction expenses.\nCost of sales increased $234.1 million primarily as a result of an increase in asset sales and Aerospace Product sales and the gross\npresentation of asset sales revenue and Aerospace Product revenues as described above.\nAsset impairment increased $126.8 million primarily due to the 2022 write down of aircraft and engines located in Russia and Ukraine that were\ndeemed not recoverable. See Note 5 to the consolidated financial statements for additional information.\nOperating expenses increased $72.6 million primarily due to:\n \u2022 an increase of $48.5 million in the Aviation Leasing segment primarily as a result of an increase in provision for credit losses as a\n result of the sanctions imposed on Russian airlines in 2022, and increases in insurance expense, shipping and storage fees,\n professional fees, and repairs and maintenance expenses.\n \u2022 an increase of $17.6 million in the Offshore Energy business which reflects increases in offshore crew expenses, project costs and\n other operating expenses as our vessels were on-hire longer in 2022 compared to 2021, as well as crane repairs on one of our\n vessels.\n \u2022 an increase of $6.5 million in the Aerospace Products segment primarily due to an increase in commission expenses due to the\n increase in sales from the used material program as well as an increase in professional fees and other operating expenses due to the\n ramp-up of Aerospace Products.\nInterest expense increased $14.2 million, which reflects an increase in the average outstanding debt of approximately $354.7 million due to\nincreases in (i) the Senior Notes due 2028 of $459.7 million, (ii) the 2021 Bridge Loans issued in December 2021 and February 2022 of $169.9\nmillion and (iii) the Revolving Credit Facility of $49.7 million, partially offset by a decrease in (iv) the Bridge Loans of $108.3 million, (v) the Senior\nNotes due 2022 of $133.1 million, which was redeemed in full in May 2021, and (vi) the Senior Notes due 2025 of $83.2 million, which were\npartially redeemed in August 2022.\nDepreciation and amortization increased $5.2 million primarily driven by an increase in the number of assets owned and on lease, partially\noffset by an increase in the number of aircraft redelivered and parted out into our engine leasing pool.\nManagement fees and incentive allocation to affiliate increased $2.9 million primarily due to an increase in incentive fee due to the Manager.\nAcquisition and transaction expenses decreased $4.7 million primarily due to a decrease in professional fees related to the Transtar acquisition\nin 2021.\nOther income (expense)\nTotal other income increased $13.3 million primarily due to (i) an increase of $28.2 million in Gain on sale of assets, net in the Aviation Leasing\nand Aerospace Products segments from more opportunistic asset sales transactions, partially offset by (ii) an increase of $16.6 million in loss\non extinguishment of debt primarily related to the 2022 paydown of the 2021 Bridge Loan and the partial redemption of the Senior Notes due\n2025 in connection with the spin-off of FTAI Infrastructure. See above discussion regarding presentation of asset sales and impact on Gain on\nsales of assets, net.\nProvision for income taxes\nThe provision for income taxes increased $2.2 million primarily due to a higher provision in the Aerospace Products segment.\n\n\n\n 36\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 38 of 96\n\n\n\n\nNet loss from continuing operations\nNet loss from continuing operations increased $67.8 million primarily due to the changes noted above.\nNet loss from discontinued operations\nNet loss from discontinued operations increased $13.6 million primarily due to:\n \u2022 An increase in net loss of $34.7 million in the Ports and Terminals business in 2022 of which $32.6 million relates to our equity pick-up\n in net losses for the Long Ridge investment.\n \u2022 An increase in acquisition and transaction expense of $11.9 million during 2022 related to the spin-off of the infrastructure business\u037e\n \u2022 Offset by a decrease in net loss of $22.6 million in the Jefferson business in 2022 which is primarily driven by seven months of activity\n during 2022 compared to a full year of activity in 2021\u037e and\n \u2022 An increase in net income of $8.4 million on the Transtar business, which was acquired on July 28, 2021.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased $105.3 million primarily due to the changes noted above.\nAviation Leasing Segment\nAs of December 31, 2023, in our Aviation Leasing segment, we own and manage 363 aviation assets, consisting of 96 commercial aircraft and\n267 engines, including eight aircraft and seventeen engines that were still located in Russia.\nAs of December 31, 2023, 76 of our commercial aircraft and 175 of our engines were leased to operators or other third parties. Aviation assets\ncurrently off lease are either undergoing repair and/or maintenance, being prepared to go on lease or held in short term storage awaiting a\nfuture lease. Our aviation equipment was approximately 77% utilized during the three months ended December 31, 2023, based on the percent\nof days on-lease in the quarter weighted by the monthly average equity value of our aviation leasing equipment, excluding airframes. Our aircraft\ncurrently have a weighted average remaining lease term of 47 months, and our engines currently on-lease have an average remaining lease\nterm of 16 months. The table below provides additional information on the assets in our Aviation Leasing segment:\n\n\nAviation Assets Widebody Narrowbody Total\nAircraft\nAssets at January 1, 2023 8 98 106\nPurchases - 40 40\nSales (2) (11) (13)\nTransfers (1) (36) (37)\nAssets at December 31, 2023 5 91 96\n\n\nEngines\nAssets at January 1, 2023 40 184 224\nPurchases 7 94 101\nSales (17) (24) (41)\nTransfers 2 (19) (17)\nAssets at December 31, 2023 32 235 267\n\n\n\n\n 37\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 39 of 96\n\n\n\n\nThe following table presents our results of operations for our Aviation Leasing segment:\n\n Year Ended December 31, Change\n(in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21\nRevenues\nLease income $ 179,704 $ 159,068 $ 163,733 $ 20,636 $ (4,665)\nMaintenance revenue 191,347 148,846 128,819 42,501 20,027\nAsset sales revenue 303,141 183,535 - 119,606 183,535\nOther revenue 7,419 11,499 5,569 (4,080) 5,930\nTotal revenues 681,611 502,948 298,121 178,663 204,827\n\nExpenses\nCost of sales 221,852 138,904 - 82,948 138,904\nOperating expenses 37,876 81,232 32,757 (43,356) 48,475\nAcquisition and transaction expenses 7,150 1,923 982 5,227 941\nDepreciation and amortization 158,354 144,258 139,678 14,096 4,580\nAsset impairment 2,121 137,219 10,463 (135,098) 126,756\nTotal expenses 427,353 503,536 183,880 (76,183) 319,656\n\nOther income (expense)\nEquity in (losses) earnings of unconsolidated entities (148) 740 - (888) 740\nGain on sale of assets, net - 59,048 28,631 (59,048) 30,417\nOther income (expense) 1,300 246 (527) 1,054 773\nTotal other income 1,152 60,034 28,104 (58,882) 31,930\nIncome before income taxes 255,410 59,446 142,345 195,964 (82,899)\n(Benefit from) provision for income taxes (36,193) 2,502 2,073 (38,695) 429\nNet income 291,603 56,944 140,272 234,659 (83,328)\nLess: Net loss attributable to non-controlling interest in\nconsolidated subsidiaries - - - - -\nNet income attributable to shareholders $ 291,603 $ 56,944 $ 140,272 $ 234,659 $ (83,328)\n\n\n\n\n 38\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 40 of 96\n\n\n\n\nThe following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:\n\n Year Ended December 31, Change\n(in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21\nNet income attributable to shareholders $ 291,603$ 56,944$ 140,272$ 234,659$ (83,328)\nAdd: (Benefit from) provision for income taxes (36,193) 2,502 2,073 (38,695) 429\nAdd: Equity-based compensation expense 337 - - 337 -\nAdd: Acquisition and transaction expenses 7,150 1,923 982 5,227 941\nAdd: Losses on the modification or extinguishment of debt and\n capital lease obligations - - - - -\nAdd: Changes in fair value of non-hedge derivative instruments - - - - -\nAdd: Asset impairment charges 2,121 137,219 10,463 (135,098) 126,756\nAdd: Incentive allocations - - - - -\nAdd: Depreciation and amortization expense (1) 202,118 181,372 167,656 20,746 13,716\nAdd: Interest expense and dividends on preferred shares - - - - -\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated\n entities (2) 104 925 - (821) 925\nLess: Equity in losses (earnings) of unconsolidated entities 148 (740) - 888 (740)\nLess: Non-controlling share of Adjusted EBITDA - - - - -\nAdjusted EBITDA (non-GAAP) $ 467,388$ 380,145$ 321,446$ 87,243$ 58,699\n\n__________________________________________________\n(1)\n Includes the following items for the years ended December 31, 2023, 2022 and 2021: (i) depreciation expense of $158,354, $144,258 and $139,678, (ii) lease\n intangible amortization of $15,126, $13,913 and $4,993 and (iii) amortization for lease incentives of $28,638, $23,201 and $22,985, respectively.\n(2)\n Includes the following items for the years ended December 31, 2023, 2022 and 2021: (i) net (loss) income of $(148), $740 and $0 and (ii) depreciation and\n amortization of $252, $185 and $0, respectively.\n\n\n\nComparison of the years ended December 31, 2023 and 2022\nRevenues\nTotal revenues increased $178.7 million driven by an increase in asset sales revenue, maintenance revenue and lease income, partially offset\nby a decrease in other revenue.\n \u2022 Asset sales revenue increased $119.6 million primarily due to an increase in the sale of commercial aircraft and engines. See above\n discussion regarding presentation of asset sales.\n \u2022 Maintenance revenue increased $42.5 million primarily due to the recognition of maintenance deposits due to the early redelivery of five\n aircraft, an increase in the number of aircraft and engines placed on lease, higher aircraft and engine utilization and higher end-of-\n lease return compensation.\n \u2022 Lease income increased $20.6 million primarily due to an increase in the number of aircraft and engines placed on lease during the\n year, partially offset by an increase in the number of aircraft and engines redelivered.\n \u2022 Other revenue decreased $4.1 million primarily due to a decrease in end-of-lease redelivery compensation.\nExpenses\nTotal expenses decreased $76.2 million primarily driven by a decrease in asset impairment and operating expenses, partially offset by an\nincrease in cost of sales, depreciation and amortization and acquisition and transaction expenses.\n\n\n\n\n 39\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 41 of 96\n\n\n\n\n \u2022 Asset impairment decreased $135.1 million primarily due to the 2022 write down of aircraft and engines located in Russia and Ukraine\n that were deemed not recoverable. See Note 5 to the consolidated financial statements for additional information.\n \u2022 Operating expenses decreased $43.4 million primarily as a result of decreases in provision for credit losses as a result of the\n sanctions imposed on Russian airlines in 2022, shipping and storage fees and repairs and maintenance expenses, partially offset by\n an increase in insurance expense.\n \u2022 Cost of sales increased $82.9 million primarily as a result of an increase in asset sales and the gross presentation of asset sales\n revenues and related costs of sales as described above.\n \u2022 Depreciation and amortization expense increased $14.1 million driven by an increase in the number of assets owned and on lease,\n partially offset by an increase in the number of aircraft redelivered and parted out into our engine leasing pool.\n \u2022 Acquisition and transaction expenses increased $5.2 million driven by higher compensation and related costs associated with the\n acquisition of aviation leasing equipment.\nOther income (expense)\nTotal other income decreased $58.9 million primarily due to a decrease of $59.0 million in Gain on sale of assets, net due to the change in\npresentation of asset sales.\n(Benefit from) provision for income taxes\nThe benefit from income taxes increased $38.7 million primarily due to the Company establishing a deferred tax asset of $46.6 million in\nconnection with a tax law change in Bermuda, which was recorded as a benefit from income taxes during the fourth quarter of 2023. See Note 11\nto the consolidated financial statements for additional information.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased $87.2 million primarily due to the changes noted above.\nComparison of the years ended December 31, 2022 and 2021\nRevenues\nTotal revenues increased $204.8 million driven by an increase in asset sales revenue, maintenance revenue and other revenue, partially offset\nby a decrease in lease income.\n \u2022 Asset sales revenue increased $183.5 million primarily due to an increase in the sale of commercial aircraft and engines during 2022.\n See above discussion regarding presentation of asset sales.\n \u2022 Maintenance revenue increased $20.0 million primarily due to an increase in the number of aircraft and engines placed on lease,\n higher aircraft and engine utilization and higher end-of-lease return compensation, partially offset by a decrease in the recognition of\n maintenance deposits due to the early redelivery of aircraft in the prior year and lower maintenance billings from the early termination of\n aircraft leases with Russian airlines as a result of the sanctions imposed on Russian airlines during the first quarter of 2022.\n \u2022 Other revenue increased $5.9 million primarily due to an increase in end-of-lease redelivery compensation.\n \u2022 Lease income decreased $4.7 million primarily due to the early termination of aircraft and engine leases as a result of the sanctions\n imposed on Russian airlines during the first quarter of 2022. Basic lease revenues from our owned aircraft and engines leased to\n Russian airlines was approximately $39.8 million for the year ended December 31, 2021. This decrease is partially offset by an\n increase in the number of aircraft and engines placed on lease during the year.\nExpenses\n\n\n\n\n 40\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 42 of 96\n\n\n\n\nTotal expenses increased $319.7 million primarily driven by an increase in cost of sales, asset impairment, operating expenses and\ndepreciation and amortization expense.\n \u2022 Cost of sales increased $138.9 million primarily as a result of an increase in asset sales and the gross presentation of asset sales\n revenues and related costs of sales as described above.\n \u2022 Asset impairment increased $126.8 million primarily due to the 2022 write down of aircraft and engines located in Russia and Ukraine\n that were deemed not recoverable. See Note 5 to the consolidated financial statements for additional information.\n \u2022 Operating expenses increased $48.5 million primarily as a result of an increase in provision for credit losses as a result of the\n sanctions imposed on Russian airlines in 2022, and increases in insurance expense, shipping and storage fees, professional fees,\n and repairs and maintenance expenses.\n \u2022 Depreciation and amortization expense increased $4.6 million driven by an increase in the number of assets owned and on lease,\n partially offset by an increase in the number of aircraft redelivered and parted out into our engine leasing pool.\nOther income (expense)\nTotal other income increased $31.9 million primarily due to an increase of $30.4 million in Gain on the sale of assets, net due to more\nopportunistic sales transactions.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased $58.7 million primarily due to the changes noted above.\nAerospace Products Segment\nThe Aerospace Products segment develops and manufactures through a joint venture, repairs and sells, through our maintenance facility and\nexclusivity arrangements, aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft\nengines. Our engine and module sales are facilitated through The Module Factory, a dedicated commercial maintenance program, designed to\nfocus on modular repair and refurbishment of CFM56-7B and CFM56-5B engines, performed by a third party. Used serviceable material is sold\nthrough our exclusive partnership with AAR Corp, who is responsible for the teardown, repair, marketing and sales of spare parts from our\nCFM56 engine pool. In December 2023, we acquired the remaining interest in Quick Turn Engine Center LLC or \u201cQuickTurn\u201d (previously iAero\nThrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. Refer to Note 4 \u201cAcquisition of QuickTurn\u201d, for additional\ninformation. We also hold a 25% interest in the Advanced Engine Repair JV which focuses on developing new cost savings programs for engine\nrepairs.\nThe following table presents our results of operations:\n Year Ended December 31, Change\n(in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21\nAerospace products revenue $ 454,970 $ 178,515 $ 23,301 $ 276,455 $ 155,214\n\nExpenses\nCost of sales 280,280 109,481 14,308 170,799 95,173\nOperating expenses 20,459 11,967 5,429 8,492 6,538\nAcquisition and transaction expenses 1,722 243 - 1,479 243\nDepreciation and amortization 661 258 66 403 192\nTotal expenses 303,122 121,949 19,803 181,173 102,146\n\nOther income (expense)\nEquity in losses of unconsolidated entities (1,458) (1,109) (1,403) (349) 294\nGain on sale of assets, net - 18,163 20,384 (18,163) (2,221)\nOther income 5,347 - - 5,347 -\nTotal other income 3,889 17,054 18,981 (13,165) (1,927)\nIncome before income taxes 155,737 73,620 22,479 82,117 51,141\n(Benefit from) provision for income taxes (24,440) 2,961 1,135 (27,401) 1,826\nNet income 180,177 70,659 21,344 109,518 49,315\nLess: Net loss attributable to non-controlling interest in\nconsolidated subsidiaries - - - - -\nNet income attributable to shareholders $ 180,177 $ 70,659 $ 21,344 $ 109,518 $ 49,315\n\n\n\n\n 41\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 43 of 96\n\n\n\n\nThe following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:\n Year Ended December 31, Change\n(in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21\nNet income attributable to shareholders $ 180,177 $ 70,659 $ 21,344 $ 109,518 $ 49,315\nAdd: (Benefit from) provision for income taxes (24,440) 2,961 1,135 (27,401) 1,826\nAdd: Equity-based compensation expense 225 - - 225 -\nAdd: Acquisition and transaction expenses 1,722 243 - 1,479 243\nAdd: Losses on the modification or extinguishment of debt and\ncapital lease obligations - - - - -\nAdd: Changes in fair value of non-hedge derivative instruments - - - - -\nAdd: Asset impairment charges - - - - -\nAdd: Incentive allocations - - - - -\nAdd: Depreciation and amortization expense 661 258 66 403 192\nAdd: Interest expense and dividends on preferred shares - - - - -\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated\nentities (1) 206 (885) (1,203) 1,091 318\nLess: Equity in losses of unconsolidated entities 1,458 1,109 1,403 349 (294)\nLess: Non-controlling share of Adjusted EBITDA - - - - -\nAdjusted EBITDA (non-GAAP) $ 160,009 $ 74,345 $ 22,745 $ 85,664 $ 51,600\n\n\n__________________________________________________\n\n(1)\n Includes the following items for the years ended December 31, 2023, 2022 and 2021: (i) net loss of $1,458, $1,109 and $1,403 (ii) depreciation and amortization\n of $1,236, $224 and $200 and (iii) acquisition and transaction expense of $428, $0, $0, respectively.\n\n\nComparison of the years ended December 31, 2023 and 2022\nRevenues\nTotal Aerospace Products revenue increased $276.5 million primarily driven by an increase in sales relating to the CFM56-7B, CFM56-5B and\nV2500 engines, engine modules, spare parts and used material inventory as operations continued to ramp-up in 2023. See above discussion\nregarding presentation of asset sales.\nExpenses\nTotal expenses increased $181.2 million primarily due to an increase in costs of sales and operating expenses.\n \u2022 Cost of sales increased $170.8 million primarily as a result of an increase in Aerospace Product sales and the gross presentation\n described above.\n \u2022 Operating expenses increased $8.5 million primarily due to an increase in commission expenses due to the increase in sales from the\n used material program as well as an increase in shipping and storage fees as operations continued to ramp-up in 2023.\nOther income (expense)\nTotal other income decreased $13.2 million which primarily reflects a decrease of $18.2 million in Gain on sale of assets, net, partially offset by\nan increase of $5.3 million in gain on consolidation of investment in connection with the QuickTurn acquisition, and an increase of $0.3 million\nin our proportionate share of unconsolidated entities\u2019 net loss. See above discussion regarding presentation of asset sales.\n(Benefit from) provision for income taxes\nThe benefit from income taxes increased $27.4 million primarily due to the Company establishing a deferred tax asset of $25.6 million in\nconnection with a tax law change in Bermuda, which was recorded as a benefit from income taxes during the fourth quarter of 2023. See Note 11\nto the consolidated financial statements for additional information.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased $85.7 million primarily due to the changes noted above.\n\n\n\n 42\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 44 of 96\n\n\n\n\nComparison of the years ended December 31, 2022 and 2021\nRevenues\nTotal Aerospace Products revenue increased $155.2 million primarily driven by an increase in sales relating to the CFM56-7B, CFM56-5B and\nV2500 engines, engine modules, spare parts and used material inventory as operations ramped up in 2022. See above discussion regarding\npresentation of asset sales.\nExpenses\nTotal expenses increased $102.1 million primarily due to an increase in costs of sales and operating expenses.\n \u2022 Cost of sales increased $95.2 million primarily as a result of an increase in Aerospace Product sales and the gross presentation\n described above.\n \u2022 Operating expenses increased $6.5 million primarily due to an increase in commission expenses due to the increase in sales from\n the used material program as well as an increase in professional fees and other operating expenses due to the ramp-up of Aerospace\n Products.\nOther income (expense)\nTotal other income decreased $1.9 million, which primarily reflects a decrease of $2.2 million in Gain on sale of assets, net. See above\ndiscussion regarding presentation of asset sales.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased $51.6 million primarily due to the changes noted above.\n\n\n\nCorporate and Other\nThe following table presents our results of operations:\n Year Ended December 31, Change\n(in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21\nRevenues\nLease income $ 28,232 $ 20,246 $ 10,131 $ 7,986 $ 10,115\nOther revenue 6,083 6,702 4,030 (619) 2,672\nTotal revenues 34,315 26,948 14,161 7,367 12,787\n\n\nExpenses\nOperating expenses 51,828 39,065 21,429 12,763 17,636\nGeneral and administrative 13,700 14,164 13,448 (464) 716\nAcquisition and transaction expenses 6,322 11,041 16,929 (4,719) (5,888)\nManagement fees and incentive allocation to affiliate 18,037 3,562 684 14,475 2,878\nDepreciation and amortization 10,862 8,401 7,996 2,461 405\nInterest expense 161,639 169,194 155,017 (7,555) 14,177\nTotal expenses 262,388 245,427 215,503 16,961 29,924\n\nOther income (expense)\nLoss on extinguishment of debt - (19,859) (3,254) 19,859 (16,605)\nOther income (expense) 943 (39) 37 982 (76)\nTotal other income (expense) 943 (19,898) (3,217) 20,841 (16,681)\nLoss before income taxes (227,130) (238,377) (204,559) 11,247 (33,818)\nProvision for (benefit from) income taxes 833 (163) (82) 996 (81)\nNet loss (227,963) (238,214) (204,477) 10,251 (33,737)\nLess: Net loss attributable to non-controlling interest in\nconsolidated subsidiaries - - - - -\nLess: Dividends on preferred shares 31,795 27,164 24,758 4,631 2,406\nNet loss attributable to shareholders from continuing\noperations $ (259,758) $ (265,378) $ (229,235) $ 5,620 $ (36,143)\n\n\n\n\n 43\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 45 of 96\n\n\n\n\nThe following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:\n Year Ended December 31, Change\n(in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21\nNet loss attributable to shareholders from continuing\noperations $ (259,758) $ (265,378) $ (229,235) $ 5,620 $ (36,143)\nAdd: Provision for (benefit from) income taxes 833 (163) (82) 996 (81)\nAdd: Equity-based compensation expense 1,076 - - 1,076 -\nAdd: Acquisition and transaction expenses 6,322 11,041 16,929 (4,719) (5,888)\nAdd: Losses on the modification or extinguishment of debt and\ncapital lease obligations - 19,859 3,254 (19,859) 16,605\nAdd: Changes in fair value of non-hedge derivative instruments - - - - -\nAdd: Asset impairment charges - - - - -\nAdd: Incentive allocations 17,116 3,489 - 13,627 3,489\nAdd: Depreciation and amortization expense 10,862 8,401 7,996 2,461 405\nAdd: Interest expense and dividends on preferred shares 193,434 196,358 179,775 (2,924) 16,583\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated\nentities - - - - -\nLess: Equity in (earnings) losses of unconsolidated entities - - - - -\nLess: Non-controlling share of Adjusted EBITDA - - - - -\nAdjusted EBITDA (non-GAAP) $ (30,115) $ (26,393) $ (21,363) $ (3,722) $ (5,030)\n\nComparison of the years ended December 31, 2023 and 2022\nRevenues\nTotal revenues increased $7.4 million primarily due to an increase in the Offshore Energy business, as one of our vessels was on-hire longer in\n2023 compared to 2022, and at higher rates.\nExpenses\nTotal expenses increased $17.0 million primarily due to higher management fees and incentive allocation to affiliate, operating expenses,\ndepreciation and amortization, partially offset by lower interest expense and lower acquisition and transaction expenses.\n \u2022 Management fees and incentive allocation to affiliate increased $14.5 million primarily due to an increase in incentive fee due to the\n Manager driven by an increase in net income.\n \u2022 Operating expenses increased $12.8 million which reflects increases in offshore crew expenses, project costs and other operating\n expenses for one of our vessels driven by increased cost of operations based on the operating location of the vessel, as well as\n increased number of days on-hire. Additionally, repairs and maintenance expense increased due to repairs on one of our vessels.\n \u2022 Depreciation and amortization increased $2.5 million primarily due to new assets being placed into service in the Offshore Energy\n business.\n \u2022 Interest expense decreased $7.6 million, which reflects a decrease in the average outstanding debt of approximately $183.8 million\n primarily due to decreases in (i) the 2021 Bridge Loans of $178.3 million and (ii) the Senior Notes due 2025 of $116.7 million, which\n were partially redeemed in August 2022, partially offset by increases in (iii) the Revolving Credit Facility of $28.7 million and (iv) the\n Senior Notes due 2030 of $82.8 million, which were issued in November 2023.\n \u2022 Acquisition and transaction expenses decreased $4.7 million primarily due to lower professional fees related to strategic transactions.\nOther income (expense)\nTotal other expense decreased $20.8 million which primarily reflects $19.9 million decrease in loss on extinguishment of debt primarily related\nto the 2022 pay-down of the 2021 Bridge Loans and the partial redemption of the Senior Notes due 2025.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA decreased $3.7 million primarily due to the changes noted above.\nComparison of the years ended December 31, 2022 and 2021\nRevenues\n\n\n\n 44\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 46 of 96\n\n\n\n\nTotal revenues increased $12.8 million primarily due to an increase in the Offshore Energy business as two of our vessels were on-hire longer\nin 2022 compared to 2021.\nExpenses\nTotal expenses increased $29.9 million primarily due to higher interest expense, operating expenses, management fees and incentive\nallocation to affiliate partially offset by lower acquisition and transaction expenses.\n \u2022 Interest expense increased $14.2 million, which reflects an increase in the average outstanding debt of approximately $354.7 million\n due to increases in (i) the Senior Notes due 2028 of $459.7 million, (ii) the 2021 Bridge Loans issued in December 2021 and February\n 2022 of $169.9 million and (iii) the Revolving Credit Facility of $49.7 million, partially offset by a decrease in (iv) the Bridge Loans of\n $108.3 million, (v) the Senior Notes due 2022 of $133.1 million, which was redeemed in full in May 2021, and (vi) the Senior Notes due\n 2025 of $83.2 million, which were partially redeemed in August 2022.\n \u2022 Operating expenses increased $17.6 million which reflects increases in offshore crew expenses, project costs and other operating\n expenses as our vessels were on-hire longer in 2022 compared to 2021, as well as crane repairs on one of our vessels.\n \u2022 Management fees and incentive allocation to affiliate increased $2.9 million primarily due to an increase in incentive fee due to the\n Manager.\n \u2022 Acquisition and transaction expenses decreased $5.9 million primarily due to a decrease in professional fees related to the Transtar\n acquisition in 2021.\nOther income (expense)\nTotal other expense increased $16.7 million which primarily reflects a $16.6 million increase in loss on extinguishment of debt primarily related\nto the 2022 pay-down of the 2021 Bridge Loans and the partial redemption of the Senior Notes due 2025.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA decreased $5.0 million primarily due to the changes noted above.\nTransactions with Affiliates and Affiliated Entities\nWe are managed by the Manager, an affiliate of Fortress, pursuant to the Management Agreement which provides for us to bear obligations for\nmanagement fees and expense reimbursements payable to the Manager. Our Management Agreement requires our Manager to manage our\nbusiness affairs in conformity with a broad asset acquisition strategy adopted and monitored by our board of directors. From time to time, we\nmay engage (subject to our strategy) in material transactions with our Manager or another entity managed by our Manager or one of its affiliates\nor other affiliates of Fortress, which may include, but are not limited to, certain financing arrangements, acquisition of assets, acquisition of debt\nobligations, debt, co-investments, and other assets that present an actual, potential or perceived conflict of interest. Please see Note 12 to our\nconsolidated financial statements included elsewhere in this filing for more information.\nGeographic Information\nPlease refer to Note 13 of our consolidated financial statements included in Item 8 in this Annual Report on Form 10-K for a report, by\ngeographic area for each segment, of revenues from our external customers, for the years ended December 31, 2023, 2022 and 2021, as well\nas a report of our total property, plant and equipment as of December 31, 2023 and 2022.\n\n\nLiquidity and Capital Resources\nOn November 21, 2023, we issued $500 million aggregate principal amount of 2030 Notes. We used a portion of the proceeds to repay $250\nmillion of outstanding borrowings under the Revolving Credit Facility, and used the remaining proceeds for general corporate purposes, and the\nfunding of acquisitions and investments.\nWe believe we have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve\nadequate liquidity and ensure that our business can continue to operate during various environments. This includes limiting discretionary\nspending across the organization and re-prioritizing our investments as necessary.\nOur principal uses of liquidity have been and continue to be (i) acquisitions of aircraft and engines, (ii) dividends to our ordinary and preferred\nshareholders, (iii) expenses associated with our operating activities, and (iv) debt service obligations associated with our investments.\n \u2022 Cash used for the purpose of making investments was $861.5 million, $831.5 million and $1.5 billion during the years ended\n December 31, 2023, 2022, and 2021, respectively.\n \u2022 Distributions to shareholders, including cash dividends, were $151.6 million, $155.6 million and $142.8 million during the years ended\n December 31, 2023, 2022 and 2021, respectively.\n \u2022 Uses of liquidity associated with our operating expenses are captured on a net basis in our cash flows from operating activities. Uses\n of liquidity associated with our debt obligations are captured in our cash flows from financing activities.\n\n\n\n 45\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 47 of 96\n\n\n\n\nOur principal sources of liquidity to fund these uses have been and continue to be (i) revenues from our aviation assets (including finance lease\ncollections and maintenance reserve collections) net of operating expenses, (ii) proceeds from borrowings or the issuance of securities and (iii)\nproceeds from asset sales.\n \u2022 Cash flows from operating activities, plus the principal collections on finance leases and maintenance reserve collections were $163.0\n million, $29.4 million and $16.9 million during the years ended December 31, 2023, 2022, and 2021, respectively.\n \u2022 During the year ended December 31, 2023, additional borrowings were obtained in connection with the (i) Revolving Credit Facility of\n $455.0 million and (ii) Senior Notes Due 2030 of $500.0 million. We made total principal repayments of $605.0 million relating to the\n Revolving Credit Facility.\n During the year ended December 31, 2022, additional borrowings were obtained in connection with the (i) 2021 Bridge Loans of $239.5\n million (ii) Revolving Credit Facility of $565.0 million and (iii) EB-5 Loan Agreement of $9.5 million. We made total principal repayments\n of (i) $604.5 million relating to the Revolving Credit Facility, (ii) $340.0 million related to the 2021 Bridge Loans and (iii) $200.0 million\n related to the Senior Notes due 2025.\n During the year ended December 31, 2021, additional borrowings were obtained in connection with the (i) Senior Notes due 2028 of\n $1.0 billion, (ii) Revolving Credit Facility of $690.0 million, (iii) Bridge Loan Agreement of $650.0 million, (iv) Series 2021 Bonds of\n $425.0 million, (v) 2021 Bridge Loans of $100.5 million and (vi) EB-5 Loan Agreement of $26.1 million. We made principal payments of\n $1.6 billion related to the Bridge Loan Agreement, Revolving Credit Facility and Senior Notes due 2022.\n \u2022 Proceeds from the sale of assets were $477.9 million, $414.2 million and $163.4 million during the years ended December 31, 2023,\n 2022, and 2021, respectively.\n \u2022 Proceeds from the issuance of ordinary shares, net of issuance costs were $323.1 million during the year ended December 31, 2021.\n There were no issuances of ordinary shares in 2023 or 2022.\n \u2022 Proceeds from the issuance of preferred shares, net of underwriters discount and issuance costs, were $61.7 million and $101.2\n million during the years ended December 31, 2023 and 2021, respectively. There were no issuances of preferred shares during the\n year ended December 31, 2022.\nWe are currently evaluating several potential transactions and related financings, including, but not limited to, certain additional debt and equity\nfinancings, which could occur within the next 12 months. None of these potential transactions, negotiations, or financings are definitive or\nincluded within our planned liquidity needs. We cannot assure if or when any such transaction will be consummated or the terms of any such\ntransaction or related financing.\nHistorical Cash Flow\nThe following table presents our historical cash flow from both continuing and discontinued operations:\n Year Ended December 31,\n(in thousands) 2023 2022 2021\nCash flow data:\nNet cash used in operating activities $ 128,982 $ (20,657) $ (22,044)\nNet cash used in investing activities (373,349) (411,253) (1,286,958)\nNet cash provided by financing activities 282,208 44,914 1,587,645\n\nComparison of the years ended December 31, 2023 and 2022\nNet cash used in operating activities decreased $149.6 million, which primarily reflects (i) a decrease in our Net loss of $455.8 million and (ii)\nChanges in working capital of $52.8 million, partially offset by certain adjustments to reconcile net income to cash used in operating activities\nincluding decreases in (i) Asset impairment of $135.1 million, (ii) Equity in losses of unconsolidated entities of $45.4 million, (iii) Provision for\ncredit losses of $41.4 million, (iv) Depreciation and amortization of $23.4 million, (v) Loss on extinguishment of debt of $19.9 million, and (vi) an\nincrease in gain on sale of assets of $19.1 million.\nNet cash used in investing activities decreased $37.9 million primarily due to (i) a decrease in Acquisition of property, plant and equipment of\n$138.0 million and (ii) higher Proceeds from the sale of leasing equipment of $68.9 million, partially offset by increases in (i) Acquisition of\nleasing equipment of $111.5 million, (ii) Acquisition of business, net of cash acquired, of $25.8 million, (iii) Purchase deposit for acquisitions of\n$17.3 million, and (iv) Investment of unconsolidated entities of $12.2 million.\nNet cash provided by financing activities increased $237.3 million primarily due to (i) a decrease in Repayment of debt of $539.5 million, (ii) an\nincrease in Proceeds from debt of $137.7 million and (iii) an increase in Proceeds from issuance of preferred shares, net of underwriter's\ndiscount and issuance costs of $61.7 million, partially offset by a decrease in the one-time Dividend from spin-off of FTAI Infrastructure, net of\ncash transferred of $500.6 million.\n\n\n\n 46\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 48 of 96\n\n\n\n\nCash Flows of Discontinued Operations\nThe cash flows related to discontinued operations have not been segregated and are included in the Consolidated Statements of Cash Flows\nfor all periods presented. Cash used in operating activities from discontinued operations were $63.9 million, and $61.7 million for the years\nended December 31, 2022 and 2021, respectively. Cash used in investing activities from discontinued operations were $136.3 million, and\n$828.7 million for the years ended December 31, 2022 and 2021, respectively.\nThe absence of cash flows from discontinued operations is not expected to adversely affect our liquidity or our ability to fund capital expenditures\nor working capital needs.\nContractual Obligations\nOur material cash requirements include the following contractual and other obligations:\nDebt Obligations-As of December 31, 2023, we had outstanding principal and interest payment obligations of $2.6 billion and $728.6 million\nthrough the maturity date of the debt, respectively, of which only interest payments of $177.4 million are due in the next twelve months. See Note\n8 to the consolidated financial statements for additional information about our debt obligations.\nLease Obligations-As of December 31, 2023, we had outstanding operating and finance lease obligations of $2.0 million, of which, $0.9 million\nis due in the next twelve months.\nOther Cash Requirements-In addition to our contractual obligations, we pay quarterly cash dividends on our ordinary shares and preferred\nshares, which are subject to change at the discretion of our Board of Directors. During 2023, we declared cash dividends of $119.8 million and\n$31.8 million on our ordinary shares and preferred shares, respectively.\nWe expect to meet our future short-term liquidity requirements through cash on hand, unused borrowing capacity or future financings and net\ncash provided by our current operations. We expect that our operating subsidiaries will generate sufficient cash flow to cover operating\nexpenses and the payment of principal and interest on our indebtedness as they become due. We may elect to meet certain long-term liquidity\nrequirements or to continue to pursue strategic opportunities through utilizing cash on hand, cash generated from our current operations and\nthe issuance of securities in the future. Management believes adequate capital and borrowings are available from various sources to fund our\ncommitments to the extent required.\nCritical Accounting Estimates and Policies\nThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the\nreported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements\nand the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 2 to the\nconsolidated financial statements describes the significant accounting policies and methods used in the preparation of our consolidated\nfinancial statements.\nOperating Leases-We lease equipment pursuant to operating leases. Operating leases with fixed rentals and step rentals are recognized on a\nstraight-line basis over the term of the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured.\nWhen collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments\nare received.\nGenerally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based\non the lessee\u2019s utilization of the leased asset or at the end of the lease. Typically, under our aircraft lease agreements, the lessee is responsible\nfor maintenance, repairs and other operating expenses throughout the term of the lease. These periodic maintenance payments accumulate\nover the term of the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the lessee\nup to the cost of maintenance paid by the lessee. In the event the total cost of maintenance events over the term of a lease is less than the\ncumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee.\nMaintenance payments received for which we expect to repay to the lessee are presented as Maintenance Deposits in our Consolidated\nBalance Sheets. All excess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance revenue.\nEstimates in recognizing revenue include mean time between removal, projected costs for engine maintenance and forecasted utilization of\naircraft which are affected by historical usage patterns and overall industry, market and economic conditions. Significant changes to these\nestimates could have a material effect on the amount of revenue recognized in the period.\nFor purchase and lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based\non the relative fair value of the aircraft and lease. The fair value of the lease may include a lease premium or discount, which is recorded as a\nfavorable or unfavorable lease intangible.\nAsset sales revenue-Asset sales revenue primarily consists of the transaction price related to the sale of aircraft and aircraft engines from our\nAviation Leasing segment. From time to time, the Company may also assign the related lease agreements to the customer as part of the sale of\nthese assets. We routinely sell leasing equipment to customers and such transactions are considered recurring and ordinary in nature to our\nbusiness. As such, these sales are accounted for within the scope of ASC 606. Revenue is recognized when a performance obligation is\nsatisfied by transferring control over an asset to a customer. Revenue is recorded with corresponding costs of sales, presented on a gross\nbasis in the Consolidated Statements of Operations. See Note 10 for additional information.\n\n\n\n 47\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 49 of 96\n\n\n\n\nAerospace Products revenue-Aerospace Products revenue primarily consists of the transaction price related to the sale of repaired CFM56-7B,\nCFM56-5B and V2500 engines, engine modules, spare parts and used material inventory, and are accounted for within the scope of ASC 606.\nRevenue is recognized when a performance obligation is satisfied by transferring control over the related asset to a customer. Revenue is\nrecorded with corresponding costs of sales, presented on a gross basis in the Consolidated Statements of Operations. Shipping costs to\ndeliver assets to customers are included in cost of sales. Aerospace products revenue also consists of engine management service contracts,\nwhere the Company has a stand-ready obligation to provide replacement CFM56-7B and CFM56-5B engines to customers as they become\nunserviceable during the contract term. The Company recognizes revenue over time using a straight-line attribution method and the costs\nrelated to fulfilling the performance obligation are expensed as incurred.\nMaintenance Payments-Typically, under an operating lease of aircraft, the lessee is responsible for performing all maintenance and is\ngenerally required to make maintenance payments to us for heavy maintenance, overhaul or replacement of certain high-value components of\nthe aircraft or engine. These maintenance payments are based on hours or cycles of utilization or on calendar time, depending on the\ncomponent, and are generally required to be made monthly in arrears. If a lessee is making monthly maintenance payments, we would typically\nbe obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to\nthe extent of maintenance payments received in respect of the specific maintenance event, usually shortly following the completion of the\nrelevant work.\nWe record the portion of maintenance payments paid by the lessee that are expected to be reimbursed as maintenance deposits in the\nConsolidated Balance Sheets. Reimbursements made to the lessee upon the receipt of evidence of qualifying maintenance work are recorded\nagainst the maintenance deposit liability.\nIn certain acquired leases, we or the lessee may be obligated to make a payment to the other party at lease termination based on redelivery\nconditions stipulated at the inception of the lease. When the lessee is required to return the aircraft in an improved maintenance condition, we\nrecord a maintenance right asset, as a component of other assets in the Consolidated Balance sheets, for the estimated value of the end-of-life\nmaintenance payment at acquisition. We recognize payments received as end-of-lease compensation adjustments, within lease income or as\na reduction to the maintenance right asset, when payment is received or collectability is assured. In the event we are required to make payments\nat the end of the lease for redelivery conditions, amounts are accrued as additional maintenance liability and expensed when we are obligated\nand can reasonably estimate such payments.\nProperty, Plant and Equipment, Leasing Equipment and Depreciation-Property, plant and equipment and leasing equipment are stated at cost\n(inclusive of capitalized acquisition costs, where applicable) and depreciated using the straight-line method, over estimated useful lives, to\nestimated residual values which are summarized as follows:\n Asset Range of Estimated Useful Lives Residual Value Estimates\nAircraft 25 years from date of manufacture Generally not to exceed 15% of manufacturer\u2019s\n list price when new\nAircraft engines 2 - 6 years, based on maintenance adjusted Sum of engine core salvage value plus the\n service life estimated fair value of life limited parts\nAviation tooling and equipment 3 - 6 years from date of purchase Scrap value at end of useful life\nOffshore energy vessels 25 years from date of manufacture 10% of new build cost\nBuildings and improvements 40 to 50 years Scrap value at end of useful life\nMachinery and equipment 6 - 23 years Scrap value at end of useful life\nFurniture and fixtures 3 - 6 years from date of purchase None\nComputer hardware and software 2 - 5 years from date of purchase None\nLand N/A N/A\nConstruction in progress N/A N/A\nOther 5 - 7 years N/A\n\nImpairment of Long-Lived Assets-We perform a recoverability assessment of each of our long-lived assets whenever events or changes in\ncircumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but\nare not limited to, a significant lease restructuring or early lease termination\u037e significant traffic decline\u037e a significant change in market conditions\u037e\nor the introduction of newer technology aircraft, vessels or engines. When performing a recoverability assessment, we measure whether the\nestimated future undiscounted net cash flows expected to be generated by the asset exceeds its net book value. The undiscounted cash flows\nconsist of cash flows from currently contracted leases and contracts, future projected leases, transition costs, estimated down time and\nestimated residual or scrap values. In the event that an asset does not meet the recoverability test, the carrying value of the asset will be\nadjusted to fair value resulting in an impairment charge.\n\n\n\n 48\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 50 of 96\n\n\n\n\nManagement develops the assumptions used in the recoverability analysis based on its knowledge of active contracts, current and future\nexpectations of the global demand for a particular asset and historical experience in the leasing markets, as well as information received from\nthird party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to\nchanges in contracted lease rates, residual values, economic conditions, technology, demand for a particular asset type and other factors.\nRecent Accounting Pronouncements\nPlease see Note 2 to our consolidated financial statements included elsewhere in this filing for recent accounting pronouncements.\nItem 7A. Quantitative and Qualitative Disclosures About Market Risk\nMarket risk represents the risk of changes in value of a financial instrument, caused by fluctuations in interest rates and foreign exchange rates.\nChanges in these factors could cause fluctuations in our results of operations and cash flows. We are exposed to the market risks described\nbelow.\nInterest Rate Risk\nInterest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates.\nInterest rate risk is highly sensitive to many factors, including the U.S. government\u2019s monetary and tax policies, global economic factors and\nother factors beyond our control. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between\ninterest rates. Our primary interest rate exposure relates to our term loan arrangements.\nLIBOR and other indices which are deemed \u201cbenchmarks\u201d are the subject of recent national, international, and other regulatory guidance and\nproposals for reform. The ICE Benchmark Administration ceased publication of one-week and two-month USD LIBOR settings after December\n31, 2021 and the remaining USD LIBOR settings after June 30, 2023, other than certain USD LIBOR settings that are expected to continue to be\npublished under a synthetic methodology until September 2024. In anticipation of LIBOR\u2019s phase out, we amended our revolving credit facility to\nincorporate SOFR as the successor rate to LIBOR. We continue to monitor related reform proposals and evaluate the related risks\u037e however, it is\nnot possible to predict the effects of any of these developments, and any future initiatives to regulate, reform or change the manner of\nadministration of LIBOR, SOFR or other benchmark indices could result in adverse consequences to the rate of interest payable and receivable\non, market value of and market liquidity for financial instruments tied to variable interest rate indices.\nOur borrowing agreements generally require payments based on a variable interest rate index, such as SOFR. Therefore, to the extent our\nborrowing costs are not fixed, increases in interest rates may reduce our net income by increasing the cost of our debt without any\ncorresponding increase in rents or cash flow from our leases. We may elect to manage our exposure to interest rate movements through the\nuse of interest rate derivatives (interest rate swaps and caps).\nThe following discussion about the potential effects of changes in interest rates is based on a sensitivity analysis, which models the effects of\nhypothetical interest rate shifts on our financial condition and results of operations. Although we believe a sensitivity analysis provides the most\nmeaningful analysis permitted by the rules and regulations of the SEC, it is constrained by several factors, including the necessity to conduct the\nanalysis based on a single point in time and by the inability to include the extraordinarily complex market reactions that normally would arise\nfrom the market shifts modeled. Although the following results of a sensitivity analysis for changes in interest rates may have some limited use\nas a benchmark, they should not be viewed as a forecast. This forward-looking disclosure also is selective in nature and addresses only the\npotential interest expense impacts on our financial instruments and, in particular, does not address the mark-to-market impact on our interest\nrate derivatives, if any. It also does not include a variety of other potential factors that could affect our business as a result of changes in interest\nrates. In addition, the following discussion does not take into account our Series A and Series B preferred shares, on which distributions\ncurrently accrue interest at a fixed rate but will accrue interest at a floating rate based on a certain variable interest rate index plus a spread from\nand after September 15, 2024.\nAs of December 31, 2023, assuming we do not hedge our exposure to interest rate fluctuations related to our outstanding floating rate debt, a\nhypothetical 100-basis point increase/decrease in our variable interest rate on our borrowings would not have increased or decreased interest\nexpense over the next 12 months.\n\n\n\n 49\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 51 of 96\n\n\n\n\nItem 8. Financial Statements and Supplementary Data\n\n\nIndex to Financial Statements:\nConsolidated Financial Statements of FTAI Aviation Ltd.:\n Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 51\n Consolidated Balance Sheets as of December 31, 2023 and 2022 53\n Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021 54\n Consolidated Statements of Comprehensive Income (loss) for the years ended December 31, 2023, 2022 and 2021 55\n Consolidated Statement of Changes in Equity for the years ended December 31, 2023, 2022 and 2021 56\n Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 57\n Notes to Consolidated Financial Statements 59\n\n\n\n\n 50\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 52 of 96\n\n\n\n\n Report of Independent Registered Public Accounting Firm\nTo the Shareholders and the Board of Directors of FTAI Aviation Ltd.\nOpinion on the Financial Statements\nWe have audited the accompanying consolidated balance sheets of FTAI Aviation Ltd. (the Company) as of December 31, 2023 and 2022, the\nrelated consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in\nthe period ended December 31, 2023, and the related notes (collectively referred to as the \u201cconsolidated financial statemen\nts\u201d). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at\nDecember 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,\n2023, in conformity with U.S. generally accepted accounting principles.\nWe also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the\nCompany's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated\nFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated\nFebruary 26, 2024 expressed an unqualified opinion thereon.\nBasis for Opinion\nThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company\u2019s\nfinancial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with\nrespect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and\nExchange Commission and the PCAOB.\nWe conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain\nreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits\nincluded performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and\nperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and\ndisclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by\nmanagement, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis\nfor our opinion.\nCritical Audit Matter\nThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was\ncommunicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the\nfinancial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit\nmatter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the\ncritical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.\n\n Recognition of Maintenance Revenue for Aircraft Leases\n\n\nDescription of the As described in Note 2 to the consolidated financial statements, the Company recognizes maintenance revenue for aircraft\nMatter leases related to the portion of maintenance payments received from lessees that are not expected to be reimbursed for\n maintenance events. Revenue related to maintenance on leased aircraft is recorded as a component of maintenance\n revenue, which totaled $191.3 million on the Consolidated Statements of Operations for the year ended December 31,\n 2023.\n\n Auditing maintenance revenue related to aircraft leases was complex and highly judgmental due to the significant\n estimation involved in projecting the timing of future major maintenance events. In particular, the estimate is sensitive to the\n mean time between removal (MTBR) assumption, which is affected by historical usage patterns and overall industry, market\n and economic conditions. Significant changes to this assumption could have a material effect on the amount of\n maintenance revenue recognized in the period.\n\n\n\n\n 51\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 53 of 96\n\n\n\n\nHow We Addressed We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company\u2019s\nthe Matter in Our maintenance revenue recognition process, including controls over management\u2019s review of the estimated timing of major\nAudit maintenance events as described above.\n\n To test maintenance revenue for aircraft leases, we performed audit procedures that included, among others, assessing\n the Company\u2019s revenue recognition methodology and testing the MTBR assumption described above. For example, we\n compared the MTBR assumption to third-party estimates and assessed management\u2019s retrospective review of timing of\n estimated maintenance events to actual results to assess the historical accuracy of the MTBR assumption and contrary\n evidence, if any. We performed testing on the impact, if any, on maintenance revenue recognized in the period due to\n changes in timing of maintenance events. We also involved our valuation specialists to assist in our evaluation of the\n appropriateness of the MTBR assumption.\n\n\n\n\n/s/ Ernst & Young LLP\n\n\n\n\nWe have served as the Company\u2019s auditor since 2016.\n\n\nNew York, New York\nFebruary 26, 2024\n\n\n\n 52\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 54 of 96\n\nFTAI AVIATION LTD.\nCONSOLIDATED BALANCE SHEETS\n(Dollars in thousands, except share and per share data)\n\n\n\n December 31,\n Notes 2023 2022\nAssets\nCash and cash equivalents 2 $ 90,756 $ 33,565\nRestricted cash 2 150 19,500\nAccounts receivable, net 115,156 99,443\nLeasing equipment, net 5 2,032,413 1,913,553\nProperty, plant, and equipment, net 45,175 10,014\nInvestments 6 22,722 22,037\nIntangible assets, net 7 50,590 41,955\nGoodwill 4. 4,630 -\nInventory, net 2 316,637 163,676\nOther assets 2 286,456 125,834\nTotal assets $ 2,964,685 $ 2,429,577\n\n\nLiabilities\nAccounts payable and accrued liabilities $ 112,907 $ 86,452\nDebt, net 8 2,517,343 2,175,727\nMaintenance deposits 2 65,387 78,686\nSecurity deposits 2 41,065 32,842\nOther liabilities 52,100 36,468\nTotal liabilities $ 2,788,802 $ 2,410,175\n\nCommitments and contingencies 15\n\nEquity\nOrdinary shares ($0.01 par value per share\u037e 2,000,000,000 shares authorized\u037e 100,245,905 and\n99,716,621 shares issued and outstanding as of December 31, 2023 and 2022, respectively) $ 1,002 $ 997\nPreferred shares ($0.01 par value per share\u037e 200,000,000 shares authorized\u037e 15,920,000 and\n13,320,000 shares issued and outstanding as of December 31, 2023 and 2022, respectively) 159 133\nAdditional paid in capital 255,973 343,350\nAccumulated deficit (81,785) (325,602)\nShareholders' equity 175,349 18,878\nNon-controlling interest in equity of consolidated subsidiaries 534 524\nTotal equity $ 175,883 $ 19,402\nTotal liabilities and equity $ 2,964,685 $ 2,429,577\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n\n 53\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 55 of 96\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF OPERATIONS\n(Dollars in thousands, except share and per share data)\n\n\n\n Year Ended December 31,\n Notes 2023 2022 2021\nRevenues\nLease Income $ 207,936 $ 179,314 $ 173,864\nMaintenance revenue 191,347 148,846 128,819\nAsset sales revenue 303,141 183,535 -\nAerospace products revenue 454,970 178,515 23,301\nOther revenue 13,502 18,201 9,599\nTotal revenues 1,170,896 708,411 335,583\n\nExpenses\nCost of sales 502,132 248,385 14,308\nOperating expenses 110,163 132,264 59,615\nGeneral and administrative 13,700 14,164 13,448\nAcquisition and transaction expenses 15,194 13,207 17,911\nManagement fees and incentive allocation to affiliate 12 18,037 3,562 684\nDepreciation and amortization 5, 7 169,877 152,917 147,740\nAsset impairment 2,121 137,219 10,463\nInterest expense 161,639 169,194 155,017\nTotal expenses 992,863 870,912 419,186\n\nOther income (expense)\nEquity in losses of unconsolidated entities 6 (1,606) (369) (1,403)\nGain on sale of assets, net - 77,211 49,015\nLoss on extinguishment of debt - (19,859) (3,254)\nOther income (expense) 7,590 207 (490)\nTotal other income 5,984 57,190 43,868\nIncome (loss) from continuing operations before income taxes 184,017 (105,311) (39,735)\n(Benefit from) provision for income taxes 11 (59,800) 5,300 3,126\n Net income (loss) from continuing operations 243,817 (110,611) (42,861)\n Net loss from discontinued operations, net of income taxes 3 - (101,416) (87,845)\nNet income (loss) 243,817 (212,027) (130,706)\nLess: Net loss attributable to non-controlling interests in consolidated\nsubsidiaries:\n Continuing operations - - -\n Discontinued operations 3 - (18,817) (26,472)\nLess: Dividends on preferred shares 31,795 27,164 24,758\nNet income (loss) attributable to shareholders $ 212,022 $ (220,374) $ (128,992)\n\n\nEarnings (loss) per share:\nBasic 14\n Continuing operations $ 2.12 $ (1.39) $ (0.75)\n Discontinued operations $ - $ (0.83) $ (0.68)\nDiluted 14\n Continuing operations $ 2.11 $ (1.39) $ (0.75)\n Discontinued operations $ - $ (0.83) $ (0.68)\nWeighted average shares outstanding:\nBasic 99,908,214 99,421,008 89,922,088\nDiluted 100,425,777 99,421,008 89,922,088\n See accompanying notes to consolidated financial statements.\n\n\n\n 54\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 56 of 96\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)\n(Dollars in thousands)\n\n\n\n Year Ended December 31,\n 2023 2022 2021\nNet income (loss) $ 243,817 $ (212,027) $ (130,706)\nOther comprehensive loss:\n Other comprehensive loss related to equity method investees, net (1) in discontinued\n operations - (182,963) (129,820)\n Changes in pension and other employee benefit accounts in discontinued operations - - (324)\nComprehensive income (loss) 243,817 (394,990) (260,850)\nComprehensive income (loss) attributable to non-controlling interest:\n Continuing operations - - -\n Discontinued operations - (18,817) (26,472)\nComprehensive income (loss) attributable to shareholders $ 243,817 $ (376,173) $ (234,378)\n\n\n__________________________________________________\n\n(1)\n Net of deferred tax benefit of $\n 0, $0 and $(2,187) for the years ended December 31, 2023, 2022 and 2021, respectively.\n\fCase 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 57 of 96\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n\n 55\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 58 of 96\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENT OF CHANGES IN EQUITY\n(Dollars in thousands)\n\n\n\n Non-\n Controlling\n Accumulated Interest in\n Other Equity of\n Ordinary Preferred Additional Accumulated Comprehensive Consolidated\n Shares(1) Shares(1) Paid In Capital Deficit Loss Subsidiaries Total Equity\nEquity - December 31, 2020 $ 856 $ 91 $ 1,130,106 $ (28,158) $ (26,237) $ 22,663 $ 1,099,321\n Net loss (104,234) (26,472) (130,706)\n Other comprehensive loss - (130,144) - (130,144)\nTotal comprehensive loss (104,234) (130,144) (26,472) (260,850)\nSettlement of equity-based\ncompensation (421) (421)\nIssuance of ordinary shares 136 323,443 323,579\nDividends declared - ordinary\nshares (118,009) (118,009)\nIssuance of preferred shares 42 101,158 101,200\nDividends declared - preferred\nshares (24,758) (24,758)\nEquity-based compensation 4,038 4,038\nEquity - December 31, 2021 $ 992 $ 133 $ 1,411,940 $ (132,392) $ (156,381) $ (192) $ 1,124,100\n Net loss (193,210) (18,817) (212,027)\n Other comprehensive loss - (182,963) - (182,963)\nTotal comprehensive loss (193,210) (182,963) (18,817) (394,990)\nSpin-off of FTAI Infrastructure,\nInc., net of distributions (913,342) 339,344 12,817 (561,181)\nAcquisition of consolidated\nsubsidiary 3,054 3,054\nSettlement of equity-based\ncompensation (148) (148)\nContributions from non-controlling\ninterest 1,187 1,187\nIssuance of ordinary shares 5 399 404\nDividends declared - ordinary\nshares (128,483) (128,483)\nDividends declared - preferred\nshares (27,164) (27,164)\nEquity-based compensation 2,623 2,623\nEquity - December 31, 2022 $ 997 $ 133 $ 343,350 $ (325,602) $ - $ 524 $ 19,402\n Net income 243,817 - 243,817\n Other comprehensive loss - - - -\nTotal comprehensive income 243,817 - - 243,817\nContributions from non-controlling\ninterest 10 10\nIssuance of ordinary shares 5 924 929\nDividends declared - ordinary\nshares (119,847) (119,847)\nIssuance of preferred shares 26 61,703 61,729\nDividends declared - preferred\nshares (31,795) (31,795)\nEquity-based compensation 1,638 - 1,638\nEquity - December 31, 2023 $ 1,002 $ 159 $ 255,973 $ (81,785) $ - $ 534 $ 175,883\n\n________________________________________________\n(1)\n Common and Preferred Shares of Fortress Transportation and Infrastructure Investors LLC were exchanged for Ordinary and Preferred Shares of FTAI Aviation\n Ltd. when the Merger, as detailed in Note 1, was completed on November 10, 2022.\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n\n 56\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 59 of 96\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF CASH FLOWS\n(Dollars in thousands)\n\n\n\n Year Ended December 31,\n 2023 2022 2021\nCash flows from operating activities:\nNet income (loss) $ 243,817 $ (212,027) $ (130,706)\nAdjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:\nEquity in losses of unconsolidated entities 1,606 46,971 12,734\nGain on sale of assets, net (160,742) (141,677) (49,031)\nSecurity deposits and maintenance claims included in earnings (40,535) (41,845) (39,067)\nLoss on extinguishment of debt - 19,859 3,254\nEquity-based compensation 1,638 2,623 4,038\nDepreciation and amortization 169,877 193,236 201,756\nAsset impairment 2,121 137,219 10,463\nChange in deferred income taxes (63,626) 2,161 (2,057)\nChange in fair value of non-hedge derivatives - (1,567) (2,220)\nChange in fair value of guarantees (1,807) - -\nAmortization of lease intangibles and incentives 43,764 37,135 27,978\nAmortization of deferred financing costs 8,860 19,018 21,723\nProvision for credit losses 6,583 47,975 12,953\nOther (6,646) (1,010) (440)\nChange in:\n Accounts receivable (40,357) (65,969) (88,872)\n Other assets (5,627) (23,037) (30,789)\n Inventory (31,884) (23,267) -\n Accounts payable and accrued liabilities 1,254 (19,599) 25,079\n Management fees payable to affiliate 1,683 804 1,042\n Other liabilities (997) 2,340 118\nNet cash provided by (used in) operating activities 128,982 (20,657) (22,044)\n\nCash flows from investing activities:\nInvestment in unconsolidated entities (19,500) (7,344) (54,655)\nPrincipal collections on finance leases 3,638 2,227 7,387\nPrincipal collections on notes receivable 4,875 - -\nAcquisition of business, net of cash acquired (29,632) (3,819) (627,090)\nAcquisition of leasing equipment (749,780) (638,329) (572,624)\nAcquisition of property, plant and equipment (6,148) (144,196) (157,332)\nAcquisition of lease intangibles (20,964) (31,127) (24,017)\nInvestment in convertible promissory notes - - (10,000)\nInvestment in promissory notes (11,500) - -\nPurchase deposit for acquisitions (23,937) (6,671) (13,658)\nProceeds from sale of leasing equipment 477,886 408,937 158,927\nProceeds from sale of property, plant and equipment - 5,289 4,494\nProceeds for deposit on sale of aircraft and engine 1,413 3,780 600\nReturn of purchase deposits 300 - 1,010\nNet cash used in investing activities $ (373,349) $ (411,253) $ (1,286,958)\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n\n 57\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 60 of 96\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF CASH FLOWS\n(Dollars in thousands)\n\n\n\n Year Ended December 31,\n 2023 2022 2021\nCash flows from financing activities:\nProceeds from debt $ 951,665 $ 813,980 $ 2,894,127\nRepayment of debt (605,000) (1,144,529) (1,553,231)\nPayment of deferred financing costs (12,180) (18,607) (52,739)\nReceipt of security deposits 9,927 3,882 8,770\nReturn of security deposits (2,385) (2,141) (1,201)\nReceipt of maintenance deposits 30,354 47,846 31,507\nRelease of maintenance deposits (275) (1,471) (20,724)\nProceeds from issuance of ordinary shares, net of underwriter's discount 5 - 323,124\nProceeds from issuance of preferred shares, net of underwriter's discount and issuance costs 61,729 - 101,200\nCapital contributions from non-controlling interests 10 1,187 -\nDividend from spin-off of FTAI Infrastructure, net of cash transferred - 500,562 -\nSettlement of equity-based compensation - (148) (421)\nCash dividends - ordinary shares (119,847) (128,483) (118,009)\nCash dividends - preferred shares (31,795) (27,164) (24,758)\nNet cash provided by financing activities 282,208 44,914 1,587,645\n\nNet increase (decrease) in cash and cash equivalents and restricted cash 37,841 (386,996) 278,643\nCash and cash equivalents and restricted cash, beginning of period 53,065 440,061 161,418\nCash and cash equivalents and restricted cash, end of period $ 90,906 $ 53,065 $ 440,061\n\n\nSupplemental disclosure of cash flow information:\nCash paid for interest, net of capitalized interest $ 150,622 $ 185,144 $ 142,200\nCash paid for taxes 1,393 3,279 402\n\nSupplemental disclosure of non-cash investing and financing activities:\nAcquisition of leasing equipment $ (105,313) (74,706) (44,552)\nAcquisition of property, plant and equipment (699) - (581)\nTransfers from leasing equipment 224,218 121,855 91,266\nSecurity deposits, maintenance deposits, other assets and other liabilities settled in the sale of leasing\nequipment 24,116 18,385 400\nSettled and assumed security deposits 823 (6,774) (4,041)\nBilled, assumed and settled maintenance deposits (18,907) (47,993) (21,710)\nNon-cash change in equity method investment - (182,963) (129,907)\nConversion of interests in unconsolidated entities - (21,302) -\nIssuance of ordinary shares 924 399 455\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n\n 58\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 61 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n\n1.\n ORGANIZATION\nFTAI Aviation Ltd. (\u201cwe\u201d, \u201cus\u201d, \u201cour\u201d or the \u201cCompany\u201d and formerly \u201cFortress Transportation and Infrastructure Investors LLC\u201d) is a Cayman\nIslands exempted company which through its subsidiaries owns, leases, and sells aviation equipment and also develops and manufactures,\nthrough a joint venture, and repairs and sells, through our maintenance facility and exclusivity arrangements, aftermarket components for aircraft\nengines. Additionally, we own and lease offshore energy equipment. We have\ntwo reportable segments, (i) Aviation Leasing and (ii) Aerospace Products (see Note 13).\nOn August 1, 2022, the Company completed the spin-off of its infrastructure business into an independent publicly traded company. Accordingly,\nthe operating results of, and costs to separate, the infrastructure business are reported in Net loss from discontinued operations, net of income\ntaxes in the Consolidated Statements of Operations for all periods presented. All amounts and disclosures included in the Notes to\nConsolidated Financial Statements reflect only the Company's continuing operations unless otherwise noted. For additional information, see\nNote 3, \"Discontinued Operations.\"\nOn November 10, 2022, the Company completed a reverse merger transaction pursuant to the Agreement and Plan of Merger (the \u201cMerger\u201d)\nbetween Fortress Transportation and Infrastructure Investors LLC (\u201cFTAI\u201d) and the Company and the parties thereto, with FTAI becoming a\nsubsidiary of the Company. This reverse merger represents a transaction between entities under common control. Upon merger completion,\nFTAI\u2019s shareholders received one share of the Company\u2019s ordinary shares, Series A Preferred Shares, Series B Preferred Shares and Series C\nPreferred Shares in exchange for each share of FTAI\u2019s common shares, Series A Preferred Shares, Series B Preferred Shares and Series C\nPreferred Shares, respectively, with the new Shares of FTAI Aviation having substantially similar rights and privileges as the respective FTAI\nshares being converted. All exchanges were completed without any further action from the shareholders.\n2.\n SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\nBasis of Accounting-The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting\nprinciples (\u201cU.S. GAAP\u201d) and include the accounts of us and our subsidiaries.\nPrinciples of Consolidation-We consolidate all entities in which we have a controlling financial interest and control over significant operating\ndecisions. The ownership interest of other investors in consolidated subsidiaries is recorded as non-controlling interest.\nWe use the equity method of accounting for investments in entities in which we exercise significant influence, but which do not meet the\nrequirements for consolidation. Under the equity method, we record our proportionate share of the underlying net income (loss) of these entities\nas well as the proportionate interest in adjustments to other comprehensive income (loss).\nUse of Estimates-The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and\nassumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the\nconsolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ\nfrom those estimates.\n\nRisks and Uncertainties-In the normal course of business, we encounter several significant types of economic risk including credit, market,\nand capital market risks. Credit risk is the risk of the inability or unwillingness of a lessee or customer to make contractually required payments\nor to fulfill its other contractual obligations. Market risk reflects the risk of a downturn or volatility in the underlying industry segments in which we\noperate, which could adversely impact the pricing of the services offered by us or a lessee\u2019s or customer\u2019s ability to make payments, increase\nthe risk of unscheduled lease terminations and depress lease rates and the value of our leasing equipment or operating assets. Capital market\nrisk is the risk that we are unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities.\nWe, through our subsidiaries, also conduct operations outside of the United States\u037e such international operations are subject to the same risks\nas those associated with our United States operations as well as additional risks, including unexpected changes in regulatory requirements,\nheightened risk of political and economic instability, potentially adverse tax consequences and the burden of complying with foreign laws. We do\nnot have significant exposure to foreign currency risk as all of our leasing arrangements are denominated in U.S. dollars.\nCash and Cash Equivalents-We consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash\nequivalents.\nRestricted Cash-Restricted cash is $\n0.2 million and $19.5 million as of December 31, 2023 and 2022, respectively. The balance as of December 31, 2022 consisted of funds\nrequired for the Company\u2019s investment in QuickTurn, as described in Note 4.\nInventory-We hold aircraft engine modules, spare parts and used material inventory for trading, repairs and to support operations. Inventory is\ncarried at the lower of cost or net realizable value on our consolidated balance sheets.\n\n\n\n 59\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 62 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nProperty, Plant and Equipment, Leasing Equipment and Depreciation-Property, plant and equipment and leasing equipment are stated at cost\n(inclusive of capitalized acquisition costs, where applicable) and depreciated using the straight-line method, over estimated useful lives, to\nestimated residual values which are summarized as follows:\n Asset Range of Estimated Useful Lives Residual Value Estimates\nAircraft 25 years from date of manufacture Generally not to exceed 15% of manufacturer\u2019s\n list price when new\nAircraft engines 2 - 6 years, based on maintenance adjusted Sum of engine core salvage value plus the\n service life estimated fair value of life limited parts\nAviation tooling and equipment 3 - 6 years from date of purchase Scrap value at end of useful life\nOffshore energy vessels 25 years from date of manufacture 10% of new build cost\nBuildings and improvements 40 to 50 years Scrap value at end of useful life\nMachinery and equipment 6 - 23 years Scrap value at end of useful life\nFurniture and fixtures 3 - 6 years from date of purchase None\nComputer hardware and software 2 - 5 years from date of purchase None\nLand N/A N/A\nConstruction in progress N/A N/A\nOther 5 - 7 years N/A\n\nMajor improvements and modifications incurred in connection with the acquisition of property, plant and equipment and leasing equipment that\nare required to get the asset ready for initial service are capitalized and depreciated over the remaining life of the asset. Project costs of major\nadditions and betterments, including capitalizable engineering costs and other costs directly related to the development or construction of\nproject, are capitalized and depreciation commences once it is placed into service. Interest costs directly related to and incurred during the\nconstruction period of property, plant and equipment are capitalized.\nWe review our depreciation policies on a regular basis to determine whether changes have taken place that would suggest that a change in our\ndepreciation policies, useful lives of our equipment or the assigned residual values is warranted.\nFor planned major maintenance or component overhaul activities for aviation equipment off lease, the cost of such major maintenance or\ncomponent overhaul event is capitalized and depreciated on a straight-line basis over the period until the next maintenance or component\noverhaul event is required.\nOur offshore energy vessels are required to be drydocked periodically for recertifications or major repairs and maintenance that cannot be\nperformed while the vessels are operating. Normal repairs and maintenance are expensed as incurred. We capitalize the costs associated with\nthe drydockings and amortize them on a straight-line basis over the period between drydockings, usually during a 60 month time span.\nIn accounting for leasing equipment, we make estimates about the expected useful lives, residual values and the fair value of acquired in-place\nleases and acquired maintenance liabilities (for aviation equipment). In making these estimates, we rely upon observable market data for the\nsame or similar types of equipment and, in the case of aviation equipment, our own estimates with respect to a lessee\u2019s anticipated utilization\nof the aircraft or engine. When we acquire leasing equipment subject to an in-place lease, determining the fair value of the in-place lease\nrequires us to make assumptions regarding the current fair values of leases for identical or similar equipment, in order to determine if the in-\nplace lease is within a fair value range of current lease rates. If a lease is below or above the range of current lease rates, the resulting lease\ndiscount or premium is recognized as a lease intangible and amortized into lease income over the remaining term of the lease.\nCapitalized Interest-The interest cost associated with major development and construction projects are capitalized and included in the cost of\nthe project. Interest capitalization ceases once a project is substantially complete or no longer undergoing construction activities to prepare it for\nits intended use. We capitalized interest of $0.7 million, $2.7 million and $2.4 million during the years ended December 31, 2023, 2022 and\n2021, respectively.\nRepairs and Maintenance-Repair and maintenance costs that do not extend the lives of the assets are expensed as incurred. Our repairs and\nmaintenance expense was $7.7 million, $7.2 million and $3.2 million during the years ended December 31, 2023, 2022 and 2021, respectively,\nand are included in Operating expenses in the Consolidated Statements of Operations.\nImpairment of Long-Lived Assets-We perform a recoverability assessment of each of our long-lived assets whenever events or changes in\ncircumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but\nare not limited to, a significant lease restructuring or early lease termination\u037e significant traffic decline\u037e a significant change in market conditions\u037e\nor the introduction of newer technology aircraft, vessels or engines. When performing a recoverability assessment, we measure whether the\nestimated future undiscounted net cash flows expected to be generated by the asset exceeds its net book value. The undiscounted cash flows\nconsist of cash flows from currently contracted leases and contracts, future projected leases, transition costs, estimated down time and\nestimated residual or scrap values. In the event that an asset does not meet the recoverability test, the carrying value of the asset will be\nadjusted to fair value resulting in an impairment charge.\n\n\n\n 60\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 63 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nManagement develops the assumptions used in the recoverability analysis based on its knowledge of active contracts, current and future\nexpectations of the global demand for a particular asset and historical experience in the leasing markets, as well as information received from\nthird party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to\nchanges in contracted lease rates, residual values, economic conditions, technology, demand for a particular asset type and other factors.\nSecurity Deposits-Our operating leases generally require the lessee to pay a security deposit or provide a letter of credit. Security deposits are\nheld until specified return dates stipulated in the lease or lease expiration.\nMaintenance Payments-Typically, under an operating lease of aircraft, the lessee is responsible for performing all maintenance and is\ngenerally required to make maintenance payments to us for heavy maintenance, overhaul or replacement of certain high-value components of\nthe aircraft or engine. These maintenance payments are based on hours or cycles of utilization or on calendar time, depending on the\ncomponent, and are generally required to be made monthly in arrears. If a lessee is making monthly maintenance payments, we would typically\nbe obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to\nthe extent of maintenance payments received in respect of the specific maintenance event, usually shortly following the completion of the\nrelevant work.\nWe record the portion of maintenance payments paid by the lessee that are expected to be reimbursed as maintenance deposit liabilities in the\nConsolidated Balance Sheets. Reimbursements made to the lessee upon the receipt of evidence of qualifying maintenance work are recorded\nagainst the maintenance deposit liability.\nIn certain acquired leases, we or the lessee may be obligated to make a payment to the other party at lease termination based on redelivery\nconditions stipulated at the inception of the lease. When the lessee is required to return the aircraft in an improved maintenance condition, we\nrecord a maintenance right asset, as a component of other assets, for the estimated value of the end-of-life maintenance payment at\nacquisition. We recognize payments received as end-of-lease compensation adjustments, within lease income or as a reduction to the\nmaintenance right asset, when payment is received or collectability is assured. In the event we are required to make payments at the end of the\nlease for redelivery conditions, amounts are accrued as additional maintenance liability and expensed when we are obligated and can\nreasonably estimate such payments.\nLease Incentives and Amortization-Lease incentives, which include lease acquisition costs related to reconfiguration of the aircraft cabin, other\nlessee specific modifications and other direct costs, are capitalized and amortized as a reduction of lease income over the primary term of the\nlease, assuming no lease renewals.\nIntangibles and amortization-Intangibles include the value of acquired favorable and unfavorable leases.\nIn accounting for acquired leasing equipment, we make estimates about the fair value of the acquired leases. In determining the fair value of\nthese leases, we make assumptions regarding the current fair values of leases for identical or similar equipment in order to determine if the\nacquired lease is within a fair value range of current lease rates. If a lease is below or above the range of current lease rates, the resulting lease\ndiscount or premium is recognized as a lease intangible and amortized into lease income over the remaining term of the lease. Acquired lease\nintangibles are amortized on a straight-line basis over the remaining lease terms, which collectively had a weighted-average remaining\namortization period of approximately 47 months as of December 31, 2023, and are recorded as a component of revenues in the accompanying\nConsolidated Statements of Operations.\nDeferred Financing Costs-Costs incurred in connection with obtaining long term financing are capitalized and amortized to interest expense\nover the term of the underlying loans. Unamortized deferred financing costs of $33.2 million and $29.4 million as of December 31, 2023 and\n2022, respectively, are included in Debt, net in the Consolidated Balance Sheets.\nWe also have unamortized deferred revolver fees related to our revolving debt of $5.1 million and $5.5 million as of December 31, 2023 and\n2022, respectively, which are included in Other assets in the Consolidated Balance Sheets.\nAmortization expense was $8.9 million, $17.0 million and $19.1 million for the years ended December 31, 2023, 2022 and 2021, respectively,\nand is included in Interest expense in the Consolidated Statements of Operations.\nDiscontinued Operations-A disposal of an entity or component of an entity is reported in discontinued operations if the disposal represents a\nstrategic shift that has or will have a material impact on our operations and financial results. See Note 3 for additional information related to our\ndiscontinued operations.\nRevenues-We disaggregate our revenue by products and services. Revenues are within the scope of ASC 842, Leases, and ASC 606, Revenue\nfrom contracts with customers, unless otherwise noted. We have elected to exclude sales and other similar taxes from revenues.\n\n\n\n\n 61\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 64 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nDuring the third quarter of 2022, we updated our corporate strategy based on the opportunities available in the market such that the sale of\naircraft and engines is now an output of our recurring, ordinary activities. As a result of this update, the transaction price allocated to the sale of\nassets is included in Asset sales revenue in the Consolidated Statements of Operations beginning in the third quarter of 2022 and are\naccounted for in accordance with ASC 606. The corresponding net book values of the assets sold are recorded in Cost of sales in the\nConsolidated Statement of Operations beginning in the third quarter of 2022. Sales transactions of aircraft and engines prior to the third quarter\nof 2022 were accounted for in accordance with ASC 610-20, Gains and losses from the derecognition of nonfinancial assets and were included\nin Gain on sale of assets, net on the Consolidated Statements of Operations, as we were previously only occasionally selling these assets.\nGenerally, assets sold were under leasing arrangements prior to sales and were included in Leasing equipment, net, on the Consolidated\nBalance Sheets.\nOperating Leases-We lease equipment pursuant to operating leases. Operating leases with fixed rentals and step rentals are recognized on a\nstraight-line basis over the term of the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured.\nWhen collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments\nare received.\nGenerally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based\non the lessee\u2019s utilization of the leased asset or at the end of the lease. Typically, under our aircraft lease agreements, the lessee is responsible\nfor maintenance, repairs and other operating expenses throughout the term of the lease. These periodic maintenance payments accumulate\nover the term of the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the lessee\nup to the cost of maintenance events paid by the lessee. In the event the total cost of maintenance events over the term of a lease is less than\nthe cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee.\nMaintenance payments received for which we expect to repay to the lessee are presented as Maintenance deposits in our Consolidated\nBalance Sheets. All excess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance revenue\non our Consolidated Statements of Operations. Estimates in recognizing revenue include mean time between removal, projected costs for\nengine maintenance and forecasted utilization of aircraft which are affected by historical usage patterns and overall industry, market and\neconomic conditions. Significant changes to these estimates could have a material effect on the amount of revenue recognized in the period.\nFor purchase and lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based\non the relative fair value of the aircraft and lease. The fair value of the lease may include a lease premium or discount, which is recorded as a\nfavorable or unfavorable lease intangible.\nFinance Leases-From time to time we enter into finance lease arrangements that include a lessee obligation to purchase the leased equipment\nat the end of the lease term, a bargain purchase option, or provides for minimum lease payments with a present value that equals or exceeds\nsubstantially all of the fair value of the leased equipment at the date of lease inception. Net investment in finance leases represents the\nminimum lease payments due from lessee, net of unearned income. The lease payments are segregated into principal and interest\ncomponents similar to a loan. Unearned income is recognized on an effective interest method over the lease term and is recorded as lease\nincome. The principal component of the lease payment is reflected as a reduction to the net investment in finance leases. Revenue is not\nrecognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual\nstatus and revenue is recognized when cash payments are received.\nAsset sales revenue-Asset sales revenue primarily consists of the transaction price related to the sale of aircraft and aircraft engines from our\nAviation Leasing segment. From time to time, the Company may also assign the related lease agreements to the customer as part of the sale of\nthese assets. We routinely sell leasing equipment to customers and such transactions are considered recurring and ordinary in nature to our\nbusiness. As such, these sales are accounted for within the scope of ASC 606. Revenue is recognized when a performance obligation is\nsatisfied by transferring control over an asset to a customer. Revenue is recorded with corresponding costs of sales, presented on a gross\nbasis in the Consolidated Statements of Operations.\nAerospace products revenue-Aerospace products revenue primarily consists of the transaction price related to the sale of repaired CFM56-7B,\nCFM56-5B and V2500 engines, engine modules, spare parts and used material inventory, and are accounted for within the scope of ASC 606.\nRevenue is recognized when a performance obligation is satisfied by transferring control over the related asset to a customer. Revenue is\nrecorded with corresponding costs of sales, presented on a gross basis in the Consolidated Statements of Operations. Aerospace products\nrevenue also consists of engine management service contracts, where the Company has a stand-ready obligation to provide replacement\nCFM56-7B and CFM56-5B engines to customers as they become unserviceable during the contract term. The Company recognizes revenue\nover time using a straight-line attribution method and the costs related to fulfilling the performance obligation are expensed as incurred.\nLeasing Arrangements-At contract inception, we evaluate whether an arrangement is or contains a lease for which we are the lessee (that is,\narrangements which provide us with the right to control a physical asset for a period of time). Operating lease right-of-use (\u201cROU\u201d) assets and\nlease liabilities are included in Other assets and Other liabilities in our Consolidated Balance Sheets, respectively. Finance lease ROU assets\nare recognized in Other assets and lease liabilities are recognized in Other liabilities in our Consolidated Balance Sheets.\nAll lease liabilities are measured at the present value of the unpaid lease payments, discounted using our incremental borrowing rate based on\nthe information available at commencement date of the lease. ROU assets, for both operating and finance leases,\n\n\n\n 62\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 65 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nare initially measured based on the lease liability, adjusted for prepaid rent and lease incentives. Operating lease ROU assets are\nsubsequently measured at the carrying amount of the lease liability adjusted for prepaid or accrued lease payments and lease incentives. The\nfinance lease ROU assets are subsequently amortized using the straight-line method.\nOperating lease expenses are recognized on a straight-line basis over the lease term. With respect to finance leases, amortization of the ROU\nasset is presented separately from interest expense related to the finance lease liability and is recorded in Operating expenses in the\nConsolidated Statements of Operations. Variable lease payments, which are primarily based on usage, are recognized when the associated\nactivity occurs.\nWe have elected to combine lease and non-lease components for all lease contracts where we are the lessee. Additionally, for arrangements\nwith lease terms of 12 months or less, we do not recognize ROU assets, and lease liabilities and lease payments are recognized on a straight-\nline basis over the lease term with variable lease payments recognized in the period in which the obligation is incurred.\nConcentration of Credit Risk-We are subject to concentrations of credit risk with respect to amounts due from customers. We attempt to limit\nour credit risk by performing ongoing credit evaluations. No single customer accounted for greater than 10% of total revenue during the years\nended December 31, 2023 and 2022. We earned 11% of our revenue from one customer in the Aviation Leasing segment during the year ended\nDecember 31, 2021.\nAs of December 31, 2023, no single customer accounted for greater than 10% of total accounts receivable, net. As of December 31, 2022, there\nwere two customers in the Aviation Leasing segment that represented 20% and 12% of total accounts receivable, net.\nWe maintain cash and restricted cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit\nquality financial institutions. We monitor the financial condition of these institutions and have not experienced any losses associated with these\naccounts.\nAllowance for Doubtful Accounts-We determine the allowance for doubtful accounts based on our assessment of the collectability of our\nreceivables on a customer-by-customer basis. Provision in credit losses is included in Operating expenses in the Consolidated Statements of\nOperations.\nThe activity in the allowance for doubtful accounts is as follows:\n December 31,\n 2023 2022 2021\nAllowance at beginning of period $ 65,580 $ 17,703 $ 4,823\n Provision for credit losses 6,583 47,877 12,880\nAllowance at end of period $ 72,163 $ 65,580 $ 17,703\n\nEconomic sanctions and export controls against Russia and Russia\u2019s aviation industry were imposed due to its invasion of Ukraine during the\nfirst quarter of 2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines and\nour allowance for doubtful accounts at December 31, 2023 includes all accounts receivable exposure to Russian and Ukrainian customers.\nComprehensive Income (Loss)-Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from\ntransactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. Our\ncomprehensive income (loss) represents net income (loss), as presented in the Consolidated Statements of Operations, adjusted for\ncomprehensive loss related to cash flow hedges of our equity method investees of discontinued operations. The cash flow impact of commodity\nderivatives held by our consolidated subsidiaries is recognized in Change in fair value of non-hedge derivatives in our Consolidated Statements\nof Cash Flows.\nOther Assets-Other assets is primarily comprised of lease incentives of $43.5 million and $37.9 million, purchase deposits of $23.9 million\nand $6.7 million, notes receivable of $102.3 million and $49.2 million, operating lease right-of-use assets, net of $3.4 million and $3.0 million,\nand finance leases, net of $3.0 million and $6.4 million, maintenance right assets of $16.3 million and $6.8 million, prepaid expenses of $7.8\nmillion and $1.9 million as of December 31, 2023 and 2022, respectively.\nDividends-Dividends are recorded if and when declared by the Board of Directors. The Board of Directors declared cash dividends of $1.20,\n$1.26 and $1.32 per ordinary share during each of the years ended December 31, 2023, 2022 and 2021, respectively.\nAdditionally, the Board of Directors declared cash dividends on the Series A Preferred Shares of $2.06, $2.06 and $2.06 per share for the years\nended December 31, 2023, 2022, and 2021, respectively, the Series B Preferred Shares of $2.00, $2.00 and $2.00 per share for the years ended\nDecember 31, 2023, 2022 and 2021, respectively, the Series C Preferred Shares of $2.06, $2.06, $1.49 per share for the year ended December\n31, 2023, 2022 and 2021, respectively, and the Series D Preferred Shares of $1.78 per share for the year ended December 31, 2023.\n\n\n\n 63\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 66 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nRecent Accounting Pronouncements-In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to\nReportable Segment Disclosures. This ASU modifies the disclosure and presentation requirements of reportable segments. The new guidance\nrequires the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within\neach reported measure of segment profit and loss. In addition, the new guidance enhances interim disclosure requirements, clarifies\ncircumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for\nentities with a single reportable segment, and contains other disclosure requirements. This standard is effective retrospectively for all public\nentities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with\nearly adoption permitted. We are currently assessing the impact this guidance will have on our consolidated financial statements and related\ndisclosures.\nIn December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. This ASU enhances\nthe transparency and decision usefulness of income tax disclosures by expanding the disclosures of an entity\u2019s income tax rate reconciliation\nand disaggregation of income taxes paid and income tax expense. Under the new guidance, public business entities must annually disclose\nspecific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, if the\neffect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (loss) by the\napplicable statutory income tax rate. This standard is effective prospectively for all public entities for annual periods beginning after December\n15, 2024, with early adoption and retrospective application permitted. We are currently assessing the impact this guidance will have on our\nconsolidated financial statements and related disclosures.\n3.\nDISCONTINUED OPERATIONS\nFTAI Infrastructure Inc. (\u201cFTAI Infrastructure\u201d) Spin-Off\nOn April 28, 2022, the Board of Directors of the Company unanimously approved the previously announced spin-off of the Company\u2019s\ninfrastructure business held by FTAI Infrastructure (a wholly owned subsidiary of the Company). The spin-off was effected as a distribution of all\nof the shares owned by the Company of common stock of FTAI Infrastructure to the holders of the Company\u2019s ordinary shares as of July 21,\n2022. The distribution was completed on August 1, 2022. Under ASC 205-20, Presentation of Financial Statements - Discontinued Operations,\nthe spin-off met the criteria to be reported as a discontinued operation. Therefore, FTAI Infrastructure is presented as a discontinued operation\nwithin the Company\u2019s financial statements for all periods prior to August 1, 2022.\nFTAI Infrastructure is a corporation for U.S. federal income tax purposes and holds, among other things, the Company\u2019s previously held interests\nin the (i) Jefferson Terminal business, (ii) Repauno business, (iii) Long Ridge investment, and (iv) Transtar business. FTAI Infrastructure\nretained all related project-level debt of those businesses. In connection with the spin-off, FTAI Infrastructure paid a dividend of $730.3 million to\nthe Company. The Company used these proceeds to repay all outstanding borrowings under its 2021 bridge loans, $200.0 million of its 6.50%\nsenior unsecured notes due 2025, and approximately $175.0 million of the outstanding borrowings under its revolving credit facility. FTAI\nretained the aviation business and certain other assets, and FTAI\u2019s remaining outstanding corporate indebtedness.\nIn connection with the spin-off, the Company and the Manager assigned the Company\u2019s then-existing management agreement to FTAI\nInfrastructure, and FTAI Infrastructure and the Manager executed an amended and restated agreement. The Company and certain of its\nsubsidiaries executed a new management agreement with the Manager. The new management agreement has an initial term of\nsix years. The Manager is entitled to a management fee and reimbursement of certain expenses on substantially similar terms as the previous\narrangements with the Manager, which were assigned to FTAI Infrastructure. Prior to the Merger described below, our Manager remained entitled\nto incentive allocations (comprised of income incentive allocation and capital gains incentive allocation) on the same terms as they existed prior\nto spin-off. Following the Merger, the Company entered into a Services and Profit Sharing Agreement (the \u201cServices and Profit Sharing\nAgreement\u201d), with a subsidiary of the Company and Fortress Worldwide Transportation and Infrastructure Master GP LLC (\u201cMaster GP\u201d),\npursuant to which Master GP is entitled to incentive payments on substantially similar terms as the previous arrangements.\nCritical Accounting Policies\nRevenue Recognition\nRevenues of discontinued operations consist of the following revenue streams:\nTerminal Services Revenues-Terminal services are provided to customers for the receipt and redelivery of various commodities. These\nrevenues relate to performance obligations that are recognized over time using the right to invoice practical expedient, i.e., invoiced as the\nservices are rendered and the customer simultaneously receives and consumes the benefit over the contract term. The Company\u2019s\nperformance of service and right to invoice corresponds with the value delivered to our customers. Revenues are typically invoiced and paid on a\nmonthly basis.\nRail Revenues-Rail revenues generally consist of the following performance obligations: industrial switching, interline services, demurrage and\nstorage. Switching revenues are derived from the performance of switching services, which involve the movement of cars from one point to\nanother within the limits of an individual plant, industrial area, or a rail yard. Switching\n\n\n\n 64\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 67 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nrevenues are recognized as the services are performed, and the services are generally completed on the same day they are initiated.\nInterline revenues are derived from transportation services for railcars that originate or terminate at our railroads and involve one or more other\ncarriers. We record revenue related to interline traffic for transportation service segments provided by carriers along railroads that are not owned\nor controlled by us on a net basis. Interline revenues are recognized as the transportation movements occur.\nAncillary services revenue primarily relates to demurrage and storage services. Demurrage represents charges assessed by railroads for the\ndetention of cars by shippers or receivers of freight beyond a specified free time and is recognized on a per day basis. Storage services revenue\nis earned for the provision of storage of shippers\u2019 railcars and is generally recognized on a per day, per car basis, as the storage services are\nprovided.\nLease Income-Lease income consists of rental income from tenants for storage space. Lease income is recognized on a straight-line basis\nover the terms of the relevant lease agreement.\nOther Revenue-Other revenue primarily consists of revenue related to the handling, storage and sale of raw materials. Revenues for the\nhandling and storage of raw materials relate to performance obligations that are recognized over time using the right to invoice practical\nexpedient, i.e., invoiced as the services are rendered and the customer simultaneously receives and consumes the benefit over the contract\nterm. Our performance of service and right to invoice corresponds with the value delivered to our customers. Revenues for the sale of raw\nmaterials relate to contracts that contain performance obligations to deliver the product over the term of the contract. The revenues are\nrecognized when the control of the product is transferred to the customer, based on the volume delivered and the price within the contract. Other\nrevenues are typically invoiced and paid on a monthly basis.\nAdditionally, other revenue consists of revenue related to derivative trading activities and also includes revenue related to providing roadside\nassistance services to customers in the intermodal and over-the-road trucking industries. Revenue is recognized when a performance\nobligation is satisfied by completing a repair service at a point in time. Revenues are typically invoiced for each repair and generally have 30-day\npayment terms.\nVariable Interest Entity\nThe assessment of whether an entity is a VIE and the determination of whether to consolidate a VIE requires judgment. VIEs are defined as\nentities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the\nentity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its\nprimary beneficiary, and only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most\nsignificantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that\ncould potentially be significant to the VIE.\nDuring 2021, we held an approximately 98% economic interest, and a 100% voting interest in Delaware River Partners LLC (\u201cDRP\u201d). DRP was\nsolely reliant on us to finance its activities and therefore was a VIE. We concluded that we were the primary beneficiary.\nGoodwill\nGoodwill included the excess of the purchase price over the fair value of the net tangible and intangible assets associated with the acquisition of\nJefferson Terminal and Transtar.\nWe reviewed the carrying values of goodwill at least annually to assess impairment since these assets are not amortized. An annual\nimpairment review was conducted as of October 1st of each year. Additionally, we reviewed the carrying value of goodwill whenever events or\nchanges in circumstances indicate that its carrying amount may not be recoverable. The determination of fair value involves significant\nmanagement judgment.\nA goodwill impairment assessment compares the fair value of the respective reporting unit with its carrying amount, including goodwill. The\nestimate of fair value of the respective reporting unit is based on the best information available as of the date of assessment, which primarily\nincorporates certain factors including our assumptions about operating results, business plans, income projections, anticipated future cash\nflows and market data. If the estimated fair value of the reporting unit is less than the carrying amount, a goodwill impairment is recorded to the\nextent that the carrying value of the reporting unit exceeds its fair value.\nWe estimated the fair value of the Jefferson and Transtar reporting units using an income approach, specifically a discounted cash flow\nanalysis. The analysis required us to make significant assumptions and estimates about the forecasted revenue growth rates, capital\nexpenditures, the timing of future cash flows, and discount rates. The estimates and assumptions were used to consider historical performance\nif indicative of future performance and were consistent with the assumptions used in determining future profit plans for the reporting units.\nThere were no impairments of goodwill for the year ended December 31, 2022.\n\n\n\n 65\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 68 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nIntangibles and amortization\nIntangibles included the value of existing customer relationships acquired in connection with the acquisition of Jefferson Terminal and Transtar.\nCustomer relationship intangible assets were amortized on a straight-line basis over their useful lives as the pattern in which the asset\u2019s\neconomic benefits are consumed cannot reliably be determined. Customer relationship intangible assets have useful lives ranging from 5 to 15\nyears, no estimated residual value, and amortization was recorded as a component of Depreciation and amortization in the Consolidated\nStatements of Operations.\nFinancial Information of Discontinued Operations\nThe following table presents the significant components of net loss from discontinued operations:\n Year Ended December 31,\n 2022 2021\nRevenues\nTotal revenues $ 140,009 $ 120,219\nExpenses\nCost of sales 12,732 -\nOperating expense 92,478 98,541\nGeneral and administrative expenses 2,694 3,961\nAcquisition and transaction expenses 13,971 4,030\nManagement fees and incentive allocation to affiliate 8,134 15,638\nDepreciation and amortization 40,319 54,016\nInterest expense 15,105 16,019\nTotal expenses 185,433 192,205\nEquity in losses of unconsolidated entities (46,600) (11,331)\nGain on sale of assets, net 258 16\nOther (expense) income (1,423) (8,727)\nTotal other expense (47,765) (20,042)\nLoss before income taxes (93,189) (92,028)\nProvision for (benefit from) income taxes 8,227 (4,183)\nNet loss from discontinued operations, net of income taxes (101,416) (87,845)\nLess: Net loss attributable to non-controlling interests in consolidated subsidiaries (18,817) (26,472)\nNet loss attributable to shareholders $ (82,599) $ (61,373)\n\nThe cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows\nfor the years ended December 31, 2022 and 2021. The following table summarizes depreciation and amortization, capital expenditures, and\nother significant operating and investing noncash items of discontinued operations for each period presented:\n\n\n\n 66\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 69 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n Year Ended December 31,\n 2022 2021\nOperating activities:\nEquity in losses of unconsolidated entities $ 46,601 $ 11,331\nDepreciation and amortization 40,319 54,016\nEquity-based compensation 2,623 4,038\nInvesting activities:\nAcquisition of property, plant and equipment $ (129,920) $ (140,896)\nAcquisition of business, net of cash acquired (3,819) (627,090)\nInvestment in unconsolidated entities (7,954) 53,055\nProceeds from sale of property, plant and equipment 5,289 4,494\nNon-cash change in equity method investment (182,963) (129,907)\nConversion of interests in unconsolidated entities (21,302) -\n\nThe Company accounted for Long Ridge Terminal LLC, included in discontinued operations for the years ended December 31, 2022 and 2021\nincluded above, using the equity method of accounting. Summarized financial data for Long Ridge Terminal LLC are shown in the following\ntable.\nIncome Statement 2022 2021\nTotal revenues $ 15,199 $ 85,638\n\n\nExpenses\nOperating expenses 36,693 28,310\nDepreciation and amortization 29,381 24,836\nInterest expense 30,622 11,005\nTotal expenses 96,696 64,151\nTotal other expense (234) (44,302)\nNet loss $ (81,731) $ (22,815)\n\n\n4.\nACQUISITION OF QUICKTURN\nOn December 1, 2023, we completed the acquisition of the remaining equity interest of Quick Turn Engine Center LLC (\u201cQuickTurn\u201d) from Unical\nAviation Inc. (\u201cUnical\u201d) for total cash consideration of $30.3 million to obtain full ownership with a 100% equity interest. The cash consideration\nincluded an additional $2.5 million in other assets acquired.\nWe acquired QuickTurn to better position the Company to have tighter integration over the development and delivery of aerospace products.\nQuickTurn is a hospital maintenance and testing facility dedicated to the CFM56 engine located in Miami, Florida that operates within our\nAerospace Products segment. The results of operations at QuickTurn have been included in the Consolidated Statements of Operations\nbeginning on the acquisition date. In connection with the acquisition, we recorded $0.2 million of acquisition and transaction expense during the\nyear ended December 31, 2023.\nIn accordance with ASC 805, the following fair values were assigned to assets acquired and liabilities assumed based on management\u2019s\nestimates and assumptions and are preliminary. The significant assumptions used to estimate the fair value of the property, plant, and\nequipment included replacement cost estimates and market data for similar assets where available. The significant assumptions used to\nestimate the value of the customer relationship intangible assets included discount rate and future revenues and operating expenses. The final\nvaluation and related allocation of the purchase price is subject to change as additional information is received and will be completed no later\nthan 12 months after the closing date. The final acquisition accounting adjustments may be materially different and may include (i) changes in\nfair values of Property, plant and equipment and associated salvage values\u037e (ii) changes in fair values of Inventory\u037e (iii) changes in allocations to\nIntangible assets, as well as goodwill\u037e and, (iv) other changes to assets and liabilities, including working capital accounts.\n\n\n\n 67\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 70 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table summarizes the preliminary allocation of the Net assets acquired as presented in our Consolidated Balance Sheets:\n\n December 1, 2023\nFair value of assets acquired:\nCash and cash equivalents $ 518\nRestricted cash 150\nAccounts receivable, net 5,133\nProperty, plant, and equipment, net 30,559\nIntangible assets 2,377\nInventory, net 9,332\nOther assets 4,301\nTotal assets 52,370\nFair value of liabilities assumed:\nAccounts payable and accrued liabilities 3,994\nOther liabilities 2,410\nTotal liabilities 6,404\nGoodwill (1) 4,630\nNet assets acquired $ 50,596\n\n\n________________________________________________________\n(1)\n Goodwill is primarily attributable to the assembled workforce of QuickTurn and the synergies expected to be achieved. This goodwill is assigned to the\n Aerospace Products segment and is deductible for income tax purposes.\n\n\n\nThe following table presents the identifiable intangible assets and their estimated useful lives:\n\n Estimated useful life in Estimated Fair\n years value\nAbove market leases 4 $ 470\nCustomer relationships 5 $ 1,907\nTotal $ 2,377\n\n\nThe following table presents the property, plant and equipment and their estimated useful lives:\n\n Estimated useful life in Estimated Fair\n years value\nLand N/A $ 2,840\nBuildings and improvements 49 13,790\nMachinery and equipment 6 - 23 13,631\nOther 5-7 298\nTotal $ 30,559\n\n\n\n\n 68\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 71 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n\nThe unaudited financial information in the table below summarizes the combined results of operations of FTAI and QuickTurn on a pro forma\nbasis. These pro forma results were based on estimates and assumptions which we believe are reasonable. The pro forma adjustments are\nprimarily comprised of the following:\n \u2022 The allocation of the purchase price and related adjustments, including adjustments to depreciation and amortization expense related\n to the fair value of property, plant and equipment and intangible assets acquired\u037e\n \u2022 Associated tax-related impacts of adjustments.\nThe following unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of\noperations that would have been achieved if the acquisition had taken place as of January 1, 2022.\n Year Ended December 31,\n 2023 2022\nTotal revenue $ 1,195,899 $ 735,379\nNet income (loss) attributable to shareholders $ 206,341 $ (236,786)\n\n5.\n LEASING EQUIPMENT, NET\nLeasing equipment, net is summarized as follows:\n December 31,\n 2023 2022\nLeasing equipment $ 2,574,394 $ 2,413,230\nLess: Accumulated depreciation (541,981) (499,677)\nLeasing equipment, net $ 2,032,413 $ 1,913,553\n\n\n\n\nEconomic sanctions and export controls against Russia and Russia\u2019s aviation industry were imposed due to its invasion of Ukraine during the\nthree months ended March 31, 2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with\nRussian airlines. We determined that it is unlikely that we will regain possession of the aircrafts and engines that had not yet been recovered\nfrom Ukraine and Russia. As a result, we recognized an impairment charge totaling $\n120.0 million, net of maintenance deposits, to write-off the entire carrying value of leasing equipment assets that we did not expect to recover\nfrom Ukraine and Russia. As of December 31, 2023, eight aircraft and seventeen engines were still located in Russia. Additionally, we identified\ncertain assets in our leasing equipment portfolio with indicators of impairment. As a result, we adjusted the carrying value of these assets to fair\nvalue and recognized transactional impairment charges of $2.1 million, net of redelivery compensation during the year ended December 31,\n2023.\nDepreciation expense for leasing equipment is summarized as follows:\n Year Ended December 31,\n 2023 2022 2021\nDepreciation expense for leasing equipment $ 168,901 $ 152,378 $ 147,444\n\n6.\n INVESTMENTS\nThe following table presents the ownership interests and carrying values of our investments:\n Carrying Value\n Investment Ownership Percentage December 31, 2023 December 31, 2022\nAdvanced Engine Repair JV Equity method 25% $ 21,040 $ 20,207\n\nFalcon MSN 177 LLC Equity method 50% 1,682 1,830\nQuick Turn Engine Center LLC Equity method 50%* - -\n $ 22,722 $ 22,037\n\n________________________________________________\n* 45% pro rata distribution of income until return of JV partner's initial investment\n\n\n\n\n 69\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 72 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nWe did not recognize any other-than-temporary impairments for the year ended December 31, 2023.\nThe following table presents our proportionate share of equity in income (losses):\n Year Ended December 31,\n 2023 2022 2021\nAdvanced Engine Repair JV $ 833 $ (1,110) $ (1,403)\nFalcon MSN 177 LLC (148) 741 -\nQuick Turn Engine Center LLC (2,291) - -\nTotal $ (1,606) $ (369) $ (1,403)\n\nEquity Method Investments\nAdvanced Engine Repair JV\nIn December 2016, we invested $15 million for a 25% interest in an advanced engine repair joint venture. We focus on developing new cost\nsavings programs for engine repairs. We exercise significant influence over this investment and account for this investment as an equity method\ninvestment.\nIn August 2019, we expanded the scope of our joint venture and invested an additional $13.5 million and maintained a 25% interest.\nFalcon MSN 177 LLC\nIn November 2021, we invested $1.6 million for a 50% interest in Falcon MSN 177 LLC, an entity that consists of one Dassault Falcon 2000\naircraft. Falcon MSN 177 LLC leases the aircraft to charter operators on aircraft, crew, maintenance and insurance contracts. We account for our\ninvestment in Falcon as an equity method investment as we have significant influence through our interest.\nQuick Turn Engine Center LLC\nOn January 4, 2023, we invested $19.5 million for a 50% interest (45% pro rata distribution of income until return of the JV partner\u2019s initial\ninvestment) in Quick Turn Engine Center LLC or \u201cQuickTurn\u201d (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated\nto the CFM56 engine. We account for our investment in QuickTurn as an equity method investment as we have significant influence through our\ninterest.\nOn December 1, 2023, we purchased the remaining interest in QuickTurn from the joint venture partner for total cash consideration of $30.3\nmillion to obtain full ownership with a 100% equity interest. The cash consideration included an additional $2.5 million in other assets acquired.\nOn the acquisition date, the Company accounted for QuickTurn on a consolidated basis and derecognized it as an equity method investment.\nThe Company remeasured its previously held equity method investment as of the acquisition date to a fair value of $17.2 million, determined\nusing the implied fair value from the transaction price, and recorded a gain of $5.3 million. The gain is included in Other income in the\nConsolidated Statements of Operations. The results of operations at QuickTurn have been included in the Consolidated Statements of\nOperations beginning on December 1, 2023. See Notes 4 for additional information.\n\n\n\n\n 70\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 73 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n7.\nINTANGIBLE ASSETS AND LIABILITIES, NET\nOur intangible assets and liabilities, net are summarized as follows:\n December 31, 2023 December 31, 2022\nIntangible assets\nAcquired favorable lease intangibles $ 68,041 $ 64,202\nLess: Accumulated amortization (19,347) (22,247)\nAcquired favorable lease intangibles, net 48,694 41,955\nAcquired customer relationships 1,907 -\nLess: Accumulated amortization (11) -\nAcquired customer relationships, net 1,896 -\nTotal intangible assets, net $ 50,590 $ 41,955\n\n\nIntangible liabilities\nAcquired unfavorable lease intangibles $ 3,151 $ 13,152\nLess: Accumulated amortization (1,389) (2,607)\nAcquired unfavorable lease intangibles, net $ 1,762 $ 10,545\n\n\nIntangible assets and liabilities are held within the Aviation Leasing and Aerospace Products segments. Intangible liabilities relate to\nunfavorable lease intangibles and are included as a component of Other liabilities in the Consolidated Balance Sheets.\nAmortization of intangible assets and liabilities is recorded as follows:\n\n Year Ended December 31,\n Classification in Consolidated Statements\n of Operations 2023 2022 2021\nLease intangibles Lease income $ 15,126 $ 13,913 $ 4,993\nCustomer relationships: Depreciation and amortization 11 - -\nTotal $ 15,137 $ 13,913 $ 4,993\n\n\n\n\nAs of December 31, 2023, estimated net annual amortization of intangibles is as follows:\n2024 $ 16,012\n2025 12,815\n2026 9,012\n2027 4,025\n2028 3,434\nThereafter 3,530\nTotal $ 48,828\n\n\n\n\n 71\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 74 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n8.\n DEBT, NET\nOur debt, net is summarized as follows:\n December 31, 2023 December 31, 2022\n Outstanding Outstanding\n Borrowings Stated Interest Rate Maturity Date Borrowings\nLoans payable\n (i) Base Rate + 1.75%\u037e or\nRevolving Credit Facility (1) - (ii) Adjusted Term SOFR Rate + 2.75% 9/20/25 150,000\nTotal loans payable - 150,000\nBonds payable\nSenior Notes due 2025 (2) 652,043 6.50% 10/1/25 653,036\nSenior Notes due 2027 400,000 9.75% 8/1/27 400,000\nSenior Notes due 2028 (3) 1,001,746 5.50% 5/1/28 1,002,091\nSenior Notes due 2030 (4) 496,704 7.88% 12/1/30 -\nTotal bonds payable 2,550,493 2,055,127\nDebt 2,550,493 2,205,127\nLess: Debt issuance costs (33,150) (29,400)\nTotal debt, net $ 2,517,343 $ 2,175,727\n\n\nTotal debt due within one year $ - $ -\n______________________________________________________________________________________\n(1)\n Requires a quarterly commitment fee at a rate of 0.50% on the average daily unused portion, as well as customary letter of credit fees and agency fees.\n(2)\n Includes unamortized discount of $866 and $1,318 at December 31, 2023 and 2022, respectively, and an unamortized premium of $2,908 and $4,354 a t\n December 31, 2023 and 2022, respectively.\n(3)\n Includes an unamortized premium of $1,746 and $2,091 at December 31, 2023 and 2022, respectively.\n(4)\n Includes unamortized discount of $3,296 at December 31, 2023\nOn November 21, 2023, we issued $500.0 million aggregate principal amount of senior unsecured notes due 2030 (the \u201c2030 Notes\u201d). The\n2030 Notes bear interest at a rate of 7.88% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, commencing\non June 1, 2024.\nWe used a portion of the proceeds to repay $250 million of outstanding borrowings under the Revolving Credit Facility, for general corporate\npurposes, and the funding of future acquisitions and investments.\nOn September 20, 2022, the Company amended and restated its Revolving Credit Facility which provides for revolving loans to be made\navailable to the Company in an aggregate principal amount of up to $225.0 million, of which up to $25.0 million may be utilized for the issuance\nof letters of credit. On November 22, 2022, the Company entered into an additional amendment which provides for additional revolving\ncommitments by Citizens Bank, National Association, as an incremental lender in an aggregate principal amount of $75.0 million (the\n\u201cIncremental Commitment\u201d). After giving effect to the Incremental Commitment, the aggregate principal amount of the Commitments available to\nthe Company is $300.0 million (the \u201cRevolving Credit Facility\u201d), of which up to $25.0 million may be utilized for the issuance of letters of credit.\nIn conjunction with the spin-off of FTAI Infrastructure, the Company repaid all outstanding borrowings under its 2021 bridge loans and $200.0\nmillion of its 6.50% senior unsecured notes due 2025, and approximately $175.0 million of the outstanding borrowings under its revolving credit\nfacility. The Company recorded a loss on extinguishment of debt of $19.9 million during the year ended December 31, 2022 as a result of these\npay downs.\nWe were in compliance with all debt covenants as of December 31, 2023.\n\n\n\n 72\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 75 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nAs of December 31, 2023, scheduled principal repayments under our debt agreements for the next five years and thereafter are summarized as\nfollows:\n\n 2024 2025 2026 2027 2028 Thereafter Total\nRevolving Credit Facility - - - - - - -\nSenior Notes due 2025 - 650,000 - - - - 650,000\nSenior Notes due 2027 - - - 400,000 - - 400,000\nSenior Notes due 2028 - - - - 1,000,000 - 1,000,000\nSenior Notes due 2030 - - - - - 500,000 500,000\nTotal principal payments on loans\nand bonds payable $ - $ 650,000 $ - $ 400,000 $ 1,000,000 $ 500,000 $ 2,550,000\n\n\n9.\n FAIR VALUE MEASUREMENTS\nFair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable\ninputs and minimize use of unobservable inputs. These inputs are prioritized as follows:\n\u2022 Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.\n\u2022 Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for\n similar assets or liabilities or market corroborated inputs.\n\u2022 Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how\n market participants price the asset or liability.\nThe valuation techniques that may be used to measure fair value are as follows:\n\u2022 Market approach-Uses prices and other relevant information generated by market transactions involving identical or comparable assets or\n liabilities.\n\u2022 Income approach-Uses valuation techniques to convert future amounts to a single present amount based on current market expectations\n about those future amounts.\n\u2022 Cost approach-Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).\nOur cash and cash equivalents and restricted cash consist largely of demand deposit accounts with maturities of 90 days or less when\npurchased that are considered to be highly liquid. These instruments are valued using inputs observable in active markets for identical\ninstruments and are therefore classified as Level 1 within the fair value hierarchy.\nExcept as discussed below, our financial instruments other than cash and cash equivalents and restricted cash consist principally of accounts\nreceivable, notes receivable, accounts payable and accrued liabilities, loans payable, security deposits, maintenance deposits and\nmanagement fees payable, whose fair values approximate their carrying values based on an evaluation of pricing data, vendor quotes, and\nhistorical trading activity or due to their short maturity profiles.\n\n\n\n 73\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 76 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe fair values of our bonds payable reported as Debt, net in the Consolidated Balance Sheets are presented in the table below and classified\nas Level 2 within the fair value hierarchy:\n December 31, 2023 December 31, 2022\nSenior Notes due 2025 649,383 613,152\nSenior Notes due 2027 416,432 402,032\nSenior Notes due 2028 963,630 853,490\nSenior Notes due 2030 521,440 -\n\nThe fair value of all other items reported as Debt, net in the Consolidated Balance Sheets approximate their carrying values due to their bearing\nmarket rates of interest and are classified as Level 2 within the fair value hierarchy.\nThe Company has contingent obligations under ASC 460, Guarantees, in connection with certain sales of aircraft on lease, which are measured\nat fair value. The guarantees are valued at $\n6.8 million and $3.8 million as of December 31, 2023 and December 31, 2022, respectively, and are reflected as a component of Other liabilities\non the Consolidated Balance Sheets. The fair values of the guarantees are determined based on the estimated condition of the engines at the\nend of each lease term and the estimated cost of replacement and applicable discount rates and are classified as Level 3. During the year\nended December 31, 2023, the Company recorded a $4.8 million increase in guarantees related to the sale of seven aircraft and a $1.8 million\ndecrease related to the change in fair value, which is recorded as Asset sales revenue in the Consolidated Statements of Operations.\nWe measure the fair value of certain assets on a non-recurring basis when U.S. GAAP requires the application of fair value, including events or\nchanges in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements\ninclude intangible assets, property, plant and equipment and leasing equipment. We record such assets at fair value when it is determined the\ncarrying value may not be recoverable. Fair value measurements for assets subject to impairment tests are based on an income approach\nwhich uses Level 3 inputs, which include our assumptions as to future cash flows from operation of the leasing and eventual sale of assets.\n10.\n EQUITY-BASED COMPENSATION\nIn 2015, we established a Nonqualified Stock Option and Incentive Award Plan (\u201cIncentive Plan\u201d) which provides for the ability to award equity\ncompensation awards in the form of stock options to eligible employees, consultants, directors, and other individuals who provide services to\nus, each as determined by the Compensation Committee of the Board of Directors.\nAs of December 31, 2023, the Incentive Plan provides for the issuance of up to 29.8 million shares. We account for equity-based compensation\nexpense in accordance with ASC 718 Compensation-Stock Compensation and is reported within operating expenses and general and\nadministrative in the Consolidated Statements of Operations.\nRestricted Shares\nDuring the first quarter of 2023, we issued restricted shares of the Company to select employees of FTAI Aviation LLC (a wholly owned\nsubsidiary of the Company) that had a grant date fair value of $\n8.8 million and vest over 4.3 years. These awards are subject to continued employment, and the compensation expense is recognized ratably\nover the vesting periods, with 50% of the units vesting on June 30, 2026 and the remaining units vesting on June 30, 2027. The fair value of\nthese awards were calculated based on the closing price of FTAI Aviation Ltd.\u2019s ordinary shares on grant date of March 13, 2023.\nThe Consolidated Statements of Operations includes the following expense related to our stock-based compensation arrangements:\n\n\n December 31, Remaining Expense To Be\n Recognized, If All Vesting\n 2023 2022 2021 Conditions Are Met\nRestricted Shares $ 1,638 $ - $ - $ 7,133\n\nThe following tables present information for our stock options and restricted shares:\n\n\n\n 74\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 77 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n Stock Options Restricted shares\n Weighted Weighted\n Average Average\n Options Exercise Price Shares Issuance Price\nOutstanding as of December 31, 2022 1,735,316 $ 22.67 - -\n Granted 248,947 26.11 365,000 24.03\n Less: exercised / vested 1,368,086 22.80 - -\n Less: forfeited and canceled - - - -\nOutstanding as of December 31, 2023 616,177 365,000\n\n Stock Options Restricted Shares\nAs of December 31, 2023:\n Weighted average exercise / issuance price (per share) $ 23.78 $ 24.03\n Aggregate intrinsic value (in thousands) $ 13,939 $ 8,771\n Weighted average remaining contractual term (in years) 8.1 3.5\n\nDuring the year ended December 31, 2023, the Manager did not transfer any options to employees.\nStock Options\nIn connection with our equity offerings (see Note 14 for details), we granted options to the Manager related to ordinary shares. The fair value of\nthese options were recorded as an increase in equity with an offsetting reduction of capital proceeds received.\nThe following table presents information related to the options granted related to our shares:\n\n Year Ended December 31,\n 2023 2022 2021\nNumber of options 248,947 - 1,684,318\nFair value ($ millions) $2.1 $- $13.8\nRanges\n The expected share volatility is based on\n an assessment of the volatility of our\nExpected volatility publicly traded ordinary shares 37.88 % - 37.88 % -% - -% 44.78 % - 45.60 %\n The risk-free rate is determined using the\n implied yield currently available on U.S.\n government bonds with a term consistent\n with the expected term on the date of\nRisk free interest rate grant. 3.47 % - 3.47 % -% - -% 1.34 % - 1.70 %\n The expected dividend yield is based on\n management\u2019s current expected dividend\nExpected dividend yield rate. 6.26 % - 6.26 % -% - -% 3.16 % - 3.64 %\n Expected term used represents the period\n of time the options granted are expected\nExpected term to be outstanding. 10 years 0 years 10 years\n\n\n\n\n 75\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 78 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n11.\n INCOME TAXES\nThe current and deferred components of the income tax (benefit) provision included in the Consolidated Statements of Operations are as\nfollows:\n\n\n Year Ended December 31,\n 2023 2022 2021\nCurrent:\n Cayman Islands $ - $ - $ -\n Bermuda - - -\n United States:\n Federal 935 522 1,850\n State and local 1,176 1,687 760\n Other Non-U.S. 1,715 443 (11)\nTotal current provision 3,826 2,652 2,599\nDeferred:\n Cayman Islands - - -\n Bermuda (72,185) - -\n United States:\n Federal 3,943 1,305 126\n State and local (2) 242 122\n Other Non-U.S. 4,618 1,101 279\nTotal deferred (benefit) provision (63,626) 2,648 527\nProvision for (benefit from) income taxes:\n Continuing operations (59,800) 5,300 3,126\n Discontinued operations - 8,227 (4,183)\nTotal $ (59,800) $ 13,527 $ (1,057)\n\n\n\nThe Company is an exempted entity domiciled in the Cayman Islands where income taxes are not imposed. The Company is considered a\nPassive Foreign Investment Company for U.S. income tax purposes and certain income taxes are imposed on our owners. Taxable income or\nloss generated by our corporate subsidiaries is subject to U.S. federal, state and foreign corporate income tax in locations where they conduct\nbusiness.\nHistorically, the Company\u2019s Bermuda operations have not been subject to Bermuda income tax. However, on December 27, 2023, the\nGovernment of Bermuda enacted a 15% corporate income tax regime (the \u201cBermuda CIT\u201d) that applies to Bermuda businesses that are part of\nmultinational enterprise groups with annual revenue of \u20ac750 million or more and is effective for tax years beginning on or after January 1, 2025.\nAs a result of the Bermuda CIT, the exemption of certain of the Company\u2019s Bermuda subsidiaries from Bermuda corporate income taxes will\ncease in 2025. With the enactment of the Bermuda CIT in 2023, the Company underwent an analysis to determine the tax impacts to its\nconsolidated financial statements for the year ended December 31, 2023. We have recorded a deferred tax asset of $72.2 million in connection\nwith the law change, which was recorded as a benefit from income taxes.\nThe difference between our reported total provision for income taxes and the Cayman Islands statutory rate of 0% is as follows:\n\n\n\n 76\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 79 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n\n Year Ended December 31,\n 2023 2022 2021\nIncome subject to tax in the United States 3.3 % (6.9)% (7.2)%\nForeign taxes (30.9)% 13.5 % (8.7)%\nChange in valuation allowance (4.9)% (11.6)% 8.0 %\nProvision for income taxes (32.5)% (5.0)% (7.9)%\n\n\n\n\nSignificant components of our deferred tax assets and liabilities are as follows:\n December 31,\n 2023 2022\nDeferred tax assets:\n Net operating loss carryforwards $ 38,911 $ 43,116\n Interest expense 1,861 2,754\n Investment in Partnerships 963 963\n Inventory 16,985 -\n Customer Relationship Intangibles 28,500 -\n Other - 272\nTotal deferred tax assets 87,220 47,105\n Less valuation allowance (18,599) (27,565)\nNet deferred tax assets 68,621 19,540\nDeferred tax liabilities:\n Fixed assets and goodwill (8,186) (22,794)\n Other (63)\nNet deferred tax assets (liabilities) $ 60,372 $ (3,254)\n\n\n\n\nDeferred tax assets and liabilities are reported net in Other assets or Other liabilities in the Consolidated Balance Sheets. In assessing the\nrealizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets\nwill not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods\nin which temporary differences become deductible. We have analyzed our deferred tax assets and have determined, based on the weight of\navailable evidence, that it is more likely than not that a significant portion will not be realized. Accordingly, valuation allowances have been\nrecognized as of December 31, 2023, 2022 and 2021 of $18.6 million, $27.6 million and $9.1 million, respectively, related to certain deductible\ntemporary differences and net operating loss carryforwards.\nA summary of the changes in the valuation allowance is as follows:\n\n December 31,\n 2023 2022 2021\nValuation allowance at beginning of period $ 27,565 $ 9,142 $ 6,794\n Change due to current year losses 855 22,094 2,356\n Change due to current year releases (9,821) (3,671) (8)\nValuation allowance at end of period $ 18,599 $ 27,565 $ 9,142\n\n\n\n\n 77\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 80 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nAs of December 31, 2023, certain of our corporate subsidiaries had U.S. federal net operating loss carryforwards of approximately $22.8 million\nwhich can be carried forward indefinitely against future business income. As of December 31, 2023, we also had net operating loss\ncarryforwards for Irish income tax purposes of $266.4 million, which can be carried forward indefinitely against future business income, $1.6\nmillion of net operating loss carryforwards for Malaysian income tax purposes, which will begin to expire in the year 2030, and $2.1 million of net\noperating loss carryforward for Singaporean income tax purpose, which can be carried forward indefinitely against the future business income.\nThe utilization of the net operating loss carryforwards to reduce future income taxes will depend on the relevant corporate subsidiary's ability to\ngenerate sufficient taxable income prior to the expiration of the carryforward period, if any. In addition, the maximum annual use of net operating\nloss carryforwards may be limited after certain changes in share ownership.\nAs of and for the period ended December 31, 2023, we had not established a liability for uncertain tax positions as no such positions existed. In\ngeneral, our tax returns and the tax returns of our corporate subsidiaries are subject to U.S. federal, state, local and foreign income tax\nexaminations by tax authorities. Generally, we are not subject to examination by taxing authorities for tax years prior to 2019. We do not believe\nthat it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within 12 months of the reporting date.\n12.\n MANAGEMENT AGREEMENT AND AFFILIATE TRANSACTIONS\n\nIn connection with the spin-off of FTAI Infrastructure on August 1, 2022, we assigned our then-existing management and advisory agreement,\ndated as of May 20, 2015, with our Manager to FTAI Infrastructure. On July 31, 2022, we entered into a new management and advisory\nagreement (the \u201cManagement Agreement\u201d), by and among FTAI, FTAI Finance Holdco Ltd. (a wholly owned subsidiary of the Company), and\neach of the subsidiaries that are party thereto and the Manager, with substantially similar terms and conditions as the existing management and\nadvisory agreement.\n\nThe Manager is paid annual fees in exchange for advising us on various aspects of our business, formulating our investment strategies,\narranging for the acquisition and disposition of assets, arranging for financing, monitoring performance, and managing our day-to-day\noperations, inclusive of all costs incidental thereto. In addition, the Manager may be reimbursed for various expenses incurred by the Manager\non our behalf, including the costs of legal, accounting and other administrative activities. Additionally, we have entered into certain incentive\nallocation arrangements with Master GP, which owns approximately 0.01% of FTAI Aviation Holdco Ltd.\nThe Manager is entitled to a management fee and reimbursement of certain expenses. The management fee is determined by taking the\naverage value of total equity (excluding non-controlling interests) determined on a consolidated basis in accordance with U.S. GAAP at the end\nof the two most recently completed months multiplied by an annual rate of 1.50%, and is payable monthly in arrears in cash.\nMaster GP is entitled to incentive allocations (comprised of income incentive allocation and capital gains incentive allocation, defined below).\nThe income incentive allocation is calculated and distributable quarterly in arrears based on the pre-incentive allocation net income for the\nimmediately preceding calendar quarter (the \u201cIncome Incentive Allocation\u201d). For this purpose, pre-incentive allocation net income means, with\nrespect to a calendar quarter, net income attributable to shareholders during such quarter calculated in accordance with U.S. GAAP excluding\nour pro rata share of (1) realized or unrealized gains and losses, and (2) certain non-cash or one-time items, and (3) any other adjustments as\nmay be approved by our independent directors. Pre-incentive allocation net income does not include any Income Incentive Allocation or Capital\nGains Incentive Allocation (described below) paid to Master GP during the relevant quarter.\nOne of our subsidiaries allocates and distributes to Master GP an Income Incentive Allocation with respect to its pre-incentive allocation net\nincome in each calendar quarter as follows: (1)\nno Income Incentive Allocation in any calendar quarter in which pre-incentive allocation net income, expressed as a rate of return on the average\nvalue of our net equity capital (excluding non-controlling interests) at the end of the two most recently completed calendar quarters, does not\nexceed 2% for such quarter (8% annualized)\u037e (2) 100% of pre-incentive allocation net income with respect to that portion of such pre-incentive\nallocation net income, if any, that is equal to or exceeds 2% but does not exceed 2.2223% for such quarter\u037e and (3) 10% of the amount of pre-\nincentive allocation net income, if any, that exceeds 2.2223% for such quarter. These calculations will be prorated for any period of less than\nthree months.\nCapital Gains Incentive Allocation is calculated and distributable in arrears as of the end of each calendar year and is equal to 10% of our pro\nrata share of cumulative realized gains from the date of the IPO through the end of the applicable calendar year, net of our pro rata share of\ncumulative realized or unrealized losses, the cumulative non-cash portion of equity-based compensation expenses and all realized gains upon\nwhich prior performance-based Capital Gains Incentive Allocation payments were made to Master GP.\n\n\n\n 78\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 81 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table summarizes the management fees, income incentive allocation and capital gains incentive allocation from continuing\noperations:\n\n Year Ended December 31,\n 2023 2022 2021\nManagement fees $ 921 $ 73 $ 684\nIncome incentive allocation 17,116 3,489 -\nCapital gains incentive allocation - - -\nTotal $ 18,037 $ 3,562 $ 684\n\n\n\n\nWe pay all of our operating expenses, except those specifically required to be borne by the Manager under the Management Agreement. The\nexpenses required to be paid by us include, but are not limited to, issuance and transaction costs incident to the acquisition, disposition and\nfinancing of our assets, legal and auditing fees and expenses, the compensation and expenses of our independent directors, the costs\nassociated with the establishment and maintenance of any credit facilities and other indebtedness of ours (including commitment fees, legal\nfees, closing costs, etc.), expenses associated with other securities offerings of ours, costs and expenses incurred in contracting with third\nparties (including affiliates of the Manager), the costs of printing and mailing proxies and reports to our shareholders, costs incurred by the\nManager or its affiliates for travel on our behalf, costs associated with any computer software or hardware that is used by us, costs to obtain\nliability insurance to indemnify our directors and officers and the compensation and expenses of our transfer agent.\nWe will pay or reimburse the Manager and its affiliates for performing certain legal, accounting, due diligence tasks and other services that\noutside professionals or outside consultants otherwise would perform, provided that such costs and reimbursements are no greater than those\nwhich would be paid to outside professionals or consultants. The Manager is responsible for all of its other costs incident to the performance of\nits duties under the Management Agreement, including compensation of the Manager\u2019s employees, rent for facilities and other \u201coverhead\u201d\nexpenses\u037e we will not reimburse the Manager for these expenses.\nThe following table summarizes our reimbursements to the Manager from continuing operations:\n\n\n Year Ended December 31,\n 2023 2022 2021\nClassification in the Consolidated Statements of Operations:\n General and administrative expenses $ 7,137 $ 6,891 $ 4,915\n Acquisition and transaction expenses 678 1,144 2,153\nTotal $ 7,815 $ 8,035 $ 7,068\n\n\n\n\nIf we terminate the Management Agreement, we will generally be required to pay the Manager a termination fee. Pursuant to the terms of the\nManagement Agreement, the termination fee is equal to the amount of the management fee during the 12 months immediately preceding the\ndate of the termination. In addition, an Incentive Allocation Fair Value Amount will be distributable to Master GP if Master GP is removed due to\nthe termination of the Management Agreement in certain specified circumstances. The Incentive Allocation Fair Value Amount is an amount\nequal to the Income Incentive Allocation and the Capital Gains Incentive Allocation that would be paid to Master GP if our assets were sold for\ncash at their then current fair market value (as determined by an appraisal, taking into account, among other things, the expected future value of\nthe underlying investments).\nUpon the successful completion of an offering of our ordinary shares or other equity securities (including securities issued as consideration in\nan acquisition), we grant the Manager options to purchase ordinary shares in an amount equal to 10% of the number of ordinary shares being\nsold in the offering (or if the issuance relates to equity securities other than our ordinary shares, options to purchase a number of ordinary\nshares equal to 10% of the gross capital raised in the equity issuance divided by the fair market value of a ordinary share as of the date of\nissuance), with an exercise price equal to the offering price per share paid by the public or other ultimate purchaser or attributed to such\nsecurities in connection with an acquisition (or the fair market value of a ordinary share as of the date of the equity issuance if it relates to equity\nsecurities other than our ordinary shares). Any ultimate purchaser of ordinary shares for which such options are granted may be an affiliate of\nthe Manager.\n\n\n\n 79\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 82 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table summarizes amounts due to the Manager, which are included within accounts payable and accrued liabilities in the\nConsolidated Balance Sheets:\n December 31,\n 2023 2022\nAccrued management fees $ 224 $ 53\nOther payables 6,200 4,688\n\nOther Affiliate Transactions\nDuring the year ended December 31, 2023, in connection with our equity offerings (as defined in Note 10 for details), we granted options to the\nManager.\n13.\nSEGMENT INFORMATION\nThe key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our\nproducts and services. Our two reportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns\nand manages aviation assets, including aircraft and aircraft engines, which it leases and sells to customers. The Aerospace Products segment\ndevelops and manufactures through a joint venture, and repairs and sells, through our maintenance facility and exclusivity arrangements,\naftermarket components for aircraft engines. During the fourth quarter of 2023, the Company changed the composition of its operating\nsegments to include V2500 engines within the Aerospace Products segment. Prior periods have been restated to reflect the change in\naccordance with the requirements of ASC 280, Segment Reporting. See Note 2 for additional information.\n\nCorporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, and\nmanagement fees. Additionally, Corporate and Other also includes offshore energy related assets, which consist of vessels and equipment that\nsupport offshore oil and gas activities and production which are typically subject to operating leases.\n\nThe accounting policies of the segments are the same as those described in the summary of significant accounting policies\u037e however, financial\ninformation presented by segment includes the impact of intercompany eliminations. Our Chief Executive Officer is our Chief Operating Decision\nMaker (\u201cCODM\u201d). Segment information is presented in the same manner that our CODM reviews the operating results in assessing\nperformance and allocating resources. The CODM evaluates performance for each reportable segment primarily based on Adjusted EBITDA.\nHistorically, the CODM\u2019s assessment of segment performance included asset information. The CODM determined that segment asset\ninformation is not a key factor in measuring performance or allocating resources. Therefore, segment asset information is not included in the\ntables below as it is not provided to or reviewed by our CODM.\n\nAdjusted EBITDA is defined as net income (loss) attributable to shareholders from continuing operations, adjusted (a) to exclude the impact of\nprovision for (benefit from) income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the\nmodification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset\nimpairment charges, incentive allocations, depreciation and amortization expense, dividends on preferred shares and interest expense, (b) to\ninclude the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings\n(losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA.\n\nWe believe that net income (loss) attributable to shareholders from continuing operations, as defined by U.S. GAAP, is the most appropriate\nearnings measurement with which to reconcile Adjusted EBITDA. Adjusted EBITDA should not be considered as an alternative to net income\n(loss) attributable to shareholders as determined in accordance with U.S. GAAP. The following tables set forth certain information for each\nreportable segment:\n\n\n\n 80\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 83 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following tables set forth certain information for each reportable segment:\nI. For the Year Ended December 31, 2023\n Year Ended December 31, 2023\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nRevenues\nLease income $ 179,704 $ - $ 28,232 $ 207,936\nMaintenance revenue 191,347 - - 191,347\nAsset sales revenue 303,141 - - 303,141\nAerospace products revenue - 454,970 - 454,970\nOther revenue 7,419 - 6,083 13,502\nTotal revenues 681,611 454,970 34,315 1,170,896\n\n\nExpenses\nCost of sales 221,852 280,280 - 502,132\nOperating expenses 37,876 20,459 51,828 110,163\nGeneral and administrative - - 13,700 13,700\nAcquisition and transaction expenses 7,150 1,722 6,322 15,194\nManagement fees and incentive allocation to affiliate - - 18,037 18,037\nDepreciation and amortization 158,354 661 10,862 169,877\nAsset impairment 2,121 - - 2,121\nInterest expense - - 161,639 161,639\nTotal expenses 427,353 303,122 262,388 992,863\n\n\nOther income (expense)\nEquity in losses of unconsolidated entities (148) (1,458) - (1,606)\nOther income 1,300 5,347 943 7,590\nTotal other income 1,152 3,889 943 5,984\nIncome (loss) from continuing operations before income taxes 255,410 155,737 (227,130) 184,017\n(Benefit from) provision for income taxes (36,193) (24,440) 833 (59,800)\nNet income (loss) from continuing operations 291,603 180,177 (227,963) 243,817\nLess: Net loss from continuing operations attributable to non-controlling interests\nin consolidated subsidiaries - - - -\nLess: Dividends on preferred shares - - 31,795 31,795\nNet income (loss) attributable to shareholders from continuing\noperations $ 291,603 $ 180,177 $ (259,758) $ 212,022\n\n\n\n\n 81\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 84 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders from continuing operations:\n Year Ended December 31, 2023\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nAdjusted EBITDA $ 467,388 $ 160,009 $ (30,115) $ 597,282\nAdd: Non-controlling share of Adjusted EBITDA -\nAdd: Equity in losses of unconsolidated entities (1,606)\nLess: Pro-rata share of Adjusted EBITDA from unconsolidated entities (310)\nLess: Interest expense and dividends on preferred shares (193,434)\nLess: Depreciation and amortization expense (213,641)\nLess: Incentive allocations (17,116)\nLess: Asset impairment charges (2,121)\nLess: Changes in fair value of non-hedge derivative instruments -\nLess: Losses on the modification or extinguishment of debt and capital lease\nobligations -\nLess: Acquisition and transaction expenses (15,194)\nLess: Equity-based compensation expense (1,638)\nLess: Benefit from income taxes 59,800\nNet income attributable to shareholders from continuing operations $ 212,022\n\n\n\n\nSummary information with respect to our geographic sources of revenue, based on location of customer, is as follows:\n Year Ended December 31, 2023\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nRevenues\nAfrica $ 822 $ 875 $ - $ 1,697\nAsia 101,305 18,364 34,315 153,984\nEurope 244,055 120,439 - 364,494\nNorth America 285,421 301,633 - 587,054\nSouth America 50,008 13,659 - 63,667\nTotal revenues $ 681,611 $ 454,970 $ 34,315 $ 1,170,896\n\n\n\n\nPresented below are the contracted minimum future annual revenues to be received under existing operating leases as of December 31, 2023:\n\n December 31, 2023\n2024 $ 193,614\n2025 142,060\n2026 103,198\n2027 73,745\n2028 66,142\nThereafter 48,109\nTotal $ 626,868\n\n\n\n\n 82\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 85 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nII. For the Year Ended December 31, 2022\n Year Ended December 31, 2022\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nRevenues\nLease income $ 159,068 $ - $ 20,246 179,314\nMaintenance revenue 148,846 - - 148,846\nAsset sales revenue 183,535 - - 183,535\nAerospace products revenue - 178,515 - 178,515\nOther revenue 11,499 - 6,702 18,201\nTotal revenues 502,948 178,515 26,948 708,411\n\n\nExpenses\nCost of sales 138,904 109,481 - 248,385\nOperating expenses 81,232 11,967 39,065 132,264\nGeneral and administrative - - 14,164 14,164\nAcquisition and transaction expenses 1,923 243 11,041 13,207\nManagement fees and incentive allocation to affiliate - - 3,562 3,562\nDepreciation and amortization 144,258 258 8,401 152,917\nAsset impairment 137,219 - - 137,219\nInterest expense - - 169,194 169,194\nTotal expenses 503,536 121,949 245,427 870,912\n\n\nOther income (expense)\nEquity in earnings (losses) of unconsolidated entities 740 (1,109) - (369)\nGain on sale of assets, net 59,048 18,163 - 77,211\nLoss on extinguishment of debt - - (19,859) (19,859)\nOther income (expense) 246 - (39) 207\nTotal other income (expense) 60,034 17,054 (19,898) 57,190\nIncome (loss) from continuing operations before income taxes 59,446 73,620 (238,377) (105,311)\nProvision for (benefit from) income taxes 2,502 2,961 (163) 5,300\nNet income (loss) from continuing operations 56,944 70,659 (238,214) (110,611)\nLess: Net loss from continuing operations attributable to non-controlling interests\nin consolidated subsidiaries - - - -\nLess: Dividends on preferred shares - - 27,164 27,164\nNet income (loss) attributable to shareholders from continuing\noperations $ 56,944 $ 70,659 $ (265,378) $ (137,775)\n\n\n\n\n 83\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 86 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders from continuing operations:\n\n Year Ended December 31, 2022\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nAdjusted EBITDA $ 380,145 $ 74,345 $ (26,393) $ 428,097\nAdd: Non-controlling share of Adjusted EBITDA -\nAdd: Equity in losses of unconsolidated entities (369)\nLess: Pro-rata share of Adjusted EBITDA from unconsolidated entities (40)\nLess: Interest expense and dividends on preferred shares (196,358)\nLess: Depreciation and amortization expense (190,031)\nLess: Incentive allocations (3,489)\nLess: Asset impairment charges (137,219)\nLess: Changes in fair value of non-hedge derivative instruments -\nLess: Losses on the modification or extinguishment of debt and capital lease\nobligations (19,859)\nLess: Acquisition and transaction expenses (13,207)\nLess: Equity-based compensation expense -\nLess: Provision for income taxes (5,300)\nNet loss attributable to shareholders from continuing operations $ (137,775)\n\n\n\n\nSummary information with respect to our geographic sources of revenue, based on location of customer, is as follows:\n\n Year Ended December 31, 2022\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nRevenues\nAfrica $ 250 $ 1,615 $ - $ 1,865\nAsia 84,953 12,731 26,948 124,632\nEurope 130,128 37,495 - 167,623\nNorth America 245,549 126,597 - 372,146\nSouth America 42,068 77 - 42,145\nTotal revenues $ 502,948 $ 178,515 $ 26,948 $ 708,411\n\n\n\n\n 84\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 87 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nIII. For the Year Ended December 31, 2021\n Year Ended December 31, 2021\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nRevenues\nLease income $ 163,733 $ - $ 10,131 $ 173,864\nMaintenance revenue 128,819 - - $ 128,819\nAsset sales revenue - - - $ -\nAerospace products revenue - 23,301 - $ 23,301\nOther revenue 5,569 - 4,030 $ 9,599\nTotal revenues 298,121 23,301 14,161 335,583\n\n\nExpenses\nCost of sales - 14,308 - 14,308\nOperating expenses 32,757 5,429 21,429 59,615\nGeneral and administrative - - 13,448 13,448\nAcquisition and transaction expenses 982 - 16,929 17,911\nManagement fees and incentive allocation to affiliate - - 684 684\nDepreciation and amortization 139,678 66 7,996 147,740\nAsset impairment 10,463 - - 10,463\nInterest expense - - 155,017 155,017\nTotal expenses 183,880 19,803 215,503 419,186\n\n\nOther income (expense)\nEquity in losses of unconsolidated entities - (1,403) - (1,403)\nGain on sale of assets, net 28,631 20,384 - 49,015\nLoss on extinguishment of debt - - (3,254) (3,254)\nOther (expense) income (527) - 37 (490)\nTotal other income (expense) 28,104 18,981 (3,217) 43,868\nIncome (loss) from continuing operations before income taxes 142,345 22,479 (204,559) (39,735)\nProvision for (benefit from) income taxes 2,073 1,135 (82) 3,126\nNet income (loss) from continuing operations 140,272 21,344 (204,477) (42,861)\nLess: Net loss from continuing operations attributable to non-controlling interests\nin consolidated subsidiaries - - - -\nLess: Dividends on preferred shares - - 24,758 24,758\nNet income (loss) attributable to shareholders from continuing\noperations $ 140,272 $ 21,344 $ (229,235) $ (67,619)\n\n\n\n\n 85\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 88 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders from continuing operations:\n\n Year Ended December 31, 2021\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nAdjusted EBITDA $ 321,446 $ 22,745 $ (21,363) $ 322,828\nAdd: Non-controlling share of Adjusted EBITDA -\nAdd: Equity in losses of unconsolidated entities (1,403)\nLess: Pro-rata share of Adjusted EBITDA from unconsolidated entities 1,203\nLess: Interest expense and dividends on preferred shares (179,775)\nLess: Depreciation and amortization expense (175,718)\nLess: Incentive allocations -\nLess: Asset impairment charges (10,463)\nLess: Changes in fair value of non-hedge derivative instruments -\nLess: Losses on the modification or extinguishment of debt and capital lease\nobligations (3,254)\nLess: Acquisition and transaction expenses (17,911)\nLess: Equity-based compensation expense -\nLess: Provision for income taxes (3,126)\nNet loss attributable to shareholders from continuing operations $ (67,619)\n\n\n\n\nSummary information with respect to our geographic sources of revenue, based on location of customer, is as follows:\n\n Year Ended December 31, 2021\n Aviation Leasing Aerospace Corporate and Total\n Products Other\nRevenues\nAfrica $ 235 $ - $ - $ 235\nAsia 114,313 - 14,161 128,474\nEurope 131,205 2,333 - 133,538\nNorth America 41,228 20,968 - 62,196\nSouth America 11,140 - - 11,140\nTotal revenues $ 298,121 $ 23,301 $ 14,161 $ 335,583\n\n\n\n\nIV. Location of long-lived assets\nThe following tables sets forth summarized geographic location of property, plant and equipment and leasing equipment, net:\n December 31, 2023 December 31, 2022\n Total\nProperty, plant and equipment and leasing equipment, net\nAfrica $ 18,380 $ 7,952\nAsia 478,120 383,378\nEurope 934,817 821,840\nNorth America 416,811 424,617\nSouth America 229,460 285,780\nTotal property, plant and equipment and leasing equipment, net $ 2,077,588 $ 1,923,567\n\n\n\n\n 86\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 89 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n14.\n EARNINGS PER SHARE AND EQUITY\n\nBasic earnings per ordinary share (\u201cEPS\u201d) is calculated by dividing net income (loss) attributable to shareholders by the weighted average\nnumber of ordinary shares outstanding, plus any participating securities. Diluted EPS is calculated by dividing net income attributable to\nshareholders by the weighted average number of ordinary shares outstanding, plus any participating securities and potentially dilutive\nsecurities. Potentially dilutive securities are calculated using the treasury stock method.\nThe calculation of basic and diluted EPS is presented below.\n Year Ended December 31,\n(in thousands, except share and per share data) 2023 2022 2021\n Net income (loss) from continuing operations $ 243,817 $ (110,611) $ (42,861)\n Net loss from discontinued operations, net of income taxes - (101,416) (87,845)\nNet income (loss) 243,817 (212,027) (130,706)\nLess: Net loss attributable to non-controlling interests in consolidated subsidiaries:\n Continuing operations - - -\n Discontinued operations - (18,817) (26,472)\nLess: Dividends on preferred shares 31,795 27,164 24,758\nNet income (loss) attributable to shareholders $ 212,022 $ (220,374) $ (128,992)\nWeighted Average Ordinary Shares Outstanding - Basic (1) 99,908,214 99,421,008 89,922,088\nWeighted Average Ordinary Shares Outstanding - Diluted (1) 100,425,777 99,421,008 89,922,088\n\n\nEarnings (loss) per share:\nBasic\n Continuing operations $ 2.12 $ (1.39) $ (0.75)\n Discontinued operations $ - $ (0.83) $ (0.68)\n\n\nDiluted\n Continuing operations $ 2.11 $ (1.39) $ (0.75)\n Discontinued operations $ - $ (0.83) $ (0.68)\n\n________________________________________________________\n(1)\n Year ended December 31, 2021 includes participating securities which can be converted into a fixed amount of our shares.\nThe calculation of Diluted EPS excludes\n0, 582,200 and 898,299 shares for the years ended December 31, 2023, 2022 and 2021, respectively, because the impact would be anti-\ndilutive.\nDuring the year ended December 31, 2023, 26,287 ordinary shares were issued to certain directors as compensation.\nOrdinary Shares\nIn September 2021, 12,000,000 ordinary shares, par value $0.01 per share, were issued at a price of $25.50 per share for net proceeds of\n$291.7 million after deducting underwriting discounts and offering expenses.\nIn October 2021, the underwriters exercised an option to purchase an additional 1,283,863 ordinary shares, par value $0.01 per share, at a price\nof $25.50 per share.\nSee Note 10 for information related to options issued to the Manager in connection with such offering.\nPreferred Shares\nIn March 2023, in a public offering, we issued 2,600,000 shares of 9.50% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable\nPreferred Shares (\u201cSeries D Preferred Shares\u201d), par value $0.01 per share, with a liquidation preference of $25.00 per share for net proceeds\nbefore expenses of approximately $63.0 million.\nIn March 2021, in a public offering, 4,200,000 shares of 8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares\n(\u201cSeries C Preferred Shares\u201d), par value $0.01 per share, were issued with a liquidation preference of $25.00 per share for net proceeds of\napproximately $101.2 million.\nSee Note 10 for information related to options issued to the Manager in connection with these offerings.\n\n\n\n 87\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 90 of 96\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n15.\n COMMITMENTS AND CONTINGENCIES\nIn the normal course of business, the Company and its subsidiaries may be involved in various claims, legal proceedings, or may enter into\ncontracts that contain a variety of representations and warranties and which provide general indemnifications. Within our offshore energy\nbusiness, a lessee did not fulfill its obligation under its charter arrangement, therefore we are pursuing rights afforded to us under the charter\nand the range of potential losses against the obligation is $0.0 million to $3.3 million. Our maximum exposure under other arrangements is\nunknown as no additional claims have been made. We believe the risk of loss in connection with such arrangements is remote.\nThe Company has contingent obligations under ASC 460, Guarantees, in connection with certain sales of aircraft on lease. Under the\nagreements, we provide certain guarantees at the end of the lease term for the condition of the aircraft engines that were sold to the buyer. The\nguarantees are valued at $\n6.8 million and $3.8 million as of December 31, 2023 and 2022, respectively, and are reflected as a component of Other liabilities on the\nConsolidated Balance Sheets.\nGiven variability in the condition of the engines at the end of the lease terms, which range from 4 to 9 years, the maximum potential amount of\nundiscounted future payments that could be required under the guarantees at December 31, 2023 was $34.7 million, which is not reasonably\nexpected.\n16.\n SUBSEQUENT EVENTS\nDividends\nOn February 22, 2024, our Board of Directors declared a cash dividend on our ordinary shares and eligible participating securities of $0.30 per\nshare for the quarter ended December 31, 2023, payable on March 20, 2024 to the holders of record on March 8, 2024.\nAdditionally, on February 22, 2024, our Board of Directors declared cash dividends on the Series A Preferred Shares, Series B Preferred Shares,\nSeries C Preferred Shares and Series D Preferred Shares of $0.52, $0.50, $0.52 and $0.59 per share, respectively, for the quarter ended\nDecember 31, 2023, payable on March 15, 2024 to the holders of record on March 5, 2024.\n\n\n\n 88\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 91 of 96\n\n\n\n\nItem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure\nNone.\nItem 9A. Controls and Procedures\nDisclosure Controls and Procedures\nAs of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the\nCompany\u2019s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and\nprocedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the \u201cExchange Act\u201d)). Based upon that evaluation, the\nCompany\u2019s Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as\nof and for the period covered by this report.\nManagement's Annual Report on Internal Control over Financial Reporting\nOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over\nfinancial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial\nstatements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting\nincludes those policies and procedures that: pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our\ntransactions and our dispositions of assets\u037e provide reasonable assurance that transactions are recorded as necessary to permit preparation\nof financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made\nonly in accordance with authorizations of our management and directors\u037e and provide reasonable assurance regarding prevention or timely\ndetection of unauthorized acquisition and use or disposition of our assets that could have a material effect on the financial statements.\nBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any\nevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or\nthat the degree of compliance with the policies or procedures may deteriorate.\nOn December 1, 2023, we completed the acquisition of QuickTurn. Our management is in the process of reviewing the operations of QuickTurn\nand integrating its controls into our internal control structure. In accordance with SEC guidance permitting a company to exclude an acquired\nbusiness from management\u2019s assessment of the effectiveness of internal control over financial reporting for the year in which the acquisition is\ncompleted, we have excluded QuickTurn from our assessment of the effectiveness of internal control over financial reporting as of December 31,\n2023. QuickTurn represented 1.9% of our total assets and less than 0.2% of our total revenues as of and for the year ended December 31, 2023.\nSee Note 4 to the consolidated financial statements for additional information about the acquisition of QuickTurn.\nManagement assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment,\nmanagement used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control -\nIntegrated Framework (2013). Based on management\u2019s assessment using this framework, management concluded that, as of December 31,\n2023, our internal control over financial reporting was effective.\nThe effectiveness of the Company\u2019s internal control over financial reporting as of December 31, 2023 has been audited by Ernst & Young LLP,\nan independent registered public accounting firm, as stated in their report included herein.\nChanges in Internal Control over Financial Reporting\nThere was no change in the Company\u2019s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during its\nmost recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.\n\n\n\n 89\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 92 of 96\n\n\n\n\n Report of Independent Registered Public Accounting Firm\nTo the Shareholders and the Board of Directors of FTAI Aviation Ltd.\nOpinion on Internal Control Over Financial Reporting\nWe have audited FTAI Aviation Ltd.\u2019s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal\nControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the\nCOSO crite\nria). In our opinion, FTAI Aviation Ltd. (the Company) maintained, in all material respects, effective internal control over financial reporting as of\nDecember 31, 2023, based on the COSO criteria.\nAs indicated in the accompanying Management\u2019s Annual Report on Internal Control over Financial Reporting, management\u2019s assessment of\nand conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Quick Turn Engine Center\nLLC, which is included in the 2023 consolidated financial statements of the Company and constituted 1.9% of total assets as of December 31,\n2023 and 0.2% of total revenues for the year then ended. Our audit of internal control over financial reporting of the Company also did not include\nan evaluation of the internal control over financial reporting of Quick Turn Engine Center LLC.\nWe also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the\nconsolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations,\ncomprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2023, and the\nrelated notes and our report dated February 26, 202\n4\nexpressed an unqualified opinion thereon.\nBasis for Opinion\nThe Company\u2019s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the\neffectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over\nFinancial Reporting. Our responsibility is to express an opinion on the Company\u2019s internal control over financial reporting based on our audit.\nWe are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with\nthe U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\nWe conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain\nreasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.\nOur audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,\ntesting and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other\nprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.\nDefinition and Limitations of Internal Control Over Financial Reporting\nA company\u2019s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial\nreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A\ncompany\u2019s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in\nreasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company\u037e (2) provide reasonable assurance\nthat transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting\nprinciples, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and\ndirectors of the company\u037e and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or\ndisposition of the company\u2019s assets that could have a material effect on the financial statements.\nBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any\nevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or\nthat the degree of compliance with the policies or procedures may deteriorate.\n\n\n\n/s/ Ernst & Young LLP\n\nNew York, New York\n\nFebruary 26, 2024\n\n\n\n\n 90\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 93 of 96\n\n\n\n\nItem 9B. Other Information\nNone.\nItem 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections\nNot applicable.\n\n\n PART III-OTHER INFORMATION\nItem 10. Directors, Executive Officers and Corporate Governance\nAny information required by this Item 10 is incorporated by reference to our definitive proxy statement for the 2024 annual meeting of\nshareholders to be filed with the SEC pursuant to Regulation 14A within 120 days after the fiscal year ended December 31, 2023 (our \u201cDefinitive\nProxy Statement\u201d) under the headings \u201cProposal No. 1 Election of Directors\u201d, \u201cExecutive Officers\u201d and if applicable, \u201cDelinquent Section 16(a)\nReports.\u201d\nItem 11. Executive Compensation\nThe information required by this Item 11 is incorporated by reference to our Definitive Proxy Statement under the headings \u201cExecutive and\nManager Compensation\u201d and \u201cCompensation Committee Report.\u201d\nItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters\nThe following table summarizes the total number of outstanding securities in the Incentive Plan and the number of securities remaining for\nfuture issuance, as well as the weighted average strike price of all outstanding securities as of December 31, 2023.\n\n Equity Compensation Plan Information\n Number of securities to be\n issued upon exercise of Weighted-average exercise price Number of securities remaining\n outstanding options, warrants, of outstanding options, available for future issuance under\nPlan category and rights warrants, and rights equity compensation plans (1)\nEquity compensation plans approved\nby security holders 616,177 $ 23.78 29,801,656\nEquity compensation plans not\napproved by security holders - - -\nTotal 616,177 29,801,656\n______________________________________________________________________________________\n\n(1)\n Excludes 15,000 stock options and 183,344 ordinary shares issued to directors as compensation.\n\nThe additional information required by this Item 12 is incorporated by reference to our Definitive Proxy Statement under the heading \u201cSecurity\nOwnership of Management and Certain Beneficial Owners.\u201d See also \u201cNonqualified Stock Option and Incentive Award Plan\u201d in Part II, Item 5,\n\u201cMarket for Registrant\u2019s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities\u201d which is incorporated herein\nby reference.\nItem 13. Certain Relationships and Related Transactions, and Director Independence\nThe information required by this Item 13 is incorporated by reference to our Definitive Proxy Statement under the headings \u201cProposal No. 1\nElection of Directors-Determination of Director Independence\u201d and \u201cCertain Relationships and Related Transactions.\u201d\nItem 14. Principal Accountant Fees and Services\nThe information required by this Item 14 is incorporated by reference to our Definitive Proxy Statement under the heading \u201cProposal No. 2\nApproval of Appointment of Ernst & Young LLP as Independent Registered Public Accounting Firm-Principal Accountant Fees and Services.\u201d\n\n\n\n PART IV\nItem 15. Exhibits\n Exhibit No. Description\n 2.1 Agreement and Plan of Merger, dated as of August 12, 2022, by and among, FTAI, the Company and FTAI Aviation Merger Sub LLC\n (incorporated by reference to Annex A to FTAI\u2019s Registration Statement on Form S-4, filed on October 11, 2022).\n 2.2 Separation and Distribution Agreement, dated as of August 1, 2022, between FTAI Infrastructure Inc. and the Company (incorporated by\n reference to Exhibit 2.1 of the Company\u2019s Current Report on Form 8-K, filed on August 1, 2022).\n 3.1 Amended and Restated Memorandum and Articles of Association of the Company (incorporated by reference to Exhibit 3.1 of the\n Company\u2019s Current Report on Form 8-K, filed on November 14, 2022).\n 3.2 Share Designation with respect to the 8.25% Fixed-to-Floating Series A Cumulative Perpetual Redeemable Preferred Shares (included as\n part of Exhibit 3.1 hereto).\n\n\n\n\n 91\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 94 of 96\n\n\n\n\n Exhibit No. Description\n 3.3 Share Designation with respect to the 8.00% Fixed-to-Floating Series B Cumulative Perpetual Redeemable Preferred Shares (included as\n part of Exhibit 3.1 hereto).\n 3.4 Share Designation with respect to the 8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares (included as\n part of Exhibit 3.1 hereto).\n 3.5 Share Designation with respect to the 9.500% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares of FTAI\n Aviation Ltd. (incorporated by reference to Exhibit 4.1 of the Company\u2019s Registration Statement on Form 8-A, filed on March 15, 2023).\n 3.6 Form of Certificate representing the 8.25% Fixed-to-Floating Rate Series A Cumulative Perpetual Redeemable Preferred Shares of FTAI\n Aviation Ltd. (included as part of Exhibit 3.1 hereto).\n 3.7 Form of Certificate representing the 8.00% Fixed-to-Floating Rate Series B Cumulative Perpetual Redeemable Preferred Shares of FTAI\n Aviation Ltd. (included as part of Exhibit 3.1 hereto).\n 3.8 Form of Certificate representing the 8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation\n Ltd. (included as part of Exhibit 3.1 hereto).\n 3.9 Form of certificate representing the 9.500% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation\n Ltd. (incorporated by reference to Exhibit 4.2 of the Company\u2019s Registration Statement on Form 8-A, filed on March 15, 2023).\n 4.1 Indenture, dated September 18, 2018, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s\n 6.50% senior unsecured notes due 2025 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n September 18, 2018).\n 4.2 Form of global note representing the Company\u2019s 6.50% senior unsecured notes due 2025 (included in Exhibit 4.1).\n 4.3 First Supplemental Indenture, dated May 21, 2019, between the Company and U.S. Bank National Association, as trustee, relating to the\n Company\u2019s 6.50% senior unsecured notes due 2025 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on Form 8-\n K, filed on May 21, 2019).\n 4.4 Second Supplemental Indenture, dated December 23, 2020, between the Company and U.S. Bank National Association, as trustee, relating\n to the Company\u2019s 6.50% senior unsecured notes due 2025 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on\n Form 8-K, filed on December 23, 2020).\n 4.5 2025 Notes Guarantee, dated November 10, 2022 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K,\n filed on November 14, 2022).\n 4.6 Indenture, dated July 28, 2020, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s 9.75%\n senior unsecured notes due 2027 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Form 8-K, filed on July 28, 2020).\n 4.7 Form of global note representing the Company\u2019s 9.75% senior unsecured notes due 2027 (included in Exhibit 4.10).\n 4.8 2027 Notes Guarantee, dated November 10, 2022 (incorporated by reference to Exhibit 4.2 of the Company\u2019s Current Report on Form 8-K,\n filed on November 14, 2022).\n 4.9 Indenture, dated April 12, 2021, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s 5.50%\n senior unsecured notes due 2028 (incorporated by reference to Exhibit 4.1 to the Company\u2019s Form 8-K, filed April 12, 2021).\n 4.10 Form of global note representing the Company\u2019s 5.50% senior unsecured notes due 2028 (included in Exhibit 4.6).\n 4.11 First Supplemental Indenture, dated as of September 24, 2021, between the Company and U.S. Bank National Association, as trustee,\n relating to the Company\u2019s 5.50% senior unsecured notes due 2028 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current\n Report on Form 8-K, filed on September 24, 2021).\n 4.12 2028 Notes Guarantee, dated November 10, 2022 (incorporated by reference to Exhibit 4.3 of the Company\u2019s Current Report on Form 8-K,\n filed on November 14, 2022).\n 4.13 Indenture, dated November 21, 2023, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s\n 7.875% senior unsecured notes due 2030 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n November 22, 2023).\n 4.14 Form of global note representing the Company\u2019s 7.875% senior unsecured notes due 2030 (included in Exhibit 4.1).\n 4.15 Description of Securities Registered under Section 12 of the Exchange Act.\n\u2020 10.1 Management and Advisory Agreement, dated as of July 31, 2022, between the Company, FTAI Aviation Ltd., the Subsidiaries that are party\n thereto and FIG LLC (incorporated by reference to Exhibit 10.1 of the Company\u2019s Current Report on Form 8-K, filed on August 1, 2022).\n\u2020 10.2 Services and Profit Sharing Agreement, dated November 10, 2022, by and among FTAI Aviation Holdco Ltd., the Company and Fortress\n Worldwide Transportation and Infrastructure Master GP LLC (incorporated by reference to Exhibit 10.1 of the Company\u2019s Current Report on\n Form 8-K, filed on November 14, 2022).\n\u2020 10.3 Amended and Restated Registration Rights Agreement, dated November 10, 2022, by and among FTAI Aviation Ltd., the Company, Fortress\n Worldwide Transportation and Infrastructure Master GP LLC and FIG LLC (incorporated by reference to Exhibit 10.2 of the Company\u2019s\n Current Report on Form 8-K, filed on November 14, 2022).\n\u2020 10.4 FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan, dated as of February 23, 2023.\n\u2020 10.5 Form of FTAI Aviation Ltd. Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.6 to the Company\u2019s\n Registration Statement on Form S-4, filed on October 4, 2022).\n\u2020 10.6 Form of Director Award Agreement pursuant to the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Plan (incorporated by\n reference to Exhibit 10.7 to the Company\u2019s Registration Statement on Form S-4, filed on October 4, 2022).\n\u2020 10.7 Form of Award Agreement under the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan (incorporated by reference to\n Exhibit 10.8 to the Company\u2019s Registration Statement on Form S-4, filed on October 4, 2022).\n\n\n\n\n 92\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 95 of 96\n\n\n\n\n Exhibit No. Description\n 10.8 Trademark License Agreement, dated as of August 1, 2022, between Fortress Transportation and Infrastructure Investors LLC and FTAI\n Infrastructure Inc. (incorporated by reference to Exhibit 10.3 of the Company\u2019s Current Report on Form 8-K, filed August 1, 2022).\n 10.9 Second Amended and Restated Credit Agreement, dated as of September 20, 2022, between the Company, the lenders and issuing banks\n from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 of the\n Company's Current Report on Form 8-K, filed September 21, 2022).\n 10.10 Amendment No. 1 to the Second Amended and Restated Credit Agreement, dated as of November 22, 2022, between the Company, the\n lenders and issuing banks from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by\n reference to Exhibit 10.10 of the Company\u2019s Annual Report on Form 10-K, filed February 27, 2023).\n 10.11 Amendment No. 2 to the Second Amended and Restated Credit Agreement, dated as of April 10, 2023, between the Company, the lenders\n and issuing banks from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to\n Exhibit 10.11 of the Company\u2019s Quarterly Report on Form 10-Q, filed April 27, 2023).\n 10.12 Revolver Guarantee, dated November 10, 2022 (incorporated by reference to Exhibit 4.4 of the Company\u2019s Current Report on Form 8-K, filed\n on November 14, 2022).\n 21.1 Subsidiaries of FTAI Aviation Ltd.\n 23.1 Consent of Independent Registered Public Accounting Firm.\n 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley\n Act of 2002.\n 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley\n Act of 2002.\n 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act\n of 2002.\n 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act\n of 2002.\n 97.1 FTAI Aviation Ltd. Clawback Policy effective as of December 1, 2023.\n 101 The following financial information from the Company\u2019s Annual Report on Form 10-K for the year ended December 31, 2023, formatted in\n iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets\u037e (ii) Consolidated Statements of Operations\u037e (iii)\n Consolidated Statements of Comprehensive (Loss) Income\u037e (iv) Consolidated Statements of Changes in Equity\u037e (v) Consolidated Statements\n of Cash Flows\u037e and (vi) Notes to Consolidated Financial Statements.\n 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).\n\u2020 Management contracts and compensatory plans or arrangements.\n\n\n\n\nItem 16. Form 10-K Summary\nNone.\n\n\n\n\n 93\n\f Case 1:25-cv-00541-JAV Document 70-8 Filed 11/20/25 Page 96 of 96\n\n\n\n\n SIGNATURES\n\nPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the\nundersigned thereunto duly authorized:\n\nFTAI AVIATION LTD.\nBy: /s/ Joseph P. Adams, Jr. Date: February 26, 2024\n Joseph P. Adams, Jr.\n Chairman and Chief Executive Officer\n\n\n\n\nPursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons\non behalf of the Registrant and in the capacities and on the dates indicated.\nBy: /s/ Joseph P. Adams, Jr. Date: February 26, 2024\n Joseph P. Adams, Jr.\n Chairman and Chief Executive Officer\n\nBy: /s/ Eun (Angela) Nam Date: February 26, 2024\n Eun (Angela) Nam\n Chief Financial Officer and Chief Accounting Officer\n\nBy: /s/ Paul R. Goodwin Date: February 26, 2024\n Paul R. Goodwin\n Director\n\nBy: /s/ Judith A. Hannaway Date: February 26, 2024\n Judith A. Hannaway\n Director\n\nBy: /s/ A. Andrew Levison Date: February 26, 2024\n A. Andrew Levison\n Director\n\nBy: /s/ Kenneth J. Nicholson Date: February 26, 2024\n Kenneth J. Nicholson\n Director\n\nBy: /s/ Ray M. Robinson Date: February 26, 2024\n Ray M. Robinson\n Director\n\nBy: /s/ Martin Tuchman Date: February 26, 2024\n Martin Tuchman\n Director\n\n\n\n\n 94\n\f","ocr_status":1,"date_upload":"2026-05-12T04:15:33.678359-07:00","document_number":"70","attachment_number":8,"pacer_doc_id":"127038602952","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit H - 2023 Form 10-K","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874409/","id":478874409,"tags":[],"absolute_url":"/docket/69558488/70/9/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.505103-07:00","date_modified":"2026-05-14T07:11:51.629930-07:00","sha1":"823a1c9381411ac69042382327dbb7d5f44ec140","page_count":50,"file_size":1017011,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.9.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.9.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 1 of 50\n\n\n\n\n Exhibit I\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 2 of 50\nAssets\n\n\n\n360 Property, Plant, and Equipment\n\n360 Property, Plant, and Equipment\n 10 Overall\n00 Status\n\n\n General Note:The Status Section identifies changes to this Subtopic resulting from Accounting\n Standards Updates. The Section provides references to the affected Codification content and links to\n the related Accounting Standards Updates. Nonsubstantive changes for items such as editorial, link\n and similar corrections are included separately in Maintenance Updates.\n\n\n\n\n Status\n 360-10- The following table identifies the changes made to this Subtopic.\n 00-1\n Paragraph Action Accounting Standards Update Date\n\n Business Amended Accounting Standards Update No. 2017-01 01/05/2017\n Business Added Accounting Standards Update No. 2014-09 05/28/2014\n Collections Added Accounting Standards Update No. 2019-03 03/21/2019\n Contract Added Accounting Standards Update No. 2014-09 05/28/2014\n Customer Added Accounting Standards Update No. 2014-09 05/28/2014\n Disposal Group Amended Accounting Standards Update No. 2014-08 04/10/2014\n Lease Added Accounting Standards Update No. 2016-02 02/25/2016\n Lease Term Added Accounting Standards Update No. 2016-02 02/25/2016\n Lessee Added Accounting Standards Update No. 2016-02 02/25/2016\n Lessor Added Accounting Standards Update No. 2016-02 02/25/2016\n Net Realizable Value Added Accounting Standards Update No. 2015-11 07/22/2015\n Nonprofit Activity Added Accounting Standards Update No. 2014-09 05/28/2014\n Not-for-Profit Entity Added Accounting Standards Update No. 2014-08 04/10/2014\n Performance\n Added Accounting Standards Update No. 2016-02 02/25/2016\n Obligation\n Public Business Entity Amended Maintenance Update 2017-06 04/07/2017\n\n Public Business Entity Amended Maintenance Update 2016-11 06/27/2016\n Public Business Entity Added Accounting Standards Update No. 2014-08 04/10/2014\n Revenue Added Accounting Standards Update No. 2016-02 02/25/2016\n Right-of-Use Asset Added Accounting Standards Update No. 2016-02 02/25/2016\n Underlying Asset Added Accounting Standards Update No. 2016-02 02/25/2016\n\n 360-10-05-1 Amended Accounting Standards Update No. 2016-02 02/25/2016\n 360-10-05-1 Amended Accounting Standards Update No. 2014-09 05/28/2014\n 360-10-05-4 Amended Accounting Standards Update No. 2014-08 04/10/2014\n 360-10-05-5 Amended Accounting Standards Update No. 2014-08 04/10/2014\n 360-10-15-4 Amended Accounting Standards Update No. 2016-02 02/25/2016\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 3 of 50\n 360-10-15-6 Added Accounting Standards Update No. 2019-03 03/21/2019\n 360-10-30-8 Amended Accounting Standards Update No. 2016-02 02/25/2016\n 360-10-35-7 Amended Accounting Standards Update No. 2014-09 05/28/2014\n 360-10-35-39 Amended Accounting Standards Update No. 2012-04 10/01/2012\n 360-10-35-41 Amended Accounting Standards Update No. 2022-02 03/31/2022\n 360-10-40-1 Superseded Accounting Standards Update No. 2014-09 05/28/2014\n 360-10-40-2 Amended Accounting Standards Update No. 2017-05 02/22/2017\n 360-10-40-2 Amended Accounting Standards Update No. 2016-02 02/25/2016\n 360-10-40-2 Amended Accounting Standards Update No. 2014-09 05/28/2014\n 360-10-40-3 Superseded Accounting Standards Update No. 2014-09 05/28/2014\n 360-10-40-3A Amended Accounting Standards Update No. 2017-05 02/22/2017\n 360-10-40-3B Amended Accounting Standards Update No. 2017-05 02/22/2017\n 360-10-40-3A through\n Added Accounting Standards Update No. 2014-09 05/28/2014\n 3C\n 360-10-40-5 Amended Accounting Standards Update No. 2017-05 02/22/2017\n 360-10-45-3 Amended Accounting Standards Update No. 2014-08 04/10/2014\n 360-10-45-5 Amended Accounting Standards Update No. 2014-09 05/28/2014\n 360-10-45-5 Amended Accounting Standards Update No. 2014-08 04/10/2014\n 360-10-45-14 Amended Accounting Standards Update No. 2014-08 04/10/2014\n 360-10-45-15 Amended Accounting Standards Update No. 2014-08 04/10/2014\n 360-10-50-2 Amended Accounting Standards Update No. 2024-03 11/04/2024\n 360-10-50-3 Amended Accounting Standards Update No. 2024-03 11/04/2024\n 360-10-50-3 Amended Accounting Standards Update No. 2014-08 04/10/2014\n 360-10-50-3A Added Accounting Standards Update No. 2014-08 04/10/2014\n 360-10-50-4 Added Accounting Standards Update No. 2014-04 01/17/2014\n 360-10-55-18A Added Accounting Standards Update No. 2014-08 04/10/2014\n 360-10-55-21 Amended Accounting Standards Update No. 2015-11 07/22/2015\n 360-10-55-43 Amended Accounting Standards Update No. 2016-02 02/25/2016\n 360-10-55-50 through\n Added Accounting Standards Update No. 2012-04 10/01/2012\n 55-54\n 360-10-60-1 Amended Accounting Standards Update No. 2014-09 05/28/2014\n\n\n\n\n05 Overview and Background\n\n\n General Note:The Overview and Background Section provides overview and background material for\n the guidance contained in the Subtopic. It does not provide the historical background or due process. It\n may contain certain material that users generally consider useful to understand the typical situations\n addressed by the standards. The Section does not summarize the accounting and reporting\n requirements.\n\n\n\n\n General\n 360-10- The Property, Plant, and Equipment Topic includes the following Subtopic:\n 05-1\n aOverall\n bSubparagraph superseded by Accounting Standards Update No. 2016-02.\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 4 of 50\n 360-10- The guidance in the Overall Subtopic is presented in the following two Subsections:\n 05-2\n aThe General Subsections address the accounting and reporting for property, plant, and equipment,\n including guidance for accumulated depreciation.\n bThe Impairment or Disposal of Long-Lived Assets Subsections retain the pervasive guidance for\n recognizing and measuring the impairment of long-lived assets and for long-lived assets to be disposed\n of.\n\n\n 360-10- Property, plant, and equipment typically consist of long-lived tangible assets used to create and distribute an\n 05-3\n entity's products and services and include:\n aLand and land improvements\n bBuildings\n cMachinery and equipment\n dFurniture and fixtures.\n\n\n Impairment or Disposal of Long-Lived Assets\n 360-10- The Impairment or Disposal of Long-Lived Assets Subsections provide guidance for:\n 05-4\n a Recognition and measurement of the impairment of long-lived assets to be held and used\n b Measurement of long-lived assets to be disposed of by sale\n cDisclosures about the impairment or disposal of long-lived assets and disposals of individually\n significant components of an entity.\n\n\n 360-10- For long-lived assets disposed of or classified as held for sale, different presentation and disclosures are\n 05-5\n required depending on the nature of the disposal. If the long-lived assets are a significant component of an\n entity, more extensive disclosures are required. Additionally, if the component of an entity meets the definition\n of discontinued operation in paragraph 205-20-45-1B, an entity shall refer to Subtopic 205-20 for the\n presentation and disclosure requirements for discontinued operations (see the flowchart in paragraph 360-10-\n 55-18A for an illustration).\n\n 360-10- This Subsection provides guidance that focuses on developing estimates of future cash flows used to test for\n 05-6\n recoverability, including the:\n aCash flow estimation approach\n bCash flow estimation period\n cTypes of asset-related expenditures that should be considered in developing estimates of future cash\n flows.\n\n\n\n\n15 Scope and Scope Exceptions\n\n\n General Note:The Scope and Scope Exceptions Section outlines the items (for example, the entities,\n transactions, instruments, or events) to which the guidance in the Subtopic does or does not apply. In\n some cases, the Section may contain definitional or other text to frame the scope.\n\n\n\n\n General Note for Financial Instruments:Some of the items subject to the guidance in this Subtopic\n are financial instruments. For guidance on matters related broadly to all financial instruments, (including\n the fair value option, accounting for registration payment arrangements, and broad financial instrument\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 5 of 50\n disclosure requirements), see Topic 825. See Section 825-10-15 for guidance on the scope of the\n Financial Instruments Topic.\n\n\n\nGeneral\n> Overall Guidance\n360-10- The General Subsection of this Section establishes the pervasive scope for this Subtopic, with specific\n15-1\n exceptions noted in the other Subsections of this Section.\n\n\n> Entities\n360-10- The guidance in this Subtopic applies to all entities.\n15-2\n\nImpairment or Disposal of Long-Lived Assets\n> Overall Guidance\n360-10- The Impairment or Disposal of Long-Lived Assets Subsections follow the same Scope and Scope Exceptions\n15-3\n as outlined in the General Subsection of this Subtopic, see paragraph 360-10-15-1, with specific transaction\n exceptions noted below.\n\n\n> Transactions\n360-10- The guidance in the Impairment or Disposal of Long-Lived Assets Subsections applies to the following\n15-4\n transactions and activities:\n aExcept as indicated in (b) and the following paragraph, all of the transactions and activities related to\n recognized long-lived assets of an entity to be held and used or to be disposed of, including:\n\n 1Right-of-use assets of lessees\n\n 2Long-lived assets of lessors subject to operating leases\n\n 3Proved oil and gas properties that are being accounted for using the successful-efforts method of\n accounting\n\n 4Long-term prepaid assets.\n bThe following transactions and activities related to assets and liabilities that are considered part of\n an asset group or a disposal group:\n\n 1If a long-lived asset (or assets) is part of a group that includes other assets and liabilities not\n covered by the Impairment or Disposal of Long-Lived Assets Subsections, the guidance in the\n Impairment or Disposal of Long-Lived Assets Subsections applies to the group. In those situations,\n the unit of accounting for the long-lived asset is its group. For a long-lived asset or assets to be held\n and used, that group is referred to as an asset group. For a long-lived asset or assets to be disposed\n of by sale or otherwise, that group is referred to as a disposal group. Examples of liabilities included\n in a disposal group are legal obligations that transfer with a long-lived asset, such as certain\n environmental obligations, and obligations that, for business reasons, a potential buyer would prefer\n to settle when assumed as part of a group, such as warranty obligations that relate to an acquired\n customer base.\n\n 2The guidance in the Impairment or Disposal of Long-Lived Assets Subsections does not change\n generally accepted accounting principles (GAAP) applicable to those other individual assets (such as\n accounts receivable and inventory) and liabilities (such as accounts payable, long-term debt, and\n asset retirement obligations) not covered by the Impairment or Disposal of Long-Lived Assets\n Subsections that are included in such groups.\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 6 of 50\n 360-10- The guidance in the Impairment or Disposal of Long-Lived Assets Subsections does not apply to the following\n 15-5\n transactions and activities:\n aGoodwill\n bIntangible assets not being amortized that are to be held and used\n cServicing assets\n dFinancial instruments, including investments in equity securities accounted for under the cost or equity\n method\n eDeferred policy acquisition costs\n fDeferred tax assets\n gUnproved oil and gas properties that are being accounted for using the successful-efforts method of\n accounting\n hOil and gas properties that are accounted for using the full-cost method of accounting as prescribed by\n the Securities and Exchange Commission (SEC) (see Regulation S-X, Rule 4-10, Financial Accounting\n and Reporting for Oil and Gas Producing Activities Pursuant to the Federal Securities Laws and the\n Energy Policy and Conservation Act of 1975)\n iCertain other long-lived assets for which the accounting is prescribed elsewhere in the standards:\n\n 1For guidance on financial reporting in the record and music industry, see Topic 928.\n\n 2For guidance on financial reporting in the broadcasting industry, see Topic 920.\n\n 3For guidance on accounting for the costs of computer software to be sold, leased, or otherwise\n marketed, see Subtopic 985-20.\n\n 4For guidance on accounting for abandonments and disallowances of plant costs for regulated\n entities, see Subtopic 980-360.\n\n\n > Entities Holding Collection Items\n 360-10- Entities that hold collections shall follow the accounting and disclosure requirements in Subtopic 958-360 on\n 15-6\n not-for-profit entities\u2014property, plant, and equipment.\n\n\n\n\n20 Glossary\n\n\n General Note:The Master Glossary contains all terms identified as glossary terms throughout the\n Codification. Clicking on any term in the Master Glossary will display where the term is used. The\n Master Glossary may contain identical terms with different definitions, some of which may not be\n appropriate for a particular Subtopic. For any particular Subtopic, users should only use the glossary\n terms included in the particular Subtopic Glossary Section (Section 20).\n\n\n\n\n Activities\n\n The term activities is to be construed broadly. It encompasses physical construction of the asset. In addition, it\n includes all the steps required to prepare the asset for its intended use. For example, it includes administrative\n and technical activities during the preconstruction stage, such as the development of plans or the process of\n obtaining permits from governmental authorities. It also includes activities undertaken after construction has\n begun in order to overcome unforeseen obstacles, such as technical problems, labor disputes, or litigation.\n\n Asset Group\n\n An asset group is the unit of accounting for a long-lived asset or assets to be held and used, which represents\n the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 7 of 50\n assets and liabilities.\n\nBusiness\n\n Paragraphs 805-10-55-3A through 55-6 and 805-10-55-8 through 55-9 define what is considered a business.\n\nCollections\n\n Works of art, historical treasures, or similar assets that meet all of the following criteria:\n aThey are held for public exhibition, education, or research in furtherance of public service rather than\n financial gain.\n bThey are protected, kept unencumbered, cared for, and preserved.\n cThey are subject to an organizational policy that requires the use of proceeds from items that are sold to\n be for the acquisitions of new collection items, the direct care of existing collections, or both.\n Collections generally are held by museums; botanical gardens; libraries; aquariums; arboretums; historic sites;\n planetariums; zoos; art galleries; nature, science, and technology centers; and similar educational, research,\n and public service organizations that have those divisions; however, the definition is not limited to those\n entities nor does it apply to all items held by those entities.\n\nComponent of an Entity\n\n A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally\n and for financial reporting purposes, from the rest of the entity. A component of an entity may be a reportable\n segment or an operating segment, a reporting unit, a subsidiary, or an asset group.\n\nContract\n\n An agreement between two or more parties that creates enforceable rights and obligations.\n\nCustomer\n\n A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary\n activities in exchange for consideration.\n\nDisposal Group\n\n A disposal group for a long-lived asset or assets to be disposed of by sale or otherwise represents assets to\n be disposed of together as a group in a single transaction and liabilities directly associated with those assets\n that will be transferred in the transaction. A disposal group may include a discontinued operation along with\n other assets and liabilities that are not part of the discontinued operation.\n\nFirm Purchase Commitment\n\n A firm purchase commitment is an agreement with an unrelated party, binding on both parties and usually\n legally enforceable, that meets both of the following conditions:\n aIt specifies all significant terms, including the price and timing of the transaction.\n bIt includes a disincentive for nonperformance that is sufficiently large to make performance probable.\n\n\nImpairment\n\n Impairment is the condition that exists when the carrying amount of a long-lived asset (asset group) exceeds\n its fair value.\n\nLease\n\n A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or\n equipment (an identified asset) for a period of time in exchange for consideration.\n\nLease Term\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 8 of 50\n The noncancellable period for which a lessee has the right to use an underlying asset, together with all of the\n following:\n aPeriods covered by an option to extend the lease if the lessee is reasonably certain to exercise that\n option\n bPeriods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise\n that option\n cPeriods covered by an option to extend (or not to terminate) the lease in which exercise of the option is\n controlled by the lessor.\n\n\nLessee\n\n An entity that enters into a contract to obtain the right to use an underlying asset for a period of time in\n exchange for consideration.\n\nLessor\n\n An entity that enters into a contract to provide the right to use an underlying asset for a period of time in\n exchange for consideration.\n\nNet Realizable Value\n\n Estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion,\n disposal, and transportation.\n\nNonprofit Activity\n\n An integrated set of activities and assets that is capable of being conducted and managed for the purpose of\n providing benefits, other than goods or services at a profit or profit equivalent, as a fulfillment of an entity's\n purpose or mission (for example, goods or services to beneficiaries, customers, or members). As with a not-\n for-profit entity, a nonprofit activity possesses characteristics that distinguish it from a business or a for-profit\n business entity.\n\nNot-for-Profit Entity\n\n An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business\n entity:\n aContributions of significant amounts of resources from resource providers who do not expect\n commensurate or proportionate pecuniary return\n bOperating purposes other than to provide goods or services at a profit\n cAbsence of ownership interests like those of business entities.\n Entities that clearly fall outside this definition include the following:\n aAll investor-owned entities\n bEntities that provide dividends, lower costs, or other economic benefits directly and proportionately to\n their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural\n electric cooperatives, and employee benefit plans.\n\n\nOperating Segment\n\n A component of a public entity. See Section 280-10-50 for additional guidance on the definition of an operating\n segment.\n\nPerformance Obligation\n\n A promise in a contract with a customer to transfer to the customer either:\n aA good or service (or a bundle of goods or services) that is distinct\n bA series of distinct goods or services that are substantially the same and that have the same pattern of\n transfer to the customer.\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 9 of 50\nProbable\n\n The future event or events are likely to occur.\n\nPublic Business Entity\n\n A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit\n entity nor an employee benefit plan is a business entity.\n aIt is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial\n statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including\n other entities whose financial statements or financial information are required to be or are included in a\n filing).\n bIt is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations\n promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the\n SEC.\n cIt is required to file or furnish financial statements with a foreign or domestic regulatory agency in\n preparation for the sale of or for purposes of issuing securities that are not subject to contractual\n restrictions on transfer.\n dIt has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange\n or an over-the-counter market.\n eIt has one or more securities that are not subject to contractual restrictions on transfer, and it is required\n by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make\n them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet\n both of these conditions to meet this criterion.\n An entity may meet the definition of a public business entity solely because its financial statements or financial\n information is included in another entity's filing with the SEC. In that case, the entity is only a public business\n entity for purposes of financial statements that are filed or furnished with the SEC.\n\nReporting Unit\n\n The level of reporting at which goodwill is tested for impairment. A reporting unit is an operating segment or\n one level below an operating segment (also known as a component).\n\nRevenue\n\n Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both)\n from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing\n major or central operations.\n\nRight-of-Use Asset\n\n An asset that represents a lessee's right to use an underlying asset for the lease term.\n\nSecurity\n\n A share, participation, or other interest in property or in an entity of the issuer or an obligation of the issuer that\n has all of the following characteristics:\n aIt is either represented by an instrument issued in bearer or registered form or, if not represented by an\n instrument, is registered in books maintained to record transfers by or on behalf of the issuer.\n bIt is of a type commonly dealt in on securities exchanges or markets or, when represented by an\n instrument, is commonly recognized in any area in which it is issued or dealt in as a medium for\n investment.\n cIt either is one of a class or series or by its terms is divisible into a class or series of shares,\n participations, interests, or obligations.\n\n\nUnderlying Asset\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 10 of 50\n An asset that is the subject of a lease for which a right to use that asset has been conveyed to a lessee. The\n underlying asset could be a physically distinct portion of a single asset.\n\n\n\n\n25 Recognition\n\n\n General Note:The Recognition Section provides guidance on the required criteria, timing, and location\n (within the financial statements) for recording a particular item in the financial statements. Disclosure is\n not recognition.\n\n\n\n\n General Note for Fair Value Option:Some of the items subject to the guidance in this Subtopic may\n qualify for application of the Fair Value Option Subsections of Subtopic 825-10. Those Subsections\n (see paragraph 825-10-05-5) address circumstances in which entities may choose, at specified election\n dates, to measure eligible items at fair value (the fair value option). See Section 825-10-15 for guidance\n on the scope of the Fair Value Option Subsections of the Financial Instruments Topic.\n\n\n\n\n General\n 360-10- See the Impairment or Disposal of Long-Lived Assets Subsection of Section 360-10-45 for a discussion of\n 25-1\n held-for-use and held-for-sale classifications of assets and asset groups.\n\n\n > Acquisition of the Residual Value in Leased Assets by a Third Party\n 360-10- This Section provides guidance on how a third-party entity shall account for the following:\n 25-2\n aThe acquisition from a lessor of the unconditional right to own and possess, at the end of the lease term,\n an asset subject to a lease\n bThe acquisition of the right to receive all, or a portion, of the proceeds from the sale of a leased asset at\n the end of the lease term.\n\n 360-10- At the date the rights in the preceding paragraph are acquired, both transactions involve a right to receive, at\n 25-3\n the end of the lease term, all, or a portion, of any future benefit to be derived from the leased asset and shall\n be accounted for as the acquisition of an asset. Both transactions are referred to as the acquisition of an\n interest in the residual value of a leased asset.\n\n 360-10- An interest in the residual value of a leased asset shall be recorded as an asset at the date the right is\n 25-4\n acquired.\n\n\n > Planned Major Maintenance Activities\n 360-10- The use of the accrue-in-advance (accrual) method of accounting for planned major maintenance activities is\n 25-5\n prohibited in annual and interim financial reporting periods.\n\n\n > Business Combinations\n 360-10- See Section 805-20-25 for general guidance related to the recognition of the acquisition of property, plant, and\n 25-6\n equipment in a business combination.\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 11 of 50\n30 Initial Measurement\n\n\n General Note:The Initial Measurement Section provides guidance on the criteria and amounts used to\n measure a particular item at the date of initial recognition.\n\n\n\n\n General\n > Historical Cost Including Interest\n 360-10- Paragraph 835-20-05-1 states that the historical cost of acquiring an asset includes the costs necessarily\n 30-1\n incurred to bring it to the condition and location necessary for its intended use. As indicated in that paragraph,\n if an asset requires a period of time in which to carry out the activities necessary to bring it to that condition\n and location, the interest cost incurred during that period as a result of expenditures for the asset is a part of\n the historical cost of acquiring the asset.\n\n 360-10- See the glossary for a definition of activities necessary to bring an asset to the condition and location\n 30-2\n necessary for its intended use.\n\n\n > Acquisition of the Residual Value in Leased Assets\n 360-10- An interest in the residual value of a leased asset recognized under paragraph 360-10-25-4 shall be measured\n 30-3\n initially at the amount of cash disbursed, the fair value of other consideration given, and the present value of\n liabilities assumed.\n\n 360-10- The fair value of the interest in the residual value of the leased asset at the date of the agreement shall be\n 30-4\n used to measure its cost if that fair value is more clearly evident than the fair value of assets surrendered,\n services rendered, or liabilities assumed.\n\n\n > Other Asset Acquisition Concepts\n 360-10- The following paragraphs contain links to other Subtopics that contain guidance on acquiring property, plant,\n 30-5\n and equipment under other concepts. The following may not represent a complete list of other locations\n containing property, plant, and equipment acquisition guidance.\n\n \u00b7 > Business Combinations\n\n 360-10- See Section 805-20-25 for general guidance related to assets acquired in a business combination.\n 30-6\n\n \u00b7 > Accounting for Nonmonetary Transactions\n 360-10- See paragraphs 845-10-30-1 through 30-10 for guidance related to assets acquired in a nonmonetary\n 30-7\n exchange.\n\n \u00b7 > Accounting for Leases\n 360-10- See Subtopic 842-20 for guidance related to assets acquired under a lease.\n 30-8\n\n\n\n\n35 Subsequent Measurement\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 12 of 50\n\n General Note:The Subsequent Measurement Section provides guidance on an entity's subsequent\n measurement and subsequent recognition of an item. Situations that may result in subsequent changes\n to carrying amount include impairment, credit losses, fair value adjustments, depreciation and\n amortization, and so forth.\n\n\n\n\nGeneral\n360-10- This Subsection addresses depreciation of property, plant, and equipment and the post acquisition accounting\n35-1\n for an interest in the residual value of a leased asset.\n\n\n> Depreciation\n360-10- This guidance addresses the concept of depreciation accounting and the various factors to consider in\n35-2\n selecting the related periods and methods to be used in such accounting.\n\n360-10- Depreciation expense in financial statements for an asset shall be determined based on the asset's useful life.\n35-3\n\n360-10- The cost of a productive facility is one of the costs of the services it renders during its useful economic life.\n35-4\n Generally accepted accounting principles (GAAP) require that this cost be spread over the expected useful life\n of the facility in such a way as to allocate it as equitably as possible to the periods during which services are\n obtained from the use of the facility. This procedure is known as depreciation accounting, a system of\n accounting which aims to distribute the cost or other basic value of tangible capital assets, less salvage (if\n any), over the estimated useful life of the unit (which may be a group of assets) in a systematic and rational\n manner. It is a process of allocation, not of valuation.\n\n360-10- See paragraph 360-10-35-20 for a discussion of depreciation of a new cost basis after recognition of\n35-5\n an impairment loss.\n\n360-10- See paragraph 360-10-35-43 for a discussion of cessation of depreciation on long-lived assets classified as\n35-6\n held for sale.\n\n\u00b7 > Declining Balance Method\n360-10- The declining-balance method is an example of one of the methods that meet the requirements of being\n35-7\n systematic and rational. If the expected productivity of the asset or ability of the asset to generate revenue is\n relatively greater during the earlier years of its life, or maintenance charges tend to increase during later years,\n the declining-balance method may provide the most satisfactory allocation of cost. That conclusion also\n applies to other methods, including the sum-of-the-years'-digits method, that produce substantially similar\n results.\n\n\u00b7 > Loss or Damage Experience as a Factor in Estimating Depreciable Lives\n360-10- In practice, experience regarding loss or damage to depreciable assets is in some cases one of the factors\n35-8\n considered in estimating the depreciable lives of a group of depreciable assets, along with such other factors\n as wear and tear, obsolescence, and maintenance and replacement policies.\n\n\u00b7 > Unacceptable Depreciation Methods\n360-10- If the number of years specified by the Accelerated Cost Recovery System of the Internal Revenue Service\n35-9\n (IRS) for recovery deductions for an asset does not fall within a reasonable range of the asset's useful life, the\n recovery deductions shall not be used as depreciation expense for financial reporting.\n\n360-10- Annuity methods of depreciation are not acceptable for entities in general.\n35-10\n\n\u00b7 > Accounting Changes\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 13 of 50\n360-10- See paragraphs 250-10-45-17 through 45-20 for guidance on the accounting and presentation of changes in\n35-11\n methods of depreciation.\n\n360-10- Paragraph not used.\n35-12\n\n> Adjusting the Residual Value in Leased Assets by a Third Party\n360-10- The following paragraph provides guidance on how an entity acquiring an interest in the residual value of a\n35-13\n leased asset shall account for that asset during the lease term.\n\n360-10- An entity acquiring an interest in the residual value of any leased asset, irrespective of the classification of the\n35-14\n related lease by the lessor, shall not recognize increases to the asset's estimated value over the remaining\n term of the related lease, and the asset shall be reported at no more than its acquisition cost until sale or\n disposition. If it is subsequently determined that the fair value of the residual value of a leased asset has\n declined below the carrying amount of the acquired interest and that decline is other than temporary, the asset\n shall be written down to fair value, and the amount of the write-down shall be recognized as a loss. That fair\n value becomes the asset's new carrying amount, and the asset shall not be increased for any subsequent\n increase in its fair value before its sale or disposition.\n\nImpairment or Disposal of Long-Lived Assets\n360-10- There are unique requirements of accounting for the impairment or disposal of long-lived assets to be held and\n35-15\n used or to be disposed of. Although this guidance deals with matters which may lead to the ultimate\n disposition of assets, it is included in this Subsection because it describes the measurement and classification\n of assets to be held and used and assets held for disposal before actual disposition and derecognition. See\n the Impairment or Disposal of Long-Lived Assets Subsection of Section 360-10-40 for a discussion of assets\n or asset groups for which disposition has taken place in an exchange or distribution to owners.\n\n\n> Long-Lived Assets Classified as Held and Used\n360-10- This guidance addresses how long-lived assets or asset groups that are intended to be held and used in an\n35-16\n entity's business shall be reviewed for impairment.\n\n\u00b7 > Measurement of an Impairment Loss\n360-10- An impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not\n35-17\n recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not\n recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual\n disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset\n (asset group) at the date it is tested for recoverability, whether in use (see paragraph 360-10-35-33) or under\n development (see paragraph 360-10-35-34). An impairment loss shall be measured as the amount by which\n the carrying amount of a long-lived asset (asset group) exceeds its fair value.\n\n\u00b7 \u00b7 > Assets Subject to Asset Retirement Obligations\n\n360-10- In applying the provisions of this Subtopic, the carrying amount of the asset being tested for impairment shall\n35-18\n include amounts of capitalized asset retirement costs. Estimated future cash flows related to the liability for an\n asset retirement obligation that has been recognized in the financial statements shall be excluded from both of\n the following:\n a The undiscounted cash flows used to test the asset for recoverability\n bThe discounted cash flows used to measure the asset's fair value.\n\n\n360-10- If the fair value of the asset is based on a quoted market price and that price considers the costs that will be\n35-19\n incurred in retiring that asset, the quoted market price shall be increased by the fair value of the asset\n retirement obligation for purposes of measuring impairment.\n\n\u00b7 > Adjusted Carrying Amount Becomes New Cost Basis\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 14 of 50\n360-10- If an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost\n35-20\n basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the\n remaining useful life of that asset. Restoration of a previously recognized impairment loss is prohibited.\n\n\u00b7 > When to Test a Long-Lived Asset for Recoverability\n360-10- A long-lived asset (asset group) shall be tested for recoverability whenever events or changes in\n35-21\n circumstances indicate that its carrying amount may not be recoverable. The following are examples of such\n events or changes in circumstances:\n aA significant decrease in the market price of a long-lived asset (asset group)\n bA significant adverse change in the extent or manner in which a long-lived asset (asset group) is being\n used or in its physical condition\n cA significant adverse change in legal factors or in the business climate that could affect the value of a\n long-lived asset (asset group), including an adverse action or assessment by a regulator\n dAn accumulation of costs significantly in excess of the amount originally expected for the acquisition or\n construction of a long-lived asset (asset group)\n eA current-period operating or cash flow loss combined with a history of operating or cash flow losses or a\n projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset\n (asset group)\n fA current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise\n disposed of significantly before the end of its previously estimated useful life. The term more likely than\n not refers to a level of likelihood that is more than 50 percent.\n\n\n360-10- When a long-lived asset (asset group) is tested for recoverability, it also may be necessary to review\n35-22\n depreciation estimates and method as required by Topic 250 or the amortization period as required by\n Topic 350. Paragraphs 250-10-45-17 through 45-20 and 250-10-50-4 address the accounting for changes in\n estimates, including changes in the method of depreciation, amortization, and depletion. Paragraphs 350-30-\n 35-1 through 35-5 address the determination of the useful life of an intangible asset. Any revision to the\n remaining useful life of a long-lived asset resulting from that review also shall be considered in developing\n estimates of future cash flows used to test the asset (asset group) for recoverability (see paragraphs 360-10-\n 35-31 through 35-32). However, any change in the accounting method for the asset resulting from that review\n shall be made only after applying this Subtopic.\n\n\u00b7 > Grouping Long-Lived Assets Classified as Held and Used\n360-10- For purposes of recognition and measurement of an impairment loss, a long-lived asset or assets shall be\n35-23\n grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely\n independent of the cash flows of other assets and liabilities. However, an impairment loss, if any, that results\n from applying this Subtopic shall reduce only the carrying amount of a long-lived asset or assets of the group\n in accordance with paragraph 360-10-35-28.\n\n360-10- In limited circumstances, a long-lived asset (for example, a corporate headquarters facility) may not have\n35-24\n identifiable cash flows that are largely independent of the cash flows of other assets and liabilities and of other\n asset groups. In those circumstances, the asset group for that long-lived asset shall include all assets and\n liabilities of the entity.\n\n360-10- In limited circumstances, an asset group will include all assets and liabilities of the entity. For example, the\n35-25\n cost of operating assets such as corporate headquarters or centralized research facilities may be funded by\n revenue-producing activities at lower levels of the entity. Accordingly, in limited circumstances, the lowest level\n of identifiable cash flows that are largely independent of other asset groups may be the entity level. See\n Example 4 (paragraph 360-10-55-35).\n\n\u00b7 \u00b7 > Effect of Goodwill when Grouping\n\n360-10- Goodwill shall be included in an asset group to be tested for impairment under this Subtopic only if the asset\n35-26\n group is or includes a reporting unit. Goodwill shall not be included in a lower-level asset group that includes\n only part of a reporting unit. Estimates of future cash flows used to test that lower-level asset group for\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 15 of 50\n recoverability shall not be adjusted for the effect of excluding goodwill from the group. The term reporting\n unit is defined in Topic 350 as the same level as or one level below an operating segment. That Topic requires\n that goodwill be tested for impairment at the reporting unit level.\n\n360-10- Other than goodwill, the carrying amounts of any assets (such as accounts receivable and inventory) and\n35-27\n liabilities (such as accounts payable, long-term debt, and asset retirement obligations) not covered by this\n Subtopic that are included in an asset group shall be adjusted in accordance with other applicable generally\n accepted accounting principles (GAAP) before testing the asset group for recoverability. Paragraph 350-20-35-\n 31 requires that goodwill be tested for impairment only after the carrying amounts of the other assets of the\n reporting unit, including the long-lived assets covered by this Subtopic, have been tested for impairment under\n other applicable accounting guidance.\n\n\u00b7 > Allocating Impairment Losses to an Asset Group\n360-10- An impairment loss for an asset group shall reduce only the carrying amounts of a long-lived asset or assets of\n35-28\n the group. The loss shall be allocated to the long-lived assets of the group on a pro rata basis using the\n relative carrying amounts of those assets, except that the loss allocated to an individual long-lived asset of the\n group shall not reduce the carrying amount of that asset below its fair value whenever that fair value is\n determinable without undue cost and effort. See Example 1 (paragraph 360-10-55-20) for an illustration of this\n guidance.\n\n\u00b7 > Estimates of Future Cash Flows Used to Test a Long-Lived Asset for Recoverability\n360-10- Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall include\n35-29\n only the future cash flows (cash inflows less associated cash outflows) that are directly associated with and\n that are expected to arise as a direct result of the use and eventual disposition of the asset (asset group).\n Those estimates shall exclude interest charges that will be recognized as an expense when incurred.\n\n360-10- Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall\n35-30\n incorporate the entity's own assumptions about its use of the asset (asset group) and shall consider all\n available evidence. The assumptions used in developing those estimates shall be reasonable in relation to the\n assumptions used in developing other information used by the entity for comparable periods, such as internal\n budgets and projections, accruals related to incentive compensation plans, or information communicated to\n others. However, if alternative courses of action to recover the carrying amount of a long-lived asset (asset\n group) are under consideration or if a range is estimated for the amount of possible future cash flows\n associated with the likely course of action, the likelihood of those possible outcomes shall be considered. A\n probability-weighted approach may be useful in considering the likelihood of those possible outcomes. See\n Example 2 (paragraph 360-10-55-23) for an illustration of this guidance.\n\n360-10- Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall be made\n35-31\n for the remaining useful life of the asset (asset group) to the entity. The remaining useful life of an asset group\n shall be based on the remaining useful life of the primary asset of the group. For purposes of this Subtopic, the\n primary asset is the principal long-lived tangible asset being depreciated or intangible asset being amortized\n that is the most significant component asset from which the asset group derives its cash-flow-generating\n capacity. The primary asset of an asset group therefore cannot be land or an intangible asset not being\n amortized.\n\n360-10- Factors that an entity generally shall consider in determining whether a long-lived asset is the primary asset of\n35-32\n an asset group include the following:\n aWhether other assets of the group would have been acquired by the entity without the asset\n bThe level of investment that would be required to replace the asset\n cThe remaining useful life of the asset relative to other assets of the group. If the primary asset is not the\n asset of the group with the longest remaining useful life, estimates of future cash flows for the group shall\n assume the sale of the group at the end of the remaining useful life of the primary asset.\n\n360-10- Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) that is in use,\n35-33\n including a long-lived asset (asset group) for which development is substantially complete, shall be based on\n the existing service potential of the asset (asset group) at the date it is tested. The service potential of a long-\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 16 of 50\n lived asset (asset group) encompasses its remaining useful life, cash-flow-generating capacity, and for\n tangible assets, physical output capacity. Those estimates shall include cash flows associated with future\n expenditures necessary to maintain the existing service potential of a long-lived asset (asset group), including\n those that replace the service potential of component parts of a long-lived asset (for example, the roof of a\n building) and component assets other than the primary asset of an asset group. Those estimates shall exclude\n cash flows associated with future capital expenditures that would increase the service potential of a long-lived\n asset (asset group).\n\n360-10- Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) that is under\n35-34\n development shall be based on the expected service potential of the asset (group) when development is\n substantially complete. Those estimates shall include cash flows associated with all future expenditures\n necessary to develop a long-lived asset (asset group), including interest payments that will be capitalized as\n part of the cost of the asset (asset group). Subtopic 835-20 requires the capitalization period to end when the\n asset is substantially complete and ready for its intended use.\n\n360-10- If a long-lived asset that is under development is part of an asset group that is in use, estimates of future cash\n35-35\n flows used to test the recoverability of that group shall include the cash flows associated with future\n expenditures necessary to maintain the existing service potential of the group (see paragraph 360-10-35-33)\n as well as the cash flows associated with all future expenditures necessary to substantially complete the asset\n that is under development (see the preceding paragraph). See Example 3 (paragraph 360-10-55-33). See also\n paragraphs 360-10-55-7 through 55-18 for considerations of site restoration and environmental exit costs.\n\n\u00b7 > Fair Value\n360-10- For long-lived assets (asset groups) that have uncertainties both in timing and amount, an expected present\n35-36\n value technique will often be the appropriate technique with which to estimate fair value.\n\n\n> Long-Lived Assets Classified as Held for Sale\n360-10- This guidance addresses the accounting for expected disposal losses for long-lived assets and asset groups\n35-37\n that are classified as held for sale but have not yet been sold. See paragraphs 360-10-45-9 through 45-11 for\n the initial criteria to be met for classification as held for sale.\n\n\u00b7 > Measurement of Expected Disposal Loss or Gain\n360-10- Costs to sell are the incremental direct costs to transact a sale, that is, the costs that result directly from and\n35-38\n are essential to a sale transaction and that would not have been incurred by the entity had the decision to sell\n not been made. Those costs include broker commissions, legal and title transfer fees, and closing costs that\n must be incurred before legal title can be transferred. Those costs exclude expected future losses associated\n with the operations of a long-lived asset (disposal group) while it is classified as held for sale. Expected future\n operating losses that marketplace participants would not similarly consider in their estimates of the fair value\n less cost to sell of a long-lived asset (disposal group) classified as held for sale shall not be indirectly\n recognized as part of an expected loss on the sale by reducing the carrying amount of the asset (disposal\n group) to an amount less than its current fair value less cost to sell. If the sale is expected to occur beyond\n one year as permitted in limited situations by paragraph 360-10-45-11, the cost to sell shall be discounted.\n\n360-10- The carrying amounts of any assets that are not covered by this Subtopic, including goodwill, that are included\n35-39\n in a disposal group classified as held for sale shall be adjusted in accordance with other applicable GAAP prior\n to measuring the fair value less cost to sell of the disposal group. Paragraphs 350-20-40-1 through 40-\n 7 provide guidance for allocating goodwill to a lower-level asset group to be disposed of that is part of a\n reporting unit and that constitutes a business. Goodwill is not included in a lower-level asset group to be\n disposed of that is part of a reporting unit if it does not constitute a business.\n\n360-10- A loss shall be recognized for any initial or subsequent write-down to fair value less cost to sell. A gain shall be\n35-40\n recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss\n previously recognized (for a write-down to fair value less cost to sell). The loss or gain shall adjust only the\n carrying amount of a long-lived asset, whether classified as held for sale individually or as part of a disposal\n group.\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 17 of 50\n 360-10- See paragraphs 310-20-35-12D and 310-20-40-12 for guidance related to determination of cost basis for\n 35-41\n foreclosed assets under Subtopic 310-20 and the measurement of cumulative losses previously recognized\n under paragraph 360-10-35-40.\n\n 360-10- See paragraphs 830-30-45-13 through 45-15 for guidance regarding the application of Topic 830 to an\n 35-42\n investment being evaluated for impairment that will be disposed of.\n\n \u00b7 > Accounting While Held for Sale\n 360-10- A long-lived asset (disposal group) classified as held for sale shall be measured at the lower of its carrying\n 35-43\n amount or fair value less cost to sell. If the asset (disposal group) is newly acquired, the carrying amount of\n the asset (disposal group) shall be established based on its fair value less cost to sell at the acquisition date. A\n long-lived asset shall not be depreciated (amortized) while it is classified as held for sale. Interest and other\n expenses attributable to the liabilities of a disposal group classified as held for sale shall continue to be\n accrued.\n\n \u00b7 > Changes to a Plan of Sale\n 360-10- If circumstances arise that previously were considered unlikely and, as a result, an entity decides not to sell a\n 35-44\n long-lived asset (disposal group) previously classified as held for sale, the asset (disposal group) shall be\n reclassified as held and used. A long-lived asset that is reclassified shall be measured individually at the lower\n of the following:\n aIts carrying amount before the asset (disposal group) was classified as held for sale, adjusted for any\n depreciation (amortization) expense that would have been recognized had the asset (disposal group)\n been continuously classified as held and used\n bIts fair value at the date of the subsequent decision not to sell.\n\n\n 360-10- If an entity removes an individual asset or liability from a disposal group previously classified as held for sale,\n 35-45\n the remaining assets and liabilities of the disposal group to be sold shall continue to be measured as a group\n only if the criteria in paragraph 360-10-45-9 are met. Otherwise, the remaining long-lived assets of the group\n shall be measured individually at the lower of their carrying amounts or fair values less cost to sell at that date.\n\n\n > Long-Lived Assets to Be Disposed of Other than by Sale\n 360-10- This guidance addresses the accounting for impairment of long-lived assets and asset groups that are\n 35-46\n intended to be disposed of by abandonment.\n\n \u00b7 > Long-Lived Assets to Be Abandoned\n 360-10- For purposes of this Subtopic, a long-lived asset to be abandoned is disposed of when it ceases to be used. If\n 35-47\n an entity commits to a plan to abandon a long-lived asset before the end of its previously estimated useful life,\n depreciation estimates shall be revised in accordance with paragraphs 250-10-45-17 through 45-20 and 250-\n 10-50-4 to reflect the use of the asset over its shortened useful life (see paragraph 360-10-35-22).\n\n 360-10- Because the continued use of a long-lived asset demonstrates the presence of service potential, only in\n 35-48\n unusual situations would the fair value of a long-lived asset to be abandoned be zero while it is being used.\n When a long-lived asset ceases to be used, the carrying amount of the asset should equal its salvage value, if\n any. The salvage value of the asset shall not be reduced to an amount less than zero.\n\n \u00b7 > Long-Lived Asset Temporarily Idled\n 360-10- A long-lived asset that has been temporarily idled shall not be accounted for as if abandoned.\n 35-49\n\n\n\n\n40 Derecognition\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 18 of 50\n\n General Note:The Derecognition Section provides guidance on determining whether and when an\n entity should remove an item from the financial statements. For example, the entity would derecognize\n an asset because it no longer has rights to the asset or it would derecognize a liability because it no\n longer has any obligation.\n\n\n\n\nGeneral Related Proposed ASUs\n\n\n360-10- Paragraph superseded by Accounting Standards Update No. 2014-09.\n40-1\n\n> Sale of Leased Property\n360-10- Paragraph 840-20-40-5 states that if a sale to a third party of property subject to an operating lease (or of\n40-2\n property that is leased by or intended to be leased by the third-party purchaser to another party) is not to be\n recorded as a sale because the entity has not transferred control over the promised asset to the third party in\n accordance with paragraph 606-10-25-30, the transaction shall be accounted for as a borrowing.\n\n360-10- Paragraph superseded by Accounting Standards Update No. 2014-09.\n40-3\n\n> Transfer or Sale of Property, Plant, and Equipment\n360-10- An entity shall account for the derecognition of a nonfinancial asset, including an in substance nonfinancial\n40-3A\n asset and an asset subject to a lease , within the scope of this Topic in accordance with Subtopic 610-20 on\n gains and losses from the derecognition of nonfinancial assets, unless a scope exception from Subtopic 610-\n 20 applies. For example, the derecognition of a nonfinancial asset in a contract with a customer shall be\n accounted for in accordance with Topic 606 on revenue from contracts with customers.\n\n360-10- An entity shall account for the derecognition of a subsidiary or group of assets that is either\n40-3B\n a business or nonprofit activity in accordance with the derecognition guidance in Subtopic 810-10.\n\n360-10- If an entity transfers a nonfinancial asset in accordance with paragraph 360-10-40-3A, and the contract does\n40-3C\n not meet all of the criteria in paragraph 606-10-25-1, the entity shall not derecognize the nonfinancial asset\n and shall follow the guidance in paragraphs 606-10-25-6 through 25-8 to determine if and when the contract\n subsequently meets all the criteria in paragraph 606-10-25-1. Until all the criteria in paragraph 606-10-25-1 are\n met, the entity shall continue to do all of the following:\n aReport the nonfinancial asset in its financial statements\n bRecognize depreciation expense as a period cost unless the assets have been classified as held for sale\n in accordance with paragraphs 360-10-45-9 through 45-10\n cApply the impairment guidance in Section 360-10-35.\n\nImpairment or Disposal of Long-Lived Assets Related Proposed ASUs\n\n\n> Long-Lived Assets to Be Exchanged or to Be Distributed to Owners in a\nSpinoff\n360-10- For purposes of this Subtopic, a long-lived asset to be disposed of in an exchange measured based on the\n40-4\n recorded amount of the nonmonetary asset relinquished or to be distributed to owners in a spinoff is disposed\n of when it is exchanged or distributed. If the asset (asset group) is tested for recoverability while it is classified\n as held and used, the estimates of future cash flows used in that test shall be based on the use of the asset\n for its remaining useful life, assuming that the disposal transaction will not occur. In such a case, an\n undiscounted cash flows recoverability test shall apply prior to the disposal date. In addition to\n any impairment losses required to be recognized while the asset is classified as held and used, an impairment\n loss, if any, shall be recognized when the asset is disposed of if the carrying amount of the asset (disposal\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 19 of 50\n group) exceeds its fair value. The provisions of this Section apply to nonmonetary exchanges that are not\n recorded at fair value under the provisions of Topic 845.\n\n\n > Recognition of Gain or Loss from Sale\n 360-10- A gain or loss not previously recognized that results from the sale of a long-lived asset (disposal group) shall\n 40-5\n be recognized when the long-lived asset (disposal group) is derecognized in accordance with applicable\n Topics (for example, Topic 610 on other income, Topic 810 on consolidation, or Topic 860 on transfers and\n servicing).\n\n\n > Long-Lived Assets to Be Abandoned\n 360-10- See paragraphs 360-10-35-47 through 35-48 for guidance related to the disposition of an asset upon its\n 40-6\n abandonment.\n\n\n\n\n45 Other Presentation Matters\n\n\n General Note:The Other Presentation Matters Section provides guidance on other presentation\n matters not addressed in the Recognition, Initial Measurement, Subsequent Measurement, and\n Derecognition Sections. Other presentation matters may include items such as current or long-term\n balance sheet classification, cash flow presentation, earnings per share matters, and so forth. The\n FASB Codification also contains Presentation Topics, which provide guidance for general presentation\n and display items. See those Topics for general guidance.\n\n\n\n\n General Related Proposed ASUs\n\n\n > Planned Major Maintenance Activities\n 360-10- An entity shall apply the same method of accounting for planned major maintenance activities in annual and\n 45-1\n interim financial reporting periods.\n\n Impairment or Disposal of Long-Lived Assets Related Proposed ASUs\n\n\n 360-10- This Subsection presents guidance for the presentation of impairment or disposal of long-lived assets or asset\n 45-2\n groups that are classified as:\n aHeld and used\n bHeld for sale\n cTo be disposed of other than by sale.\n\n 360-10- See paragraphs 205-20-45-1A through 45-11 for guidance on the presentation of operations of a discontinued\n 45-3\n operation.\n\n\n > Long-Lived Assets Classified as Held and Used\n \u00b7 > Presentation of Impairment Loss for Long-Lived Assets to Be Held and Used\n 360-10- An impairment loss recognized for a long-lived asset (asset group) to be held and used shall be included in\n 45-4\n income from continuing operations before income taxes in the income statement of a business entity. If a\n subtotal such as income from operations is presented, it shall include the amount of that loss.\n\n \u00b7 > Presentation of Disposal Gains or Losses in Continuing Operations\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 20 of 50\n360-10- A gain or loss recognized (see Subtopic 610-20 on the sale or transfer of a nonfinancial asset) on the sale of a\n45-5\n long-lived asset (disposal group) that is not a discontinued operation shall be included in income from\n continuing operations before income taxes in the income statement of a business entity. If a subtotal such as\n income from operations is presented, it shall include the amounts of those gains or losses.\n\n\u00b7 > Changes to a Plan of Sale\n360-10- If circumstances arise that previously were considered unlikely and, as a result, an entity decides not to sell a\n45-6\n long-lived asset (disposal group) previously classified as held for sale, the asset (disposal group) shall be\n reclassified as held and used.\n\n360-10- Any required adjustment to the carrying amount of a long-lived asset that is reclassified as held and used shall\n45-7\n be included in income from continuing operations in the period of the subsequent decision not to sell. That\n adjustment shall be reported in the same income statement caption used to report a loss, if any, recognized in\n accordance with paragraph 360-10-45-5. If a component of an entity is reclassified as held and used, the\n results of operations of the component previously reported in discontinued operations in accordance with\n paragraph 205-20-45-3 shall be reclassified and included in income from continuing operations for all periods\n presented.\n\n360-10- Any long-lived assets that will not be sold shall be reclassified as held and used in accordance with\n45-8\n paragraph 360-10-35-44.\n\n\n> Long-Lived Assets Classified as Held for Sale\n\u00b7 > Initial Criteria for Classification as Held for Sale\n360-10- A long-lived asset (disposal group) to be sold shall be classified as held for sale in the period in which all of the\n45-9\n following criteria are met:\n aManagement, having the authority to approve the action, commits to a plan to sell the asset (disposal\n group).\n bThe asset (disposal group) is available for immediate sale in its present condition subject only to terms\n that are usual and customary for sales of such assets (disposal groups). (See Examples 5 through 7\n [paragraphs 360-10-55-37 through 55-41], which illustrate when that criterion would be met.)\n cAn active program to locate a buyer and other actions required to complete the plan to sell the asset\n (disposal group) have been initiated.\n dThe sale of the asset (disposal group) is probable, and transfer of the asset (disposal group) is expected\n to qualify for recognition as a completed sale, within one year, except as permitted by paragraph 360-10-\n 45-11. (See Example 8 [paragraph 360-10-55-43], which illustrates when that criterion would be met.) The\n term probable refers to a future sale that is likely to occur.\n eThe asset (disposal group) is being actively marketed for sale at a price that is reasonable in relation to\n its current fair value. The price at which a long-lived asset (disposal group) is being marketed is indicative\n of whether the entity currently has the intent and ability to sell the asset (disposal group). A market price\n that is reasonable in relation to fair value indicates that the asset (disposal group) is available for\n immediate sale, whereas a market price in excess of fair value indicates that the asset (disposal group) is\n not available for immediate sale.\n fActions required to complete the plan indicate that it is unlikely that significant changes to the plan will be\n made or that the plan will be withdrawn.\n\n\n360-10- If at any time the criteria in this Subsection are no longer met (except as permitted by the following paragraph),\n45-10\n a long-lived asset (disposal group) classified as held for sale shall be reclassified as held and used in\n accordance with paragraph 360-10-35-44.\n\n360-10- Events or circumstances beyond an entity's control may extend the period required to complete the sale of a\n45-11\n long-lived asset (disposal group) beyond one year. An exception to the one-year requirement in\n paragraph 360-10-45-9(d) shall apply in the following situations in which such events or circumstances arise:\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 21 of 50\n aIf at the date an entity commits to a plan to sell a long-lived asset (disposal group) the entity reasonably\n expects that others (not a buyer) will impose conditions on the transfer of the asset (group) that will\n extend the period required to complete the sale and both of the following conditions are met:\n\n 1Actions necessary to respond to those conditions cannot be initiated until after a firm purchase\n commitment is obtained.\n\n 2A firm purchase commitment is probable within one year. (See Example 9 [paragraph 360-10-55-\n 44], which illustrates that situation.)\n bIf an entity obtains a firm purchase commitment and, as a result, a buyer or others unexpectedly impose\n conditions on the transfer of a long-lived asset (disposal group) previously classified as held for sale that\n will extend the period required to complete the sale and both of the following conditions are met:\n\n 1Actions necessary to respond to the conditions have been or will be timely initiated.\n\n 2A favorable resolution of the delaying factors is expected. (See Example 10 [paragraph 360-10-55-\n 46], which illustrates that situation.)\n cIf during the initial one-year period, circumstances arise that previously were considered unlikely and, as\n a result, a long-lived asset (disposal group) previously classified as held for sale is not sold by the end of\n that period and all of the following conditions are met:\n\n 1During the initial one-year period the entity initiated actions necessary to respond to the change in\n circumstances.\n\n 2The asset (group) is being actively marketed at a price that is reasonable given the change in\n circumstances.\n\n 3The criteria in paragraph 360-10-45-9 are met. (See Example 11 [paragraph 360-10-55-48], which\n illustrates that situation.)\n\n\u00b7 > Newly Acquired Asset Classified as Held for Sale\n360-10- A long-lived asset (disposal group) that is newly acquired and that will be sold rather than held and used shall\n45-12\n be classified as held for sale at the acquisition date only if the one-year requirement in paragraph 360-10-45-\n 9(d) is met (except as permitted by the preceding paragraph) and any other criteria in paragraph 360-10-45-\n 9 that are not met at that date are probable of being met within a short period following the acquisition (usually\n within three months).\n\n\u00b7 > Change of Classification After Balance Sheet Date but Before Issuance of Financial Statements\n360-10- If the criteria in paragraph 360-10-45-9 are met after the balance sheet date but before the financial\n45-13\n statements are issued or are available to be issued (as discussed in Section 855-10-25), a long-lived asset\n shall continue to be classified as held and used in those financial statements when issued or when available to\n be issued. In addition, information required by paragraph 205-20-50-1(a) shall be disclosed in the notes to\n financial statements. If the asset (asset group) is tested for recoverability (on a held-and-used basis) as of the\n balance sheet date, the estimates of future cash flows used in that test shall consider the likelihood of possible\n outcomes that existed at the balance sheet date, including the assessment of the likelihood of the future sale\n of the asset. That assessment made as of the balance sheet date shall not be revised for a decision to sell the\n asset after the balance sheet date. Because it is difficult to separate the benefit of hindsight when assessing\n conditions that existed at a prior date, it is important that judgments about those conditions, the need to test an\n asset for recoverability, and the application of a recoverability test be made and documented together with\n supporting evidence on a timely basis. An impairment loss, if any, to be recognized shall be measured as the\n amount by which the carrying amount of the asset (asset group) exceeds its fair value at the balance sheet\n date.\n\n\u00b7 > Presentation of Long-Lived Assets or Disposal Group Classified as Held for Sale\n360-10- A long-lived asset classified as held for sale (but not qualifying for presentation as a discontinued operation in\n45-14\n the statement of financial position in accordance with paragraph 205-20-45-10) shall be presented separately\n in the statement of financial position of the current period. The assets and liabilities of a disposal group\n classified as held for sale shall be presented separately in the asset and liability sections, respectively, of the\n statement of financial position. Those assets and liabilities shall not be offset and presented as a single\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 22 of 50\n amount. The major classes of assets and liabilities classified as held for sale shall be separately presented on\n the face of the statement of financial position or disclosed in the notes to financial statements (see\n paragraph 360-10-50-3(e)).\n\n\n > Long-Lived Assets to Be Disposed of Other Than by Sale\n \u00b7 > Presentation of Long-Lived Assets to Be Disposed of Other Than by Sale\n\n 360-10- A long-lived asset to be disposed of other than by sale (for example, by abandonment, in an exchange\n 45-15\n measured based on the recorded amount of the nonmonetary asset relinquished, or in a distribution to owners\n in a spinoff) shall continue to be classified as held and used until it is disposed of. The guidance on long-lived\n assets to be held and used in Sections 360-10-35, 360-10-45, and 360-10-50 shall apply while the asset is\n classified as held and used. If a long-lived asset is to be abandoned or distributed to owners in a spinoff\n together with other assets (and liabilities) as a group and that disposal group meets the conditions in\n paragraphs 205-20-45-1A through 45-1C to be reported in discontinued operations, paragraphs 205-20-45-3\n through 45-5 shall apply to the disposal group at the date it is disposed of.\n\n\n\n\n50 Disclosure\n\n\n General Note:The Disclosure Section provides guidance regarding the disclosure in the notes to\n financial statements. In some cases, disclosure may relate to disclosure on the face of the financial\n statements.\n\n\n\n\n General Related Proposed ASUs\n\n\n 360-10- Because of the significant effects on financial position and results of operations of the depreciation method or\n 50-1\n methods used, all of the following disclosures shall be made in the financial statements or in notes thereto:\n aDepreciation expense for the period\n bBalances of major classes of depreciable assets, by nature or function, at the balance sheet date\n cAccumulated depreciation, either by major classes of depreciable assets or in total, at the balance sheet\n date\n dA general description of the method or methods used in computing depreciation with respect to major\n classes of depreciable assets.\n\n\n Impairment or Disposal of Long-Lived Assets Related Proposed ASUs\n\n\n > Impairment of Long-Lived Assets Classified as Held and Used\n 360-10- All of the following information shall be disclosed in the notes to financial statements that include the period in\n 50-2\n which an impairment loss is recognized:\n aA description of the impaired long-lived asset (asset group) and the facts and circumstances leading to\n the impairment\n bIf not separately presented on the face of the statement, the amount of the impairment loss and the\n caption in the income statement or the statement of activities that includes that loss\n cThe method or methods for determining fair value (whether based on a quoted market price, prices for\n similar assets, or another valuation technique)\n dIf applicable, the segment in which the impaired long-lived asset (asset group) is reported under\n Topic 280.\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 23 of 50\n PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 220-40-65-1\n All of the following information shall be disclosed in the notes to financial statements that include the\n period in which an impairment loss is recognized:\n aA description of the impaired long-lived asset (asset group) and the facts and circumstances leading\n to the impairment\n bIf not separately presented on the face of the statement, the amount of the impairment loss and the\n caption in the income statement or the statement of activities that includes that loss\n cThe method or methods for determining fair value (whether based on a quoted market price, prices\n for similar assets, or another valuation technique)\n dIf applicable, the segment in which the impaired long-lived asset (asset group) is reported under\n Topic 280.\n See paragraphs 220-40-50-21 through 50-25 for additional disclosure requirements.\n\n\n\n> Long-Lived Assets Classified as Held for Sale or Disposed Of\n360-10- For any period in which a long-lived asset (disposal group) either has been disposed of or is classified as held\n50-3\n for sale (see paragraph 360-10-45-9), an entity shall disclose all of the following in the notes to financial\n statements:\n aA description of the facts and circumstances leading to the disposal or the expected disposal.\n bThe expected manner and timing of that disposal.\n cThe gain or loss recognized in accordance with paragraphs 360-10-35-37 through 35-45 and 360-10-40-\n 5.\n dIf not separately presented on the face of the statement where net income is reported (or in the\n statement of activities for a not-for-profit entity), the caption in the statement where net income is reported\n (or in the statement of activities for a not-for-profit entity) that includes that gain or loss.\n eIf not separately presented on the face of the statement of financial position, the carrying amount(s) of\n the major classes of assets and liabilities included as part of a disposal group classified as held for sale.\n Any loss recognized on the disposal group classified as held for sale in accordance with paragraphs 360-\n 10-35-37 through 35-45 and 360-10-40-5 shall not be allocated to the major classes of assets and\n liabilities of the disposal group.\n fIf applicable, the segment in which the long-lived asset (disposal group) is reported under Topic 280 on\n segment reporting.\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 24 of 50\n PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 220-40-65-1\n For any period in which a long-lived asset (disposal group) either has been disposed of or is classified as\n held for sale (see paragraph 360-10-45-9), an entity shall disclose all of the following in the notes to\n financial statements:\n aA description of the facts and circumstances leading to the disposal or the expected disposal.\n bThe expected manner and timing of that disposal.\n cThe gain or loss recognized in accordance with paragraphs 360-10-35-37 through 35-45 and 360-\n 10-40-5.\n dIf not separately presented on the face of the statement where net income is reported (or in the\n statement of activities for a not-for-profit entity), the caption in the statement where net income is\n reported (or in the statement of activities for a not-for-profit entity) that includes that gain or loss.\n eIf not separately presented on the face of the statement of financial position, the carrying amount(s)\n of the major classes of assets and liabilities included as part of a disposal group classified as held for\n sale. Any loss recognized on the disposal group classified as held for sale in accordance with\n paragraphs 360-10-35-37 through 35-45 and 360-10-40-5 shall not be allocated to the major classes\n of assets and liabilities of the disposal group.\n fIf applicable, the segment in which the long-lived asset (disposal group) is reported under\n Topic 280 on segment reporting.\n See paragraphs 220-40-50-21 through 50-25 for additional disclosure requirements.\n\n\n360-10- In addition to the disclosures in paragraph 360-10-50-3, if a long-lived asset (disposal group) includes an\n50-3A\n individually significant component of an entity that either has been disposed of or is classified as held for sale\n (see paragraph 360-10-45-9) and does not qualify for presentation and disclosure as a discontinued operation\n (see Subtopic 205-20 on discontinued operations), a public business entity and a not-for-profit entity that has\n issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-\n the-counter market shall disclose the information in (a). All other entities shall disclose the information in (b).\n aFor a public business entity and a not-for-profit entity that has issued, or is a conduit bond obligor for,\n securities that are traded, listed, or quoted on an exchange or an over-the-counter market, both of the\n following:\n\n 1The pretax profit or loss (or change in net assets for a not-for-profit entity) of the individually\n significant component of an entity for the period in which it is disposed of or is classified as held for\n sale and for all prior periods that are presented in the statement where net income is reported (or\n statement of activities for a not-for-profit entity) calculated in accordance with paragraphs 205-20-45-\n 6 through 45-9\n\n 2If the individually significant component of an entity includes a noncontrolling interest, the pretax\n profit or loss (or change in net assets for a not-for-profit entity) attributable to the parent for the period\n in which it is disposed of or is classified as held for sale and for all prior periods that are presented in\n the statement where net income is reported (or statement of activities for a not-for-profit entity).\n bFor all other entities, both of the following:\n\n 1The pretax profit or loss (or change in net assets for a not-for-profit entity) of the individually\n significant component of an entity for the period in which it is disposed of or is classified as held for\n sale calculated in accordance with paragraphs 205-20-45-6 through 45-9\n\n 2If the individually significant component of an entity includes a noncontrolling interest, the pretax\n profit or loss (or change in net assets for a not-for-profit entity) attributable to the parent for the period\n in which it is disposed of or is classified as held for sale.\n\n\n> Foreclosed Properties Held for Sale\n360-10- See paragraph 310-10-50-11 for guidance related to foreclosed and repossessed assets.\n50-4\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 25 of 50\n\n\n\n55 Implementation Guidance and Illustrations\n\n\n General Note:The Implementation Guidance and Illustrations Section contains implementation\n guidance and illustrations that are an integral part of the Subtopic. The implementation guidance and\n illustrations do not address all possible variations. Users must consider carefully the actual facts and\n circumstances in relation to the requirements of the Subtopic.\n\n\n\n\n Impairment or Disposal of Long-Lived Assets\n > Implementation Guidance\n \u00b7 > Treatment of Certain Site Restoration and Environmental Exit Costs when Testing a Long-Lived Asset\n for Impairment\n 360-10- The following guidance demonstrates the consideration of restoration and environmental exit costs when\n 55-1\n testing a long-lived asset for impairment. Paragraphs 360-10-35-18 through 35-19 also provide guidance for\n such testing for assets subject to asset retirement obligations.\n\n 360-10- For certain assets covered by this Subtopic, costs for future site restoration or closure (environmental exit\n 55-2\n costs) may be incurred if the asset is sold, is abandoned, or ceases operations. Environmental exit costs\n within the scope of this Subsection include:\n aAsset retirement costs recognized pursuant to Subtopic 410-20\n bAsset retirement costs that have not been recognized because the obligation has not been incurred\n cCertain environmental remediation costs that have not yet been recognized as a liability pursuant to\n Subtopic 410-30.\n\n 360-10- Pursuant to Subtopic 410-20, asset retirement costs may be incurred over more than one reporting period. For\n 55-3\n example, the liability for performing certain capping, closure, and postclosure activities in connection with\n operating a landfill is incurred as the landfill receives waste.\n\n 360-10- The related cash flows, if any, might not occur until the end of the asset's life if the asset ceases operations, or\n 55-4\n they might be deferred indefinitely as long as the asset is not sold or abandoned.\n\n 360-10- The issue is whether the cash flows associated with environmental exit costs that may be incurred if a long-\n 55-5\n lived asset is sold, is abandoned, or ceases operations should be included in the undiscounted expected\n future cash flows used to test a long-lived asset for recoverability under this Subtopic.\n\n 360-10- For environmental exit costs that have not been recognized as a liability for accounting purposes, whether\n 55-6\n those environmental exit costs shall be included in the undiscounted expected future cash flows used to test a\n long-lived asset for recoverability under this Subtopic depends on management's intent with respect to the\n asset. Pursuant to this Subtopic, if management's intent contemplates alternative courses of action to recover\n the carrying amount of the asset or if a range is estimated for the amount of possible future cash flows, the\n likelihood of those possible outcomes shall be considered. Examples of management's intent and the\n corresponding treatment of the environmental exit costs in this Subtopic's recoverability test are described\n below. (Environmental remediation costs discussed in certain of these cases refer to environmental\n remediation costs that have not yet been recognized as a liability pursuant to Subtopic 410-30.) This\n paragraph illustrates the guidance in paragraphs 360-10-35-29 through 35-35 on estimating future cash flows\n used to test a long-lived asset for recoverability.\n\n \u00b7 > Environmental Exit Costs that Shall Be Excluded from this Subtopic's Recoverability Test\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 26 of 50\n360-10- The following guidance demonstrates the consideration of restoration and environmental exit costs when\n55-7\n testing a long-lived asset for impairment. In all of the following situations, environmental exit costs would be\n excluded from this Subtopic's recoverability test.\n\n\u00b7 \u00b7 > Management Intends to Operate Asset, Future Cash Flows Exceed Carrying Amount, and No Expectation of Cash\nOutflow in Disposition\n\n360-10- Management intends to operate the asset for at least the asset's remaining depreciable life, the sum of the\n55-8\n undiscounted future cash flows expected from the asset's use during that period exceeds the asset's carrying\n amount including any associated goodwill, and management has no reason to believe that the asset's\n eventual disposition will result in a net cash outflow.\n\n\u00b7 \u00b7 > Management Expects to Operate Asset, Asset Generating Positive Cash Flows, Profitability Expected to Continue,\nand No Constraints on Economic Life\n\n360-10- Management expects to operate the asset indefinitely and has the ability to do so, the asset is generating\n55-9\n positive cash flows, management's best information indicates that the asset will continue to be profitable in the\n future, and there are no known constraints to the asset's economic life. This Subtopic's recoverability test shall\n include the future cash outflows for repairs, maintenance, and capital expenditures necessary to obtain the\n future cash inflows expected to be generated by the asset based on its existing service potential.\n\n\u00b7 \u00b7 > Asset Has Finite Life but Remediation Costs Only Incurred if Asset Sold or Abandoned\n\n360-10- The asset has a finite economic life, but environmental remediation costs will only be incurred if the asset is\n55-10\n sold or abandoned. At the end of the asset's life, management intends either to close the asset permanently\n because the costs of remediating the asset exceed the proceeds that likely would be received if the asset\n were sold or, alternatively, to idle the asset by reducing production to a minimal or nominal amount. (Although\n the environmental remediation costs are excluded from this Subtopic's recoverability test, the recoverability\n test shall incorporate the entity's own assumptions about its use of the asset. That is, the recoverability test\n shall consider the likelihood of the alternative courses of action [either closing or idling the asset] and the\n resulting cash flows associated with those alternative courses.)\n\n\u00b7 \u00b7 > Management Expects to Sell Asset and Remediation Costs Not Required\n\n360-10- Management expects to sell the asset in the future, and the asset's sale will not require the environmental\n55-11\n remediation costs to be incurred. (Although the environmental remediation costs are excluded from this\n Subtopic's recoverability test, the fair value of the asset is likely to be affected by the existence of those costs.\n The diminished fair value shall be considered in estimating the cash flows expected to arise from the eventual\n sale of the asset.)\n\n\u00b7 > Environmental Exit Costs that Shall Be Included in this Subtopic's Recoverability Test\n\n360-10- The following guidance demonstrates the consideration of restoration and environmental exit costs when\n55-12\n testing a long-lived asset for impairment. In all of the following situations, environmental exit costs would be\n included in this Subtopic's recoverability test.\n\n\u00b7 \u00b7 > Management Expects Remediation Costs to Be Incurred but Uncertainties Exist in Application of Laws\n\n360-10- Management expects to take a future action related to the asset that may cause the environmental\n55-13\n remediation costs to be incurred. However, uncertainties or inconsistencies exist in how the related laws or\n regulatory requirements are applied. Management estimates, based on the weight of the available evidence, a\n 60 percent chance that the remediation costs will not be incurred and a 40 percent chance that those costs will\n be incurred. Pursuant to this Subtopic, other situations may exist in which cash flows are estimated using a\n single set or best estimate of cash flows.\n\n\u00b7 \u00b7 > Useful Life Limited and then Asset Disposition Required\n\n360-10- The useful life of the asset is limited as a result of any of the following:\n55-14\n aActual or expected technological advances\n bContractual provisions\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 27 of 50\n cRegulatory restrictions.\n Also, when the asset's service potential has ended, management will be required to dispose of the asset\n under paragraph 360-10-55-16 or 360-10-55-17.\n\n\u00b7 \u00b7 > Continuing Losses May Require Asset Disposition\n\n360-10- The asset has a current period cash flow loss from operations combined with a projection or forecast that\n55-15\n anticipates continuing losses. Management expects the asset to achieve profitability in the future but\n uncertainty exists about management's ability to fund the future cash outflows up to the time that net cash\n inflows are expected from the asset's use. In the event of a forced liquidation, management would likely\n dispose of the asset under the following paragraph or paragraph 360-10-55-17.\n\n\u00b7 \u00b7 > Intent to Abandon or Close an Asset\n\n360-10- Management intends to abandon or close the asset in the future, and the event of abandonment or closure will\n55-16\n cause the environmental remediation costs to be incurred.\n\n\u00b7 \u00b7 > Future Sale Will Require Remediation Costs to Be Incurred\n\n360-10- Management intends to sell the asset in the future, and the applicable laws, regulations, or interpretations\n55-17\n thereof require that appropriate environmental remediation (not within the scope of Subtopic 410-20) occur in\n connection with the sale.\n\n\u00b7 \u00b7 > Management Expects to Operate Asset and Retirement Costs to Be Incurred over Its Life\n\n360-10- Management expects to operate the asset for the remainder of its useful life. Related asset retirement costs\n55-18\n are incurred over the life of the asset (for example, the operation of a landfill). Estimated cash flows associated\n with the asset retirement costs yet to be incurred and recognized shall be included in this Subtopic's\n recoverability test.\n\n\u00b7 > Disposal Disclosure Requirements\n\n360-10- The following flowchart provides an overview of the disclosures required for disposals of long-lived assets and\n55-18A\n individually significant components of an entity that do not qualify for presentation and disclosure as a\n discontinued operation (see Subtopic 205-20 on discontinued operations).\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 28 of 50\n\n\n\n\n> Illustrations\n360-10- The following Examples illustrate application of some of the provisions of this Subtopic. The Examples do not\n55-19\n address all possible situations or applications of this Subtopic.\n\n\u00b7 > Example 1: Allocation of Impairment Loss\n360-10- This Example illustrates the allocation of an impairment loss to the long-lived assets of an asset group (see\n55-20\n paragraph 360-10-35-28).\n\n360-10- An entity owns a manufacturing facility that together with other assets is tested for recoverability as a group. In\n55-21\n addition to long-lived assets (Assets A-D), the asset group includes inventory measured using first-in, first-out\n (FIFO), which is reported at the lower of cost and net realizable value in accordance with Topic 330, and other\n current assets and liabilities that are not covered by this Subtopic. The $2.75 million aggregate carrying\n amount of the asset group is not recoverable and exceeds its fair value by $600,000. In accordance with\n paragraph 360-10-35-28, the impairment loss of $600,000 would be allocated as shown below to the long-\n lived assets of the group.\n\n\n\n\n360-10- If the fair value of an individual long-lived asset of an asset group is determinable without undue cost and effort\n55-22\n and exceeds the adjusted carrying amount of that asset after an impairment loss is allocated initially, the\n excess impairment loss initially allocated to that asset would be reallocated to the other long-lived assets of\n the group. For example, if the fair value of Asset C is $822,000, the excess impairment loss of $100,000\n initially allocated to that asset (based on its adjusted carrying amount of $722,000) would be reallocated as\n shown below to the other long-lived assets of the group on a pro rata basis using the relative adjusted carrying\n amounts of those assets.\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 29 of 50\n\n\n\u00b7 > Example 2: Probability-Weighted Cash Flows\n360-10- This Example illustrates the use of a probability-weighted approach for developing estimates of future cash\n55-23\n flows used to test a long-lived asset for recoverability when alternative courses of action are under\n consideration (see paragraph 360-10-35-30). This Example has the following Cases:\n aProbability-weighted cash flows (Case A)\n bExpected cash flows technique (Case B).\n\n360-10- Cases A and B share all of the following assumptions.\n55-24\n\n360-10- As of December 31, 20X2, a manufacturing facility with a carrying amount of $48 million is tested for\n55-25\n recoverability. At that date, 2 courses of action to recover the carrying amount of the facility are under\n consideration\u2014sell in 2 years or sell in 10 years (at the end of its remaining useful life).\n\n360-10- The possible cash flows associated with each of those courses of action are $41 million and $48.7 million,\n55-26\n respectively. They are developed based on entity-specific assumptions about future sales (volume and price)\n and costs in varying scenarios that consider the likelihood that existing customer relationships will continue,\n changes in economic (market) conditions, and other relevant factors.\n\n\u00b7 \u00b7 > Case A: Probability-Weighted Cash Flows\n\n360-10- The following table shows the possible cash flows associated with each of the courses of action\u2014sell in 2\n55-27\n years or sell in 10 years.\n\n\n\n\n360-10- As further indicated in the following table, there is a 60 percent probability that the facility will be sold in 2\n55-28\n years and a 40 percent probability that the facility will be sold in 10 years.\n\n360-10- The alternatives of whether to sell or use an asset are not necessarily independent of each other. In many\n55-29\n situations, after estimating the possible future cash flows relating to those potential courses of action, an entity\n might select the course of action that results in a significantly higher estimate of possible future cash flows. In\n that situation, the entity generally would use the estimates of possible future cash flows relating only to that\n course of action in computing future cash flows. As shown, the expected cash flows are $44.1 million\n (undiscounted). Therefore, the carrying amount of the facility of $48 million would not be recoverable.\n\n\n\n\n\u00b7 \u00b7 > Case B: Expected Cash Flows Technique\n\n360-10- This Case illustrates the application of an expected present value technique to estimate the fair value of a\n55-30\n long-lived asset in an impairment situation.\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 30 of 50\n360-10- The following table shows by year the computation of the expected cash flows used in the measurement. They\n55-31\n reflect the possible cash flows (probability-weighted) used to test the manufacturing facility for recoverability in\n Case A, adjusted for relevant marketplace assumptions, which increases the possible cash flows in total by\n approximately 15 percent.\n\n\n\n\n360-10- The following table shows the computation of the expected present value; that is, the sum of the present\n55-32\n values of the expected cash flows by year, each discounted at a risk-free interest rate determined from the\n yield curve for U.S. Treasury instruments. In this Case, a market risk premium is included in the expected cash\n flows; that is, the cash flows are certainty equivalent cash flows. As shown, the expected present value is\n $42.3 million, which is less than the carrying amount of $48 million. In accordance with paragraph 360-10-35-\n 17 the entity would recognize an impairment loss of $5.7 million.\n\n\n\n\n\u00b7 > Example 3: Estimates of Future Cash Flows Used to Test an Asset Group for Recoverability\n\n360-10- A long-lived asset that is under development may be part of an asset group that is in use. In that situation,\n55-33\n estimates of future cash flows used to test the recoverability of that group shall include the cash flows\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 31 of 50\n associated with future expenditures necessary to maintain the existing service potential of the group as well as\n the cash flows associated with future expenditures necessary to substantially complete the asset that is under\n development (see paragraph 360-10-35-35).\n\n360-10- An entity engaged in mining and selling phosphate estimates future cash flows from its commercially minable\n55-34\n phosphate deposits in order to test the recoverability of the asset group that includes the mine and related\n long-lived assets (plant and equipment). Deposits from the mined rock must be processed in order to extract\n the phosphate. As the active mining area expands along the geological structure of the mine, a new\n processing plant is constructed near the production area. Depending on the size of the mine, extracting the\n minable deposits may require building numerous processing plants over the life of the mine. In testing the\n recoverability of the mine and related long-lived assets, the estimates of future cash flows from its\n commercially minable phosphate deposits would include cash flows associated with future expenditures\n necessary to build all of the required processing plants.\n\n\u00b7 > Example 4: Grouping Assets for Impairment Review\n\n360-10- Varying facts and circumstances will inevitably justify different groupings of assets for impairment review.\n55-35\n While grouping at the lowest level for which there are identifiable cash flows for recognition and measurement\n of an impairment loss is understood, determining that lowest level requires considerable judgment.\n\n360-10- This Example illustrates the need for judgment in grouping assets for impairment, as discussed in\n55-36\n paragraphs 360-10-35-23 through 35-25. In this Example, an entity operates a bus entity that provides service\n under contract with a municipality that requires minimum service on each of five separate routes. Assets\n devoted to serving each route and the cash flows from each route are discrete. One of the routes operates at\n a significant deficit that results in the inability to recover the carrying amounts of the dedicated assets. The five\n bus routes would be an appropriate level at which to group assets to test for and measure impairment\n because the entity does not have the option to curtail any one bus route.\n\n\u00b7 > Example 5: Plan to Sell Headquarters Building\n\n360-10- This Example illustrates the classification as held for sale of a long-lived asset (disposal group) in accordance\n55-37\n with paragraph 360-10-45-9(b).\n\n360-10- An entity commits to a plan to sell its headquarters building and has initiated actions to locate a buyer. The\n55-38\n following illustrate situations in which the criterion in paragraph 360-10-45-9(b) would or would not be met:\n aThe entity intends to transfer the building to a buyer after it vacates the building. The time necessary to\n vacate the building is usual and customary for sales of such assets. The criterion in paragraph 360-10-45-\n 9(b) would be met at the plan commitment date.\n bThe entity will continue to use the building until construction of a new headquarters building is\n completed. The entity does not intend to transfer the existing building to a buyer until after construction of\n the new building is completed (and it vacates the existing building). The delay in the timing of the transfer\n of the existing building imposed by the entity (seller) demonstrates that the building is not available for\n immediate sale. The criterion in paragraph 360-10-45-9(b) would not be met until construction of the new\n building is completed, even if a firm purchase commitment for the future transfer of the existing building is\n obtained earlier.\n\n\n\u00b7 > Example 6: Plan to Sell Manufacturing Facility with Backlog of Orders\n360-10- This Example illustrates the classification as held for sale of a long-lived asset (disposal group) in accordance\n55-39\n with paragraph 360-10-45-9(b).\n\n360-10- An entity commits to a plan to sell a manufacturing facility and has initiated actions to locate a buyer. At the\n55-40\n plan commitment date, there is a backlog of uncompleted customer orders. The following illustrate situations in\n which the criterion in paragraph 360-10-45-9(b) would or would not be met:\n aThe entity intends to sell the manufacturing facility with its operations. Any uncompleted customer orders\n at the sale date would transfer to the buyer. The transfer of uncompleted customer orders at the sale date\n will not affect the timing of the transfer of the facility. The criterion in paragraph 360-10-45-9(b) would be\n met at the plan commitment date.\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 32 of 50\n bThe entity intends to sell the manufacturing facility, but without its operations. The entity does not intend\n to transfer the facility to a buyer until after it ceases all operations of the facility and eliminates the backlog\n of uncompleted customer orders. The delay in the timing of the transfer of the facility imposed by the\n entity (seller) demonstrates that the facility is not available for immediate sale. The criterion in\n paragraph 360-10-45-9(b) would not be met until the operations of the facility cease, even if a firm\n purchase commitment for the future transfer of the facility is obtained earlier.\n\n\u00b7 > Example 7: Intent to Sell Acquired Real Estate Foreclosure\n\n360-10- This Example illustrates the classification as held for sale of a long-lived asset (disposal group) in accordance\n55-41\n with paragraph 360-10-45-9(b).\n\n360-10- An entity acquires through foreclosure a real estate property that it intends to sell. The following illustrate\n55-42\n situations in which the criterion in paragraph 360-10-45-9(b) would not be met:\n aThe entity does not intend to transfer the property to a buyer until after it completes renovations to\n increase its sales value. The delay in the timing of the transfer of the property imposed by the entity\n (seller) demonstrates that the property is not available for immediate sale. The criterion in paragraph 360-\n 10-45-9(b) would not be met until the renovations are completed.\n bAfter the renovations are completed and the property is classified as held for sale but before a firm\n purchase commitment is obtained, the entity becomes aware of environmental damage requiring\n remediation. The entity still intends to sell the property. However, the entity does not have the ability to\n transfer the property to a buyer until after the remediation is completed. The delay in the timing of the\n transfer of the property imposed by others before a firm purchase commitment is obtained demonstrates\n that the property is not available for immediate sale. The criterion in paragraph 360-10-45-9(b) would not\n continue to be met. The property would be reclassified as held and used in accordance with\n paragraph 360-10-45-7.\n\n\n\u00b7 > Example 8: Proposed Disposition Not Expected to Qualify as Completed Sale\n\n360-10- This Example illustrates the classification as held for sale of a long-lived asset (disposal group) in accordance\n55-43\n with the criterion in paragraph 360-10-45-9(d). The following illustrates situations in which that criterion would\n not be met:\n aAn entity that is a commercial leasing and finance company is holding for sale or lease equipment that\n has recently come off lease and the ultimate form of a future transaction (sale or lease) has not yet been\n determined.\n bAn entity commits to a plan to sell an asset that is in use and lease back that asset; however, the\n transfer of the asset will not be accounted for as a sale and leaseback transaction because the buyer-\n lessor does not obtain control of the asset based on the guidance in paragraphs 842-40-25-1 through 25-\n 3. The asset would continue to be classified as held and used following the appropriate guidance in\n Sections 360-10-35, 360-10-45, and 360-10-50.\n\n\n\u00b7 > Example 9: Regulatory Approval of Sale Required\n360-10- This Example illustrates an exception to the one-year requirement in paragraph 360-10-45-9(d) to complete\n55-44\n the sale of a long-lived asset (disposal group) (see paragraph 360-10-45-11). The following illustrates\n situations in which the conditions for an exception to the criterion in paragraph 360-10-45-9(d) would be met.\n\n360-10- An entity in the utility industry commits to a plan to sell a disposal group that represents a significant portion of\n55-45\n its regulated operations. The sale will require regulatory approval, which could extend the period required to\n complete the sale beyond one year. Actions necessary to obtain that approval cannot be initiated until after a\n buyer is known and a firm purchase commitment is obtained. However, a firm purchase commitment is\n probable within one year. In that situation, the conditions in paragraph 360-10-45-11(a) for an exception to the\n one-year requirement in paragraph 360-10-45-9(d) would be met.\n\n\u00b7 > Example 10: Environmental Damage Identified During Buyer's Inspection\n\n360-10- This Example illustrates an exception to the one-year requirement in paragraph 360-10-45-9(d) to complete\n55-46\n the sale of a long-lived asset (disposal group) (see paragraph 360-10-45-11). The following illustrates a\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 33 of 50\n situation in which the conditions for an exception to the criterion in paragraph 360-10-45-9(d) would be met.\n\n360-10- An entity commits to a plan to sell a manufacturing facility in its present condition and classifies the facility as\n55-47\n held for sale at that date. After a firm purchase commitment is obtained, the buyer's inspection of the property\n identifies environmental damage not previously known to exist. The entity is required by the buyer to\n remediate the damage, which will extend the period required to complete the sale beyond one year. However,\n the entity has initiated actions to remediate the damage, and satisfactory remediation of the damage is\n probable. In that situation, the conditions in paragraph 360-10-45-11(b) for an exception to the one-year\n requirement in paragraph 360-10-45-9(d) would be met.\n\n\u00b7 > Example 11: Deterioration of Market Conditions\n\n360-10- This Example illustrates an exception to the one-year requirement in paragraph 360-10-45-9(d) to complete\n55-48\n the sale of a long-lived asset (disposal group) (see paragraph 360-10-45-11).\n\n360-10- An entity commits to a plan to sell a long-lived asset and classifies the asset as held for sale at that date. The\n55-49\n following illustrates situations in which the conditions for an exception to the criterion in paragraph 360-10-45-\n 9(d) would or would not be met:\n aDuring the initial one-year period, the market conditions that existed at the date the asset was classified\n initially as held for sale deteriorate and, as a result, the asset is not sold by the end of that period. During\n that period, the entity actively solicited but did not receive any reasonable offers to purchase the asset\n and, in response, reduced the price. The asset continues to be actively marketed at a price that is\n reasonable given the change in market conditions, and the criteria in paragraph 360-10-45-9 are met. In\n that situation, the conditions in paragraph 360-10-45-11(c) for an exception to the one-year requirement in\n paragraph 360-10-45-9(d) would be met. At the end of the initial one-year period, the asset would\n continue to be classified as held for sale.\n bDuring the following one-year period, market conditions deteriorate further, and the asset is not sold by\n the end of that period. The entity believes that the market conditions will improve and has not further\n reduced the price of the asset. The asset continues to be held for sale, but at a price in excess of its\n current fair value. In that situation, the absence of a price reduction demonstrates that the asset is not\n available for immediate sale as required by the criterion in paragraph 360-10-45-9(b). In addition, the\n criterion in paragraph 360-10-45-9(e) requires that an asset be marketed at a price that is reasonable in\n relation to its current fair value. Therefore, the conditions in paragraph 360-10-45-11(c) for an exception to\n the one-year requirement in paragraph 360-10-45-9(d) would not be met. The asset would be reclassified\n as held and used in accordance with paragraph 360-10-35-44.\n\n\n\u00b7 > Example 12: Specialized Equipment\u2014Potential Impairment\n360-10- Offshore Industries is a manufacturer of offshore drilling rigs and platforms. The entity's manufacturing process\n55-50\n requires significant specialized equipment, which it currently owns. As a result of a decline in the price of oil,\n the demand for its products and services has fallen dramatically in the past two years, resulting in a significant\n underutilization of its manufacturing capacity.\n\n360-10- The entity depreciates its investments in specialized equipment based on its original estimate of the remaining\n55-51\n useful lives of the equipment using the units-of-production method, since it believes that the exhaustion of\n usefulness of these specialized assets relates more to their use than to the passage of time. The entity\n reevaluates these estimates in light of current conditions in accordance with generally accepted accounting\n principles (GAAP). The entity also monitors the policies of its major competitors and is aware that several have\n reported large write-downs of similar assets. Nevertheless, while the entity believes that it is at least\n reasonably possible that its estimate that it will recover the carrying amount of those assets from future\n operations will change during the next year, it believes it is more likely that conditions in the industry will\n improve and that no write-down for impairment will be necessary.\n\n360-10- The entity would make the following disclosure:\n55-52\n Offshore's policy is to depreciate specialized manufacturing equipment (with a net book value of $25\n million at December 31, 19X7) over its remaining useful life using the units-of-production method and to\n evaluate the remaining life and recoverability of such equipment in light of current conditions. [Given the\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 34 of 50\n excess capacity in the industry,] it is reasonably possible that the entity's estimate that it will recover the\n carrying amount of this equipment from future operations will change in the near term.\n\n 360-10- Regarding the preceding illustrative disclosure, if the information in the first sentence is already disclosed\n 55-53\n elsewhere in the notes, it need not be repeated. Also, the bracketed material in the second sentence\n represents an example of voluntary disclosure that is encouraged by paragraph 275-10-50-9.\n\n 360-10- In this Example, the entity acknowledges that the carrying amount of the specialized assets is subject to\n 55-54\n significant uncertainty based on current conditions. The uncertainty relates to the measurement of the\n specialized assets at the date of the financial statements, and the entity's disclosure makes clear that it is at\n least reasonably possible that the carrying amount will change in the near term.\n\n\n\n\n60 Relationships\n\n\n General Note:The Relationships Section contains links to guidance that may be helpful to, but not\n required by, a user of the Subtopic. This Section may not be all-inclusive. The relationship items are\n organized according to the Topic structure in the Codification.\n\n\n\n\n General\n > Real Estate\u2014Real Estate Investment Trusts\n 360-10- For a discussion of the appropriate accounting affecting property, plant, and equipment by a real estate\n 60-1\n investment trust for operating support from its adviser, see paragraph 974-720-25-2.\n\n\n\n\nS00 Status\n\n\n General Note:The Status Section identifies changes to this Subtopic resulting from Accounting\n Standards Updates. The Section provides references to the affected Codification content and links to\n the related Accounting Standards Updates. Nonsubstantive changes for items such as editorial, link\n and similar corrections are included separately in Maintenance Updates.\n\n\n\n\n General\n 360-10- The following table identifies the changes made to this Subtopic.\n S00-1\n Paragraph Action Accounting Standards Update Date\n\n 360-10-S99-2 Amended Accounting Standards Update No. 2012-03 08/27/2012\n\n\n\n\nS45 Other Presentation Matters\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 35 of 50\n\n General Note:The Other Presentation Matters Section provides guidance on other presentation\n matters not addressed in the Recognition, Initial Measurement, Subsequent Measurement, and\n Derecognition Sections. Other presentation matters may include items such as current or long-term\n balance sheet classification, cash flow presentation, earnings per share matters, and so forth. The\n FASB Codification also contains Presentation Topics, which provide guidance for general presentation\n and display items. See those Topics for general guidance.\n\n\n\n\n General\n > Presentation of Disposal Gains or Losses in Continuing Operations\n 360-10- See paragraph 360-10-S99-1, SAB Topic 5.B, for SEC Staff views on the presentation of gains or losses from\n S45-1\n the disposition of equipment.\n\n\n > Presentation of Accumulated Depreciation\n 360-10- See paragraph 210-10-S99-1, Regulation S-X Rule 5-02.14, for the presentation requirements of accumulated\n S45-2\n depreciation within the balance sheet or notes thereto.\n\n Impairment or Disposal of Long-lived Assets\n > Presentation of Disposal Gains or Losses\n 360-10- See paragraph 360-10-S99-1, SAB Topic 5.B, for SEC Staff views on the presentation of gains or losses from\n S45-3\n the disposal of equipment.\n\n\n\n\nS50 Disclosure\n\n\n General Note:The Disclosure Section provides guidance regarding the disclosure in the notes to\n financial statements. In some cases, disclosure may relate to disclosure on the face of the financial\n statements.\n\n\n\n\n General\n > Required Disclosure Regarding Basis for Determining Amounts of\n Property, Plant, and Equipment\n 360-10- See paragraph 210-10-S99-1, Regulation S-X Rule 5-02.13(a), for required disclosure regarding the basis for\n S50-1\n determining amounts of property, plant, and equipment.\n\n\n\n\nS55 Implementation Guidance and Illustrations\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 36 of 50\n\n General Note:The Implementation Guidance and Illustrations Section contains implementation\n guidance and illustrations that are an integral part of the Subtopic. The implementation guidance and\n illustrations do not address all possible variations. Users must consider carefully the actual facts and\n circumstances in relation to the requirements of the Subtopic.\n\n\n\n\n Impairment or Disposal of Long-lived Assets\n > Long-Lived Assets to Be Abandoned\n 360-10- See paragraph 360-10-S99-2, SAB Topic 5.CC, for SEC Staff views on the accounting for long-lived assets\n S55-1\n that are to be abandoned in the near future.\n\n\n > Estimates of Future Cash Flows Used to Test a Long-Lived Asset for\n Recoverability\n 360-10- See paragraph 360-10-S99-2, SAB Topic 5.CC, for SEC Staff views on estimating future cash flows for the\n S55-2\n purposes of performing an impairment test.\n\n\n\n\nS99 SEC Materials\n\n\n General Note:As more fully described in About the Codification, the Codification includes selected SEC\n and SEC Staff content for reference by public companies. The Codification does not replace or affect\n how the SEC or SEC Staff issues or updates SEC content. SEC Staff content does not constitute\n Commission-approved rules or interpretations of the SEC.\n\n\n\n\n Impairment or Disposal of Long-lived Assets\n > SEC Staff Guidance\n \u00b7 > Staff Accounting Bulletins\n\n \u00b7 \u00b7 > SAB Topic 5.B, Gain or Loss from Disposition of Equipment\n\n 360-10- The following is the text of SAB Topic 5.B, Gain or Loss from Disposition of Equipment.\n S99-1\n Facts: Company A has adopted the policy of treating gains and losses from disposition of revenue\n producing equipment as adjustments to the current year's provision for depreciation. Company B reflects\n such gains and losses as a separate item in the statement of income.\n Question: Does the staff have any views as to which method is preferable?\n Interpretive Response: Gains and losses resulting from the disposition of revenue producing equipment\n should not be treated as adjustments to the provision for depreciation in the year of disposition, but should\n be shown as a separate item in the statement of income.\n If such equipment is depreciated on the basis of group of composite accounts for fleets of like vehicles,\n gains (or losses) may be charged (or credited) to accumulated depreciation with the result that\n depreciation is adjusted over a period of years on an average basis. It should be noted that the latter\n treatment would not be appropriate for (1) an enterprise (such as an airline) which replaces its fleet on an\n episodic rather than a continuing basis or (2) an enterprise (such as a car leasing company) where\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 37 of 50\n equipment is sold after limited use so that the equipment on hand is both fairly new and carried at\n amounts closely related to current acquisition cost.\n\n\u00b7 \u00b7 > SAB Topic 5.CC, Impairments\n\n360-10- The following is the text of SAB Topic 5.CC, Impairments.\nS99-2\n Standards for recognizing and measuring impairment of the carrying amount of long-lived assets including\n certain identifiable intangibles to be held and used in operations are found in FASB ASC Topic 360,\n Property, Plant, and Equipment. Standards for recognizing and measuring impairment of the carrying\n amount of goodwill and identifiable intangible assets that are not currently being amortized are found in\n FASB ASC Topic 350, Intangibles\u2014Goodwill and Other.\n Facts: Company X has mainframe computers that are to be abandoned in six to nine months as\n replacement computers are put in place. The mainframe computers were placed in service in January\n 20X0 and were being depreciated on a straight-line basis over seven years. No salvage value had been\n projected at the end of seven years and the original cost of the computers was $8,400. The board of\n directors, with the appropriate authority, approved the abandonment of the computers in March 20X3\n when the computers had a remaining carrying value of $4,600. No proceeds are expected upon\n abandonment. Abandonment cannot occur prior to the receipt and installation of replacement computers,\n which is expected prior to the end of 20X3. Management had begun reevaluating its mainframe computer\n capabilities in January 20X2 and had included in its 20X3 capital expenditures budget an estimated\n amount for new mainframe computers. The 20X3 capital expenditures budget had been prepared by\n management in August 20X2, had been discussed with the company's board of directors in September\n 20X2 and was formally approved by the board of directors in March 20X3. Management had also begun\n soliciting bids for new mainframe computers beginning in the fall of 20X2. The mainframe computers,\n when grouped with assets at the lowest level of identifiable cash flows, were not impaired on a \"held and\n used\" basis throughout this time period. Management had not adjusted the original estimated useful life of\n the computers (seven years) since 20X0.\n Question 1: Company X proposes to recognize an impairment charge under FASB ASC Topic 360 for the\n carrying value of the mainframe computers of $4,600 in March 20X3. Does Company X meet the\n requirements in FASB ASC Topic 360 to classify the mainframe computer assets as \"to be abandoned?\"\n Interpretive Response: No. FASB ASC paragraph 360-10-35-47 provides that \"a long-lived asset to be\n abandoned is disposed of when it ceases to be used. If an entity commits to a plan to abandon a long-\n lived asset before the end of its previously estimated useful life, depreciation estimates shall be revised in\n accordance with FASB ASC Topic 250, Accounting Changes and Error Corrections, to reflect the use of\n the asset over its shortened useful life.\"\n Question 2: Would the staff accept an adjustment to write down the carrying value of the computers to\n reflect a \"normalized depreciation\" rate for the period from March 20X3 through actual abandonment (e.\n g., December 20X3)? Normalized depreciation would represent the amount of depreciation otherwise\n expected to be recognized during that period without adjustment of the asset's useful life, or $1,000\n ($100/month for ten months) in the example fact pattern.\n Interpretive Response: No. The mainframe computers would be viewed as \"held and used\" at March 20X3\n under the fact pattern described. There is no basis under FASB ASC Topic 360 to write down an asset to\n an amount that would subsequently result in a \"normalized depreciation\" charge through the disposal\n date, whether disposal is to be by sale, abandonment, or other means. FASB ASC paragraph 360-10-35-\n 43 requires the asset to be valued at the lower of carrying amount or fair value less cost to sell in order to\n be classified as \"held for sale.\" For assets that are classified as \"held and used\" under FASB ASC\n Topic 360, an assessment must first be made as to whether the asset (asset group) is impaired. FASB\n ASC paragraph 360-10-35-17 indicates that an impairment loss shall be recognized only if the carrying\n amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying\n amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted\n cash flows expected to result from the use and eventual disposition of the asset (asset group). The staff\n would object to a write down of long-lived assets to a \"normalized depreciation\" value as representing an\n acceptable alternative to the approaches required in FASB ASC Topic 360.\n The staff also believes that registrants must continually evaluate the appropriateness of useful lives\n assigned to long-lived assets, including identifiable intangible assets and goodwill. In the above fact\n pattern, management had contemplated removal of the mainframe computers beginning in January 20X2\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 38 of 50\n and, more formally, in August 20X2 as part of compiling the 20X3 capital expenditures budget. At those\n times, at a minimum, management should have reevaluated the original useful life assigned to the\n computers to determine whether a seven year amortization period remained appropriate given the\n company's current facts and circumstances, including ongoing technological changes in the market place.\n This reevaluation process should have continued at the time of the September 20X2 board of directors'\n meeting to discuss capital expenditure plans and, further, as the company pursued mainframe computer\n bids. Given the contemporaneous evidence that management's best estimate during much of 20X2 was\n that the current mainframe computers would be removed from service in 20X3, the depreciable life of the\n computers should have been adjusted prior to 20X3 to reflect this new estimate. The staff does not view\n the recognition of an impairment charge to be an acceptable substitute for choosing the appropriate initial\n amortization or depreciation period or subsequently adjusting this period as company or industry\n conditions change. The staff's view applies also to selection of, and changes to, estimated residual\n values. Consequently, the staff may challenge impairment charges for which the timely evaluation of\n useful life and residual value cannot be demonstrated.\n Question 3: Has the staff expressed any views with respect to company-determined estimates of cash\n flows used for assessing and measuring impairment of assets under FASB ASC Topic 360?\n Interpretive Response: In providing guidance on the development of cash flows for purposes of applying\n the provisions of that Topic, FASB ASC paragraph 360-10-35-30 indicates that \"estimates of future cash\n flows used to test the recoverability of a long-lived asset (asset group) shall incorporate the entity's own\n assumptions about its use of the asset (asset group) and shall consider all available evidence. The\n assumptions used in developing those estimates shall be reasonable in relation to the assumptions used\n in developing other information used by the entity for comparable periods, such as internal budgets and\n projections, accruals related to incentive compensation plans, or information communicated to others.\"\n The staff recognizes that various factors, including management's judgments and assumptions about the\n business plans and strategies, affect the development of future cash flow projections for purposes of\n applying FASB ASC Topic 360. The staff, however, cautions registrants that the judgments and\n assumptions made for purposes of applying FASB ASC Topic 360 must be consistent with other financial\n statement calculations and disclosures and disclosures in MD&A. The staff also expects that forecasts\n made for purposes of applying FASB ASC Topic 360 be consistent with other forward-looking information\n prepared by the company, such as that used for internal budgets, incentive compensation plans,\n discussions with lenders or third parties, and/or reporting to management or the board of directors.\n For example, the staff has reviewed a fact pattern where a registrant developed cash flow projections for\n purposes of applying the provisions of FASB ASC Topic 360 using one set of assumptions and utilized a\n second, more conservative set of assumptions for purposes of determining whether deferred tax valuation\n allowances were necessary when applying the provisions of FASB ASC Topic 740, Income Taxes. In this\n case, the staff objected to the use of inconsistent assumptions.\n In addition to disclosure of key assumptions used in the development of cash flow projections, the staff\n also has required discussion in MD&A of the implications of assumptions. For example, do the projections\n indicate that a company is likely to violate debt covenants in the future? What are the ramifications to the\n cash flow projections used in the impairment analysis? If growth rates used in the impairment analysis are\n lower than those used by outside analysts, has the company had discussions with the analysts regarding\n their overly optimistic projections? Has the company appropriately informed the market and its\n shareholders of its reduced expectations for the future that are sufficient to cause an impairment charge?\n The staff believes that cash flow projections used in the impairment analysis must be both internally\n consistent with the company's other projections and externally consistent with financial statement and\n other public disclosures.\n\n\n\n\n360 Property, Plant, and Equipment\n 20 Real Estate Sales\n00 Status\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 39 of 50\n\n General Note:The Status Section identifies changes to this Subtopic resulting from Accounting\n Standards Updates. The Section provides references to the affected Codification content and links to\n the related Accounting Standards Updates. Nonsubstantive changes for items such as editorial, link\n and similar corrections are included separately in Maintenance Updates.\n\n\n\n\nGeneral\n360-20- The following table identifies the changes made to this Subtopic.\n00-1\n Paragraph Action Accounting Standards Update Date\n\n Accounting Standards Update No.\n Conduit Debt Securities Superseded 02/25/2016\n 2016-02\n Conduit Debt Security Added Maintenance Update 2014-20 09/29/2014\n Accounting Standards Update No.\n Cost Recovery Method Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n Deposit Method Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n Fair Value (2nd def.) Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n Fair Value (3rd def.) Added 10/01/2012\n 2012-04\n Accounting Standards Update No.\n Installment Method Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n Integral Equipment Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n Market Participants Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n Nonpublic Entity (1st def.) Superseded 02/25/2016\n 2016-02\n Nonpublic Entity (1st def.) Amended Maintenance Update 2014-20 09/29/2014\n Accounting Standards Update No.\n Orderly Transaction Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n Reduced-Profit Method Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n Related Parties Superseded 02/25/2016\n 2016-02\n Sale-Leaseback Accounting Standards Update No.\n Superseded 02/25/2016\n Accounting 2016-02\n Sale-Leaseback Accounting Standards Update No.\n Added 05/28/2014\n Accounting 2014-09\n\n Accounting Standards Update No.\n 360-10-05-1 Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n 360-20-05-1 Amended 05/28/2014\n 2014-09\n Accounting Standards Update No.\n 360-10-05-2 Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n 360-10-15-1 through 15-6 Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n 360-20-15-1 through 15-3 Amended 05/28/2014\n 2014-09\n Accounting Standards Update No.\n 360-20-15-3 Amended 12/14/2011\n 2011-10\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 40 of 50\n Accounting Standards Update No.\n 360-20-15-4 Amended 10/01/2012\n 2012-04\n Accounting Standards Update No.\n 360-20-15-5 Amended 10/01/2012\n 2012-04\n Accounting Standards Update No.\n 360-20-15-7 Amended 10/01/2012\n 2012-04\n Accounting Standards Update No.\n 360-20-15-8 Amended 10/01/2012\n 2012-04\n Accounting Standards Update No.\n 360-20-15-10 Amended 01/05/2016\n 2016-01\n Accounting Standards Update No.\n 360-20-40-1 through 40-64 Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n 360-20-55-1 through 55-10 Superseded 02/25/2016\n 2016-02\n 360-20-55-2 Amended Maintenance Update 2016-17 09/02/2016\n Accounting Standards Update No.\n 360-20-55-3 Amended 12/14/2016\n 2016-19\n 360-20-55-10 Amended Maintenance Update 2016-11 06/27/2016\n Accounting Standards Update No.\n 360-20-55-10 Amended 05/28/2014\n 2014-09\n Accounting Standards Update No.\n 360-20-55-11 Superseded 05/28/2014\n 2014-09\n 360-20-55-12 through 55- Accounting Standards Update No.\n Superseded 02/25/2016\n 17 2016-02\n Accounting Standards Update No.\n 360-20-55-18 Superseded 05/28/2014\n 2014-09\n 360-20-55-19 through 55- Accounting Standards Update No.\n Superseded 02/25/2016\n 67 2016-02\n Accounting Standards Update No.\n 360-20-55-21 Amended 05/28/2014\n 2014-09\n 360-20-55-68 through 55- Accounting Standards Update No.\n Superseded 05/28/2014\n 77 2014-09\n 360-20-55-68 through 55- Accounting Standards Update No.\n Added 12/14/2011\n 77 2011-10\n Accounting Standards Update No.\n 360-20-60-1 through 60-3 Superseded 02/25/2016\n 2016-02\n Accounting Standards Update No.\n 360-20-65-2 Added 12/14/2011\n 2011-10\n\n\n\n\n05 Overview and Background\n\n\n General Note:The Overview and Background Section provides overview and background material for\n the guidance contained in the Subtopic. It does not provide the historical background or due process. It\n may contain certain material that users generally consider useful to understand the typical situations\n addressed by the standards. The Section does not summarize the accounting and reporting\n requirements.\n\n\n\n\n General\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 05-1\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 41 of 50\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 05-2\n\n\n\n\n15 Scope and Scope Exceptions\n\n\n General Note:The Scope and Scope Exceptions Section outlines the items (for example, the entities,\n transactions, instruments, or events) to which the guidance in the Subtopic does or does not apply. In\n some cases, the Section may contain definitional or other text to frame the scope.\n\n\n\n\n General Note for Financial Instruments:Some of the items subject to the guidance in this Subtopic\n are financial instruments. For guidance on matters related broadly to all financial instruments, (including\n the fair value option, accounting for registration payment arrangements, and broad financial instrument\n disclosure requirements), see Topic 825. See Section 825-10-15 for guidance on the scope of the\n Financial Instruments Topic.\n\n\n\n\n General\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 15-1\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 15-2\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 15-3\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 15-4\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 15-5\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 15-6\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 15-7\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 15-8\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 15-9\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 15-10\n\n\n\n\n20 Glossary\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 42 of 50\n\n General Note:The Master Glossary contains all terms identified as glossary terms throughout the\n Codification. Clicking on any term in the Master Glossary will display where the term is used. The\n Master Glossary may contain identical terms with different definitions, some of which may not be\n appropriate for a particular Subtopic. For any particular Subtopic, users should only use the glossary\n terms included in the particular Subtopic Glossary Section (Section 20).\n\n\n\n\nConduit Debt Securities\n\n Certain limited-obligation revenue bonds, certificates of participation, or similar debt instruments issued by a\n state or local governmental entity for the express purpose of providing financing for a specific third party (the\n conduit bond obligor) that is not a part of the state or local government's financial reporting entity. Although\n conduit debt securities bear the name of the governmental entity that issues them, the governmental entity\n often has no obligation for such debt beyond the resources provided by a lease or loan agreement with the\n third party on whose behalf the securities are issued. Further, the conduit bond obligor is responsible for any\n future financial reporting requirements.\n\nFair Value\n\n The price that would be received to sell an asset or paid to transfer a liability in an orderly\n transaction between market participants at the measurement date.\n\nMarket Participants\n\n Buyers and sellers in the principal (or most advantageous) market for the asset or liability that have all of the\n following characteristics:\n aThey are independent of each other, that is, they are not related parties, although the price in a related-\n party transaction may be used as an input to a fair value measurement if the reporting entity has evidence\n that the transaction was entered into at market terms\n bThey are knowledgeable, having a reasonable understanding about the asset or liability and the\n transaction using all available information, including information that might be obtained through due\n diligence efforts that are usual and customary\n cThey are able to enter into a transaction for the asset or liability\n dThey are willing to enter into a transaction for the asset or liability, that is, they are motivated but not\n forced or otherwise compelled to do so.\n\n\nNonpublic Entity\n\n Any entity that does not meet any of the following conditions:\n aIts debt or equity securities trade in a public market either on a stock exchange (domestic or foreign) or\n in an over-the-counter market, including securities quoted only locally or regionally.\n bIt is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or\n foreign stock exchange or an over-the-counter market, including local or regional markets).\n cIt files with a regulatory agency in preparation for the sale of any class of debt or equity securities in a\n public market.\n dIt is required to file or furnish financial statements with the Securities and Exchange Commission.\n eIt is controlled by an entity covered by criteria (a) through (d).\n\n\nOrderly Transaction\n\n A transaction that assumes exposure to the market for a period before the measurement date to allow for\n marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a\n forced transaction (for example, a forced liquidation or distress sale).\n\nRelated Parties\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 43 of 50\n Related parties include:\n aAffiliates of the entity\n bEntities for which investments in their equity securities would be required, absent the election of the fair\n value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the\n equity method by the investing entity\n cTrusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or\n under the trusteeship of management\n dPrincipal owners of the entity and members of their immediate families\n eManagement of the entity and members of their immediate families\n fOther parties with which the entity may deal if one party controls or can significantly influence the\n management or operating policies of the other to an extent that one of the transacting parties might be\n prevented from fully pursuing its own separate interests\n gOther parties that can significantly influence the management or operating policies of the transacting\n parties or that have an ownership interest in one of the transacting parties and can significantly influence\n the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its\n own separate interests.\n\n\n\n\n40 Derecognition\n\n\n General Note:The Derecognition Section provides guidance on determining whether and when an\n entity should remove an item from the financial statements. For example, the entity would derecognize\n an asset because it no longer has rights to the asset or it would derecognize a liability because it no\n longer has any obligation.\n\n\n\n\n General\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-1\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-2\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-3\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-4\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-5\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-6\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-7\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-8\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-9\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 44 of 50\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-10\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-11\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-12\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-13\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-14\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-15\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-16\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-17\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-18\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-19\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-20\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-21\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-22\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-23\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-24\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-25\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-26\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-27\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-28\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-29\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-30\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-31\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-32\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-33\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 45 of 50\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-34\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-35\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-36\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-37\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-38\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-39\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-40\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-41\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-42\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-43\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-44\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-45\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-46\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-47\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-48\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-49\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-50\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-51\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-52\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-53\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-54\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-55\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-56\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n40-57\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 46 of 50\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-58\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-59\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-60\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-61\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-62\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-63\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 40-64\n\n\n\n\n55 Implementation Guidance and Illustrations\n\n\n General Note:The Implementation Guidance and Illustrations Section contains implementation\n guidance and illustrations that are an integral part of the Subtopic. The implementation guidance and\n illustrations do not address all possible variations. Users must consider carefully the actual facts and\n circumstances in relation to the requirements of the Subtopic.\n\n\n\n\n General\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-1\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-2\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-3\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-4\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-5\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-6\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-7\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-8\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-9\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-10\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 55-11\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 47 of 50\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-12\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-13\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-14\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-15\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-16\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-17\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2014-09.\n55-18\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-19\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-20\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-21\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-21A\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-22\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-23\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-24\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-25\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-26\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-27\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-28\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-29\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-30\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-31\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-32\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-33\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-34\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 48 of 50\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-35\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-36\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-37\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-38\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-39\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-40\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-41\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-42\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-43\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-44\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-45\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-46\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-47\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-48\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-49\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-50\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-51\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-52\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-53\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-54\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-55\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-56\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-57\n\n360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n55-58\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 49 of 50\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-59\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-60\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-61\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-62\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-63\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-64\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-65\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-66\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 55-67\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 55-68\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 55-69\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 55-70\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 55-71\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 55-72\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 55-73\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 55-74\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 55-75\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 55-76\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 55-77\n\n\n\n\n60 Relationships\n\n\n General Note:The Relationships Section contains links to guidance that may be helpful to, but not\n required by, a user of the Subtopic. This Section may not be all-inclusive. The relationship items are\n organized according to the Topic structure in the Codification.\n\f Case 1:25-cv-00541-JAV Document 70-9 Filed 11/20/25 Page 50 of 50\n\n General\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 60-1\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 60-2\n\n 360-20- Paragraph superseded by Accounting Standards Update No. 2016-02.\n 60-3\n\n\n\n\n65 Transition and Open Effective Date Information\n\n\n General Note:The Transition Section contains a description of the required transition provisions and a\n list of the related paragraphs that have been modified. This Section will retain the transition content\n during the transition period. After the transition period, the transition content will be removed yet will be\n available in archived versions of the Section.\n\n\n\n\n General\n 360-20- Paragraph superseded on 03/23/2010 after the end of the transition period stated in EITF Issue No. 07-6,\n 65-1\n \"Accounting for the Sale of Real Estate Subject to the Requirements of FASB Statement No. 66 When the\n Agreement Includes a Buy-Sell Clause.\"\n\n 360-20- Paragraph superseded on 06/26/2015 after the end of the transition period stated in Accounting Standards\n 65-2\n Update No. 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate\u2014\n a Scope Clarification.\n\f","ocr_status":2,"date_upload":"2026-05-12T04:15:34.845825-07:00","document_number":"70","attachment_number":9,"pacer_doc_id":"127038602953","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit I - FASB ASC Topic 360","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874410/","id":478874410,"tags":[],"absolute_url":"/docket/69558488/70/10/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.516611-07:00","date_modified":"2026-05-14T07:11:58.035287-07:00","sha1":"9aaead1e105ff0ecfb51468d3cacf5f1a13e8d95","page_count":71,"file_size":816780,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.10.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.10.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 1 of 71\n\n\n\n\n Exhibit J\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 2 of 71\n\n\n\n\n UNITED STATES SECURITIES AND EXCHANGE COMMISSION\n WASHINGTON, D.C. 20549\n FORM 10-Q\n\u2611 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n For the quarterly period ended September 30, 2024\n OR\n\u2610 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n\n For the transition period from ____ to ____\n Commission file number 001-37386\n\n\n\n\n FTAI AVIATION LTD.\n (Exact name of registrant as specified in its charter)\n Cayman Islands XX-XXXXXXX\n (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)\n\n 415 West 13th Street, 7th Floor New York NY 10014\n (Address of principal executive offices) (Zip Code)\n\n\n (Registrant\u2019s telephone number, including area code) (332) 239-7600\n (Former name, former address and former fiscal year, if changed since last report) N/A\n Securities registered pursuant to Section 12(b) of the Act:\n Title of each class: Trading Symbol: Name of exchange on which registered:\n Ordinary shares, $0.01 par value per share FTAI The Nasdaq Global Select Market\n The Nasdaq Global Select Market\n 8.25% Fixed-to-Floating Rate Series A Cumulative Perpetual Redeemable Preferred Shares FTAIP (Redeemed)\n 8.00% Fixed-to-Floating Rate Series B Cumulative Perpetual Redeemable Preferred Shares FTAIO The Nasdaq Global Select Market\n 8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares FTAIN The Nasdaq Global Select Market\n 9.50% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares FTAIM The Nasdaq Global Select Market\n\nIndicate 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\nmonths (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 \u00fe No \u00a8\nIndicate 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\n(\u00a7232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes \u00fe No \u00a8\nIndicate 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\ncompany. See the definitions of \u201clarge accelerated filer,\u201d \u201caccelerated filer,\u201d \u201csmaller reporting company,\u201d and \u201cemerging growth company\u201d in Rule 12b-2 of the Exchange Act.\n Large accelerated filer \u00fe Accelerated filer \u00a8\n Non-accelerated filer \u00a8 Smaller reporting company \u2610\n Emerging growth company \u2610\n\nIf 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\naccounting standards provided pursuant to Section 13(a) of the Exchange Act. \u00a8\nIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes \u2610 No \u00fe\nThere were 102,549,679 ordinary shares outstanding at November 10, 2024.\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 3 of 71\n\n\n\n\n FORWARD-LOOKING STATEMENTS AND RISK FACTORS SUMMARY\nThis report contains \u201cforward-looking statements\u201d within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of\nhistorical fact but instead are based on our present beliefs and assumptions and on information currently available to us. You can identify these forward-looking statements by\nthe use of forward-looking words such as \u201coutlook,\u201d \u201cbelieves,\u201d \u201cexpects,\u201d \u201cpotential,\u201d \u201ccontinues,\u201d \u201cmay,\u201d \u201cwill,\u201d \u201cshould,\u201d \u201ccould,\u201d \u201cseeks,\u201d \u201capproximately,\u201d \u201cpredicts,\u201d \u201cintends,\u201d\n\u201cplans,\u201d \u201cestimates,\u201d \u201canticipates,\u201d \u201ctarget,\u201d \u201cprojects,\u201d \u201ccontemplates\u201d or the negative version of those words or other comparable words. Any forward-looking statements\ncontained in this report are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The\ninclusion of this forward-looking information should not be regarded as a representation by us, that the future plans, estimates or expectations contemplated by us will be\nachieved.\nSuch forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business,\nprospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these\nstatements. The following is a summary of the principal risk factors that make investing in our securities risky and may materially adversely affect our business, financial\ncondition, results of operations and cash flows. This summary should be read in conjunction with the more complete discussion of the risk factors we face, which are set forth\nin Part II, Item 1A. \u201cRisk Factors\u201d of this report. We believe that these factors include, but are not limited to:\n \u2022 changes in economic conditions generally and specifically in our industry sectors, and other risks relating to the global economy, including, but not limited to, the\n Russia-Ukraine conflict, and any related responses or actions by businesses and governments\u037e\n \u2022 reductions in cash flows received from our assets, as well as contractual limitations on the use of our aviation assets to secure debt for borrowed money\u037e\n \u2022 our ability to take advantage of acquisition opportunities at favorable prices\u037e\n \u2022 a lack of liquidity surrounding our assets, which could impede our ability to vary our portfolio in an appropriate manner\u037e\n \u2022 the relative spreads between the yield on the assets we acquire and the cost of financing\u037e\n \u2022 adverse changes in the financing markets we access affecting our ability to finance our acquisitions\u037e\n \u2022 customer defaults on their obligations\u037e\n \u2022 our ability to renew existing contracts and enter into new contracts with existing or potential customers\u037e\n \u2022 the availability and cost of capital for future acquisitions\u037e\n \u2022 concentration of a particular type of asset or in a particular sector\u037e\n \u2022 competition within the aviation industry\u037e\n \u2022 the competitive market for acquisition opportunities\u037e\n \u2022 risks related to operating through joint ventures, partnerships, consortium arrangements or other collaborations with third parties\u037e\n \u2022 our ability to successfully integrate acquired businesses\u037e\n \u2022 obsolescence of our assets or our ability to sell, re-lease or re-charter our assets\u037e\n \u2022 exposure to uninsurable losses and force majeure events\u037e\n \u2022 the legislative/regulatory environment and exposure to increased economic regulation\u037e\n \u2022 exposure to the oil and gas industry\u2019s volatile oil and gas prices\u037e\n \u2022 difficulties in obtaining effective legal redress in jurisdictions in which we operate with less developed legal systems\u037e\n \u2022 our ability to maintain our exemption from registration under the Investment Company Act of 1940 and the fact that maintaining such exemption imposes limits on\n our operations\u037e\n \u2022 our ability to successfully utilize leverage in connection with our investments\u037e\n \u2022 foreign currency risk and risk management activities\u037e\n \u2022 effectiveness of our internal control over financial reporting\u037e\n \u2022 exposure to environmental risks, including natural disasters, increasing environmental legislation and the broader impacts of climate change\u037e\n \u2022 changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes\u037e\n \u2022 actions taken by national, state, or provincial governments, including nationalization, or the imposition of new taxes, could materially impact the financial\n performance or value of our assets\u037e\n \u2022 our ability to attract and retain highly skilled management and other personnel\u037e\n \u2022 risks relating to the Company entering into an Internalization Agreement (the \u201cInternalization Agreement\u201d) with FIG LLC (the \u201cFormer Manager\u201d) and the impact on the\n Company\u2019s management functions and business operations\u037e\n\n\n 2\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 4 of 71\n\n\n\n\n \u2022 volatility in the market price of our shares\u037e\n \u2022 the inability to pay dividends to our shareholders in the future\u037e\n \u2022 impacts from our past and future acquisitions, and our ability to successfully integrate acquired assets and assumed liabilities\u037e and\n \u2022 other risks described in the \u201cRisk Factors\u201d section of this report.\nThese factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. The forward-\nlooking statements made in this report relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review\nany forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise.\nIf one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we\nmay have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements.\nFurthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.\n\n\n 3\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 5 of 71\n\n\n\n\n FTAI AVIATION LTD.\n INDEX TO FORM 10-Q\n\n PART I - FINANCIAL INFORMATION\nItem 1. Unaudited Consolidated Financial Statements of FTAI Aviation Ltd.: 5\n Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 5\n Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023 6\n Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2024 and 2023 7\n Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 9\n Notes to Consolidated Financial Statements 11\n Note 1: Organization 11\n Note 2: Summary of Significant Accounting Policies 11\n Note 3: Acquisition of Lockheed Martin Commercial Engine Solutions 14\n Note 4: Acquisition of QuickTurn 16\n Note 5: Leasing Equipment, net 17\n Note 6: Investments 17\n Note 7: Intangible Assets and Liabilities, net 19\n Note 8: Debt, net 20\n Note 9: Fair Value Measurements 21\n Note 10: Equity-Based Compensation 21\n Note 11: Income Taxes 23\n Note 12: Affiliate Transactions 23\n Note 13: Segment Information 25\n Note 14: Earnings per Share and Equity 34\n Note 15: Commitments and Contingencies 34\n Note 16: Restructuring Charges 35\n Note 17: Subsequent Events 35\nItem 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations 36\nItem 3. Quantitative and Qualitative Disclosures About Market Risk 52\nItem 4. Controls and Procedures 52\n\n PART II - OTHER INFORMATION\nItem 1. Legal Proceedings 53\nItem 1A. Risk Factors 53\nItem 2. Unregistered Sales of Equity Securities and Use of Proceeds 67\nItem 3. Defaults Upon Senior Securities 67\nItem 4. Mine Safety Disclosures 67\nItem 5. Other Information 67\nItem 6. Exhibits 68\n\n\n\n\n 4\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 6 of 71\n\n\n\n\n PART I-FINANCIAL INFORMATION\nItem 1. Financial Statements\n\nFTAI AVIATION LTD.\nCONSOLIDATED BALANCE SHEETS\n(Dollars in thousands, except share and per share data)\n\n (Unaudited)\n Notes September 30, 2024 December 31, 2023\nAssets\nCash and cash equivalents 2 $ 111,888 $ 90,756\nRestricted cash 150 150\nAccounts receivable, net 2 166,338 115,156\nLeasing equipment, net 5 2,066,337 2,032,413\nProperty, plant, and equipment, net 2 103,605 45,175\nInvestments 6 19,448 22,722\nIntangible assets, net 7 38,001 50,590\nAssets held for sale 2 119,012 -\nGoodwill 4 31,533 4,630\nInventory, net 2 490,997 316,637\nOther assets 2 591,601 286,456\nTotal assets $ 3,738,910 $ 2,964,685\n\n\nLiabilities\nAccounts payable and accrued liabilities $ 196,660 $ 112,907\nDebt, net 8 3,218,343 2,517,343\nMaintenance deposits 2 75,606 65,387\nSecurity deposits 2 42,863 41,065\nOther liabilities 86,906 52,100\nTotal liabilities $ 3,620,378 $ 2,788,802\n\n\nCommitments and contingencies 15\n\n\nEquity\nOrdinary shares ($0.01 par value per share\u037e 2,000,000,000 shares authorized\u037e 102,549,679 and 100,245,905\nshares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively) $ 1,025 $ 1,002\nPreferred shares ($0.01 par value per share\u037e 200,000,000 shares authorized\u037e 15,920,000 and 15,920,000 shares\nissued and outstanding as of September 30, 2024 and December 31, 2023, respectively) 159 159\nAdditional paid in capital 292,899 255,973\nAccumulated deficit (175,551) (81,785)\nShareholders' equity 118,532 175,349\nNon-controlling interest in equity of consolidated subsidiaries - 534\nTotal equity 118,532 175,883\nTotal liabilities and equity $ 3,738,910 $ 2,964,685\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n 5\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 7 of 71\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)\n(Dollars in thousands, except share and per share data)\n\n\n\n Three Months Ended September 30, Nine Months Ended September 30,\n Notes 2024 2023 2024 2023\nRevenues\nLease income $ 65,450 $ 45,622 $ 189,365 $ 161,141\nMaintenance revenue 59,917 63,925 156,894 141,131\nAsset sales revenue 34,953 61,400 145,993 246,927\nAerospace products revenue 303,469 118,675 737,726 296,513\nOther revenue 2,005 1,474 6,104 12,447\nTotal revenues 13 465,794 291,096 1,236,082 858,159\n\n\nExpenses\nCost of sales 219,496 116,707 568,157 366,909\nOperating expenses 2 26,858 33,887 81,274 81,218\nGeneral and administrative 4,045 3,015 10,697 10,270\nAcquisition and transaction expenses 9,341 4,261 23,539 10,195\nManagement fees and incentive allocation to affiliate 12 - 4,577 8,449 13,137\nInternalization fee to affiliate 16 - - 300,000 -\nDepreciation and amortization 5, 7 56,775 43,959 163,386 123,399\nAsset impairment - - 962 1,220\nTotal expenses 316,515 206,406 1,156,464 606,348\n\n\nOther (expense) income\nEquity in (losses) earnings of unconsolidated entities 6 (438) 46 (1,799) (1,669)\nInterest expense (57,937) (40,185) (160,840) (117,976)\nLoss on extinguishment of debt - - (13,920) -\nOther income 2,909 461 3,045 877\nTotal other expense (55,466) (39,678) (173,514) (118,768)\nIncome (loss) before income taxes 93,813 45,012 (93,896) 133,043\nProvision for (benefit from) income taxes 11 7,331 3,705 (130) 7,586\nNet income (loss) 86,482 41,307 (93,766) 125,457\nLess: Dividends on preferred shares 8,335 8,334 25,005 23,460\nNet income (loss) attributable to shareholders $ 78,147 $ 32,973 $ (118,771) $ 101,997\n\n\nEarnings (loss) per share: 14\nBasic $ 0.76 $ 0.33 $ (1.17) $ 1.02\nDiluted $ 0.76 $ 0.33 $ (1.17) $ 1.02\n\n\nWeighted average shares outstanding:\nBasic 102,380,659 99,927,594 101,199,356 99,796,736\nDiluted 103,395,348 100,482,309 101,199,356 100,269,203\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n 6\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 8 of 71\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)\n(Dollars in thousands)\n\n\n\n Three and Nine Months Ended September 30, 2024\n Non-\n Controlling Interest in\n Ordinary Preferred Additional Paid In Accumulated Equity of Consolidated\n Shares Shares Capital Deficit Subsidiaries Total Equity\n Equity -\nDecember 31,\n2023 $ 1,002 $ 159 $ 255,973 $ (81,785) $ 534 $ 175,883\n Net loss (180,248) (180,248)\n Total\ncomprehensive\nloss (180,248) (180,248)\n Purchase\nof non-controlling\ninterest (534) (534)\n Dividends\ndeclared - ordinary\nshares (60,148) (60,148)\n Dividends\ndeclared -\npreferred shares (16,670) (16,670)\n Issuance\nof ordinary shares 20 150,116 150,136\n Equity-\nbased\ncompensation 1,148 1,148\n Equity -\nJune 30, 2024 $ 1,022 $ 159 $ 330,419 $ (262,033) $ - $ 69,567\n Net\n income 86,482 86,482\n Total\ncomprehensive\nincome 86,482 86,482\n Dividends\ndeclared - ordinary\nshares (30,661) (30,661)\n Dividends\ndeclared -\npreferred shares (8,335) (8,335)\n Issuance\nof ordinary shares 3 46 49\n Equity-\nbased\ncompensation 1,430 1,430\n Equity -\nSeptember 30,\n2024 $ 1,025 $ 159 $ 292,899 $ (175,551) $ - $ 118,532\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n 7\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 9 of 71\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)\n(Dollars in thousands)\n\n\n\n Three and Nine Months Ended September 30, 2023\n Non-Controlling\n Interest in Equity of\n Preferred Additional Paid Consolidated\n Ordinary Shares Shares In Capital Accumulated Deficit Subsidiaries Total Equity\nEquity - December 31, 2022 $ 997 $ 133 $ 343,350 $ (325,602) $ 524 $ 19,402\n Net income 84,150 84,150\nTotal comprehensive income 84,150 84,150\nContributions from non-controlling interest 10 10\nIssuance of ordinary shares 389 389\nDividends declared - ordinary shares (59,854) (59,854)\nIssuance of preferred shares 26 61,703 61,729\nDividends declared - preferred shares (15,126) (15,126)\nEquity-based compensation 618 618\nEquity - June 30, 2023 $ 997 $ 159 $ 331,080 $ (241,452) $ 534 $ 91,318\n Net income 41,307 41,307\nTotal comprehensive income 41,307 41,307\nIssuance of ordinary shares 5 178 183\nDividends declared - ordinary shares (29,922) (29,922)\nDividends declared - preferred shares (8,334) (8,334)\nEquity-based compensation 510 510\nEquity - September 30, 2023 $ 1,002 $ 159 $ 293,512 $ (200,145) $ 534 $ 95,062\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n 8\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 10 of 71\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)\n(Dollars in thousands)\n\n\n\n\n Nine Months Ended September 30,\n 2024 2023\nCash flows from operating activities:\nNet (loss) income $ (93,766) $ 125,457\nAdjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:\nEquity in losses of unconsolidated entities 1,799 1,669\nGain on sale of assets (244,353) (110,511)\nSecurity deposits and maintenance claims included in earnings (13,437) (34,458)\nLoss on extinguishment of debt 13,920 -\nEquity-based compensation 2,578 1,128\nNon-cash termination fee to affiliate (issuance of ordinary shares) 150,000 -\nDepreciation and amortization 163,386 123,399\nAsset impairment 962 1,220\nChange in deferred income taxes (2,470) 5,974\nChange in fair value of guarantees 1,340 (1,677)\nAmortization of lease intangibles and incentives 30,998 33,685\nAmortization of deferred financing costs 7,996 6,429\nProvision for credit losses 2,784 6,583\nOther (158) (995)\nChange in:\n Accounts receivable (31,234) (34,358)\n Inventory (163,900) (4,845)\n Other assets (16,769) (3,727)\n Accounts payable and accrued liabilities 50,630 321\n Management fees payable to affiliate (3,967) 824\n Other liabilities (2,492) 648\nNet cash (used in) provided by operating activities (146,153) 116,766\n\nCash flows from investing activities:\nInvestment in unconsolidated entities - (19,500)\nPrincipal collections on finance leases 1,872 3,624\nPrincipal collections on notes receivable 3,874 2,438\nAcquisition of business, net of cash acquired (143,634) -\nAcquisition of leasing equipment (622,366) (506,923)\nInvestments in financing receivables (63,857) -\nAcquisition of property, plant and equipment (2,968) (3,906)\nAcquisition of lease intangibles 1,174 (10,474)\nInvestment in promissory notes - (11,500)\nDeposits for acquisitions of aircraft and engines (162,708) (10,533)\nProceeds from sale of assets 542,938 366,065\nProceeds (refunds) from deposits on sale of aircraft and engines 2,414 (683)\nReturn of deposits for acquisition of aircraft and engines 530 300\nNet cash used in investing activities $ (442,731) $ (191,092)\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n 9\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 11 of 71\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)\n(Dollars in thousands)\n\n\n\n Nine Months Ended September 30,\n 2024 2023\nCash flows from financing activities:\nProceeds from debt $ 2,069,250 $ 430,000\nRepayment of debt (1,367,304) (330,000)\nPayment of deferred financing costs (10,825) (1,805)\nReceipt of security deposits under operating lease agreements 6,120 7,355\nReturn of security deposits under operating lease agreements - (2,385)\nReceipt of maintenance deposits under operating lease agreements 35,583 22,747\nRelease of maintenance deposits under operating lease agreements (6,460) (275)\nCapital contributions from non-controlling interests (534) 10\nProceeds from issuance of preferred shares, net of underwriter's discount and issuance costs - 61,729\nCash dividends - ordinary shares (90,809) (89,776)\nCash dividends - preferred shares (25,005) (23,460)\nNet cash provided by financing activities $ 610,016 $ 74,140\n\nNet increase (decrease) in cash and cash equivalents and restricted cash 21,132 (186)\nCash and cash equivalents and restricted cash, beginning of period 90,906 53,065\nCash and cash equivalents and restricted cash, end of period $ 112,038 $ 52,879\n\nSupplemental disclosure of non-cash investing and financing activities (see Note 2 for additional non-cash information):\nIssuance of notes receivable in connection with the sale of aircraft and engines $ 69,826 $ 27,634\nAcquisition of leasing equipment in accrued expenses (11,772) (8,825)\nPurchase deposits reclassified to leasing equipment from other assets (19,608) (6,371)\nSecurity deposits settled with accounts receivable (4,365) (2,851)\nMaintenance deposits settled with accounts receivable (38,795) (38,754)\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n 10\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 12 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n\n1. ORGANIZATION\nFTAI Aviation Ltd. (\u201cwe\u201d, \u201cus\u201d, \u201cour\u201d or the \u201cCompany\u201d and formerly \u201cFortress Transportation and Infrastructure Investors LLC\u201d) is a Cayman Islands exempted company which\nthrough its subsidiaries owns, leases, and sells aviation equipment and also develops and manufactures, through a joint venture, and repairs and sells, through our\nmaintenance facilities and exclusivity arrangements, aftermarket components for aircraft engines. Additionally, we own and lease offshore energy equipment. We have\ntwo reportable segments, (i) Aviation Leasing and (ii) Aerospace Products (see Note 13).\nPrior to May 28, 2024, FTAI Aviation Ltd. operated under a management agreement (the \u201cManagement Agreement\u201d) with FIG LLC (the \u201cFormer Manager\u201d), and Fortress\nWorldwide Transportation and Infrastructure Master GP LLC (the \u201cMaster GP\u201d), each an affiliate of Fortress Investment Group LLC (\u201cFortress\u201d). For their services, the Former\nManager was entitled to management fees and the Master GP was entitled to certain incentive allocations, both defined in, and in accordance with the terms of, the\nManagement Agreement. On May 28, 2024, the Company entered into an Internalization Agreement with the Former Manager and the Master GP (the \u201cInternalization\nAgreement\u201d), pursuant to which the Management Agreement was terminated effective May 28, 2024 (the \u201cEffective Date\u201d), except that certain indemnification and other\nobligations survive, and the Company internalized its management functions (such transactions, the \u201cInternalization\u201d). As a result of the Internalization, the Company ceased to\nbe externally managed and operates as an internally managed company. In connection with the termination of the Management Agreement, the Company (i) agreed to pay the\nFormer Manager (for itself and on behalf of the Master GP, as applicable) $150.0 million (the \u201cCash Consideration\u201d), the compensation accrued and payable, but not yet paid,\nunder the Management Agreement, and the expenses that were reimbursable, but not yet reimbursed, under the Management Agreement\u037e (ii) issued to the Former Manager\n(for itself and on behalf of the Master GP, as applicable) 1,866,949 ordinary shares of the Company (the \u201cShare Consideration\u201d)\u037e and (iii) purchased from Master GP all of its\npartnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the Company, in exchange for $30. In addition, the Former Manager repaid to the Company certain annual\nbonus payments due to certain employees of the Former Manager or its affiliates who provide services to the Company with respect to the 2024 calendar year on a pro rata\nbasis. The Company financed the cash payments through one or more debt financings, along with cash on hand.\nOn May 28, 2024, the Company also entered into a Transition Services Agreement (the \u201cTransition Services Agreement\u201d) with the Former Manager. Under the Transition\nServices Agreement, the Former Manager was required to continue to provide the Company and its affiliates with all of the services provided by the Former Manager to the\nCompany and its affiliates immediately prior to May 28, 2024 (the \u201cServices\u201d) for a transition period until October 31, 2024, during which the Company procured replacements\nfor the Services. The Services were provided to the Company for a fee equal to the Former Manager\u2019s cost of providing the Services, plus a mark-up of ten percent (10%). In\naddition, the Former Manager is required to continue to provide the services that are reasonably required by the Company to prepare its quarterly and annual financial\nstatements until May 31, 2025. The Transition Services Agreement may be terminated earlier (x) by mutual agreement of the parties, (y) by either the Former Manager or the\nCompany in the event of a material breach by the non-terminating party that is not cured within thirty (30) days following written notification thereof, or (z) by the Former Manager\nif the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days.\n\n2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\nBasis of Accounting-The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (\u201cU.S. GAAP\u201d) and\ninclude the accounts of us and our subsidiaries. These financial statements and related notes should be read in conjunction with the Consolidated Financial Statements and\nrelated notes included in the Company\u2019s Annual Report on Form 10-K for the year ended December 31, 2023.\nPrinciples of Consolidation-We consolidate all entities in which we have a controlling financial interest and control over significant operating decisions. All adjustments\n(consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The ownership interest of other investors in consolidated\nsubsidiaries is recorded as non-controlling interest.\nWe use the equity method of accounting for investments in entities in which we exercise significant influence but which do not meet the requirements for consolidation. Under\nthe equity method, we record our proportionate share of the underlying net income (loss) of these entities.\nUse of Estimates-The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported\namounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues\nand expenses during the reporting period. Actual results could differ from those estimates.\nRestructuring Charges-The termination of the Management Agreement was a material change in the management structure of the business and is accounted for under ASC\n420, Exit or Disposal Cost Obligations. The termination fee payment to the Former Manager under the Internalization Agreement is recorded within Internalization Fee to Affiliate\nin the Consolidated Statements of Operations. See Note 16 for additional discussion of the restructuring charges related to the Internalization.\n\n\n 11\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 13 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nReclassifications-Certain amounts from prior periods in the Company\u2019s consolidated financial statements have been reclassified to align with the presentation in the current\nperiod.\nRisks and Uncertainties-In the normal course of business, we encounter several significant types of economic risk including credit, market, and capital market risks. Credit\nrisk is the risk of the inability or unwillingness of a lessee or customer to make contractually required payments or to fulfill its other contractual obligations. Market risk reflects\nthe risk of a downturn or volatility in the underlying industry segments in which we operate, which could adversely impact the pricing of the services offered by us or a lessee\u2019s\nor customer\u2019s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of our leasing equipment or operating\nassets. Capital market risk is the risk that we are unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities. We,\nthrough our subsidiaries, also conduct operations outside of the United States\u037e such international operations are subject to the same risks as those associated with our\nUnited States operations as well as additional risks, including unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially\nadverse tax consequences and the burden of complying with foreign laws. We do not have significant exposure to foreign currency risk as all of our leasing arrangements are\ndenominated in U.S. dollars.\nCash and Cash Equivalents-We consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents.\nInventory, net-We hold aircraft engines, engine modules, spare parts and used material inventory for trading, repairs and to support operations. Inventory is carried at the\nlower of cost or net realizable value.\nRevenues-We disaggregate our revenue by products and services. Revenues are within the scope of ASC 842, Leases, and ASC 606, Revenue from contracts with customers,\nunless otherwise noted. We have elected to exclude sales and other similar taxes from revenues.\nOperating Leases-We lease equipment pursuant to operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term\nof the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is\nplaced on non-accrual status and revenue is recognized when cash payments are received.\nGenerally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee\u2019s utilization of the\nleased asset or at the end of the lease. Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs and other operating expenses\nthroughout the term of the lease. These periodic maintenance payments accumulate over the term of the lease to fund major maintenance events, and we are contractually\nobligated to return maintenance payments to the lessee up to the cost of maintenance events paid by the lessee. In the event the total cost of maintenance events over the term\nof a lease is less than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee.\nMaintenance payments received for which we expect to repay to the lessee are presented as Maintenance deposits. All excess maintenance payments received that we do not\nexpect to repay to the lessee are recorded as Maintenance revenue. Estimates in recognizing revenue include mean time between removal, projected costs for engine\nmaintenance and forecasted utilization of aircraft which are affected by historical usage patterns and overall industry, market and economic conditions. Significant changes to\nthese estimates could have a material effect on the amount of revenue recognized in the period.\nFor purchase and lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based on the relative fair value of the\naircraft and lease and other related assets/liabilities acquired. The fair value of the lease may include a lease premium or discount, which is recorded as a favorable or\nunfavorable lease intangible.\nFinance Leases-From time to time we enter into finance lease arrangements that include a lessee obligation to purchase the leased equipment at the end of the lease term, a\nbargain purchase option, or provides for minimum lease payments with a present value that equals or exceeds substantially all of the fair value of the leased equipment at the\ndate of lease inception. Net investment in finance leases represents the minimum lease payments due from lessee, net of unearned income. The lease payments are\nsegregated into principal and interest components similar to a loan. Unearned income is recognized on an effective interest method over the lease term and is recorded as\nlease income. The principal component of the lease payment is reflected as a reduction to the net investment in finance leases. Revenue is not recognized when collection is\nnot reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are\nreceived.\nAsset sales revenue-Asset sales revenue primarily consists of the transaction price related to the sale of aircraft and aircraft engines from our Aviation Leasing segment. From\ntime to time, the Company may also assign the related lease agreements to the customer as part of the sale of these assets. We routinely sell leasing equipment to\ncustomers and such transactions are considered recurring and ordinary in nature to our business. As such, these sales are accounted for within the scope of ASC 606.\nRevenue is recognized when a performance obligation is satisfied by transferring control over an asset to a customer. Revenue is recorded with corresponding costs of sales,\npresented on a gross basis.\n\n\n 12\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 14 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nAerospace products revenue-Aerospace products revenue primarily consists of the transaction price related to the sale of CFM56-7B, CFM56-5B and V2500 engines, engine\nmodules, spare parts and used material inventory, and are accounted for within the scope of ASC 606. Revenue is recognized when a performance obligation is satisfied by\ntransferring control over the related asset to a customer. Revenue is recorded with corresponding costs of sales, presented on a gross basis. Aerospace products revenue\nalso consists of engine management service contracts, where the Company has a stand-ready obligation to provide replacement CFM56-7B and CFM56-5B engines to\ncustomers as they become unserviceable during the contract term. The Company recognizes revenue over time using a straight-line attribution method and the costs related to\nfulfilling the performance obligation are expensed as incurred.\nConcentration of Credit Risk-We are subject to concentrations of credit risk with respect to amounts due from customers. We attempt to limit our credit risk by performing\nongoing credit evaluations. No single customer accounted for greater than 10% of total revenue during the three and nine months ended September 30, 2024 and September\n30, 2023.\nAs of September 30, 2024 and December 31, 2023, no single customer accounted for greater than 10% of total accounts receivable, net.\nWe maintain cash and restricted cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial institutions. We\nmonitor the financial condition of these institutions and have not experienced any losses associated with these accounts.\nAllowance for Doubtful Accounts and Credit Losses-For receivables related to operating lease arrangements, we determine the allowance for doubtful accounts based on\nour assessment of the collectability of our receivables on a customer-by-customer basis. The allowance for doubtful accounts was $\n74.9 million and $72.2 million as of September 30, 2024 and December 31, 2023, respectively. We determine the credit loss reserve for note receivables, receivables related to\nfinance leases and inventory sales. There was provision for credit losses of $2.7 million for the three and nine months ended September 30, 2024. There was provision for\ncredit losses of $5.6 million and $6.6 million for the three and nine months ended September 30, 2023.\nComprehensive Income-Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and\ncircumstances, excluding those resulting from investments by and distributions to owners. Our comprehensive income represents net income, as presented in the\nConsolidated Statements of Operations.\nOther Assets-Other assets is primarily comprised of lease incentives of $58.3 million and $43.5 million, purchase deposits of $46.5 million and $23.9 million, notes\nreceivable for sales and exchanges of $152.2 million and $102.3 million, operating lease right-of-use assets, net of $12.2 million and $3.4 million, finance leases, net of $0.9\nmillion and $3.0 million, maintenance right assets of $21.5 million and $16.3 million, financing receivable resulting from failed sale-leaseback transactions of $63.9 million\nand $0.0 million, and prepaid expenses including prepayments for maintenance that has not yet been incurred of $132.5 million and $7.8 million as of September 30, 2024\nand December 31, 2023, respectively.\nAssets Held for Sale- We classify assets as held for sale when the Company commits to a plan to sell and it is probable that the sale will be completed within one year. These\nassets are recorded at the lower of their carrying value or fair market value, less costs to sell, starting from the period in which they meet the criteria for this classification.\nIn September 2024, the Company committed to a formal plan to sell two vessels within Corporate and Other, which includes offshore energy related assets. Consequently,\nthese vessels met the criteria to be classified as assets held for sale and have been presented separately. Any subsequent changes in our estimate of the fair value of these\nassets or costs to sell before their sale will be recorded as a gain or loss, with a corresponding adjustment to their carrying values. The disposal is expected to occur in the\nfourth quarter of 2024.\nAs of September 30, 2024 the vessels had a net book value of $119.0 million.\nDividends-Dividends are recorded if and when declared by the Board of Directors. For the three and nine months ended September 30, 2024 and 2023, the Board of Directors\ndeclared cash dividends of $0.30 and $0.90 per ordinary share, respectively.\nAdditionally, for the quarter ended September 30, 2024, the Board of Directors declared cash dividends on the Series B Preferred Shares, Series C Preferred Shares and\nSeries D Preferred Shares of $0.50, $0.52 and $0.59 per share, respectively.\nCash Flow Presentation-Included in net cash (used in) provided by operating activities are inflows from the sale of engine modules and parts that were on engines originally\npurchased and reported as Leasing equipment, net on the Consolidated Balance Sheet. The purchase of the original engine was reported as an outflow in net cash used in\ninvesting activities at the time of purchase through the Acquisition of leasing equipment line item. As part of the Aerospace products business, the Company breaks down\ngenerally unserviceable engines with the intent to manufacture modules and parts for creation and sale of new assets. To manufacture the modules and parts and bring them\ninto a salable condition, the Company spends significant costs, often over multiple reporting periods, for new inventory and capitalizable labor (e.g., engineering) that are\nincluded in net cash (used in) provided by operating activities as components of the changes in the related working capital accounts.\n\n\n 13\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 15 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nTherefore, when the costs to manufacture the assets are greater than (predominant to) the estimated value transferred from Leasing equipment into inventory, the related cash\nreceipt has been recorded as an inflow in net cash (used in) provided by operating activities.\nAdditionally, the Company buys inventory from third parties with the intent to use the parts in the manufacturing of the items discussed above, which is reported as an outflow in\nnet cash (used in) provided by operating activities. When rebuilding whole engines for resale, for which the cash inflow upon sale is reported as a cash inflow from investing\nactivities, the Company will transfer modules and parts needed (those purchased from third parties as well as parts from engines previously transferred to inventory from\nleasing equipment and rebuilt as discussed above) in the rebuild from inventory to leasing equipment.\nThe cash and noncash related activities described above during the nine months ended September 30, 2024 and 2023 are detailed below:\n\n Nine Months Ended September 30,\n(in thousands) 2024 2023\n\nCost of modules and parts sold sourced from engines originally within leasing equipment $ 33,663 $ 30,045\n\nTransfers of engines from leasing equipment to inventory for manufacturing and sale 143,678 147,285\nTransfers of inventory to leasing equipment for rebuilding and sale of engines (159,876) (53,533)\nTotal outflows related to manufacturing modules and parts - included in net cash (used in) provided by operating activities (270,679) (81,109)\nCash received for assets sold sourced from Leasing equipment - inflow included in cash (used in) provided by operating activities 56,670 59,115\n\nRecent Accounting Pronouncements-In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment\nDisclosures. This ASU modifies the disclosure and presentation requirements of reportable segments. The new guidance requires the disclosure of significant segment\nexpenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit and loss. In addition, the new\nguidance enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new\nsegment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. This standard is effective retrospectively for all\npublic entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We\nare currently assessing the impact this guidance will have on our consolidated financial statements and related disclosures.\nIn December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. This ASU enhances the transparency and decision\nusefulness of income tax disclosures by expanding the disclosures of an entity\u2019s income tax rate reconciliation and disaggregation of income taxes paid and income tax\nexpense. Under the new guidance, public business entities must annually disclose specific categories in the rate reconciliation and provide additional information for\nreconciling items that meet a quantitative threshold, if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax\nincome (loss) by the applicable statutory income tax rate. This standard is effective prospectively for all public entities for annual periods beginning after December 15, 2024,\nwith early adoption and retrospective application permitted. We are currently assessing the impact this guidance will have on our consolidated financial statements and related\ndisclosures.\nIn March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concept Statements. This ASU amends the\nCodification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the\nscope of the affected accounting guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. ASU\n2024-02 is effective January 1, 2025 and we are currently assessing the impact this guidance will have on our consolidated financial statements and related disclosures.\n\n3. ACQUISITION OF LOCKHEED MARTIN COMMERCIAL ENGINE SOLUTIONS\nOn September 9, 2024, the Company, through its subsidiary FTAIC Aviation Inc. (\u201cFTAIC\u201d) created on April 25, 2024, acquired certain assets and assumed certain liabilities of\nLockheed Martin Commercial Engine Solutions (\u201cLMCES\u201d) from Lockheed Martin Canada for a total cash consideration of $170.0 million. LMCES is a 526,000-square-foot\naircraft engine maintenance repair facility located in Montr\u00e9al, Quebec. We acquired LMCES to further enhance our Maintenance, Repair, and Exchange business and establish\npermanent engine and module manufacturing capabilities in Canada. The facility operates within our Aerospace Products segment, providing extensive engine and piece-part\nrepair capabilities for the CFM56 engines. See Note 13 for additional information. The results of operations at LMCES have been included in the Consolidated Statements of\nOperations as of the effective date of the acquisition. In connection with the acquisition, we recorded $4.8 million and $5.2 million of acquisition and transaction expense during\nthe three and nine months ended September 30, 2024, respectively.\n\n\n 14\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 16 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe acquisition of LMCES was accounted for as a business combination and, as such, the following fair values were assigned to assets acquired and liabilities assumed\nbased on management\u2019s estimates and assumptions and are preliminary. The significant assumptions used to estimate the fair values of the property, plant, and equipment\nand inventory included replacement cost estimates and market data for similar assets where available. The final valuation and related allocation of the purchase price is\nsubject to change as additional information is received and will be completed no later than 12 months after the closing date. The final acquisition accounting adjustments may\nbe materially different and may include (i) changes in fair values of property, plant and equipment and associated salvage values\u037e (ii) changes in fair values of inventory\u037e (iii)\nchanges in allocations to intangible assets, including goodwill\u037e (iv) changes due to net working capital adjustments\u037e (v) changes due to deferred taxes and (vi) changes to other\nassets and other liabilities.\nThe following table summarizes the preliminary allocation of the net assets acquired:\n\n September 9, 2024\nFair value of assets acquired:\nAccounts receivable $ 12,273\nProperty, plant, and equipment 71,376\nLeasing equipment 5,675\nInventory 47,445\nOther assets (1) 12,804\nTotal assets 149,573\nFair value of liabilities assumed:\nAccounts payable and accrued liabilities 9,847\nOther liabilities 22,996\nTotal liabilities 32,843\nGoodwill (2) 26,904\nNet assets acquired (3) $ 143,634\n\n________________________________________________________\n(1) Acquired Other assets include a favorable off-market lease component with an estimated fair value of $2,340.\n\n\n(2) Goodwill is primarily attributable to the assembled workforce of FTAIC and the synergies expected to be achieved. This goodwill is assigned to the Aerospace Products segment and is deductible\n\nfor income tax purposes.\n(3) Total consideration is calculated as cash paid, adjusted for the settlement of pre-existing relationships. Cash consideration is also preliminary, as it is subject to net working capital adjustments.\n\n\n\n\nThe following table presents preliminary fair values of the components of property, plant and equipment acquired and their estimated useful lives:\n\n Estimated Fair\n Estimated useful life in years value\nBuildings and improvements 25 $ 40,602\nMachinery and equipment 2 - 21 29,973\nOther N/A 801\nTotal $ 71,376\n\nThe results of operations for the acquired business are included in the accompanying Consolidated Statements of Operations from the acquisition date.\nThe following table presents supplemental pro-forma information as if the acquisitions had occurred at the beginning of fiscal year 2023. The pro-forma information does not\nnecessarily reflect the results of operations that would have occurred had the acquisitions had taken place as of January 1, 2023. Cost savings are also not reflected in the pro-\nforma amounts presented below.\n\n\n 15\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 17 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n Three Months Ended September 30, Nine Months Ended September 30,\n 2024 2023 2024 2023\nTotal revenue $ 479,277 $ 315,666 $ 1,283,520 $ 929,297\nNet income (loss) attributable to shareholders $ 83,727 $ 34,753 $ (122,542) $ 89,716\n\n4. ACQUISITION OF QUICKTURN\nOn December 1, 2023, we completed the acquisition of the remaining equity interest of Quick Turn Engine Center LLC (\u201cQuickTurn\u201d) from Unical Aviation Inc. (\u201cUnical\u201d) for total\ncash consideration of $\n30.3 million to obtain full ownership.\nWe acquired QuickTurn to better position the Company to have tighter integration over the development and delivery of aerospace products. QuickTurn is a hospital\nmaintenance and testing facility dedicated to the CFM56 engine located in Miami, Florida that operates within our Aerospace Products segment. The results of operations at\nQuickTurn have been included in the Consolidated Statements of Operations beginning on the acquisition date.\nThe acquisition of QuickTurn was accounted for as a business combination and, as such, the following fair values were assigned to assets acquired and liabilities assumed\nbased on management\u2019s estimates and assumptions and are preliminary. The significant assumptions used to estimate the fair value of the property, plant, and equipment\nincluded replacement cost estimates and market data for similar assets where available. The significant assumptions used to estimate the value of the customer relationship\nintangible assets included the discount rate and future revenues and operating expenses. The final valuation and related allocation of the purchase price is subject to change\nas additional information is received and will be completed no later than 12 months after the closing date. The final acquisition accounting adjustment may be materially\ndifferent and may include changes in fair values of Inventory.\nThe following table summarizes the preliminary allocation of the net assets acquired:\n\n December 1, 2023\nFair value of assets acquired:\nCash and cash equivalents $ 518\nRestricted cash 150\nAccounts receivable 5,133\nProperty, plant, and equipment 30,559\nIntangible assets 2,377\nInventory 9,332\nOther assets 4,301\nTotal assets 52,370\nFair value of liabilities assumed:\nAccounts payable and accrued liabilities 3,994\nOther liabilities 2,410\nTotal liabilities 6,404\nGoodwill (1) 4,630\nNet assets acquired $ 50,596\n\n________________________________________________________\n(1) Goodwill is primarily attributable to the assembled workforce of QuickTurn and the synergies expected to be achieved. This goodwill is assigned to the Aerospace Products segment and is\n\ndeductible for income tax purposes.\n\n\n\nThe following table presents the identifiable intangible assets and their estimated useful lives:\n\n Estimated Fair\n Estimated useful life in years value\nAbove market leases 4 $ 470\nCustomer relationships 5 $ 1,907\nTotal $ 2,377\n\n\n\n 16\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 18 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table presents the property, plant and equipment and their estimated useful lives:\n\n Estimated Fair\n Estimated useful life in years value\nLand N/A $ 2,840\nBuildings and improvements 25 13,790\nMachinery and equipment 6 - 23 13,631\nOther 5-7 298\nTotal $ 30,559\n\nThe financial information in the table below summarizes the combined results of operations of FTAI and QuickTurn on a pro forma basis. These pro forma results were based\non estimates and assumptions which we believe are reasonable. The pro forma adjustments are primarily comprised of the following:\n \u2022 The allocation of the purchase price and related adjustments, including adjustments to depreciation and amortization expense related to the fair value of property,\n plant and equipment and intangible assets acquired\u037e\n \u2022 Associated tax-related impacts of adjustments.\nThe following pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the\nacquisition had taken place as of January 1, 2023.\n\n Three Months Ended Nine Months Ended\n September 30, 2023 September 30, 2023\nTotal revenue $ 296,480 $ 875,066\nNet income attributable to shareholders $ 31,350 $ 97,633\n\n\n5. LEASING EQUIPMENT, NET\n\nLeasing equipment, net is summarized as follows:\n\n September 30, 2024 December 31, 2023\nLeasing equipment $ 2,621,016 $ 2,574,394\nLess: Accumulated depreciation (554,679) (541,981)\nLeasing equipment, net $ 2,066,337 $ 2,032,413\n\nDue to specific transactions, we identified certain assets in our leasing equipment portfolio with indicators of impairment. As a result, we adjusted the carrying value of these\nassets to fair value and recognized transactional impairment charges of $1.0 million and $1.2 million, net of redelivery compensation, for the nine months ended September\n30, 2024 and 2023, respectively. For the three months ended September 30, 2024 and 2023, no transactional impairment charges were recorded.\nDepreciation expense for leasing equipment is summarized as follows:\n\n Three Months Ended September 30, Nine Months Ended September 30,\n 2024 2023 2024 2023\nDepreciation expense for leasing equipment $ 55,376 $ 43,765 159,936 122,867\n\n6. INVESTMENTS\n\nThe following table presents the ownership interests and carrying values of our investments:\n\n Carrying Value\n Investment Ownership Percentage September 30, 2024 December 31, 2023\nAdvanced Engine Repair JV Equity method 25% $ 19,448 $ 21,040\nFalcon MSN 177 LLC Equity method 50% - 1,682\n $ 19,448 $ 22,722\n\n\nWe did not recognize any other-than-temporary impairments for the three and nine months ended September 30, 2024 and 2023.\n\n\n 17\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 19 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table presents our proportionate share of equity in (losses) income:\n\n Three Months Ended September 30, Nine Months Ended September 30,\n 2024 2023 2024 2023\nAdvanced Engine Repair JV $ (438) $ 1,063 $ (1,592) $ 1,336\nFalcon MSN 177 LLC - (108) (207) (242)\nQuick Turn Engine Center LLC - (909) - (2,763)\nTotal $ (438) $ 46 $ (1,799) $ (1,669)\n\nEquity Method Investments\nAdvanced Engine Repair JV\nIn December 2016, we invested $15 million for a 25% interest in an advanced engine repair joint venture. This joint venture is focused on developing new cost savings\nprograms for engine repairs.\nIn August 2019, we expanded the scope of our joint venture and invested an additional $13.5 million and maintained a 25% interest. We exercise significant influence over this\ninvestment and account for this investment as an equity method investment.\nFalcon MSN 177 LLC\nIn November 2021, we invested $1.6 million for a 50% interest in Falcon MSN 177 LLC (\u201cFalcon\u201d), an entity that consists of one Dassault Falcon 2000 aircraft. Falcon leases\nthe aircraft to charter operators on aircraft, crew maintenance, and insurance contracts. We account for our investment in Falcon as an equity method investment as we have\nsignificant influence through our interest.\nOn May 3, 2024, we purchased the remaining interest from S7 Aerospace for total cash consideration of $0.8 million and obtained full ownership of the aircraft with a 100%\nequity interest. On the acquisition date, the Company accounted for the Falcon investment on a consolidated basis and derecognized it as an equity method investment.\nQuick Turn Engine Center LLC\nOn January 4, 2023, we invested $19.5 million for a 50% interest (45% pro rata distribution of income until return of the JV partner\u2019s initial investment) in Quick Turn Engine\nCenter LLC (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. We account for our investment in QuickTurn as an equity\nmethod investment as we have significant influence through our interest.\nOn December 1, 2023, we purchased the remaining interest in QuickTurn from the joint venture partner for total cash consideration of $30.3 million to obtain full ownership with\na 100% equity interest. On the acquisition date, the Company accounted for QuickTurn on a consolidated basis and derecognized it as an equity method investment. See Note\n4 for additional information.\n\n\n 18\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 20 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n7. INTANGIBLE ASSETS AND LIABILITIES, NET\n\nIntangible assets and liabilities, net are summarized as follows:\n September 30, 2024 December 31, 2023\nIntangible assets\nAcquired favorable lease intangibles $ 66,535 $ 68,041\nLess: Accumulated amortization (30,123) (19,347)\nAcquired favorable lease intangibles, net 36,412 48,694\nAcquired customer relationships 1,907 1,907\nLess: Accumulated amortization (318) (11)\nAcquired customer relationships, net 1,589 1,896\nTotal intangible assets, net $ 38,001 $ 50,590\n\n\nIntangible liabilities\nAcquired unfavorable lease intangibles $ 3,085 $ 3,151\nLess: Accumulated amortization (1,040) (1,389)\nAcquired unfavorable lease intangibles, net $ 2,045 $ 1,762\n\n\nIntangible liabilities relate to unfavorable lease intangibles and are included as a component of Other liabilities.\nAmortization of intangible assets and liabilities is recorded as follows:\n\n Three Months Ended September 30, Nine Months Ended September 30,\n Classification in Consolidated Statements\n of Operations 2024 2023 2024 2023\nLease intangibles Lease income $ 3,720 $ 3,726 $ 11,482 $ 11,325\nCustomer relationships Depreciation and amortization 95 - 307 -\nTotal $ 3,815 3,726 $ 11,789 11,325\n\n\nAs of September 30, 2024, estimated net annual amortization of intangibles is as follows:\n\nRemainder of 2024 $ 3,849\n2025 12,652\n2026 9,356\n2027 4,348\n2028 3,759\nThereafter 1,992\nTotal $ 35,956\n\n\n\n 19\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 21 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n8. DEBT, NET\n\nOur debt, net is summarized as follows:\n September 30, 2024 December 31, 2023\n Outstanding Outstanding\n Borrowings Stated Interest Rate Maturity Date Borrowings\nLoans payable\n (i) Base Rate + 1.75%\u037e or\nRevolving Credit Facility (1) $ 150,000 (ii) Adjusted Term SOFR Rate + 2.75% 5/22/27 $ -\nTotal loans payable 150,000 -\nBonds payable\nSenior Notes due 2025 (2) - 6.50% 10/1/25 652,043\nSenior Notes due 2027 130,500 9.75% 8/1/27 400,000\nSenior Notes due 2028 (3) 1,001,475 5.50% 5/1/28 1,001,746\nSenior Notes due 2030 (4) 496,976 7.88% 12/1/30 496,704\nSenior Notes due 2031 700,000 7.00% 5/1/31 -\nSenior Notes due 2032 800,000 7.00% 6/15/32 -\nTotal bonds payable 3,128,951 2,550,493\n\n\nDebt 3,278,951 2,550,493\nLess: Debt issuance costs (60,608) (33,150)\nTotal debt, net $ 3,218,343 $ 2,517,343\n\n\nTotal debt due within one year $ - $ -\n\n________________________________________________________\n(1) Requires a quarterly commitment fee at a rate of 0.50% on the average daily unused portion, as well as customary letter of credit fees and agency fees.\n\n(2) Includes an unamortized discount of $866 at December 31, 2023 and an unamortized premium of $2,908 at December 31, 2023.\n\n(3) Includes an unamortized premium of $1,475 and $1,746 at September 30, 2024 and December 31, 2023, respectively.\n\n(4) Includes unamortized discount of $3,024 and $3,296 at September 30, 2024 and December 31, 2023, respectively.\n\n\nRevolving Credit Facility-On May 23, 2024, the Company amended and restated its Revolving Credit Facility by executing a Third Amended and Restated Credit Agreement\n(the \u201cRevolver Amendment\u201d). The Revolver Amendment provides for revolving loans to be made available to the Company in an aggregate principal amount of up to $400.0\nmillion, of which up to $25.0 million may be utilized for the issuance of letters of credit.\nSenior Notes due 2031-On April 11, 2024, we issued $700.0 million aggregate principal amount of senior unsecured notes due 2031 (the \u201cSenior Notes due 2031\u201d). The\nSenior Notes due 2031 bear interest at a rate of 7.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on November 1,\n2024. Using a portion of the net proceeds, the Company completed a cash tender offer for $324.6 million aggregate principal amount of 2025 Notes validly tendered on April\n11, 2024. Holders whose notes were accepted for purchase received equal consideration per $1,000 principal amount of 2025 Notes, plus accrued and unpaid interest to, but\nnot including, April 11, 2024. The Company used the remaining net proceeds to redeem the remaining $325.4 million aggregate principal amount of Senior Notes due 2025,\nplus accrued and unpaid interest, and recognized a loss on extinguishment of debt of $2.7 million. The remaining net proceeds were used for general corporate purposes,\nincluding the funding of acquisitions and investments.\nSenior Notes due 2032-On June 17, 2024, we issued $800.0 million aggregate principal amount of senior unsecured notes due 2032 (the \u201cSenior Notes due 2032\u201d). These\nnotes bear interest at a rate of 7.00% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2024. The\nCompany utilized the net proceeds from the issuance for several purposes: (i) to fully repay outstanding amounts under our Revolving Credit Facility provided under the\nRevolver Amendment, without reduction in commitments, (ii) to fund the cash termination fee for the previously announced management Internalization described in Note 12,\n(iii) to complete a cash tender offer for up to $300.0 million in aggregate principal amount of Senior Notes due 2027 validly tendered on June 18, 2024, plus accrued and\nunpaid interest, and recognized a loss on extinguishment of debt of $11.2 million, (iv) to cover fees and expenses related to the aforementioned transactions, and (v) for\ngeneral corporate purposes.\nWe were in compliance with all debt covenants as of September 30, 2024.\n\n\n 20\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 22 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n9. FAIR VALUE MEASUREMENTS\n\nFair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of\nunobservable inputs. These inputs are prioritized as follows:\n\u2022 Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.\n\u2022 Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or\n market corroborated inputs.\n\u2022 Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the\n asset or liability.\nThe valuation techniques that may be used to measure fair value are as follows:\n\u2022 Market approach-Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.\n\u2022 Income approach-Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts.\n\u2022 Cost approach-Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).\nOur cash and cash equivalents and restricted cash consist largely of demand deposit accounts with maturities of 90 days or less when purchased that are considered to be\nhighly liquid. These instruments are valued using inputs observable in active markets for identical instruments and are therefore classified as Level 1 within the fair value\nhierarchy.\nExcept as discussed below, our financial instruments other than cash and cash equivalents and restricted cash consist principally of accounts receivable, notes receivable,\naccounts payable and accrued liabilities, loans payable, security deposits, maintenance deposits and management fees payable, whose fair values approximate their carrying\nvalues based on an evaluation of pricing data, vendor quotes, and historical trading activity or due to their short maturity profiles.\nThe fair values of our bonds payable are presented in the table below and classified as Level 2 within the fair value hierarchy:\n September 30, 2024 December 31, 2023\nSenior Notes due 2025 $ - $ 649,383\nSenior Notes due 2027 133,883 416,432\nSenior Notes due 2028 997,080 963,630\nSenior Notes due 2030 539,175 521,440\nSenior Notes due 2031 736,162 -\nSenior Notes due 2032 840,312 -\n\nThe Company has contingent obligations under ASC 460, Guarantees, in connection with certain sales of aircraft on lease, which are measured at fair value. The guarantees\nare valued at $\n8.1 million and $6.8 million as of September 30, 2024 and December 31, 2023, respectively, and are reflected as a component of Other liabilities. The fair values of the\nguarantees are determined based on the estimated condition of the engines at the end of each lease term and the estimated cost of replacement and applicable discount\nrates and are classified as Level 3. During the three and nine months ended September 30, 2024, the Company recorded a $0.3 million and $1.3 million increase related to\nthe change in fair value, which is recorded as Asset sales revenue. During the nine months ended September 30, 2023, the Company recorded a $4.9 million increase in\nguarantees related to the sale of seven aircrafts and a $1.7 million decrease related to the change in fair value, which is recorded as Asset sales revenue. During the three and\nnine months ended September 30, 2024 and 2023, there were no significant transfers into or out of Level 3.\nWe measure the fair value of certain assets on a non-recurring basis when U.S. GAAP requires the application of fair value, including events or changes in circumstances that\nindicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include intangible assets, property, plant and equipment and\nleasing equipment. We record such assets at fair value when it is determined the carrying value may not be recoverable. Fair value measurements for assets subject to\nimpairment tests are based on an income approach which uses Level 3 inputs, which include our assumptions as to future cash flows from operation of the leasing and\neventual sale of assets.\n\n10. EQUITY-BASED COMPENSATION\n\nWe have a Nonqualified Stock Option and Incentive Award Plan (\u201cIncentive Plan\u201d) which provides for the ability to award equity compensation awards in the form of stock\noptions to eligible employees, consultants, directors, and other individuals who provide services to us, each as determined by the Compensation Committee of the Board of\nDirectors.\n\n\n 21\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 23 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nAs of September 30, 2024, the Incentive Plan provides for the issuance of up to 29.8 million shares. Equity-based compensation expense is reported within operating\nexpenses and general and administrative.\nThe Consolidated Statements of Operations includes the following expense related to our stock-based compensation arrangements:\n\n Remaining Expense To Be Weighted Average\n Three Months Ended September 30, Nine Months Ended September 30, Recognized, If All Vesting Remaining Contractual\n 2024 2023 2024 2023 Conditions Are Met Term (in years)\nStock Options $ 128 $ - $ 170 $ - $ 1,905 3.8 years\nRestricted Shares 1,302 510 2,408 1,128 16,112 2.9 years\nTotal $ 1,430 $ 510 $ 2,578 $ 1,128 $ 18,017\n\nOptions\nDuring the nine months ended September 30, 2024, the Former Manager transferred 37,343 of its options to certain of the Former Manager\u2019s employees. All of these options\nwere issued prior to the Internalization.\nAdditionally, the Company granted options to select employees of FTAI Aviation LLC (a wholly owned subsidiary of the Company) related to\n60,000 ordinary shares at an exercise price of $79.13, which had a grant date fair value of $2.1 million. The assumptions used in valuing the options were: a 4.52% risk-free\nrate, a 1.50% dividend yield, a 43.00% volatility and a 6.8 year term.\nRestricted Shares\nDuring the nine months ended September 30, 2024, we issued the following restricted shares of the Company to select employees and officers of FTAI Aviation LLC:\nIn May 2024, we issued restricted shares to (i) select officers with a grant date fair value of $5.5 million, vesting over 3.0 years and (ii) select employees with a grant date fair\nvalue of $5.7 million, vesting over 4.0 years.\nIn September 2024, we issued restricted shares to select employees with a grant date fair value of $0.8 million, vesting over 3.0 years.\nAll awards are subject to continued employment, with compensation expense recognized ratably over the vesting periods. The fair value was based on the closing price of FTAI\nAviation Ltd.\u2019s ordinary shares on the respective grant dates.\n\n\n 22\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 24 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n11. INCOME TAXES\nThe current and deferred components of the income tax provision included in the Consolidated Statements of Operations are as follows:\n\n Three Months Ended September 30, Nine Months Ended September 30,\n 2024 2023 2024 2023\nCurrent:\n Cayman Islands $ - $ - $ - $ -\n Bermuda - - - -\n United States: - - - -\n Federal (296) (32) 888 (77)\n State and local (72) 39 217 20\n Non-U.S. 446 851 1,235 1,669\nTotal current provision 78 858 2,340 1,612\nDeferred:\n Cayman Islands - - - -\n Bermuda 4,738 - (3,088) -\n United States: - - - -\n Federal 1,422 1,521 2,733 2,344\n State and local 317 (430) 584 68\n Non-U.S. 776 1,756 (2,699) 3,562\nTotal deferred provision 7,253 2,847 (2,470) 5,974\nTotal provision for income taxes $ 7,331 $ 3,705 $ (130) $ 7,586\n\nThe Company is an exempted entity domiciled in the Cayman Islands where income taxes are not imposed. The Company is considered a Passive Foreign Investment\nCompany for U.S. income tax purposes and certain income taxes are imposed on our owners. Taxable income or loss generated by our corporate subsidiaries is subject to\ncorporate income tax in locations where they conduct business.\nHistorically, the Company\u2019s Bermuda operations have not been subject to Bermuda income tax. However, on December 27, 2023, the Government of Bermuda enacted a 15\npercent corporate income tax regime (the \u201cBermuda CIT\u201d) that applies to Bermuda businesses that are part of multinational enterprise groups with annual revenue of \u20ac750\nmillion or more and is effective for tax years beginning on or after January 1, 2025. As a result of the Bermuda CIT, the exemption of certain of the Company\u2019s Bermuda\nsubsidiaries from Bermuda corporate income taxes will cease in 2025. For the year ended December 31, 2023, we recorded a deferred tax asset of $72.2 million in connection\nwith the Bermuda law change. As of September 30, 2024, we project the Bermuda subsidiaries to generate a net operating loss for the year ended December 31, 2024. As\nsuch, the Company recorded a tax benefit of $3.1 million to increase its Bermuda deferred tax asset.\nOur effective tax rate differs from the U.S. federal tax rate of 21% primarily due to a significant portion of our income not being subject to U.S. corporate tax rates, or being\ndeemed to be foreign sourced and thus either not taxable or taxable at effectively lower tax rates.\nAs of and for the nine months ended September 30, 2024, we had not established a liability for uncertain tax positions as no such positions existed. In general, our tax returns\nand the tax returns of our corporate subsidiaries are subject to U.S. federal, state, local and foreign income tax examinations by tax authorities. Generally, we are not subject to\nexamination by taxing authorities for tax years prior to 2020. We do not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly\nchange within 12 months of the reporting date.\n\n12. AFFILIATE TRANSACTIONS\n\nOn May 28, 2024, the Company entered into definitive agreements with the Former Manager and Master GP to internalize the Company\u2019s management function. As part of the\ntermination of the Management Agreement, the Company (i) paid the Former Manager (for itself and on behalf of the Master GP, as applicable) the Cash Consideration, the\ncompensation accrued and payable, but not yet paid, under the Management Agreement and the expenses that were reimbursable, but not yet reimbursed, under the\nManagement Agreement\u037e (ii) issued to the Former Manager (for itself and on behalf of the Master GP, as applicable) the Share Consideration\u037e and (iii) purchased from Master\nGP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the Company, in exchange for $\n30. Following the Internalization, the Company no longer pays management fees or incentive distributions to the Former Manager and Master GP.\n\n\n 23\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 25 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nIn connection with the termination of the Management Agreement, the Company also entered into a Transition Services Agreement with the Former Manager. Under the\nTransition Services Agreement, the Former Manager was required to continue to provide the Company and its affiliates with all of the Services for a transition period through\nOctober 31, 2024, during which the Company procured replacements for the Services. The Services were provided to the Company for a fee equal to the Former Manager\u2019s\ncost of providing the Services, plus a mark-up of ten percent (10%). In addition, the Former Manager is required to continue to provide the services that are reasonably required\nby the Company to prepare its quarterly and annual financial statements until May 31, 2025. The Transition Services Agreement may be terminated earlier (x) by mutual\nagreement of the parties, (y) by either the Former Manager or the Company in the event of a material breach by the non-terminating party that is not cured within thirty (30) days\nfollowing written notification thereof, or (z) by the Former Manager if the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days.\n\nPrior to the Internalization, the Former Manager was paid annual fees in exchange for advising us on various aspects of our business, formulating our investment strategies,\narranging for the acquisition and disposition of assets, arranging for financing, monitoring performance, and managing our day-to-day operations, inclusive of all costs\nincidental thereto. In addition, the Former Manager was reimbursed for various expenses incurred by the Former Manager on our behalf, including the costs of legal,\naccounting and other administrative activities. Additionally, we entered into certain incentive allocation arrangements with Master GP, which owned approximately 0.01% of FTAI\nAviation Holdco Ltd. (a wholly owned subsidiary of the Company).\n\nThe Former Manager was entitled to a management fee and reimbursement of certain expenses. The management fee was determined by taking the average value of total\nequity (excluding non-controlling interests) determined on a consolidated basis in accordance with U.S. GAAP at the end of the two most recently completed months multiplied\nby an annual rate of 1.50%, and was payable monthly in arrears in cash.\n\nPrior to the Internalization and the termination of the Management Agreement on May 28, 2024, Master GP, was entitled to incentive allocations (comprised of income incentive\nallocation and capital gains incentive allocation, defined below). The income incentive allocation was calculated and distributable quarterly in arrears based on the pre-\nincentive allocation net income for the immediately preceding calendar quarter (the \u201cIncome Incentive Allocation\u201d). For this purpose, pre-incentive allocation net income means,\nwith respect to a calendar quarter, net income attributable to shareholders during such quarter calculated in accordance with U.S. GAAP excluding our pro rata share of (1)\nrealized or unrealized gains and losses, and (2) certain non-cash or one-time items, and (3) any other adjustments as may be approved by our independent directors. Pre-\nincentive allocation net income did not include any Income Incentive Allocation or Capital Gains Incentive Allocation (described below) paid to Master GP during the relevant\nquarter.\n\nPrior to the Internalization, one of our subsidiaries allocated and distributed to Master GP an Income Incentive Allocation with respect to its pre-incentive allocation net income\nin each calendar quarter as follows: (1) no Income Incentive Allocation in any calendar quarter in which pre-incentive allocation net income, expressed as a rate of return on the\naverage value of our net equity capital (excluding non-controlling interests) at the end of the two most recently completed calendar quarters, does not exceed 2% for such\nquarter (8% annualized)\u037e (2) 100% of pre-incentive allocation net income with respect to that portion of such pre-incentive allocation net income, if any, that is equal to or\nexceeds 2% but does not exceed 2.2223% for such quarter\u037e and (3) 10% of the amount of pre-incentive allocation net income, if any, that exceeds 2.2223% for such quarter.\nThese calculations were prorated for any period of less than three months.\n\nPrior to the Internalization, Capital Gains Incentive Allocation was calculated and distributable in arrears as of the end of each calendar year and was equal to 10% of our pro\nrata share of cumulative realized gains from the date of the IPO through the end of the applicable calendar year, net of our pro rata share of cumulative realized or unrealized\nlosses, the cumulative non-cash portion of equity-based compensation expenses and all realized gains upon which prior performance-based Capital Gains Incentive\nAllocation payments were made to Master GP.\n\nThe following table summarizes the management fees, income incentive allocation and capital gains incentive allocation prior to the Internalization on May 28, 2024:\n\n Three Months Ended September 30, Nine Months Ended September 30,\n 2024 2023 2024 2023\nManagement fees $ - $ 303 $ 993 $ 597\nIncome incentive allocation - 4,274 7,456 12,540\nTotal $ - $ 4,577 $ 8,449 $ 13,137\n\n\n\n 24\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 26 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nWe paid all of our operating expenses, except those specifically required to be borne by the Former Manager under the Management Agreement. The expenses required to be\npaid by us included, but were not limited to, issuance and transaction costs incident to the acquisition, disposition and financing of our assets, legal and auditing fees and\nexpenses, the compensation and expenses of our independent directors, the costs associated with the establishment and maintenance of any credit facilities and other\nindebtedness of ours (including commitment fees, legal fees, closing costs, etc.), expenses associated with other securities offerings of ours, costs and expenses incurred in\ncontracting with third parties (including affiliates of the Former Manager), the costs of printing and mailing proxies and reports to our shareholders, costs incurred by the Former\nManager or its affiliates for travel on our behalf, costs associated with any computer software or hardware that was used by us, costs to obtain liability insurance to indemnify\nour directors and officers and the compensation and expenses of our transfer agent.\n\nWe paid or reimbursed the Former Manager and its affiliates for performing certain legal, accounting, due diligence tasks and other services that outside professionals or\noutside consultants otherwise would perform, provided that such costs and reimbursements were no greater than those which would be paid to outside professionals or\nconsultants. The Former Manager was responsible for all of its other costs incident to the performance of its duties under the Management Agreement, including\ncompensation of the Former Manager\u2019s employees, rent for facilities and other \u201coverhead\u201d expenses\u037e we did not reimburse the Former Manager for these expenses.\n\nThe following table summarizes our reimbursements to the Former Manager:\n Three Months Ended September 30, Nine Months Ended September 30,\n 2024 2023 2024 2023\nClassification in the Consolidated Statements of Operations:\n General and administrative $ 2,557 $ 1,592 $ 6,115 $ 5,096\n Acquisition and transaction expenses 967 172 1,654 381\nTotal $ 3,524 $ 1,764 $ 7,769 $ 5,477\n\n\nUpon the successful completion of an offering of our ordinary shares or other equity securities (including securities issued as consideration in an acquisition), we granted the\nFormer Manager options to purchase ordinary shares in an amount equal to 10% of the number of ordinary shares being sold in the offering (or if the issuance relates to equity\nsecurities other than our ordinary shares, options to purchase a number of ordinary shares equal to 10% of the gross capital raised in the equity issuance divided by the fair\nmarket value of a ordinary share as of the date of issuance), with an exercise price equal to the offering price per share paid by the public or other ultimate purchaser or\nattributed to such securities in connection with an acquisition (or the fair market value of a ordinary share as of the date of the equity issuance if it relates to equity securities\nother than our ordinary shares). Any ultimate purchaser of ordinary shares for which such options are granted may have been an affiliate of the Former Manager.\n\nThe following table summarizes amounts due to the Former Manager, which are included within accounts payable and accrued liabilities in the Consolidated Balance Sheets:\n\n September 30, 2024 December 31, 2023\nAccrued management fees $ - $ 224\nOther payables 2,500 6,200\n\nAs of September 30, 2024 and December 31, 2023, there were no receivables from the Former Manager.\n\n13. SEGMENT INFORMATION\n\nThe key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and services. Our two\nreportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft\nengines, which it leases and sells to customers. The Aerospace Products segment, through our maintenance facilities, equity method investment and exclusivity\narrangements, develops and manufactures, repairs/refurbishes and sells aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500\ncommercial aircraft engines. During the fourth quarter of 2023, the Company changed the composition of its operating segments to include V2500 engines within the\nAerospace Products segment. Prior periods have been restated to reflect the change in accordance with the requirements ASC 280, Segment Reporting. See Note 2 for\nadditional information.\n\nCorporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, internalization fee and management fees\nand incentive compensation pursuant to the Management Agreement prior to the Internalization effective May 28, 2024. Additionally, Corporate and Other also includes offshore\nenergy related assets, which consist of vessels and equipment that support offshore oil and gas activities and production which are typically subject to operating leases.\n\n\n 25\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 27 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe accounting policies of the segments are the same as those described in the summary of significant accounting policies\u037e however, financial information presented by\nsegment includes the impact of intercompany eliminations. Our Chief Executive Officer is our Chief Operating Decision Maker (\u201cCODM\u201d). Segment information is presented in\nthe same manner that our CODM reviews the operating results in assessing performance and allocating resources. The CODM evaluates performance for each reportable\nsegment primarily based on Adjusted EBITDA. Historically, the CODM\u2019s assessment of segment performance included asset information. The CODM determined that\nsegment asset information is not a key factor in measuring performance or allocating resources. Therefore, segment asset information is not included in the tables below as it\nis not provided to or reviewed by our CODM.\n\nAdjusted EBITDA is defined as net income (loss) attributable to shareholders, adjusted (a) to exclude the impact of provision for (benefit from) income taxes, equity-based\ncompensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-\nhedge derivative instruments, asset impairment charges, incentive allocations, depreciation and amortization expense, dividends on preferred shares and interest expense,\ninternalization fee to affiliate, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings\n(losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA.\n\nWe believe that net income (loss) attributable to shareholders, as defined by U.S. GAAP, is the most appropriate earnings measurement with which to reconcile Adjusted\nEBITDA. Adjusted EBITDA should not be considered as an alternative to net income (loss) attributable to shareholders as determined in accordance with U.S. GAAP.\nThe following tables set forth certain information for each reportable segment:\n\nI. For the Three Months Ended September 30, 2024\n\n Three Months Ended September 30, 2024\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nLease income $ 57,322 $ - $ 8,128 $ 65,450\nMaintenance revenue 59,917 - - 59,917\nAsset sales revenue 34,953 - - 34,953\nAerospace products revenue - 303,469 - 303,469\nOther revenue 74 - 1,931 2,005\nTotal revenues $ 152,266 $ 303,469 $ 10,059 $ 465,794\n\n\nExpenses\nCost of sales 20,684 198,812 - 219,496\nOperating expenses 9,995 2,617 14,246 26,858\nGeneral and administrative - - 4,045 4,045\nAcquisition and transaction expenses 2,620 2,100 4,621 9,341\nDepreciation and amortization 52,455 1,306 3,014 56,775\nTotal expenses 85,754 204,835 25,926 316,515\n\n\nOther income (expense)\nEquity in losses of unconsolidated entities - (438) - (438)\nInterest expense - - (57,937) (57,937)\nOther income 1,982 - 927 2,909\nTotal other income (expense) 1,982 (438) (57,010) (55,466)\nIncome (loss) before income taxes 68,494 98,196 (72,877) 93,813\nProvision for (benefit from) income taxes 8,898 4,408 (5,975) 7,331\nNet income (loss) 59,596 93,788 (66,902) 86,482\nLess: Dividends on preferred shares - - 8,335 8,335\nNet income (loss) attributable to shareholders $ 59,596 $ 93,788 $ (75,237) $ 78,147\n\n\n\n 26\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 28 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table sets forth a reconciliation of Adjusted EBITDA to net income attributable to shareholders:\n Three Months Ended September 30, 2024\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nAdjusted EBITDA $ 136,423 $ 101,814 $ (6,207) $ 232,030\nAdd: Non-controlling share of Adjusted EBITDA -\nAdd: Equity in losses of unconsolidated entities (438)\nLess: Pro-rata share of Adjusted EBITDA from unconsolidated entities 382\nLess: Interest expense and dividends on preferred shares (66,272)\nLess: Depreciation and amortization expense (69,453)\nLess: Incentive allocations -\nLess: Asset impairment charges -\nLess: Changes in fair value of non-hedge derivative instruments -\nLess: Losses on the modification or extinguishment of debt and capital lease obligations -\nLess: Acquisition and transaction expenses (9,341)\nLess: Equity-based compensation expense (1,430)\nLess: Provision for income taxes (7,331)\nNet income attributable to shareholders $ 78,147\n\nSummary information with respect to our geographic sources of revenue, based on location of customer, is as follows:\n\n Three Months Ended September 30, 2024\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nAfrica $ 1,266 $ - $ - $ 1,266\nAsia 46,459 65,714 10,059 $ 122,232\nEurope 56,750 84,136 - $ 140,886\nNorth America 34,700 149,530 - $ 184,230\nSouth America 13,091 4,089 - $ 17,180\nTotal revenues (1) $ 152,266 $ 303,469 $ 10,059 $ 465,794\n\n_______________________________________________________\n(1) The United States, included in North America, and Ireland, included in Europe, represent 35% and 15% of total revenues, respectively, based on the location of our customers and lessees. No\n\nother country represents more than 10% of total revenues.\n\n\n\n\n 27\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 29 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nII. For the Nine Months Ended September 30, 2024\n\n Nine Months Ended September 30, 2024\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nLease income $ 168,927 $ - $ 20,438 $ 189,365\nMaintenance revenue 156,894 - - 156,894\nAsset sales revenue 145,993 - - 145,993\nAerospace products revenue - 737,726 - 737,726\nOther revenue 199 - 5,905 6,104\nTotal revenues $ 472,013 $ 737,726 $ 26,343 $ 1,236,082\n\n\nExpenses\nCost of sales 111,542 456,615 - 568,157\nOperating expenses 26,984 16,510 37,780 81,274\nGeneral and administrative - - 10,697 10,697\nAcquisition and transaction expenses 7,350 2,871 13,318 23,539\nManagement fees and incentive allocation to affiliate - - 8,449 8,449\nInternalization fee to affiliate - - 300,000 300,000\nDepreciation and amortization 151,211 3,177 8,998 163,386\nAsset impairment 962 - - 962\nTotal expenses 298,049 479,173 379,242 1,156,464\n\n\nOther income (expense)\nEquity in losses of unconsolidated entities (207) (1,592) - (1,799)\nInterest expense - - (160,840) (160,840)\nLoss on extinguishment of debt - - (13,920) (13,920)\nOther income 1,440 - 1,605 3,045\nTotal other income (expense) 1,233 (1,592) (173,155) (173,514)\nIncome (loss) before income taxes 175,197 256,961 (526,054) (93,896)\nProvision for (benefit from) income taxes 20,224 11,865 (32,219) (130)\nNet income (loss) 154,973 245,096 (493,835) (93,766)\nLess: Dividends on preferred shares - - 25,005 25,005\nNet income (loss) attributable to shareholders $ 154,973 $ 245,096 $ (518,840) $ (118,771)\n\n\n\n\n 28\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 30 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders:\n\n Nine Months Ended September 30, 2024\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nAdjusted EBITDA $ 366,211 $ 263,331 $ (19,507) $ 610,035\nAdd: Non-controlling share of Adjusted EBITDA -\nAdd: Equity in losses of unconsolidated entities (1,799)\nLess: Pro-rata share of Adjusted EBITDA from unconsolidated entities 1,547\nLess: Internalization fee to affiliate (300,000)\nLess: Interest expense and dividends on preferred shares (185,845)\nLess: Depreciation and amortization expense (194,384)\nLess: Incentive allocations (7,456)\nLess: Asset impairment charges (962)\nLess: Changes in fair value of non-hedge derivative instruments -\nLess: Losses on the modification or extinguishment of debt and capital lease obligations (13,920)\nLess: Acquisition and transaction expenses (23,539)\nLess: Equity-based compensation expense (2,578)\nLess: Benefit from income taxes 130\nNet loss attributable to shareholders $ (118,771)\n\nSummary information with respect to our geographic sources of revenue, based on location of customer, is as follows:\n\n Nine Months Ended September 30, 2024\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nAfrica $ 3,389 $ 8,271 $ - $ 11,660\nAsia 105,220 122,744 26,343 $ 254,307\nEurope 235,367 256,752 - $ 492,119\nNorth America 81,709 336,672 - $ 418,381\nSouth America 46,328 13,287 - $ 59,615\nTotal revenues (1) $ 472,013 $ 737,726 $ 26,343 $ 1,236,082\n\n________________________________________________________\n(1) The United States, included in North America, and Ireland, included in Europe, represent 32% and 18% of total revenues, respectively, based on the location of our customers and lessees. No\n\nother country represents more than 10% of total revenues.\n\n\n\nPresented below are the contracted minimum future annual revenues to be received under existing operating leases as of September 30, 2024:\n\n Operating Leases\nRemainder of 2024 $ 73,112\n2025 203,217\n2026 148,127\n2027 111,158\n2028 101,250\nThereafter 108,318\nTotal $ 745,182\n\n\n\n\n 29\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 31 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nIII. For the Three Months Ended September 30, 2023\n Three Months Ended September 30, 2023\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nLease income $ 35,981 $ - $ 9,641 $ 45,622\nMaintenance revenue 63,925 - - 63,925\nAsset sales revenue 61,400 - - 61,400\nAerospace products revenue - 118,675 - 118,675\nOther revenue 82 - 1,392 1,474\nTotal revenues $ 161,388 $ 118,675 $ 11,033 $ 291,096\n\n\nExpenses\nCost of sales 46,511 70,196 - 116,707\nOperating expenses 13,944 5,947 13,996 33,887\nGeneral and administrative - - 3,015 3,015\nAcquisition and transaction expenses 2,329 110 1,822 4,261\nManagement fees and incentive allocation to affiliate - - 4,577 4,577\nDepreciation and amortization 41,141 115 2,703 43,959\nTotal expenses 103,925 76,368 26,113 206,406\n\n\nOther income (expense)\nEquity in (losses) earnings of unconsolidated entities (108) 154 - 46\nInterest expense - - (40,185) (40,185)\nOther income 444 - 17 461\nTotal other income (expense) 336 154 (40,168) (39,678)\nIncome (loss) before income taxes 57,799 42,461 (55,248) 45,012\nProvision for income taxes 2,332 1,131 242 3,705\nNet income (loss) 55,467 41,330 (55,490) 41,307\nLess: Dividends on preferred shares - - 8,334 8,334\nNet income (loss) attributable to shareholders $ 55,467 $ 41,330 $ (63,824) $ 32,973\n\n\n\n 30\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 32 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table sets forth a reconciliation of Adjusted EBITDA to net income attributable to shareholders:\n\n Three Months Ended September 30, 2023\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nAdjusted EBITDA $ 116,858 $ 43,289 $ (5,929) $ 154,218\nAdd: Non-controlling share of Adjusted EBITDA -\nAdd: Equity in earnings of unconsolidated entities 46\nLess: Pro-rata share of Adjusted EBITDA from unconsolidated entities (642)\nLess: Interest expense and dividends on preferred shares (48,519)\nLess: Depreciation and amortization expense (59,380)\nLess: Incentive allocations (4,274)\nLess: Asset impairment charges -\nLess: Changes in fair value of non-hedge derivative instruments -\nLess: Losses on the modification or extinguishment of debt and capital lease obligations -\nLess: Acquisition and transaction expenses (4,261)\nLess: Equity-based compensation expense (510)\nLess: Provision for income taxes (3,705)\nNet income attributable to shareholders $ 32,973\n\n\nSummary information with respect to our geographic sources of revenue, based on location of customer, is as follows:\n\n Three Months Ended September 30, 2023\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nAfrica $ 154 $ - $ - $ 154\nAsia 48,267 952 11,033 60,252\nEurope 56,679 34,961 - 91,640\nNorth America 44,369 77,213 - 121,582\nSouth America 11,919 5,549 - 17,468\nTotal revenues (1) $ 161,388 $ 118,675 $ 11,033 $ 291,096\n\n________________________________________________________\n(1) The United States, included in North America, and Ireland, included in Europe, represent 35% and 10% of total revenues, respectively, based on the location of our customers and lessees. No\n\nother country represents more than 10% of total revenues.\n\n\n\n\n 31\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 33 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nIII. For the Nine Months Ended September 30, 2023\n\n Nine Months Ended September 30, 2023\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nLease income $ 132,978 $ - $ 28,163 $ 161,141\nMaintenance revenue 141,131 - - 141,131\nAsset sales revenue 246,927 - - 246,927\nAerospace products revenue - 296,513 - 296,513\nOther revenue 6,773 - 5,674 12,447\nTotal revenues $ 527,809 $ 296,513 $ 33,837 $ 858,159\n\n\nExpenses\nCost of sales 188,343 178,566 - 366,909\nOperating expenses 28,610 12,838 39,770 81,218\nGeneral and administrative - - 10,270 10,270\nAcquisition and transaction expenses 4,960 1,137 4,098 10,195\nManagement fees and incentive allocation to affiliate - - 13,137 13,137\nDepreciation and amortization 114,994 298 8,107 123,399\nAsset impairment 1,220 - - 1,220\nTotal expenses 338,127 192,839 75,382 606,348\n\n\nOther income (expense)\nEquity in losses of unconsolidated entities (242) (1,427) - (1,669)\nInterest expense - - (117,976) (117,976)\nOther income 860 - 17 877\nTotal other income (expense) 618 (1,427) (117,959) (118,768)\nIncome (loss) before income taxes 190,300 102,247 (159,504) 133,043\nProvision for income taxes 4,414 2,631 541 7,586\nNet income (loss) 185,886 99,616 (160,045) 125,457\nLess: Dividends on preferred shares - - 23,460 23,460\nNet income (loss) attributable to shareholders $ 185,886 $ 99,616 $ (183,505) $ 101,997\n\n\n\n 32\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 34 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table sets forth a reconciliation of Adjusted EBITDA to net income attributable to shareholders:\n\n Nine Months Ended September 30, 2023\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nAdjusted EBITDA $ 345,580 $ 105,413 $ (16,042) $ 434,951\nAdd: Non-controlling share of Adjusted EBITDA -\nAdd: Equity in losses of unconsolidated entities (1,669)\nLess: Pro-rata share of Adjusted EBITDA from unconsolidated entities (96)\nLess: Interest expense and dividends on preferred shares (141,436)\nLess: Depreciation and amortization expense (157,084)\nLess: Incentive allocations (12,540)\nLess: Asset impairment charges (1,220)\nLess: Changes in fair value of non-hedge derivative instruments -\nLess: Losses on the modification or extinguishment of debt and capital lease obligations -\nLess: Acquisition and transaction expenses (10,195)\nLess: Equity-based compensation expense (1,128)\nLess: Provision for income taxes (7,586)\nNet income attributable to shareholders $ 101,997\n\n\nSummary information with respect to our geographic sources of revenue, based on location of customer, is as follows:\n\n Nine Months Ended September 30, 2023\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nAfrica $ 154 $ 875 $ - $ 1,029\nAsia 81,285 2,737 33,837 117,859\nEurope 188,498 84,547 - 273,045\nNorth America 225,769 198,359 - 424,128\nSouth America 32,103 9,995 - 42,098\nTotal revenues (1) $ 527,809 $ 296,513 $ 33,837 $ 858,159\n\n________________________________________________________\n(1) The United States, included in North America, represents 46% of total revenues based on the location of our customers and lessees. No other country represents more than 10% of total\nrevenues.\n\nV. Location of Long-Lived Assets\nThe following tables sets forth the geographic location of property, plant and equipment and leasing equipment, net:\n\n September 30, 2024 December 31, 2023\nProperty, plant and equipment and leasing equipment, net\nAfrica $ 35,419 $ 18,380\nAsia 446,744 478,120\nEurope 939,380 934,817\nNorth America 559,433 416,811\nSouth America 188,966 229,460\nTotal property, plant and equipment and leasing equipment, net (1) $ 2,169,942 $ 2,077,588\n\n________________________________________________________\n(1) The United States, included in North America, and Italy, included in Europe, represent 21% and 14% of property, plant and equipment and leasing equipment, net as of September 30, 2024, and 17%\n\nas of December 31, 2023, respectively. No other country represents more than 10% of property, plant and equipment and leasing equipment, net.\n\n\n 33\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 35 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n14. EARNINGS PER SHARE AND EQUITY\n\nBasic earnings per ordinary share (\u201cEPS\u201d) is calculated by dividing net income attributable to shareholders by the weighted average number of ordinary shares outstanding,\nplus any participating securities. Diluted EPS is calculated by dividing net income attributable to shareholders by the weighted average number of ordinary shares outstanding,\nplus any participating securities and potentially dilutive securities. Potentially dilutive securities are calculated using the treasury stock method.\n\nThe calculation of basic and diluted EPS is presented below:\n\n Three Months Ended September 30, Nine Months Ended September 30,\n(in thousands, except share and per share data) 2024 2023 2024 2023\nNet income (loss) $ 86,482 $ 41,307 $ (93,766) $ 125,457\nLess: Dividends on preferred shares 8,335 8,334 25,005 23,460\nNet income (loss) attributable to shareholders $ 78,147 $ 32,973 $ (118,771) $ 101,997\nWeighted Average Ordinary Shares Outstanding - Basic 102,380,659 99,927,594 101,199,356 99,796,736\nWeighted Average Ordinary Shares Outstanding - Diluted 103,395,348 100,482,309 101,199,356 100,269,203\n\n\nEarnings (loss) per share:\nBasic $ 0.76 $ 0.33 $ (1.17) $ 1.02\nDiluted $ 0.76 $ 0.33 $ (1.17) $ 1.02\n\nFor both the three months ended September 30, 2024 and 2023,\n0 shares, and for the nine months ended September 30, 2024 and 2023, 859,940 and 0 shares, respectively, were excluded from the calculation of diluted EPS due to an anti-\ndilutive impact.\nDuring the three months ended September 30, 2024 and 2023, 482 and 0 ordinary shares, respectively, and for the nine months ended September 30, 2024 and 2023, 4,852\nand 18,457 ordinary shares, respectively, were issued to certain directors as compensation.\n\n15. COMMITMENTS AND CONTINGENCIES\nIn the normal course of business, the Company and its subsidiaries may be involved in various claims, legal proceedings, or may enter into contracts that contain a variety of\nrepresentations and warranties and which provide general indemnifications. Within our offshore energy business, a lessee did not fulfill its obligation under its charter\narrangement, therefore we are pursuing rights afforded to us under the charter and the range of potential losses against the obligation is $0.0 million to $3.3 million. Our\nmaximum exposure under other arrangements is unknown as no additional claims have been made. We believe the risk of loss in connection with such arrangements is\nremote.\nThe Company has contingent obligations under ASC 460, Guarantees, in connection with certain sales of aircraft on lease. Under the agreements, we provide certain\nguarantees at the end of the lease term for the condition of the aircraft engines that were sold to the buyer. The guarantees are valued at $\n8.1 million and $6.8 million as of September 30, 2024 and December 31, 2023, respectively, and are reflected as a component of Other liabilities.\nGiven variability in the condition of the engines at the end of the lease terms, which range from 4 to 8 years, the maximum potential amount of undiscounted future payments\nthat could be required under the guarantees at September 30, 2024 was $37.2 million, which is not reasonably expected.\nInternalization-During the second quarter of 2024, the Company entered into the Internalization Agreement with the Former Manager and Master GP. Pursuant to the\nInternalization Agreement, the Management Agreement was terminated effective May 28, 2024, except that certain indemnification and other obligations survive, and the\nCompany was no longer required to pay management fees or incentive distributions with respect to any period thereafter. As a result of the Internalization, the Company ceased\nto be externally managed and operates as an internally managed company. In connection with the termination of the Management Agreement, the Company (i) agreed to pay\nthe Former Manager (for itself and on behalf of the Master GP, as applicable) the Cash Consideration, the compensation accrued and payable, but not yet paid, under the\nManagement Agreement and the expenses that were reimbursable, but not yet reimbursed, under the Management Agreement\u037e (ii) issued to the Former Manager (for itself and\non behalf of the Master GP, as applicable) the Share Consideration\u037e and (iii) purchased from Master GP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary\nof the Company, in exchange for $30.\n\n\n\n\n 34\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 36 of 71\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n16. RESTRUCTURING CHARGES\n\nIn connection with the Internalization and termination of the Management Agreement, the Company agreed to pay a total of $\n300.0 million to its Former Manager (for itself and on behalf of the Master GP, as applicable). At closing, the Company issued 1,866,949 ordinary shares valued at $150.0\nmillion. The remaining balance was paid in cash on June 17, 2024. The restructuring charge paid in connection with the Internalization and termination of the Management\nAgreement is reflected in Internalization Fee to Affiliate expense in the Consolidated Statements of Operations for the three and nine months ended September 30, 2024. See\nNote 12 for additional discussion. There were no restructuring charges recorded for the three and nine months ended September 30, 2023.\n\n17. SUBSEQUENT EVENTS\nSenior Notes due 2033\nOn October 9, 2024, we issued $500.0 million aggregate principal amount of senior unsecured notes due 2033 (the \u201cSenior Notes due 2033\u201d). The Senior Notes due 2033\nbear interest at a rate of 5.875% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2025. Using a portion of the\nnet proceeds, the Company redeemed the remaining $130.5 million aggregate principal amount of Senior Notes due 2027, plus accrued and unpaid interest. The Company\nused the remaining net proceeds to pay down in full the Company\u2019s Revolving Credit Facility, with any excess proceeds intended for general corporate purposes, including\nfunding acquisitions and investments.\nSeries A Shares\nOn October 29, 2024, the Company redeemed in full the outstanding 4,180,000 8.25% Fixed-to-Floating Rate Series A Cumulative Perpetual Redeemable Preferred Shares at\na redemption price equal to $25.00 per share in cash, plus $1.6 million of accumulated and unpaid distributions thereon to, but not including, the redemption date of October\n29, 2024.\nDividends\nOn October 30, 2024, our Board of Directors declared a cash dividend on our ordinary shares and eligible participating securities of $0.30 per share for the quarter ended\nSeptember 30, 2024, payable on November 25, 2024 to the holders of record on November 14, 2024.\nAdditionally, on October 30, 2024, our Board of Directors also declared cash dividends on the Series B Preferred Shares, Series C Preferred Shares and Series D Preferred\nShares of $0.50, $0.52 and $0.59 per share, respectively, payable on December 16, 2024 to the holders of record on December 2, 2024.\n\n\n 35\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 37 of 71\n\n\n\n\nItem 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations\nThe following Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations (\u201cMD&A\u201d) is intended to help you understand FTAI Aviation Ltd. (the\n\u201cCompany,\u201d \u201cwe,\u201d \u201cour\u201d or \u201cus\u201d). Our MD&A should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes, and with Part II,\nItem 1A, \u201cRisk Factors\u201d included elsewhere in this Quarterly Report on Form 10-Q.\nOverview\nWe own, lease and sell aviation equipment. We also develop and manufacture through a joint venture, and repair and sell, through our maintenance facilities and exclusivity\narrangements, aftermarket components for aircraft engines. Additionally, we own and lease offshore energy equipment. We target assets that, on a combined basis, generate\nstrong cash flows with potential for earnings growth and asset appreciation. We believe that there is a large number of acquisition opportunities in our markets and that our\nexpertise and business and financing relationships, together with our access to capital, will allow us to take advantage of these opportunities. As of September 30, 2024, we\nhad total consolidated assets of $3.7 billion and total equity of $118.5 million.\nInternalization of Management\nOn May 28, 2024, the Company entered into definitive agreements with the Former Manager and Master GP to internalize the Company\u2019s management function. As part of the\ntermination of the Management Agreement, the Company (i) agreed to pay the Former Manager (for itself and on behalf of the Master GP, as applicable) the Cash\nConsideration, the compensation accrued and payable, but not yet paid, under the Management Agreement and the expenses that were reimbursable, but not yet reimbursed,\nunder the Management Agreement\u037e (ii) issued to the Former Manager (for itself and on behalf of the Master GP, as applicable) the Share Consideration\u037e (iii) purchased from\nMaster GP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the Company, in exchange for $30. Following the Internalization, the Company no longer\npays management fees or incentive distributions to the Former Manager and Master GP.\nIn connection with the termination of the Management Agreement, the Company also entered into a Transition Services Agreement with the Former Manager. Under the\nTransition Services Agreement, the Former Manager was required to continue to provide the Company and its affiliates with all of the Services for a transition period until\nOctober 31, 2024, during which the Company procured replacements for the Services. The Services were provided to the Company for a fee equal to the Former Manager\u2019s\ncost of providing the Services, including the allocated cost of, among other things, overhead, employee wages and compensation, rent and related real estate expenses and\nactually incurred out-of-pocket expenses, plus a mark-up of ten percent (10%). The Company was required to use commercially reasonable efforts to make available to the\nFormer Manager certain employees of the Company who were previously employees of the Former Manager to provide the Reverse Services, subject to certain exceptions. In\naddition, the Former Manager is required to continue to provide the services that are reasonably required by the Company to prepare its quarterly and annual financial\nstatements until May 31, 2025. The Company is required to continue to provide the Reverse Services until the later to occur of the dissolution or sale of the entities receiving\nReverse Services. The Transition Services Agreement may be terminated earlier (x) by mutual agreement of the parties, (y) by either the Former Manager or the Company in the\nevent of a material breach by the non-terminating party that is not cured within thirty (30) days following written notification thereof, or (z) by the Former Manager if the Company\nfails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days.\nImpact of Russia\u2019s Invasion of Ukraine\nEconomic sanctions and export controls against Russia and Russia\u2019s aviation industry were imposed due to its invasion of Ukraine during the three months ended March 31,\n2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines. We determined that it is unlikely that we will regain\npossession of the aircraft and engines that had not yet been recovered from Ukraine and Russia. As a result we recognized an impairment charge totaling $120.0 million, net\nof maintenance deposits, to write-off the entire carrying value of leasing equipment assets that we did not expect to recover from Ukraine and Russia. As of September 30,\n2024, eight aircraft and seventeen engines were still located in Russia.\nOur lessees are required to provide insurance coverage with respect to leased aircraft and engines, and we are named as insureds under those policies in the event of a total\nloss of an aircraft or engine. We also purchase insurance which provides us with coverage when our aircraft or engines are not subject to a lease or where a lessee\u2019s policy\nfails to indemnify us. The insured value of the aircraft and engines that remain in Russia is approximately $210.7 million. We intend to pursue all of our claims under these\npolicies. However, the timing and amount of any recoveries under these policies are uncertain.\nThe extent of the impact of Russia\u2019s invasion of Ukraine and the related sanctions on our operational and financial performance, including the ability for us to recover our\nleasing equipment in the region, will depend on future developments, including the duration of the conflict, sanctions and restrictions imposed by Russian and international\ngovernments, all of which remain uncertain.\n\n\n 36\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 38 of 71\n\n\n\n\nOperating Segments\nThe key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and services. Our two\nreportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft\nengines, which it leases and sells to customers. The Aerospace Products segment, through our maintenance facilities, equity method investment and exclusivity\narrangements, develops and manufactures, repairs/refurbishes and sells aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500\ncommercial aircraft engines. During the fourth quarter of 2023, the Company changed the composition of its operating segments to include product offerings for V2500\nengines within the Aerospace Products segment. Prior periods have been restated to reflect the change in accordance with the requirements of ASC 280, Segment Reporting.\nCorporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, and management fees. Additionally,\nCorporate and Other also includes offshore energy related assets, which consist of vessels and equipment that support offshore oil and gas activities and production which\nare typically subject to operating leases.\nResults of Operations\nAdjusted EBITDA (Non-GAAP)\nThe chief operating decision maker (\u201cCODM\u201d) utilizes Adjusted EBITDA as the key performance measure. Adjusted EBITDA is not a financial measure in accordance with U.S.\ngenerally accepted accounting principles (\u201cU.S. GAAP\u201d). This performance measure provides the CODM with the information necessary to assess operational performance\nand make resource and allocation decisions. We believe Adjusted EBITDA is a useful metric for investors and analysts for similar purposes of assessing our operational\nperformance.\nAdjusted EBITDA is defined as net income (loss) attributable to shareholders, adjusted (a) to exclude the impact of provision for (benefit from) income taxes, equity-based\ncompensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-\nhedge derivative instruments, asset impairment charges, incentive allocations, depreciation and amortization expense, dividends on preferred shares and interest expense,\ninternalization fee to affiliate, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities and (c) to exclude the impact of equity in earnings\n(losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA.\n\n\n\n\n 37\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 39 of 71\n\n\n\n\nComparison of the three and nine months ended September 30, 2024 and 2023\nThe following table presents our consolidated results of operations:\n\n Three Months Ended September Nine Months Ended\n 30, September 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nRevenues\nLease income $ 65,450 $ 45,622 $ 19,828 $ 189,365 $ 161,141 $ 28,224\nMaintenance revenue 59,917 63,925 (4,008) 156,894 141,131 15,763\nAsset sales revenue 34,953 61,400 (26,447) 145,993 246,927 (100,934)\nAerospace products revenue 303,469 118,675 184,794 737,726 296,513 441,213\nOther revenue 2,005 1,474 531 6,104 12,447 (6,343)\nTotal revenues 465,794 291,096 174,698 1,236,082 858,159 377,923\n\n\nExpenses\nCost of sales 219,496 116,707 102,789 568,157 366,909 201,248\nOperating expenses 26,858 33,887 (7,029) 81,274 81,218 56\nGeneral and administrative 4,045 3,015 1,030 10,697 10,270 427\nAcquisition and transaction expenses 9,341 4,261 5,080 23,539 10,195 13,344\nManagement fees and incentive allocation to affiliate - 4,577 (4,577) 8,449 13,137 (4,688)\nInternalization fee to affiliate - - - 300,000 - 300,000\nDepreciation and amortization 56,775 43,959 12,816 163,386 123,399 39,987\nAsset impairment - - - 962 1,220 (258)\nTotal expenses 316,515 206,406 110,109 1,156,464 606,348 550,116\n\n\nOther (expense) income\nEquity in (losses) earnings of unconsolidated entities (438) 46 (484) (1,799) (1,669) (130)\nInterest expense (57,937) (40,185) (17,752) (160,840) (117,976) (42,864)\nLoss on extinguishment of debt - - - (13,920) - (13,920)\nOther income 2,909 461 2,448 3,045 877 2,168\nTotal other expense (55,466) (39,678) (15,788) (173,514) (118,768) (54,746)\nIncome (loss) from before income taxes 93,813 45,012 48,801 (93,896) 133,043 (226,939)\nProvision for (benefit from) income taxes 7,331 3,705 3,626 (130) 7,586 (7,716)\nNet income (loss) 86,482 41,307 45,175 (93,766) 125,457 (219,223)\nLess: Dividends on preferred shares 8,335 8,334 1 25,005 23,460 1,545\nNet income (loss) attributable to shareholders $ 78,147 $ 32,973 $ 45,174 $ (118,771) $ 101,997 $ (220,768)\n\n\n\n\n 38\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 40 of 71\n\n\n\n\nThe following table sets forth a reconciliation of net income (loss) attributable to shareholders to Adjusted EBITDA:\n\n Three Months Ended September Nine Months Ended\n 30, September 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nNet income (loss) attributable to shareholders $ 78,147 $ 32,973 $ 45,174 $ (118,771) $ 101,997 $ (220,768)\nAdd: Provision for (benefit from) income taxes 7,331 3,705 3,626 (130) 7,586 (7,716)\nAdd: Equity-based compensation expense 1,430 510 920 2,578 1,128 1,450\nAdd: Acquisition and transaction expenses 9,341 4,261 5,080 23,539 10,195 13,344\nAdd: Losses on the modification or extinguishment of debt and capital lease\nobligations - - - 13,920 - 13,920\nAdd: Changes in fair value of non-hedge derivative instruments - - - - - -\nAdd: Asset impairment charges - - - 962 1,220 (258)\nAdd: Incentive allocations - 4,274 (4,274) 7,456 12,540 (5,084)\nAdd: Depreciation and amortization expense (1) 69,453 59,380 10,073 194,384 157,084 37,300\nAdd: Interest expense and dividends on preferred shares 66,272 48,519 17,753 185,845 141,436 44,409\nAdd: Internalization fee to affiliate - - - 300,000 - 300,000\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) (382) 642 (1,024) (1,547) 96 (1,643)\nLess: Equity in losses (earnings) of unconsolidated entities 438 (46) 484 1,799 1,669 130\nLess: Non-controlling share of Adjusted EBITDA - - - - - -\nAdjusted EBITDA (non-GAAP) $ 232,030 $ 154,218 $ 77,812 $ 610,035 $ 434,951 $ 175,084\n\n________________________________________________________\n(1) Includes the following items for the three months ended September 30, 2024 and 2023: (i) depreciation and amortization expense of $56,775 and $43,959, (ii) lease intangible amortization of $3,720\n\n and $3,726 and (iii) amortization for lease incentives of $8,958 and $11,695, respectively. Includes the following items for the nine months ended September 30, 2024 and 2023: (i) depreciation and\n amortization expense of $163,386 and $123,399, (ii) lease intangible amortization of $11,482 and $11,325 and (iii) amortization for lease incentives of $19,516 and $22,360, respectively.\n(2) Includes the following items for the three months ended September 30, 2024 and 2023: (i) net (loss) income of $(438) and $46, (ii) depreciation and amortization expense of $56 and $367, and (iii)\n\n acquisition and transaction expenses of $0 and $229, respectively. Includes the following items for the nine months ended September 30, 2024 and 2023: (i) net loss of $1,799 and $1,669, (ii)\n depreciation and amortization expense of $252 and $1,202, and (iii) acquisition and transaction expenses of $0 and $563, respectively.\nRevenues\nComparison of the three months ended September 30, 2024 and 2023\nTotal revenues increased by $174.7 million, driven by the following:\n \u2022 Aerospace products revenue increased by $184.8 million, primarily due to a $164.3 million increase in CFM56-7B, CFM56-5B and V2500 engine and module sales, a\n $9.6 million increase in parts inventory sales, and other sales revenue of $7.7 million from the QuickTurn and LMCES acquisitions.\n \u2022 Lease income increased by $19.8 million, primarily due to increases in aircraft lease revenue of $10.0 million, engine lease revenue of $7.2 million, and a decrease in\n lease incentive amortization of $4.1 million. Aircraft and engine revenue both increased due to an increased number of assets on lease in Q3 2024 compared to Q3\n 2023. This was partially offset by a decrease of $1.5 million in the Offshore Energy business driven by one of our vessels in the Offshore Energy business having\n fewer days on-hire in 2024 compared to 2023.\n \u2022 Asset sales revenue decreased by $26.4 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines.\n Specifically, one aircraft was sold in Q3 2024 as compared to one aircraft and eight engines sold in Q3 2023.\n \u2022 Maintenance revenue decreased by $4.0 million. Aircraft maintenance revenue decreased by $14.8 million from Q3 2023 to Q3 2024, due to $18.2 million of higher\n maintenance reserves taken into revenue in Q3 2023, partially offset by an increased number of aircraft on lease in Q3 2024 generating maintenance revenue as\n compared to Q3 2023. This decrease in aircraft maintenance revenue was partially offset by increased engine maintenance revenue of $10.8 million, driven by an\n increased number of engines on lease in Q3 2024 generating maintenance revenue as compared to Q3 2023.\n\n\n 39\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 41 of 71\n\n\n\n\nComparison of the nine months ended September 30, 2024 and 2023\nTotal revenues increased by $377.9 million, driven by the following:\n \u2022 Aerospace products revenue increased by $441.2 million, primarily due to a $387.2 million increase in CFM56-7B, CFM56-5B and V2500 engine and module sales, a\n $26.0 million increase in parts inventory sales, and other sales revenue of $22.5 million from the QuickTurn and LMCES acquisitions.\n \u2022 Lease income increased by $28.2 million, primarily due to an increase in engine lease revenue of $30.4 million, driven by an increased number of engines on lease,\n and a decrease in lease amortization of $6.6 million, partially offset by a $7.7 million decrease in the Offshore Energy business due to one of our vessels having fewer\n days on-hire in 2024 compared to 2023 and a decrease in aircraft lease revenue of $0.9 million.\n \u2022 Maintenance revenue increased by $15.8 million. Engine maintenance revenue increased by $41.2 million, driven by an increased number of engines on lease in\n 2024 as compared to 2023. This increase was partially offset by a decrease in aircraft maintenance revenue of $25.5 million, primarily due to $20.1 million of higher\n maintenance reserves taken into revenue in 2023 as well as lower utilization.\n \u2022 Asset sales revenue decreased by $100.9 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines.\n Specifically, one aircraft and 12 engines were sold in 2024 as compared to 11 aircraft and 18 engines sold in 2023.\n \u2022 Other revenue decreased by $6.3 million, primarily due to a decrease in assets with end-of-lease redelivery compensation. During 2024, one aircraft and six engines\n had end-of-lease redelivery compensation, as compared to eight aircraft and four engines in 2023.\nExpenses\nComparison of the three months ended September 30, 2024 and 2023\nTotal expenses increased by $110.1 million, driven by the following:\n \u2022 Cost of sales increased by $102.8 million, driven by a $128.6 million increase in the Aerospace Products segment, primarily due to increases in CFM56-7B, CFM56-\n 5B and V2500 engine and module sales, parts inventory sales, and directly corresponds to components of increases in Aerospace products revenue over the same\n period. This increase was partially offset by a $25.8 million decrease in the Aviation Leasing segment, primarily due to an overall decrease in the number of sales\n transactions of commercial aircraft and engines, which is in line with an overall decrease in the corresponding asset sales revenue. Specifically, one aircraft was sold\n in Q3 2024 as compared to one aircraft and eight engines sold in Q3 2023.\n \u2022 Depreciation and amortization increased by $12.8 million, primarily driven by an increase in the number of assets owned and on lease, the acquisitions of LMCES and\n QuickTurn, partially offset by an increase in the number of aircraft redelivered.\n \u2022 Acquisition and transaction expenses increased by $5.1 million, primarily due to higher legal and other professional fees incurred for the acquisition of LMCES on\n September 9, 2024.\n \u2022 General and administrative expense increased by $1.0 million, primarily due to higher reimbursements to the Former Manager for certain services provided to the\n Company subsequent to the Internalization effective May 28, 2024.\n \u2022 Operating expenses decreased by $7.0 million, primarily due to a $3.9 million decrease in the Aviation Leasing segment, driven by a decrease in bad debt expense of\n $5.6 million, partially offset by increases in insurance expense of $0.9 million and repairs and maintenance expense of $0.3 million. The Aerospace Products\n segment contributed a $3.3 million decrease, primarily due to a $1.1 million decrease in shipping and storage fees, a $0.6 million decrease in professional fees, and\n a $0.5 million decrease in insurance expense.\n \u2022 Management fees and incentive allocation to affiliate decreased by $4.6 million, due to the absence of any management or incentive fee to the Former Manager in the\n current quarter, since the Internalization was effective May 28, 2024.\nComparison of the nine months ended September 30, 2024 and 2023\nTotal expenses increased by $550.1 million, driven by the following:\n \u2022 Internalization fee to affiliate increased by $300.0 million relating to the Internalization effective May 28, 2024.\n \u2022 Cost of sales increased by $201.2 million, primarily due to an increase of $278.0 million in our Aerospace Products segment, primarily due to increases in CFM56-7B,\n CFM56-5B and V2500 engine and module sales, parts inventory sales, and directly corresponds to components of increases in Aerospace products revenue over the\n same period. This was partially offset by a decrease of $76.8 million in the Aviation Leasing segment primarily due to an overall decrease in the number of sales\n transactions of commercial aircraft and engines, which is in line with an overall decrease in the corresponding asset sales revenue. Specifically, one aircraft and 12\n engines were sold in 2024 compared to 11 aircraft and 18 engines sold in 2023.\n\n\n 40\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 42 of 71\n\n\n\n\n \u2022 Depreciation and amortization increased by $40.0 million, primarily driven by an increase in the number of assets owned and on lease, partially offset by an increase\n in the number of aircraft redelivered.\n \u2022 Acquisition and transaction expenses increased by $13.3 million, primarily due to higher professional fees incurred in evaluating and completing strategic\n transactions and fees associated with the Internalization and the acquisition of LMCES on September 9, 2024.\n \u2022 Management fees and incentive allocation to affiliate decreased by $4.7 million, due to a decrease in management and incentive fees to the Former Manager during\n 2024, with the Internalization effective May 28, 2024, as compared to fees paid for the full nine months ended September 30, 2023.\nOther (expense) income\nTotal other expense increased by $15.8 million during the three months ended September 30, 2024, due to the following:\n \u2022 Interest expense increased by $17.8 million, reflecting an increase in the average debt outstanding of approximately $913.0 million, primarily due to increases in the (i)\n Senior Notes due 2032 of $800.0 million, which were issued in June 2024, (ii) Senior Notes due 2031 of $700.0 million, which were issued in April 2024, and the (iii)\n Senior Notes due 2030 of $497.0 million, which were issued in November 2023, partially offset by decreases in the (iv) Senior Notes due 2025 of $652.4 million,\n which were redeemed in April 2024, (v) Senior Notes due 2027 of $269.5 million, which were partially redeemed in June 2024, and the (vi) Revolving Credit Facility of\n $161.7 million.\n \u2022 Other income increased by $2.4 million primarily driven by $1.6 million of interest income earned on financing receivables within our Aviation Leasing Segment and\n $0.9 million of interest income from the Company\u2019s investments in money market funds.\nTotal other expense increased by $54.7 million during the nine months ended September 30, 2024, due to the following:\n \u2022 Interest expense increased by $42.9 million, reflecting an increase in the average debt outstanding of approximately $694.8 million, primarily due to increases in the (i)\n Senior Notes due 2030 of $496.9 million, which were issued in November 2023, (ii) Senior Notes due 2031 of $466.7 million, issued in April 2024, and (iii) Senior\n Notes due 2032 of $355.6 million, which were issued in June 2024, partially offset by decreases in the (iv) Senior Notes due 2025 of $435.4 million, which were\n redeemed in April 2024, (v) Senior Notes due 2027 of $119.7 million, which were partially redeemed in June 2024, and the (vi) Revolving Credit Facility of $68.9 million\n \u2022 Loss on extinguishment of debt increased by $13.9 million driven by the redemption of Senior Notes due 2025 and a partial redemption of Senior Notes due 2027.\n \u2022 Other income increased by $2.2 million primarily driven by $1.6 million of interest income generated from the Company\u2019s investments in money market funds and $0.6\n million of interest income earned on financing receivables within our Aviation Leasing Segment.\nProvision for (benefit from) income taxes\nThe provision for income taxes increased by $3.6 million during the three months ended September 30, 2024. This increase is primarily attributable to an increase in income\ngenerated from leasing and aerospace activities in jurisdictions subject to taxes. As the Company\u2019s operations in these areas grew, so did the corresponding tax obligations,\nresulting in a higher provision for income taxes.\n\nThe benefit from income taxes increased by $7.7 million during the nine months ended September 30, 2024. This increase was primarily attributable to a substantial tax\nbenefit arising from the Internalization fee paid to the affiliate. The fee provided a favorable impact on the Company's overall tax position, despite being partially offset by higher\nincome from leasing and aerospace activities. As the Aviation Leasing and Aerospace Products segments experienced growth, the associated income increased, leading to a\ngreater tax expense that reduced the tax benefit received from the Internalization fee.\nNet income (loss)\nNet income increased by $45.2 million and decreased $219.2 million for the three and nine months ended September 30, 2024 as compared to prior years, primarily due to\nthe changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased by $77.8 million and $175.1 million during the three and nine months ended September 30, 2024, respectively, primarily due to the changes noted\nabove.\n\n\n\n\n 41\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 43 of 71\n\n\n\n\nAviation Leasing Segment\n\nAs of September 30, 2024, in our Aviation Leasing segment, we own and manage 393 aviation assets, consisting of 96 commercial aircraft and 297 engines, including eight\naircraft and seventeen engines that were still located in Russia.\nAs of September 30, 2024, 86 of our commercial aircraft and 184 of our engines were leased to operators or other third parties. Aviation assets currently off lease are either\nundergoing repair and/or maintenance, being prepared to go on lease, or held in short term storage awaiting a future lease. Our aviation equipment was approximately 79%\nutilized during the nine months ended September 30, 2024, based on the percentage of days on lease in the quarter, weighted by the monthly average equity value of our\naviation leasing equipment, excluding airframes. Our aircraft currently have a weighted average remaining lease term of 45 months, and our engines currently on lease have\nan average remaining lease term of 21 months. The table below provides additional information on the assets in our Aviation Leasing segment:\n\nAviation Assets Widebody Narrowbody Total\nAircraft\nAssets at January 1, 2024 5 91 96\nPurchases - 27 27\nSales - (1) (1)\nTransfers - (26) (26)\nAssets at September 30, 2024 5 91 96\n\nEngines\nAssets at January 1, 2024 32 235 267\nPurchases 4 86 90\nSales (9) (1) (10)\nTransfers - (50) (50)\nAssets at September 30, 2024 27 270 297\n\nThe following table presents our results of operations for our Aviation Leasing segment:\n\n Three Months Ended September Nine Months Ended\n 30, September 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nRevenues\nLease income $ 57,322 $ 35,981 $ 21,341 $ 168,927 $ 132,978 $ 35,949\nMaintenance revenue 59,917 63,925 (4,008) 156,894 141,131 15,763\nAsset sales revenue 34,953 61,400 (26,447) 145,993 246,927 (100,934)\nOther revenue 74 82 (8) 199 6,773 (6,574)\nTotal revenues 152,266 161,388 (9,122) 472,013 527,809 (55,796)\n\n\nExpenses\nCost of sales 20,684 46,511 (25,827) 111,542 188,343 (76,801)\nOperating expenses 9,995 13,944 (3,949) 26,984 28,610 (1,626)\nAcquisition and transaction expenses 2,620 2,329 291 7,350 4,960 2,390\nDepreciation and amortization 52,455 41,141 11,314 151,211 114,994 36,217\nAsset impairment - - - 962 1,220 (258)\nTotal expenses 85,754 103,925 (18,171) 298,049 338,127 (40,078)\n\n\nOther income (expense)\nEquity in losses of unconsolidated entities - (108) 108 (207) (242) 35\nOther income 1,982 444 1,538 1,440 860 580\nTotal other income 1,982 336 1,646 1,233 618 615\nIncome before income taxes 68,494 57,799 10,695 175,197 190,300 (15,103)\nProvision for income taxes 8,898 2,332 6,566 20,224 4,414 15,810\nNet income attributable to shareholders $ 59,596 $ 55,467 $ 4,129 $ 154,973 $ 185,886 $ (30,913)\n\n\n\n\n 42\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 44 of 71\n\n\n\n\nThe following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:\n\n Three Months Ended September Nine Months Ended\n 30, September 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nNet income attributable to shareholders $ 59,596 $ 55,467 $ 4,129 $ 154,973 $ 185,886 $ (30,913)\nAdd: Provision for income taxes 8,898 2,332 6,566 20,224 4,414 15,810\nAdd: Equity-based compensation expense 176 105 71 409 232 177\nAdd: Acquisition and transaction expenses 2,620 2,329 291 7,350 4,960 2,390\nAdd: Losses on the modification or extinguishment of debt and capital lease\nobligations - - - - - -\nAdd: Changes in fair value of non-hedge derivative instruments - - - - - -\nAdd: Asset impairment charges - - - 962 1,220 (258)\nAdd: Incentive allocations - - - - - -\nAdd: Depreciation and amortization expense (1) 65,133 56,562 8,571 182,209 148,679 33,530\nAdd: Interest expense and dividends on preferred shares - - - - - -\nAdd: Internalization fee to affiliate - - - - - -\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) - (45) 45 (123) (53) (70)\nLess: Equity in losses of unconsolidated entities - 108 (108) 207 242 (35)\nLess: Non-controlling share of Adjusted EBITDA - - - - - -\nAdjusted EBITDA (non-GAAP) $ 136,423 $ 116,858 $ 19,565 $ 366,211 $ 345,580 $ 20,631\n\n________________________________________________________\n(1) Includes the following items for the three months ended September 30, 2024 and 2023: (i) depreciation expense of $52,455 and $41,141, (ii) lease intangible amortization of $3,720 and $3,726 and\n\n (iii) amortization for lease incentives of $8,958 and $11,695, respectively. Includes the following items for the nine months ended September 30, 2024 and 2023: (i) depreciation expense of\n $151,211 and $114,994, (ii) lease intangible amortization of $11,482 and $11,325 and (iii) amortization for lease incentives of $19,516 and $22,360, respectively.\n(2) Includes the following items for the three months ended September 30, 2024 and 2023: (i) net loss of $0 and $108 and (ii) depreciation and amortization of $0 and $63, respectively. Includes the\n\n following items for the nine months ended September 30, 2024 and 2023: (i) net loss of $207 and $242 and (ii) depreciation and amortization of $84 and $189, respectively.\n\nRevenues\nComparison of the three months ended September 30, 2024 and 2023\nTotal revenues decreased by $9.1 million, driven by the following:\n \u2022 Asset sales revenue decreased by $26.4 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines.\n Specifically, one aircraft was sold in Q3 2024 as compared to one aircraft and eight engines sold in Q3 2023.\n \u2022 Maintenance revenue decreased by $4.0 million. Aircraft maintenance revenue decreased by $14.8 million from Q3 2023 to Q3 2024, due to $18.2 million of higher\n maintenance reserves taken into revenue in Q3 2023, partially offset by an increased number of aircraft on lease in Q3 2024 as compared to Q3 2023. This decrease\n in aircraft maintenance revenue was partially offset by increased engine maintenance revenue of $10.8 million, driven by an increased number of engines on lease in\n Q3 2024 generating maintenance revenue as compared to Q3 2023.\n \u2022 Lease income increased by $21.3 million, due to increases in aircraft lease revenue of $10.0 million, engine lease revenue of $7.2 million, and a decrease in lease\n amortization of $4.1 million. Aircraft and engine revenue both increased due to an increased number of assets on lease in Q3 2024 as compared to Q3 2023.\nComparison of the nine months ended September 30, 2024 and 2023\nTotal revenue decreased by $55.8 million, driven by the following:\n \u2022 Asset sales revenue decreased by $100.9 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines.\n Specifically, one aircraft and 12 engines were sold in 2024 as compared to 11 aircraft and 18 engines sold in 2023.\n \u2022 Other revenue decreased by $6.6 million, primarily due to a decrease in assets with end-of-lease redelivery compensation. During 2024, one aircraft and five engines\n had end-of-lease redelivery compensation, as compared to eight aircraft and four engines in 2023.\n\n\n 43\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 45 of 71\n\n\n\n\n \u2022 Lease income increased by $35.9 million, due to an increase in engine lease revenue of $30.4 million, driven by an increased number of engines on lease, and a\n decrease in lease amortization of $6.6 million. This increase was partially offset by a slight decrease in aircraft lease revenue of $0.9 million.\n \u2022 Maintenance revenue increased by $15.8 million. Engine maintenance revenue increased by $41.2 million, driven by an increased number of engines on lease in\n 2024 as compared to 2023. This increase was partially offset by a decrease in aircraft maintenance revenue of $25.5 million, primarily due to $20.1 million of higher\n maintenance reserves taken into revenue in 2023 as well as lower utilization.\nExpenses\nComparison of the three months ended September 30, 2024 and 2023\nTotal expenses decreased by $18.2 million, driven by the following:\n \u2022 Cost of sales decreased by $25.8 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines, and is in line\n with an overall decrease in the corresponding asset sales revenue. Specifically, one aircraft was sold in Q3 2024 as compared to one aircraft and eight engines sold\n in Q3 2023.\n \u2022 Operating expenses decreased by $3.9 million, primarily driven by a decrease in bad debt expense of $5.6 million in connection with the termination of four aircraft\n leases in Q3 2023, partially offset by increases in insurance expense of $0.9 million and repairs and maintenance expense of $0.3 million.\n \u2022 Depreciation and amortization expense increased by $11.3 million, driven by an increase in the number of assets owned and on lease, partially offset by an increase\n in the number of aircraft redelivered.\nComparison of the nine months ended September 30, 2024 and 2023\nTotal expenses decreased by $40.1 million, driven by the following:\n \u2022 Cost of sales decreased by $76.8 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines, and is in line\n with an overall decrease in the corresponding asset sales revenue. Specifically, one aircraft and 12 engines were sold in 2024 compared to 11 aircraft and 18 engines\n sold in 2023.\n \u2022 Operating expenses decreased by $1.6 million, primarily driven by a decrease in bad debt expense of $5.9 million, partially offset by increases in legal fees of $1.5\n million, repairs and maintenance expense of $1.1 million, technical consulting expense of $1.0 million and payroll-related expenses of $0.7 million.\n \u2022 Depreciation and amortization expense increased by $36.2 million, driven by an increase in the number of assets owned and on lease, partially offset by an increase\n in the number of aircraft redelivered.\n \u2022 Acquisition and transaction expenses increased by $2.4 million, primarily due to higher legal fees incurred in evaluating and completing strategic transactions.\nOther income\nTotal other income increased by $1.6 million and $0.6 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods,\nprimarily due to interest income earned on financing receivables during 2024.\nProvision for income taxes\nThe provision for income taxes increased by $6.6 million and $15.8 million during the three and nine months ended September 30, 2024, respectively, as compared to prior\nperiods, primarily due to increases in income from leasing activities in jurisdictions subject to taxes. As the Company\u2019s operations in these areas grew, so did the\ncorresponding tax obligations, resulting in a higher provision for income taxes.\nNet income\nNet income increased by $4.1 million and decreased by $30.9 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods,\nprimarily due to the changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased by $19.6 million and $20.6 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods,\nprimarily due to the changes noted above.\n\n\n\n\n 44\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 46 of 71\n\n\n\n\nAerospace Products Segment\nThe Aerospace Products segment, through our maintenance facilities, equity method investment and exclusivity arrangements, develops and manufactures,\nrepairs/refurbishes and sells aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines. Our engine, module\nand parts sales are facilitated through a dedicated commercial maintenance program, designed to focus on modular and parts repair and refurbishment of CFM56-7B and\nCFM56-5B engines. In September 2024, we acquired LMCES to further enhance this business and establish permanent engine and module manufacturing capabilities. Refer\nto Note 3 \u201cAcquisition of Lockheed Martin Commercial Engine Solutions\u201d, for additional information. In addition, other serviceable used modules and parts are sold through our\nexclusive partnership, who is responsible for the teardown, repair, marketing and sales of parts from our CFM56 engine pool. In December 2023, we acquired the remaining\ninterest in Quick Turn Engine Center LLC or \u201cQuickTurn\u201d (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. Refer to Note\n4 \u201cAcquisition of QuickTurn\u201d, for additional information. We also hold a 25% interest in the Advanced Engine Repair JV which focuses on developing new cost savings\nprograms for engine repairs.\nThe following table presents our results of operations:\n\n Three Months Ended September Nine Months Ended\n 30, September 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nAerospace products revenue $ 303,469 $ 118,675 $ 184,794 $ 737,726 $ 296,513 $ 441,213\n\n\nExpenses\nCost of sales 198,812 70,196 128,616 456,615 178,566 278,049\nOperating expenses 2,617 5,947 (3,330) 16,510 12,838 3,672\nAcquisition and transaction expenses 2,100 110 1,990 2,871 1,137 1,734\nDepreciation and amortization 1,306 115 1,191 3,177 298 2,879\nTotal expenses 204,835 76,368 128,467 479,173 192,839 286,334\n\n\nOther (expense) income\nEquity in (losses) earnings of unconsolidated entities (438) 154 (592) (1,592) (1,427) (165)\nTotal other (expense) income (438) 154 (592) (1,592) (1,427) (165)\nIncome before income taxes 98,196 42,461 55,735 256,961 102,247 154,714\nProvision for income taxes 4,408 1,131 3,277 11,865 2,631 9,234\nNet income attributable to shareholders $ 93,788 $ 41,330 $ 52,458 $ 245,096 $ 99,616 $ 145,480\n\n\n\n\n 45\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 47 of 71\n\n\n\n\nThe following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:\n\n Three Months Ended September Nine Months Ended\n 30, September 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nNet income attributable to shareholders $ 93,788 $ 41,330 $ 52,458 $ 245,096 $ 99,616 $ 145,480\nAdd: Provision for income taxes 4,408 1,131 3,277 11,865 2,631 9,234\nAdd: Equity-based compensation expense 156 70 86 154 155 (1)\nAdd: Acquisition and transaction expenses 2,100 110 1,990 2,871 1,137 1,734\nAdd: Losses on the modification or extinguishment of debt and capital lease\nobligations - - - - - -\nAdd: Changes in fair value of non-hedge derivative instruments - - - - - -\nAdd: Asset impairment charges - - - - - -\nAdd: Incentive allocations - - - - - -\nAdd: Depreciation and amortization expense 1,306 115 1,191 3,177 298 2,879\nAdd: Interest expense and dividends on preferred shares - - - - - -\nAdd: Internalization fee to affiliate - - - - - -\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) (382) 687 (1,069) (1,424) 149 (1,573)\nLess: Equity in losses (earnings) of unconsolidated entities 438 (154) 592 1,592 1,427 165\nLess: Non-controlling share of Adjusted EBITDA - - - - - -\nAdjusted EBITDA (non-GAAP) $ 101,814 $ 43,289 $ 58,525 $ 263,331 $ 105,413 $ 157,918\n\n________________________________________________________\n(1) Includes the following items for the three months ended September 30, 2024 and 2023: (i) net (loss) income of $(438) and $154, (ii) depreciation and amortization expense of $56 and $304, and\n\n (iii) acquisition and transaction expenses of $0 and $229, respectively. Includes the following items for the nine months ended September 30, 2024 and 2023: (i) net loss of $1,592 and $1,427, (ii)\n depreciation and amortization expense of $168 and $1,013, and (iii) acquisition and transaction expenses of $0 and $563, respectively.\nRevenues\nTotal Aerospace products revenue increased by $184.8 million during the three months ended September 30, 2024 as compared to 2023, primarily due to a $164.3 million\nincrease in CFM56-7B, CFM56-5B and V2500 engine and module sales, a $9.6 million increase in parts inventory sales, and other sales revenues of $7.7 million from the\nQuickTurn and LMCES acquisitions.\nTotal Aerospace products revenue increased by $441.2 million during the nine months ended September 30, 2024 as compared to 2023, primarily due to a $387.2 million\nincrease in CFM56-7B, CFM56-5B and V2500 engine and module sales, a $26.0 million increase in parts inventory sales, and other sales revenues of $22.5 million from the\nQuickTurn and LMCES acquisitions.\nExpenses\nComparison of the three months ended September 30, 2024 and 2023\nTotal expenses increased by $128.5 million, due to the following:\n \u2022 Cost of sales increased by $128.6 million, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory sales, and\n directly corresponds to components of increases in Aerospace products revenue over the same period.\n \u2022 Acquisition and transaction expenses increased by $2.0 million, primarily driven by higher professional fees incurred in evaluating and completing strategic\n transactions.\n \u2022 Depreciation and amortization increased by $1.2 million due to the acquisitions of LMCES in Q3 2024 and QuickTurn in Q4 2023.\n \u2022 Operating expenses decreased by $3.3 million, primarily due to a $1.1 million decrease in shipping and storage fees, a $0.6 million decrease in professional fees,\n and a $0.5 million decrease in insurance expense.\nComparison of the nine months ended September 30, 2024 and 2023\nTotal expenses increased by $286.3 million, due to the following:\n\n\n 46\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 48 of 71\n\n\n\n\n \u2022 Cost of sales increased by $278.0 million, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory sales, and\n directly corresponds to components of increases in Aerospace products revenue over the same period.\n \u2022 Operating expenses increased by $3.7 million, primarily driven by a $2.0 million increase in compensation and benefits expense and a $1.3 million increase in\n insurance expense.\n \u2022 Depreciation and amortization increased by $2.9 million due to the acquisitions of LMCES in Q3 2024 and QuickTurn in Q4 2023.\n \u2022 Acquisition and transaction expenses increased by $1.7 million, primarily driven by higher professional fees incurred in evaluating and completing strategic\n transactions.\nProvision for income taxes\nThe provision for income taxes increased by $3.3 million and $9.2 million during the three and nine months ended September 30, 2024, respectively, primarily due to an\nincrease in income from aerospace activities in jurisdictions subject to taxes. As the Company\u2019s operations in these areas grew, so did the corresponding tax obligations,\nresulting in a higher provision for income taxes.\nNet income\nNet income increased by $52.5 million and $145.5 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily\ndue to the changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased by $58.5 million and $157.9 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods,\nprimarily due to the changes noted above.\n\n\n\n\n 47\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 49 of 71\n\n\n\n\nCorporate and Other\nThe following table presents our results of operations:\n\n Three Months Ended September Nine Months Ended\n 30, September 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nRevenues\nLease income $ 8,128 $ 9,641 $ (1,513) $ 20,438 $ 28,163 $ (7,725)\nOther revenue 1,931 1,392 539 5,905 5,674 231\nTotal revenues 10,059 11,033 (974) 26,343 33,837 (7,494)\n\n\nExpenses\nOperating expenses 14,246 13,996 250 37,780 39,770 (1,990)\nGeneral and administrative 4,045 3,015 1,030 10,697 10,270 427\nAcquisition and transaction expenses 4,621 1,822 2,799 13,318 4,098 9,220\nManagement fees and incentive allocation to affiliate - 4,577 (4,577) 8,449 13,137 (4,688)\nInternalization fee to affiliate - - - 300,000 - 300,000\nDepreciation and amortization 3,014 2,703 311 8,998 8,107 891\nTotal expenses 25,926 26,113 (187) 379,242 75,382 303,860\n\n\nOther (expense) income\nLoss on extinguishment of debt - - - (13,920) - (13,920)\nInterest expense (57,937) (40,185) (17,752) (160,840) (117,976) (42,864)\nOther income 927 17 910 1,605 17 1,588\nTotal other expense (57,010) (40,168) (16,842) (173,155) (117,959) (55,196)\nLoss before income taxes (72,877) (55,248) (17,629) (526,054) (159,504) (366,550)\n(Benefit from) provision for income taxes (5,975) 242 (6,217) (32,219) 541 (32,760)\nNet loss (66,902) (55,490) (11,412) (493,835) (160,045) (333,790)\nLess: Dividends on preferred shares 8,335 8,334 1 25,005 23,460 1,545\nNet loss attributable to shareholders $ (75,237) $ (63,824) $ (11,413) $ (518,840) $ (183,505) $ (335,335)\n\nThe following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:\n\n Three Months Ended September Nine Months Ended\n 30, September 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nNet loss attributable to shareholders $ (75,237) $ (63,824) $ (11,413) $ (518,840) $ (183,505) $ (335,335)\nAdd: (Benefit from) provision for income taxes (5,975) 242 (6,217) (32,219) 541 (32,760)\nAdd: Equity-based compensation expense 1,098 335 763 2,015 741 1,274\nAdd: Acquisition and transaction expenses 4,621 1,822 2,799 13,318 4,098 9,220\nAdd: Losses on the modification or extinguishment of debt and capital lease\nobligations - - - 13,920 - 13,920\nAdd: Changes in fair value of non-hedge derivative instruments - - - - - -\nAdd: Asset impairment charges - - - - - -\nAdd: Incentive allocations - 4,274 (4,274) 7,456 12,540 (5,084)\nAdd: Depreciation and amortization expense 3,014 2,703 311 8,998 8,107 891\nAdd: Interest expense and dividends on preferred shares 66,272 48,519 17,753 185,845 141,436 44,409\nAdd: Internalization fee to affiliate - - - 300,000 - 300,000\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated entities - - - - - -\nLess: Equity in losses (earnings) of unconsolidated entities - - - - - -\nLess: Non-controlling share of Adjusted EBITDA - - - - - -\nAdjusted EBITDA (non-GAAP) $ (6,207) $ (5,929) $ (278) $ (19,507) $ (16,042) $ (3,465)\n\n\n\n 48\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 50 of 71\n\n\n\n\nRevenues\nComparison of the three months ended September 30, 2024 and 2023\nTotal revenues decreased by $1.0 million, primarily due to a $1.5 million decrease in Lease income, partially offset by a $0.5 million increase in Other revenue. Lease income\ndeclined primarily due to one of our vessels in the Offshore Energy business having fewer days on-hire in 2024 compared to 2023. The increase in Other revenue is driven by\nhigher victualling income for one of our vessels from a new lessee that required additional operational support services in 2024 compared to 2023.\nComparison of the nine months ended September 30, 2024 and 2023\nTotal revenues decreased by $7.5 million, primarily due to a $7.7 million decrease in the Lease income. Lease income declined primarily due to one of our vessels in the\nOffshore Energy business had fewer days on-hire in 2024 compared to 2023.\nExpenses\nComparison of the three months ended September 30, 2024 and 2023\nTotal expenses decreased by $0.2 million, due to the following:\n \u2022 Management fees and incentive allocation to affiliate decreased by $4.6 million, due to the absence of any management or incentive fee to the Former Manager in the\n current quarter, since the Internalization was effective May 28, 2024.\n \u2022 Acquisition and transaction expense increased by $2.8 million, primarily due to higher legal and other professional fees incurred for the acquisition of LMCES on\n September 9, 2024.\n \u2022 General and administrative expense increased by $1.0 million, primarily due to reimbursements to the Former Manager for certain services provided to the Company\n subsequent to the Internalization effective May 28, 2024.\nComparison of the nine months ended September 30, 2024 and 2023\nTotal expenses increased by $303.9 million, due to the following:\n \u2022 Internalization fee to affiliate increased by $300.0 million for the Internalization effective May 28, 2024.\n \u2022 Acquisition and transaction expense increased by $9.2 million, primarily due to higher legal and other professional fees incurred for the Internalization on May 28,\n 2024 and the acquisition of LMCES on September 9, 2024.\n \u2022 Management fees and incentive allocation to affiliate decreased by $4.7 million, due to a decrease in management and incentive fees to the Former Manager during\n 2024, with the Internalization effective May 28, 2024, as compared to fees paid for the full nine months ended September 30, 2023.\n \u2022 Operating expenses decreased by $2.0 million, primarily due to decreases in the Offshore Energy business, driven by decreases in project costs of $7.0 million and\n crew expenses of $6.0 million as a result of one of our vessels having fewer days on-hire in 2024 compared to 2023. This decrease was partially offset by an increase\n in bad debt expense of $2.1 million. The decrease was also offset by increases in Corporate expenses, including payroll-related expenses of $2.8 million, IT,\n marketing, and subscription expenses of $2.7 million and professional fees of $2.1 million.\nOther (expense) income\nTotal other expense increased by $16.8 million during the three months ended September 30, 2024, due to the following:\n \u2022 Interest expense increased by $17.8 million, reflecting an increase in the average debt outstanding of approximately $913.0 million, primarily due to increases in the (i)\n Senior Notes due 2032 of $800.0 million, which were issued in June 2024, (ii) Senior Notes due 2031 of $700.0 million, which were issued in April 2024, and the (iii)\n Senior Notes due 2030 of $497.0 million, which were issued in November 2023, partially offset by decreases in the (iv) Senior Notes due 2025 of $652.4 million,\n which were redeemed in April 2024, (v) Senior Notes due 2027 of $269.5 million, which were partially redeemed in June 2024, and the (vi) Revolving Credit Facility of\n $161.7 million.\n \u2022 Other income increased by $0.9 million, driven by interest income generated from the Company\u2019s investments in money market funds.\nTotal other expense increased by $55.2 million during the nine months ended September 30, 2024, due to the following:\n \u2022 Interest expense increased by $42.9 million, reflecting an increase in the average debt outstanding of approximately $694.8 million, primarily due to increases in the (i)\n Senior Notes due 2030 of $496.9 million, which were issued in November 2023, (ii) Senior Notes due 2031 of $466.7 million, issued in April 2024 (iii) Senior Notes\n due 2032 of $355.6 million, which were issued in June 2024, partially offset by decreases in the (iv) Senior Notes due 2025 of $435.4 million, which were redeemed in\n April 2024, (v) Senior Notes due 2027 of $119.7 million, which were partially redeemed in June 2024, and the (vi) Revolving Credit Facility of $68.9 million.\n \u2022 Loss on extinguishment of debt increased by $13.9 million, driven by the redemption of Senior Notes due 2025 and a partial redemption of Senior Notes due 2027.\n\n\n 49\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 51 of 71\n\n\n\n\n \u2022 Other income increased by $1.6 million, driven by interest income generated from the Company\u2019s investments in money market funds.\nBenefit from income taxes\nThe benefit from income taxes increased by $6.2 million and $32.8 million during the three and nine months ended September 30, 2024, respectively, primarily due to the tax\nbenefit from the Internalization fee paid to affiliate. The Internalization fee created a substantial tax benefit, which led to an improved tax position for the Company. The impact of\nthe fee was notable in both the quarterly and year-to-date financials, as it provided a meaningful offset against taxable income from the leasing and aerospace segments.\nNet loss\nNet loss increased by $11.4 million and $333.8 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due\nto the changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased by $0.3 million and $3.5 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily\ndue to the changes noted above.\n\n\nLiquidity and Capital Resources\nWe believe we have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that\nour business can continue to operate during various environments. This includes limiting discretionary spending across the organization and re-prioritizing our investments as\nnecessary.\nOur principal uses of liquidity have been and continue to be (i) acquisitions of aircraft and engines, (ii) dividends to our ordinary and preferred shareholders, (iii) expenses\nassociated with our operating activities, and (iv) debt service obligations associated with our investments.\n \u2022 Cash used for the purpose of making investments was $1.0 billion and $562.8 million during the nine months ended September 30, 2024 and 2023, respectively.\n \u2022 Distributions to shareholders, including cash dividends, were $115.8 million and $113.2 million during the nine months ended September 30, 2024 and 2023,\n respectively.\n \u2022 Uses of liquidity associated with our operating expenses are captured on a net basis in our cash flows from operating activities. Uses of liquidity associated with our\n debt obligations are captured in our cash flows from financing activities.\nOur principal sources of liquidity to fund these uses have been and continue to be (i) revenues from our aviation assets (including maintenance reserve collections) net of\noperating expenses, (ii) proceeds from borrowings or the issuance of securities and (iii) proceeds from asset sales.\n \u2022 Cash flows used in operating activities, plus Principal collections on finance leases and Receipt of maintenance deposits under operating lease agreements were\n $108.7 million during the nine months ended September 30, 2024. Cash flows from operating activities, plus Principal collections on finance leases and Receipt of\n maintenance deposits under operating lease agreements were $143.1 million during the nine months ended September 30, 2023.\n \u2022 During the nine months ended September 30, 2024, additional borrowings were obtained in connection with the (i) Senior Notes due 2031 of $800.0 million, (ii)\n Senior Notes due 2030 of $700.0 million and (iii) Revolving Credit Facility of $590.0 million. We made total principal repayments of (i) $650.0 million related to the\n Senior Notes due 2025, (ii) $440.0 million relating to the Revolving Credit Facility and (iii) $269.5 million related to the Senior Notes due 2027. During the nine months\n ended September 30, 2023, additional borrowings and total principal repayments in connection with the Revolving Credit Facility were $430.0 million and $330.0\n million, respectively.\n \u2022 Proceeds from sales of assets were $542.9 million and $366.1 million during the nine months ended September 30, 2024 and 2023, respectively.\n \u2022 Proceeds from the issuance of preferred shares, net of underwriter\u2019s discount and issuance costs, were $61.7 million during the nine months ended September 30,\n 2023.\nOn May 28, 2024, we entered into definitive agreements with the Former Manager and Master GP to internalize our management function. As part of the termination of the\nManagement Agreement, we agreed to pay $150.0 million to the Former Manager. Following the internalization of management on May 28, 2024, we no longer pay a\nmanagement fee or incentive distribution to the Former Manager or Master GP. Consequently, we have assumed general and administrative, and compensation and benefit\nexpenses directly. We anticipate a savings in operation costs as a result of the Internalization.\nWe are currently evaluating several potential transactions and related financings, including, but not limited to, certain additional acquisitions of assets and operating\ncompanies in the aviation section or debt and equity financings, which could occur within the next 12 months. None of these potential transactions, negotiations, or financings\nare definitive or included within our planned\n\n\n 50\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 52 of 71\n\n\n\n\nliquidity needs. We cannot assure if or when any such transaction will be consummated or the terms of any such transaction or related financing.\nHistorical Cash Flow\nComparison of the nine months ended September 30, 2024 and 2023\nThe following table compares the historical cash flow for the nine months ended September 30, 2024 and 2023:\n\n\n Nine Months Ended September 30,\n(in thousands) 2024 2023\nCash Flow Data:\nNet cash (used in) provided by operating activities $ (146,153) $ 116,766\nNet cash used in investing activities (442,731) (191,092)\nNet cash provided by financing activities 610,016 74,140\n\n\nNet cash used in operating activities increased $262.9 million, which primarily reflects an increase in (i) Net loss of $219.2 million and certain adjustments to reconcile net\nloss to cash provided by operating activities including an increase in (ii) Gain on sale of assets of $133.8 million and decreases in (iii) Changes in net working capital of\n$126.6 million, (iv) Change in deferred income taxes of $8.4 million and (v) Provision for credit losses of $3.8 million, partially offset by increases in (vi) Non-cash termination\nfee to affiliate (issuance of ordinary shares) of $150.0 million and (vii) Depreciation and amortization of $40.0 million, a decrease in (viii) Security deposits and maintenance\nclaims included in earnings of $21.0 million and an increase in (ix) Loss on extinguishment of debt of $13.9 million.\nNet cash used in investing activities increased $251.6 million, primarily due to increases in (i) Acquisition of business, net of cash acquired of $143.6 million, (ii) Deposits for\nacquisitions of aircraft and engines of $152.2 million, (iii) Acquisition of leasing equipment of $115.4 million and (iv) Investments in financing receivable of $63.9 million\npartially offset by higher (v) Proceeds from the sale of assets of $176.9 million, decreases in (vi) Investment in unconsolidated entities of $19.5 million, (vii) Acquisition of lease\nintangibles of $11.6 million and (viii) Investment in promissory notes of $11.5 million and higher (ix) Proceeds (refunds) from deposits on sale of aircraft and engines of $3.1\nmillion.\nNet cash provided by financing activities increased $535.9 million, primarily due to increases in (i) Proceeds from debt of $1.6 billion and (ii) Receipt of maintenance deposits\nunder operating lease agreements of $12.8 million, partially offset by an increase in (iii) Repayment of debt of $1.0 billion, a decrease in (iv) Proceeds from the issuance of\npreferred shares, net of underwriter\u2019s discount and issuance costs of $61.7 million, and increases in (v) Payment of deferred financing costs of $9.0 million and (vi) Release of\nmaintenance deposits under operating lease agreements of $6.2 million.\nContractual Obligations\nOur material cash requirements include the following contractual and other obligations:\nDebt Obligations-As of September 30, 2024, we had outstanding principal and interest payment obligations of $3.3 billion and $1.3 billion, respectively, of which only interest\npayments of $216.4 million are due in the next twelve months. See Note 8 to the consolidated financial statements for additional information about our debt obligations.\nLease Obligations-As of September 30, 2024, we had outstanding operating and finance lease obligations of $19.6 million, of which $2.1 million is due in the next twelve\nmonths.\nOther Cash Requirements-In addition to our contractual obligations, we pay quarterly cash dividends on our ordinary shares and preferred shares, which are subject to\nchange at the discretion of our Board of Directors. During the last twelve months, we declared cash dividends of $120.9 million and $33.3 million on our ordinary shares and\npreferred shares, respectively.\nWe expect to meet our future short-term liquidity requirements through cash on hand, unused borrowing capacity or future financings and net cash provided by our current\noperations. We expect that our operating subsidiaries will generate sufficient cash flow to cover operating expenses and the payment of principal and interest on our\nindebtedness as they become due. We may elect to meet certain long-term liquidity requirements or to continue to pursue strategic opportunities through utilizing cash on\nhand, cash generated from our current operations and the issuance of securities in the future. Management believes adequate capital and borrowings are available from\nvarious sources to fund our commitments to the extent required.\nCritical Accounting Estimates and Policies\nThere were no material changes to our critical accounting estimates described in our Annual Report on Form 10-K for the year ended December 31, 2023.\nRecent Accounting Pronouncements\nSee Note 2 to our Consolidated Financial Statements for recent accounting pronouncements.\n\n\n 51\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 53 of 71\n\n\n\n\nItem 3. Quantitative and Qualitative Disclosures About Market Risk\nMarket risk represents the risk of changes in value of a financial instrument, caused by fluctuations in interest rates and foreign exchange rates. Changes in these factors could\ncause fluctuations in our results of operations and cash flows. We are exposed to the market risks described below.\nInterest Rate Risk\nInterest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Interest rate risk is highly sensitive\nto many factors, including the U.S. government\u2019s monetary and tax policies, global economic factors and other factors beyond our control. We are exposed to changes in the\nlevel of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate exposure relates to our term loan arrangements.\nLIBOR and other indices which are deemed \u201cbenchmarks\u201d are the subject of recent national, international, and other regulatory guidance and proposals for reform. The ICE\nBenchmark Administration ceased publication of one-week and two-month USD LIBOR settings after December 31, 2021 and the remaining USD LIBOR settings after June\n30, 2023, other than certain USD LIBOR settings that are expected to continue to be published under a synthetic methodology until September 2024. In anticipation of LIBOR\u2019s\nphase out, we amended our revolving credit facility to incorporate SOFR as the successor rate to LIBOR. We continue to monitor related reform proposals and evaluate the\nrelated risks\u037e however, it is not possible to predict the effects of any of these developments, and any future initiatives to regulate, reform or change the manner of administration\nof LIBOR, SOFR or other benchmark indices could result in adverse consequences to the rate of interest payable and receivable on, market value of and market liquidity for\nfinancial instruments tied to variable interest rate indices.\nOur borrowing agreements generally require payments based on a variable interest rate index, such as SOFR. Therefore, to the extent our borrowing costs are not fixed,\nincreases in interest rates may reduce our net income by increasing the cost of our debt without any corresponding increase in rents or cash flow from our leases. We may\nelect to manage our exposure to interest rate movements through the use of interest rate derivatives (interest rate swaps and caps).\nThe following discussion about the potential effects of changes in interest rates is based on a sensitivity analysis, which models the effects of hypothetical interest rate shifts\non our financial condition and results of operations. Although we believe a sensitivity analysis provides the most meaningful analysis permitted by the rules and regulations of\nthe SEC, it is constrained by several factors, including the necessity to conduct the analysis based on a single point in time and by the inability to include the extraordinarily\ncomplex market reactions that normally would arise from the market shifts modeled. Although the following results of a sensitivity analysis for changes in interest rates may\nhave some limited use as a benchmark, they should not be viewed as a forecast. This forward-looking disclosure also is selective in nature and addresses only the potential\ninterest expense impacts on our financial instruments and, in particular, does not address the mark-to-market impact on our interest rate derivatives, if any. It also does not\ninclude a variety of other potential factors that could affect our business as a result of changes in interest rates. In addition, the following discussion does not take into account\nour Series B preferred shares, on which distributions currently accrue interest at a fixed rate but will accrue interest at a floating rate based on a certain variable interest rate\nindex plus a spread from and after December 15, 2024.\nAs of September 30, 2024, assuming we do not hedge our exposure to interest rate fluctuations related to our outstanding floating rate debt, a hypothetical 100-basis point\nincrease/decrease in our variable interest rate on our borrowings would result in an increase of approximately $1.5 million or a decrease of approximately $1.5 million in\ninterest expense over the next 12 months.\nItem 4. Controls and Procedures\nDisclosure Controls and Procedures\nAs of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief\nExecutive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of\n1934 (the \u201cExchange Act\u201d)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures\nwere effective as of and for the period covered by this report.\nInternal Control over Financial Reporting\nThere have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal\nquarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.\n\n\n 52\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 54 of 71\n\n\n\n\n PART II-OTHER INFORMATION\nItem 1. Legal Proceedings\nWe are and may become involved in legal proceedings, including but not limited to regulatory investigations and inquiries, in the ordinary course of our business. Although we\nare unable to predict with certainty the eventual outcome of any litigation, regulatory investigation or inquiry, in the opinion of management, we do not expect our current and any\nthreatened legal proceedings to have a material adverse effect on our business, financial position or results of operations. Given the inherent unpredictability of these types of\nproceedings, however, it is possible that future adverse outcomes could have a material adverse effect on our financial results.\nItem 1A. Risk Factors\nYou should carefully consider the following risks and other information in this Form 10-Q in evaluating us and our shares. Any of the following risks, as well as additional risks\nand uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition. The risk\nfactors generally have been separated into the following categories: risks related to our business, risks related to taxation and risks related to the Company\u2019s shares. However,\nthese categories do overlap and should not be considered exclusive.\nRisks Related to Our Business\nWe may not realize some or all of the targeted benefits of the Internalization.\nIn connection with the Internalization, we entered into a Transition Services Agreement with the Former Manager. Under the Transition Services Agreement, the Former Manager\nis required to continue to provide the Company and its affiliates with certain Services for a transition period during which the Company will procure replacements for the\nServices. The Services are provided to the Company for a fee equal to the Former Manager\u2019s cost of providing the Services, including the allocated cost of, among other things,\noverhead, employee wages and compensation, rent and related real estate expenses and actually incurred out-of-pocket expenses, plus a mark-up of ten percent (10%). The\nCompany is required to use commercially reasonable efforts to make available to the Former Manager certain employees of the Company who were previously employees of\nthe Former Manager to provide the Reverse Services, subject to certain exceptions. The Former Manager is required to continue to provide the services that are reasonably\nrequired by the Company to prepare its quarterly and annual financial statements until May 31, 2025. The Company is required to continue to provide the Reverse Services until\nthe later to occur of the dissolution or sale of the entities receiving Reverse Services. The Transition Services Agreement may be terminated earlier (x) by mutual agreement of\nthe parties, (y) by either the Former Manager or the Company in the event of a material breach by the non-terminating party that is not cured within thirty (30) days following\nwritten notification thereof, or (z) by the Former Manager if the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days. The failure\nto effectively complete the transition of these services to a fully internal basis, efficiently manage the transition with the Former Manager or find adequate internal replacements\nfor these services, could impede our ability to achieve the targeted cost savings of the Internalization and adversely affect our operations. In addition, complexities arising from\nthe Internalization could increase our overhead costs and detract from management\u2019s ability to focus on operating our business. There can be no assurance we will be able to\nrealize the expected cost savings of the Internalization.\nWe are reliant on certain transition services provided by the Former Manager under the Transition Services Agreement, and may not find a suitable provider for these\ntransition services if the Former Manager no longer provides the transition services to which we are entitled under the Transition Services Agreement.\nWe remain reliant on the Former Manager during the period of the Transition Services Agreement, and the loss of these transition services could adversely affect our\noperations. We are subject to the risk that the Former Manager will default on its obligation to provide the transition services to which we are entitled under the Transition\nServices Agreement, or that we or the Former Manager will terminate the Transition Services Agreement pursuant to its termination provisions, and that we will not be able to\nfind a suitable replacement for the transition services provided under the Transition Services Agreement in a timely manner, at a reasonable cost or at all. In addition, the\nFormer Manager\u2019s liability to us if it defaults on its obligation to provide transition services to us during the transition period is limited by the terms of the Transition Services\nAgreement, and we may not recover the full cost of any losses related to such a default. We may also be adversely affected by operational risks, including cybersecurity attacks,\nthat could disrupt the Former Manager\u2019s financial, accounting and other data processing systems during the period of the transition services.\nUncertainty relating to macroeconomic conditions may reduce the demand for our assets, result in non-performance of contracts by our lessees or charterers, limit our\nability to obtain additional capital to finance new investments, or have other unforeseen negative effects.\nUncertainty and negative trends in general economic conditions in the United States and abroad, including significant tightening of credit markets and commodity price volatility,\nhistorically have created difficult operating environments for owners and operators in the transportation industries. Many factors, including factors that are beyond our control,\nmay impact our operating results or financial condition and/or affect the lessees and charterers that form our customer base. For some years, the world has experienced\nweakened economic conditions and volatility following adverse changes in global capital markets. Excess supply in oil and gas markets can put significant downward\npressure on prices for these commodities, and may affect demand for assets used in production, refining and transportation of oil and gas. In the past, a significant decline in\noil prices has led to lower\n\n\n 53\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 55 of 71\n\n\n\n\noffshore exploration and production budgets worldwide. These conditions have resulted in significant contraction, deleveraging and reduced liquidity in the credit markets. A\nnumber of governments have implemented, or are considering implementing, a broad variety of governmental actions or new regulations for the financial markets. In addition,\nlimitations on the availability of capital, higher costs of capital for financing expenditures or the desire to preserve liquidity, may cause our current or prospective customers to\nmake reductions in future capital budgets and spending.\nFurther, demand for our assets is related to passenger and cargo traffic growth, which in turn is dependent on general business and economic conditions. Global economic\ndownturns could have an adverse impact on passenger and cargo traffic levels and consequently our lessees\u2019 and charterers\u2019 business, which may in turn result in a\nsignificant reduction in revenues, earnings and cash flows, difficulties accessing capital and a deterioration in the value of our assets. We have in the past been exposed to\nincreased credit risk from our customers and third parties who have obligations to us, which resulted in non-performance of contracts by our lessees and adversely impacted\nour business, financial condition, results of operations and cash flows. We cannot assure you that similar loss events may not occur in the future.\nInstability in geographies where we have assets or where we derive revenue could have a material adverse effect on our business, customers, operations and financial\nresults.\nEconomic, civil, military and political uncertainty exists and may increase in regions where we operate and derive our revenue. Various countries in which we operate are\nexperiencing and may continue to experience military action and civil and political unrest. We have assets in the emerging market economies of Eastern Europe, including\nsome assets in Russia. In late February 2022, Russian military forces launched significant military action against Ukraine. The conflict remains ongoing and sustained conflict\nand disruption in the region is likely. The impact to Russia and Ukraine, as well as actions taken by other countries, including new and stricter export controls and sanctions by\nCanada, the United Kingdom, the European Union, the U.S. and other countries and organizations against officials, individuals, regions, and industries in Russia and Ukraine,\nand each country\u2019s potential response to such sanctions, tensions and military actions, could have a material adverse effect on our business and delay or prevent us from\naccessing certain of our assets. We are actively monitoring the security of our remaining assets in the region.\nThe aviation industry has experienced periods of oversupply during which lease rates and asset values have declined, particularly during the most recent economic\ndownturn, and any future oversupply could materially adversely affect our results of operations and cash flows.\nThe oversupply of a specific asset is likely to depress the lease or charter rates for and the value of that type of asset and result in decreased utilization of our assets, and the\nindustries in which we operate have experienced periods of oversupply during which rates and asset values have declined, particularly during the most recent economic\ndownturn. Factors that could lead to such oversupply include, without limitation:\n \u2022 general demand for the type of assets that we purchase\u037e\n \u2022 general macroeconomic conditions, including market prices for commodities that our assets may serve\u037e\n \u2022 geopolitical events, including war, prolonged armed conflict and acts of terrorism\u037e\n \u2022 outbreaks of communicable diseases and natural disasters\u037e\n \u2022 governmental regulation\u037e\n \u2022 interest rates\u037e\n \u2022 the availability of credit\u037e\n \u2022 potential reduced cash flows and financial condition, including potential liquidity restraints\u037e\n \u2022 restructurings and bankruptcies of companies in the industries in which we operate, including our customers\u037e\n \u2022 manufacturer production levels and technological innovation\u037e\n \u2022 manufacturers merging or exiting the industry or ceasing to produce certain asset types\u037e\n \u2022 retirement and obsolescence of the assets that we own\u037e\n \u2022 increases in supply levels of assets in the market due to the sale or merging of operating lessors\u037e and\n \u2022 reintroduction of previously unused or dormant assets into the industries in which we operate.\nThese and other related factors are generally outside of our control and could lead to persistence of, or increase in, the oversupply of the types of assets that we acquire or\ndecreased utilization of our assets, either of which could materially adversely affect our results of operations and cash flow. In addition, aviation lessees may redeliver our\nassets to locations where there is oversupply, which may lead to additional repositioning costs for us if we move them to areas with higher demand. Positioning expenses vary\ndepending on geographic location, distance, rates and other factors, and may not be fully covered by drop-off charges collected from the last lessees of the equipment or pick-\nup charges paid by the new lessees. Positioning expenses can be significant if a large portion of our assets are returned to locations with weak demand, which could\nmaterially adversely affect our business, prospects, financial condition, results of operations and cash flows.\n\n\n 54\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 56 of 71\n\n\n\n\nThe airline industry is heavily regulated, and if we fail to comply with applicable requirements, our results of operations could suffer.\nThe Federal Aviation Administration (\u201cFAA\u201d) and equivalent regulatory agencies have increasingly focused on the need to assure that airline industry products are designed with\nsufficient cybersecurity controls to protect against unauthorized access or other unwanted compromise. A failure to meet these evolving expectations could negatively impact\nsales into the industry and expose us to legal or contractual liability.\nGovernmental agencies throughout the world, including the FAA, prescribe standards and qualification requirements for aircraft components, including virtually all commercial\nairline and general aviation products. Specific regulations vary from country to country, although compliance with FAA requirements generally satisfies regulatory requirements\nin other countries. If any material authorization or approval qualifying us to supply our products is revoked or suspended, then sale of the product would be prohibited by law,\nwhich would have an adverse effect on our business, financial condition and results of operations.\nFrom time to time, the FAA or equivalent regulatory agencies in other countries propose new regulations or changes to existing regulations, which often are more stringent than\nexisting regulations. If such proposals are adopted and enacted, we may incur significant additional costs to achieve compliance, which could have a material adverse effect\non our business, financial condition and results of operations.\nRecent trends by China\u2019s aviation authority to relax restrictions on airspace may be reversed, and anticipated new regulations loosening airspace restrictions may not\nmaterialize, which could impact sales prospects in China for our commercial aerospace businesses.\nThe retirement or prolonged grounding of commercial aircraft could reduce our revenues and the value of any related inventory.\nWe sell aircraft components and replacement parts. If aircraft or engines for which we offer aircraft components and replacement parts are retired or grounded for prolonged\nperiods of time and there are fewer aircraft that require these components or parts, our revenues may decline as well as the value of any related inventory.\nContractual defaults may adversely affect our business, prospects, financial condition, results of operations and cash flows by decreasing revenues and increasing\nstorage, positioning, collection, recovery and lost equipment expenses.\nThe success of our business depends in large part on the success of the operators in the sectors in which we participate. Cash flows from our assets are substantially\nimpacted by our ability to collect compensation and other amounts to be paid in respect of such assets from the customers with whom we enter into leases, charters or other\ncontractual arrangements. Inherent in the nature of the leases, charters and other arrangements for the use of such assets is the risk that we may not receive, or may\nexperience delay in realizing, such amounts to be paid. While we target the entry into contracts with credit-worthy counterparties, no assurance can be given that such\ncounterparties will perform their obligations during the term of the leases, charters or other contractual arrangements. In addition, when counterparties default, we may fail to\nrecover all of our assets, and the assets we do recover may be returned in damaged condition or to locations where we will not be able to efficiently lease, charter or sell them.\nIn most cases, we maintain, or require our lessees to maintain, certain insurances to cover the risk of damages or loss of our assets. However, these insurance policies may\nnot be sufficient to protect us against a loss.\nDepending on the specific sector, the risk of contractual defaults may be elevated due to excess capacity as a result of oversupply during the most recent economic downturn.\nWe lease assets to our customers pursuant to fixed-price contracts, and our customers then seek to utilize those assets to transport goods and provide services. If the price at\nwhich our customers receive for their transportation services decreases as a result of an oversupply in the marketplace, then our customers may be forced to reduce their\nprices in order to attract business (which may have an adverse effect on their ability to meet their contractual lease obligations to us), or may seek to renegotiate or terminate\ntheir contractual lease arrangements with us to pursue a lower-priced opportunity with another lessor, which may have a direct, adverse effect on us. See \u201c-The industries in\nwhich we operate have experienced periods of oversupply during which lease rates and asset values have declined, particularly during the most recent economic downturn,\nand any future oversupply could materially adversely affect our results of operations and cash flows.\u201d Any default by a material customer would have a significant impact on our\nprofitability at the time the customer defaulted, which could materially adversely affect our operating results and growth prospects. In addition, some of our counterparties may\nreside in jurisdictions with legal and regulatory regimes that make it difficult and costly to enforce such counterparties\u2019 obligations.\nWe acquire a high concentration of a particular type of asset, or concentrate our investments in a particular sector, and our business, prospects, financial condition,\nresults of operations and cash flows could be adversely affected by changes in market demand or problems specific to that asset or sector.\nIf we acquire a high concentration of a particular asset, or concentrate our investments in a particular sector, and our business and financial results could be adversely affected\nby sector-specific or asset-specific factors. If the market demand for a particular asset declines, it is redesigned or replaced by its manufacturer or it experiences design or\ntechnical problems, the value and rates relating to such asset may decline, and we may be unable to lease such asset on favorable terms, if at all. Any decrease in the value\nand rates of our assets may have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.\n\n\n 55\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 57 of 71\n\n\n\n\nWe operate in highly competitive markets.\nThe business of acquiring aviation assets is highly competitive. Market competition for opportunities includes traditional transportation companies, commercial and investment\nbanks, as well as a growing number of non-traditional participants, such as hedge funds, private equity funds and other private investors, including Fortress-related entities.\nSome of these competitors may have access to greater amounts of capital and/or to capital that may be committed for longer periods of time or may have different return\nthresholds than us, and thus these competitors may have certain advantages not shared by us. In addition, competitors may have incurred, or may in the future incur, leverage\nto finance their debt investments at levels or on terms more favorable than those available to us. Strong competition for investment opportunities could result in fewer such\nopportunities for us, as certain of these competitors have established and are establishing investment vehicles that target the same types of assets that we intend to purchase.\nIn addition, some of our competitors may have longer operating histories, greater financial resources and lower costs of capital than us, and consequently, may be able to\ncompete more effectively in one or more of our target markets. We likely will not always be able to compete successfully with our competitors and competitive pressures or\nother factors may also result in significant price competition, particularly during industry downturns, which could have a material adverse effect on our business, prospects,\nfinancial condition, results of operations and cash flows.\nOur business could suffer if we fail to attract and retain management and other highly skilled personnel.\nOur future success will depend on our ability to identify, hire, develop, motivate and retain highly qualified management and other personnel for all areas of the Company.\nTrained and experienced personnel are in high demand and may be in short supply in some areas. We may not be able to attract, develop and maintain an adequate skilled\nmanagement and workforce necessary to operate our businesses and labor expenses may increase as a result of a shortage in the supply of qualified personnel. If we are\nunable to attract and retain such personnel, we may not be able to take advantage of acquisitions and other growth opportunities that may be presented to us and this could\nhave a material adverse effect on our business, financial condition, liquidity and results of operations.\nCertain liens may arise on our assets.\nCertain of our assets are currently subject to liens under separate financing arrangements entered into by certain subsidiaries in connection with acquisitions of assets. In the\nevent of a default under such arrangements by the applicable subsidiary, the lenders thereunder would be permitted to take possession of or sell such assets. In addition, our\ncurrently owned assets and assets that we purchase in the future may be subject to other liens based on the industry practices relating to such assets. Until they are\ndischarged, these liens could impair our ability to repossess, re-lease or sell our assets, and to the extent our lessees or charterers do not comply with their obligations to\ndischarge any liens on the applicable assets, we may find it necessary to pay the claims secured by such liens in order to repossess such assets. Such payments could\nmaterially adversely affect our operating results and growth prospects.\nThe values of our assets may fluctuate due to various factors.\nThe fair market values of our assets may decrease or increase depending on a number of factors, including the prevailing level of charter or lease rates from time to time,\ngeneral economic and market conditions affecting our target markets, type and age of assets, supply and demand for assets, competition, new governmental or other\nregulations and technological advances, all of which could impact our profitability and our ability to lease, develop, operate, or sell such assets. In addition, our assets\ndepreciate as they age and may generate lower revenues and cash flows. We must be able to replace such older, depreciated assets with newer assets, or our ability to\nmaintain or increase our revenues and cash flows will decline. In addition, if we dispose of an asset for a price that is less than the depreciated book value of the asset on our\nbalance sheet or if we determine that an asset\u2019s value has been impaired, we will recognize a related charge in our consolidated statement of operations and such charge\ncould be material.\nWe may not generate a sufficient amount of cash or generate sufficient free cash flow to fund our operations or repay our indebtedness.\nOur ability to make payments on our indebtedness as required depends on our ability to generate cash flow in the future. This ability, to a certain extent, is subject to general\neconomic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we do not generate sufficient free cash flow to satisfy our debt\nobligations, including interest payments and the payment of principal at maturity, we may have to undertake alternative financing plans, such as refinancing or restructuring our\ndebt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot provide assurance that any refinancing would be possible, that\nany assets could be sold, or, if sold, of the timeliness and amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at\nall, or that additional financing would be permitted under the terms of our various debt instruments then in effect. Furthermore, our ability to refinance would depend upon the\ncondition of the finance and credit markets. Our inability to generate sufficient free cash flow to satisfy our debt obligations, or to refinance our obligations on commercially\nreasonable terms or on a timely basis, would materially affect our business, financial condition and results of operations.\nOur use of joint ventures or partnerships may present unforeseen obstacles or costs.\nWe have acquired and may in the future acquire interests in certain assets in cooperation with third-party partners or co-investors through jointly-owned acquisition vehicles,\njoint ventures or other structures. In these co-investment situations, our ability to\n\n\n 56\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 58 of 71\n\n\n\n\ncontrol the management of such assets depends upon the nature and terms of the joint arrangements with such partners and our relative ownership stake in the asset, each\nof which will be determined by negotiation at the time of the investment. . Such arrangements present risks not present with wholly-owned assets, such as the possibility that a\nco-investor becomes bankrupt, develops business interests or goals that conflict with our interests and goals in respect of the assets, all of which could materially adversely\naffect our business, prospects, financial condition, results of operations and cash flows.\nIn addition, we expect to utilize third-party contractors to perform services and functions related to the operation and leasing of our assets. These functions may include billing,\ncollections, recovery and asset monitoring. Because we do not directly control these third parties, there can be no assurance that the services they provide will be delivered at a\nlevel commensurate with our expectations, or at all. The failure of any such third-party contractors to perform in accordance with our expectations could materially adversely\naffect our business, prospects, financial condition, results of operations and cash flows.\nWe are subject to the risks and costs of obsolescence of our assets.\nTechnological and other improvements expose us to the risk that certain of our assets may become technologically or commercially obsolete. For example, as manufacturers\nintroduce technological innovations and new types of aircraft, some of our assets could become less desirable to potential lessees. Such technological innovations may\nincrease the rate of obsolescence of existing aircraft faster than currently anticipated by us. In addition, the imposition of increased regulation regarding stringent noise or\nemissions restrictions may make some of our aircraft less desirable and less valuable in the marketplace. In our offshore energy business, development and construction of\nnew, sophisticated, high-specification assets could cause our assets to become less desirable to potential charterers, and insurance rates may also increase with the age of\na vessel, making older vessels less desirable to potential charterers. Any of these risks may adversely affect our ability to lease, charter or sell our assets on favorable terms, if\nat all, which could materially adversely affect our operating results and growth prospects.\nThe inability to obtain certain components from suppliers could harm our business.\nOur business is affected by the availability and price of the component parts that we use to maintain our products or to manufacture products. Our ability to manage inventory\nand meet delivery requirements may be constrained by our suppliers\u2019 ability to adjust delivery of long-lead time products during times of volatile demand. The supply chains for\nour business could also be disrupted by external events such as natural disasters, extreme weather events, pandemics, labor disputes, governmental actions and legislative\nor regulatory changes. As a result, our suppliers may fail to perform according to specifications when required and we may be unable to identify alternate suppliers or to\notherwise mitigate the consequences of their non-performance.\nTransitions to new suppliers may result in significant costs and delays, including those related to the required recertification of parts obtained from new suppliers with our\ncustomers and/or regulatory agencies. Our inability to fill our supply needs could jeopardize our ability to fulfill obligations under customer contracts, which could result in\nreduced revenues and profits, contract penalties or terminations, and damage to customer relationships. Further, increased costs of such components could reduce our profits\nif we were unable to pass along such price in-creases to our customers.\nWe could be negatively impacted by environmental, social, and governance (ESG) and sustainability-related matters.\nGovernments, investors, customers, employees and other stakeholders are increasingly focusing on corporate ESG practices and disclosures, and expectations in this area\nare rapidly evolving. We have announced, and may in the future announce, sustainability-focused investments, partnerships and other initiatives and goals. These initiatives,\naspirations, targets or objectives reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our efforts to accomplish and accurately\nreport on these initiatives and goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material negative impact,\nincluding on our reputation and stock price.\nIn addition, the standards for tracking and reporting on ESG matters are relatively new, have not been harmonized and continue to evolve. Our selection of disclosure\nframeworks that seek to align with various voluntary reporting standards may change from time to time and may result in a lack of comparative data from period to period.\nMoreover, our processes and controls may not always align with evolving voluntary standards for identifying, measuring, and reporting ESG metrics, our interpretation of\nreporting standards may differ from those of others, and such standards may change over time, any of which could result in significant revisions to our goals or reported\nprogress in achieving such goals. In this regard, the criteria by which our ESG practices and disclosures are assessed may change due to the quickly evolving landscape,\nwhich could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. The increasing attention to corporate ESG initiatives\ncould also result in increased investigations and litigation or threats thereof. If we are unable to satisfy such new criteria, investors may conclude that our ESG and\nsustainability practices are inadequate. If we fail or are perceived to have failed to achieve previously announced initiatives or goals or to accurately disclose our progress on\nsuch initiatives or goals, our reputation, business, financial condition and results of operations could be adversely impacted.\nWe may be affected by fluctuating prices for fuel and energy.\nVolatility in energy prices could have a significant effect on a variety of items including, but not limited to, the economy and demand for transportation services.\nInternational, political, and economic factors, events and conditions, including current sanctions against Russia related to its invasion of Ukraine, affect the volatility of fuel\nprices and supplies. Weather can also affect fuel supplies and limit domestic\n\n\n 57\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 59 of 71\n\n\n\n\nrefining capacity. A severe shortage of, or disruption to, domestic fuel supplies could have a material adverse effect on our results of operations, financial condition, and\nliquidity.\nOur assets generally require routine maintenance, and we may be exposed to unforeseen maintenance costs.\nWe may be exposed to unforeseen maintenance costs for our assets associated with a lessee\u2019s or charterer\u2019s failure to properly maintain the asset. We enter into leases and\ncharters with respect to some of our assets pursuant to which the lessees are primarily responsible for many obligations, which generally include complying with all\ngovernmental requirements applicable to the lessee or charterer, including operational, maintenance, government agency oversight, registration requirements and other\napplicable directives. Failure of a lessee or charterer to perform required maintenance during the term of a lease or charter could result in a decrease in value of an asset, an\ninability to re-lease or charter an asset at favorable rates, if at all, or a potential inability to utilize an asset. Maintenance failures would also likely require us to incur\nmaintenance and modification costs upon the termination of the applicable lease or charter\u037e such costs to restore the asset to an acceptable condition prior to re-leasing,\ncharter or sale could be substantial. Any failure by our lessees or charterers to meet their obligations to perform required scheduled maintenance or our inability to maintain\nour assets could materially adversely affect our business, prospects, financial condition, results of operations and cash flows.\nSome of our customers operate in highly regulated industries and changes in laws or regulations, including laws with respect to international trade, may adversely\naffect our ability to lease, charter or sell our assets.\nSome of our customers operate in highly regulated industries such as aviation and offshore energy. A number of our contractual arrangements-for example, our leasing aircraft\nengines or offshore energy equipment to third-party operators-require the operator (our customer) to obtain specific governmental or regulatory licenses, consents or\napprovals. These include consents for certain payments under such arrangements and for the export, import or re-export of the related assets. Failure by our customers or, in\ncertain circumstances, by us, to obtain certain licenses and approvals could negatively affect our ability to conduct our business. In addition, the shipment of goods, services\nand technology across international borders subjects the operation of our assets to international trade laws and regulations. Moreover, many countries, including the United\nStates, control the export and re-export of certain goods, services and technology and impose related export recordkeeping and reporting obligations. Governments also may\nimpose economic sanctions against certain countries, persons and other entities that may restrict or prohibit transactions involving such countries, persons and entities. If any\nsuch regulations or sanctions affect the asset operators that are our customers, our business, prospects, financial condition, results of operations and cash flows may be\nmaterially adversely affected.\nCertain of our assets are subject to purchase options held by the charterer or lessee of the asset which, if exercised, could reduce the size of our asset base and our\nfuture revenues.\nWe have granted purchase options to the charterers and lessees of certain of our assets. The market values of these assets may change from time to time depending on a\nnumber of factors, such as general economic and market conditions affecting the industries in which we operate, competition, cost of construction, governmental or other\nregulations, technological changes and prevailing levels of charter or lease rates from time to time. The purchase price under a purchase option may be less than the asset\u2019s\nmarket value at the time the option may be exercised. In addition, we may not be able to obtain a replacement asset for the price at which the asset is sold. In such cases, our\nbusiness, prospects, financial condition, results of operations and cash flows may be materially adversely affected.\nThe profitability of our offshore energy assets may be impacted by the profitability of the offshore oil and gas industry generally, which is significantly affected by,\namong other things, volatile oil and gas prices.\nDemand for assets in the offshore energy business and our ability to secure charter contracts for our assets at favorable charter rates following expiry or termination of existing\ncharters will depend, among other things, on the level of activity in the offshore oil and gas industry. The offshore oil and gas industry is cyclical and volatile, and demand for oil-\nservice assets depends on, among other things, the level of development and activity in oil and gas exploration, as well as the identification and development of oil and gas\nreserves and production in offshore areas worldwide. The availability of high quality oil and gas prospects, exploration success, relative production costs, the stage of reservoir\ndevelopment, political concerns and regulatory requirements all affect the level of activity for charterers of oil-service vessels. Accordingly, oil and gas prices and market\nexpectations of potential changes in these prices significantly affect the level of activity and demand for oil-service assets. Oil and gas prices can be extremely volatile and are\naffected by numerous factors beyond our control, such as: worldwide demand for oil and gas\u037e costs of exploring, developing, producing and delivering oil and gas\u037e expectations\nregarding future energy prices\u037e the ability of the Organization of Petroleum Exporting Countries (\u201cOPEC\u201d) to set and maintain production levels and impact pricing\u037e the level of\nproduction in non-OPEC countries\u037e governmental regulations and policies regarding development of oil and gas reserves\u037e local and international political, economic and\nweather conditions\u037e domestic and foreign tax or trade policies\u037e political and military conflicts in oil-producing and other countries\u037e and the development and exploration of\nalternative fuels. Any reduction in the demand for our assets due to these or other factors could materially adversely affect our operating results and growth prospects.\n\n\n 58\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 60 of 71\n\n\n\n\nWe may not be able to renew or obtain new or favorable charters or leases, which could adversely affect our business, prospects, financial condition, results of\noperations and cash flows.\nOur operating leases are subject to greater residual risk than direct finance leases because we will own the assets at the expiration of an operating lease term and we may be\nunable to renew existing charters or leases at favorable rates, or at all, or sell the leased or chartered assets, and the residual value of the asset may be lower than anticipated.\nIn addition, our ability to renew existing charters or leases or obtain new charters or leases will also depend on prevailing market conditions, and upon expiration of the\ncontracts governing the leasing or charter of the applicable assets, we may be exposed to increased volatility in terms of rates and contract provisions. For example, we do not\ncurrently have long-term charters for our construction support vessel and our ROV support vessel. Likewise, our customers may reduce their activity levels or seek to terminate\nor renegotiate their charters or leases with us. If we are not able to renew or obtain new charters or leases in direct continuation, or if new charters or leases are entered into at\nrates substantially below the existing rates or on terms otherwise less favorable compared to existing contractual terms, or if we are unable to sell assets for which we are\nunable to obtain new contracts or leases, our business, prospects, financial condition, results of operations and cash flows could be materially adversely affected.\nLitigation to enforce our contracts and recover our assets has inherent uncertainties that are increased by the location of our assets in jurisdictions that have less\ndeveloped legal systems.\nWhile some of our contractual arrangements are governed by New York law and provide for the non-exclusive jurisdiction of the courts located in the state of New York, our\nability to enforce our counterparties\u2019 obligations under such contractual arrangements is subject to applicable laws in the jurisdiction in which enforcement is sought. While\nsome of our existing assets are used in specific jurisdictions, transportation and aviation assets by their nature generally move throughout multiple jurisdictions in the ordinary\ncourse of business. As a result, it is not possible to predict, with any degree of certainty, the jurisdictions in which enforcement proceedings may be commenced. Litigation and\nenforcement proceedings have inherent uncertainties in any jurisdiction and are expensive. These uncertainties are enhanced in countries that have less developed legal\nsystems where the interpretation of laws and regulations is not consistent, may be influenced by factors other than legal merits and may be cumbersome, time-consuming\nand even more expensive. For example, repossession from defaulting lessees may be difficult and more expensive in jurisdictions whose laws do not confer the same\nsecurity interests and rights to creditors and lessors as those in the United States and where the legal system is not as well developed. As a result, the remedies available and\nthe relative success and expedience of collection and enforcement proceedings with respect to the owned assets in various jurisdictions cannot be predicted. To the extent\nmore of our business shifts to areas outside of the United States and Europe, such as Asia and the Middle East, it may become more difficult and expensive to enforce our\nrights and recover our assets.\nOur international operations involve additional risks, which could adversely affect our business, prospects, financial condition, results of operations and cash flows.\nWe and our customers operate in various regions throughout the world. As a result, we may, directly or indirectly, be exposed to political and other uncertainties, including risks\nof:\n \u2022 terrorist acts, armed hostilities, war and civil disturbances\u037e\n \u2022 acts of piracy\u037e\n \u2022 potential cybersecurity attacks\u037e\n \u2022 significant governmental influence over many aspects of local economies\u037e\n \u2022 seizure, nationalization or expropriation of property or equipment\u037e\n \u2022 repudiation, nullification, modification or renegotiation of contracts\u037e\n \u2022 limitations on insurance coverage, such as war risk coverage, in certain areas\u037e\n \u2022 political unrest\u037e\n \u2022 foreign and U.S. monetary policy and foreign currency fluctuations and devaluations\u037e\n \u2022 the inability to repatriate income or capital\u037e\n \u2022 complications associated with repairing and replacing equipment in remote locations\u037e\n \u2022 import-export quotas, wage and price controls, imposition of trade barriers\u037e\n \u2022 U.S. and foreign sanctions or trade embargoes\u037e\n \u2022 restrictions on the transfer of funds into or out of countries in which we operate\u037e\n \u2022 compliance with U.S. Treasury sanctions regulations restricting doing business with certain nations or specially designated nationals\u037e\n \u2022 regulatory or financial requirements to comply with foreign bureaucratic actions\u037e\n \u2022 compliance with applicable anti-corruption laws and regulations\u037e\n \u2022 changing taxation policies, including confiscatory taxation\u037e\n \u2022 other forms of government regulation and economic conditions that are beyond our control\u037e and\n \u2022 governmental corruption.\nAny of these or other risks could adversely impact our customers\u2019 international operations which could materially adversely impact our operating results and growth\nopportunities.\n\n\n 59\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 61 of 71\n\n\n\n\nWe may make acquisitions in emerging markets throughout the world, and investments in emerging markets are subject to greater risks than developed markets and\ncould adversely affect our business, prospects, financial condition, results of operations and cash flows.\nTo the extent that we acquire assets in emerging markets-which we may do throughout the world-additional risks may be encountered that could adversely affect our business.\nEmerging market countries have less developed economies and infrastructure and are often more vulnerable to economic and geopolitical challenges and may experience\nsignificant fluctuations in gross domestic product, interest rates and currency exchange rates, as well as civil disturbances, government instability, nationalization and\nexpropriation of private assets and the imposition of taxes or other charges by government authorities. In addition, the currencies in which investments are denominated may\nbe unstable, may be subject to significant depreciation and may not be freely convertible or may be subject to the imposition of other monetary or fiscal controls and\nrestrictions.\nEmerging markets are still in relatively early stages of their development and accordingly may not be highly or efficiently regulated. Moreover, emerging markets tend to be\nshallower and less liquid than more established markets which may adversely affect our ability to realize profits from our assets in emerging markets when we desire to do so\nor receive what we perceive to be their fair value in the event of a realization. In some cases, a market for realizing profits from an investment may not exist locally. In addition,\nissuers based in emerging markets are not generally subject to uniform accounting and financial reporting standards, practices and requirements comparable to those\napplicable to issuers based in more developed countries, thereby potentially increasing the risk of fraud and other deceptive practices. Settlement of transactions may be\nsubject to greater delay and administrative uncertainties than in developed markets and less complete and reliable financial and other information may be available to\ninvestors in emerging markets than in developed markets. In addition, economic instability in emerging markets could adversely affect the value of our assets subject to leases\nor charters in such countries, or the ability of our lessees or charters, which operate in these markets, to meet their contractual obligations. As a result, lessees or charterers\nthat operate in emerging market countries may be more likely to default under their contractual obligations than those that operate in developed countries. Liquidity and volatility\nlimitations in these markets may also adversely affect our ability to dispose of our assets at the best price available or in a timely manner.\nAs we have and may continue to acquire assets located in emerging markets throughout the world, we may be exposed to any one or a combination of these risks, which could\nadversely affect our operating results.\nWe are actively evaluating potential acquisitions of assets and operating companies in other aviation sectors which could result in additional risks and uncertainties for\nour business and unexpected regulatory compliance costs.\nWhile our existing portfolio primarily consists of assets in the aviation sector, we are actively evaluating potential acquisitions of assets and operating companies in sectors of\nthe aviation market in which we do not currently operate and we plan to be flexible as other attractive opportunities arise over time. To the extent we make acquisitions in other\nsectors, we will face numerous risks and uncertainties, including risks associated with the required investment of capital and other resources and with combining or\nintegrating operational and management systems and controls. Entry into certain lines of business may subject us to new laws and regulations and may lead to increased\nlitigation and regulatory risk. Many types of transportation assets, including certain aviation assets, are subject to registration requirements by U.S. governmental agencies, as\nwell as foreign governments if such assets are to be used outside of the United States. Failing to register the assets, or losing such registration, could result in substantial\npenalties, forced liquidation of the assets and/or the inability to operate and, if applicable, lease the assets. We may need to incur significant costs to comply with the laws and\nregulations applicable to any such new acquisition. The failure to comply with these laws and regulations could cause us to incur significant costs, fines or penalties or require\nthe assets to be removed from service for a period of time resulting in reduced income from these assets. In addition, if our acquisitions in other sectors produce insufficient\nrevenues, or produce investment losses, or if we are unable to efficiently manage our expanded operations, our results of operations will be adversely affected, and our\nreputation and business may be harmed.\nThe agreements governing our indebtedness place restrictions on us and our subsidiaries, reducing operational flexibility and creating default risks.\nThe agreements governing our indebtedness, including, but not limited to, the indentures governing our senior unsecured notes due 2027, 2028, 2030, 2031, 2032 and 2033\n(\u201cSenior Notes\u201d) and our third amended and restated revolving credit facility (the \u201cRevolving Credit Facility\u201d), contain covenants that place restrictions on us and our\nsubsidiaries. The indentures governing our Senior Notes and the Revolving Credit Facility restrict among other things, our and certain of our subsidiaries\u2019 ability to:\n \u2022 merge, consolidate or transfer all, or substantially all, of our assets\u037e\n \u2022 incur additional debt or issue preferred shares\u037e\n \u2022 make certain investments or acquisitions\u037e\n \u2022 create liens on our or our subsidiaries\u2019 assets\u037e\n \u2022 sell assets\u037e\n \u2022 make distributions on or repurchase our shares\u037e\n \u2022 enter into transactions with affiliates\u037e and\n \u2022 create dividend restrictions and other payment restrictions that affect our subsidiaries.\nThese covenants could impair our ability to grow our business, take advantage of attractive business opportunities, pay dividends on our ordinary shares or successfully\ncompete. A breach of any of these covenants could result in an event of default.\n\n\n 60\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 62 of 71\n\n\n\n\nCross-default provisions in our debt agreements could cause an event of default under one debt agreement to trigger an event of default under our other debt agreements.\nUpon the occurrence of an event of default under any of our debt agreements, the lenders or holders thereof could elect to declare all outstanding debt under such agreements\nto be immediately due and payable.\nTerrorist attacks or other hostilities could negatively impact our operations and our profitability and may expose us to liability and reputational damage.\nTerrorist attacks may negatively affect our operations. Such attacks have contributed to economic instability in the United States and elsewhere, and further acts of terrorism,\nviolence or war could similarly affect world trade and the industries in which we and our customers operate. In addition, terrorist attacks or hostilities may directly impact\nairports or aircraft or our physical facilities or those of our customers. In addition, it is also possible that our assets could be involved in a terrorist attack or other hostilities. The\nconsequences of any terrorist attacks or hostilities are unpredictable, and we may not be able to foresee events that could have a material adverse effect on our operations.\nAlthough our lease and charter agreements generally require the counterparties to indemnify us against all damages arising out of the use of our assets, and we carry\ninsurance to potentially offset any costs in the event that our customer indemnifications prove to be insufficient, our insurance does not cover certain types of terrorist attacks,\nand we may not be fully protected from liability or the reputational damage that could arise from a terrorist attack which utilizes our assets.\nProjects in the aerospace products and services sector are exposed to a variety of unplanned interruptions which could cause our results of operations to suffer.\nProjects in the aerospace products and services sector are exposed to unplanned interruptions caused by breakdown or failure of equipment, aging infrastructure, employee\nerror or contractor or subcontractor failure, limitations that may be imposed by equipment conditions or environmental, safety or other regulatory requirements, fuel supply or\nfuel transportation reductions or interruptions, labor or legal disputes, difficulties with the implementation or operation of information systems, power outages, pipeline or\nelectricity line ruptures, catastrophic events, such as hurricanes, cyclones, earthquakes, landslides, floods, explosions, fires, or other disasters. Any equipment or system\noutage or constraint can, among other things, reduce sales, increase costs and affect the ability to meet regulatory service metrics, customer expectations and regulatory\nreliability and security requirements. Operational disruption, as well as supply disruption, and increased government oversight could adversely impact the cash flows available\nfrom these assets. In addition, the cost of repairing or replacing damaged assets could be considerable. Repeated or prolonged interruption may result in temporary or\npermanent loss of customers, substantial litigation or penalties for regulatory or contractual non-compliance, and any loss from such events may not be recoverable under\nrelevant insurance policies. Although we believe that we are adequately insured against these types of events, no assurance can be given that the occurrence of any such event\nwill not materially adversely affect us.\nOur leases and charters typically require payments in U.S. dollars, but many of our customers operate in other currencies\u037e if foreign currencies devalue against the\nU.S. dollar, our lessees or charterers may be unable to meet their payment obligations to us in a timely manner.\nOur current leases and charters typically require that payments be made in U.S. dollars. If the currency that our lessees or charterers typically use in operating their businesses\ndevalues against the U.S. dollar, our lessees or charterers could encounter difficulties in making payments to us in U.S. dollars. Furthermore, many foreign countries have\ncurrency and exchange laws regulating international payments that may impede or prevent payments from being paid to us in U.S. dollars. Future leases or charters may\nprovide for payments to be made in euros or other foreign currencies. Any change in the currency exchange rate that reduces the amount of U.S. dollars obtained by us upon\nconversion of future lease payments denominated in euros or other foreign currencies, may, if not appropriately hedged by us, have a material adverse effect on us and\nincrease the volatility of our earnings.\nOur inability to obtain sufficient capital would constrain our ability to grow our portfolio and to increase our revenues.\nOur business is capital intensive, and we have used and may continue to employ leverage to finance our operations. Accordingly, our ability to successfully execute our\nbusiness strategy and maintain our operations depends on the availability and cost of debt and equity capital. Additionally, our ability to borrow against our assets is\ndependent, in part, on the appraised value of such assets. If the appraised value of such assets declines, we may be required to reduce the principal outstanding under our\ndebt facilities or otherwise be unable to incur new borrowings.\nWe can give no assurance that the capital we need will be available to us on favorable terms, or at all. Our inability to obtain sufficient capital, or to renew or expand our credit\nfacilities, could result in increased funding costs and would limit our ability to:\n \u2022 meet the terms and maturities of our existing and future debt facilities\u037e\n \u2022 purchase new assets or refinance existing assets\u037e\n \u2022 fund our working capital needs and maintain adequate liquidity\u037e and\n \u2022 finance other growth initiatives.\nIn addition, we conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment Company Act of\n1940 (the \u201cInvestment Company Act\u201d). As such, certain forms of financing such as finance leases may not be available to us. Please see \u201c- If we are deemed an \u201cinvestment\ncompany\u201d under the Investment Company Act, it could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.\u201d\n\n\n 61\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 63 of 71\n\n\n\n\nThe effects of various environmental regulations may negatively affect the industries in which we operate which could have a material adverse effect on our financial\ncondition, results of operations and cash flows.\nWe are subject to federal, state, local and foreign laws and regulations relating to the protection of the environment, including those governing the discharge of pollutants to air\nand water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites and noise and emission levels and greenhouse gas\nemissions. Legislative and regulatory measures currently under consideration or being implemented by government authorities to address climate change could require\nreductions in our greenhouse gas or other emissions, establish a carbon tax or increase fuel or energy taxes. These legal requirements are expected to result in increased\ncapital expenditures and compliance costs, and could result in higher costs and may require us to acquire emission credits or carbon offsets. These costs and restrictions\ncould harm our business and results of operations by increasing our expenses or requiring us to alter our operations. The inconsistent international, regional and/or national\nrequirements associated with climate change regulations also create economic and regulatory uncertainty.\nUnder some environmental laws in the United States and certain other countries, strict liability may be imposed on the owners or operators of assets, which could render us\nliable for environmental and natural resource damages without regard to negligence or fault on our part. We could incur substantial costs, including cleanup costs, fines and\nthird-party claims for property damage and personal injury, as a result of violations of or liabilities under environmental laws and regulations in connection with our or our\nlessee\u2019s or charterer\u2019s current or historical operations, any of which could have a material adverse effect on our results of operations and financial condition. In addition, a\nvariety of new legislation is being enacted, or considered for enactment, at the federal, state and local levels relating to greenhouse gas emissions and climate change. While\nthere has historically been a lack of consistent climate change legislation, as climate change concerns continue to grow, further legislation and regulations are expected to\ncontinue in areas such as greenhouse gas emissions control, emission disclosure requirements and building codes or other infrastructure requirements that impose energy\nefficiency standards. Government mandates, standards or regulations intended to mitigate or reduce greenhouse gas emissions or projected climate change impacts could\nresult in increased energy and transportation costs, and increased compliance expenses and other financial obligations to meet permitting or development requirements that\nwe may be unable to fully recover (due to market conditions or other factors), any of which could result in reduced profits and adversely affect our results of operations. While we\ntypically maintain liability insurance coverage and typically require our lessees to provide us with indemnity against certain losses, the insurance coverage is subject to large\ndeductibles, limits on maximum coverage and significant exclusions and may not be sufficient or available to protect against any or all liabilities and such indemnities may not\ncover or be sufficient to protect us against losses arising from environmental damage. In addition, changes to environmental standards or regulations in the industries in\nwhich we operate could limit the economic life of the assets we acquire or reduce their value, and also require us to make significant additional investments in order to\nmaintain compliance, which would negatively impact our cash flows and results of operations.\nThe discontinuation of the LIBOR benchmark interest rate may have an impact on our business.\nOn July 27, 2017, the U.K. Financial Conduct Authority (the \"FCA\"), which regulates LIBOR, announced that it will no longer persuade or compel banks to submit rates for the\ncalculation of LIBOR rates after 2021. On November 30, 2020, ICE Benchmark Administration, or the IBA, the administrator of LIBOR, with the support of the United States\nFederal Reserve and the FCA, announced plans to consult on ceasing publication of LIBOR on December 31, 2021, for only the one-week and two-month LIBOR tenors, and\non June 30, 2023, for all other LIBOR tenors. The U.S. Federal Reserve concurrently issued a statement advising banks to stop new LIBOR issuances by the end of 2021. The\nIBA ceased publication of one-week and two-month USD LIBOR settings after December 31, 2021, and the remaining USD LIBOR settings after June 30, 2023, other than\ncertain USD LIBOR settings that are expected to continue to be published under a synthetic methodology until September 2024.\nIn the United States, the Alternative Reference Rate Committee (\u201cARRC\u201d), a group of diverse private-market participants assembled by the Federal Reserve Board and the\nFederal Reserve Bank of New York, was tasked with identifying alternative reference rates to replace LIBOR. The Secured Overnight Finance Rate (\u201cSOFR\u201d) has emerged as\nthe ARRC's preferred alternative rate for LIBOR. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities in the repurchase\nagreement market. At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates.\nA cyberattack that bypasses our information technology (\u201cIT\u201d), security systems or the IT security systems of our third-party providers, causing an IT security breach,\nmay lead to a disruption of our IT systems and the loss of business information which may hinder our ability to conduct our business effectively and may result in lost\nrevenues and additional costs.\nParts of our business depend on the secure operation of our IT systems and the IT systems of our third-party providers to manage, process, store, and transmit information\nassociated with aircraft leasing. We have, from time to time, experienced threats to our data and systems, including malware and computer virus attacks. A cyberattack that\nbypasses our IT security systems or the IT security systems of our third-party providers, causing an IT security breach, could adversely impact our daily operations and lead to\nthe loss of sensitive information, including our own proprietary information and that of our customers, suppliers and employees. Such losses could harm our reputation and\nresult in competitive disadvantages, litigation, regulatory enforcement actions, lost revenues, additional costs and liabilities. While we devote substantial resources to\nmaintaining adequate levels of cybersecurity, our resources and technical sophistication may not be adequate to prevent all types of cyberattacks.\n\n\n 62\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 64 of 71\n\n\n\n\nIf we are deemed an \u201cinvestment company\u201d under the Investment Company Act, it could have a material adverse effect on our business, prospects, financial condition,\nresults of operations and cash flows.\nWe conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment Company Act. Section 3(a)\n(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily, or proposes to engage primarily, in\nthe business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged\nor proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value\nexceeding 40% of the value of the issuer\u2019s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Excluded from the term\n\u201cinvestment securities,\u201d among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment\ncompanies and are not relying on the exception from the definition of investment company for certain privately-offered investment vehicles set forth in Section 3(c)(1) or Section\n3(c)(7) of the Investment Company Act.\nWe are a holding company that is not an investment company because we are engaged in the business of holding securities of our wholly-owned and majority-owned\nsubsidiaries, which are engaged in transportation and related businesses which lease assets pursuant to operating leases and finance leases. The Investment Company Act\nmay limit our and our subsidiaries\u2019 ability to enter into financing leases and engage in other types of financial activity because less than 40% of the value of our and our\nsubsidiaries\u2019 total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis can consist of \u201cinvestment securities.\u201d\nIf we or any of our subsidiaries were required to register as an investment company under the Investment Company Act, the registered entity would become subject to\nsubstantial regulation that would significantly change our operations, and we would not be able to conduct our business as described in this report. We have not obtained a\nformal determination from the SEC as to our status under the Investment Company Act and, consequently, any violation of the Investment Company Act would subject us to\nmaterial adverse consequences.\nBecause we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through\nthe U.S. federal courts may be limited.\nWe are an exempted company incorporated under the laws of the Cayman Islands. As a result, it may be difficult for investors to effect service of process within the United\nStates upon our directors or officers, or enforce judgments obtained in the United States courts against our directors or officers.\nOur corporate affairs are governed by our Articles, the Companies Act (As Revised) of the Cayman Islands (the \u2018\u2018Cayman Companies Act\u2019\u2019) and the common law of the Cayman\nIslands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman\nIslands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited\njudicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the\nCayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are different from what they would be under\nstatutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws as compared to the United\nStates, and certain states, such as Delaware, may have more fully developed and judicially interpreted bodies of corporate law. In addition, Cayman Islands companies may\nnot have standing to initiate a shareholders derivative action in a federal court of the United States.\nWe have been advised by Maples and Calder (Cayman) LLP, our Cayman Islands legal counsel, that the courts of the Cayman Islands are unlikely (1) to recognize or enforce\nagainst us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state\u037e and (2) in original\nactions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the federal securities laws of the United States or any\nstate, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of\njudgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction\nwithout retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which\njudgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and\nfor a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the\ngrounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or\nmultiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought\nelsewhere.\nAs a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of\ndirectors or controlling shareholders than they would as public shareholders of a United States company.\n\n\n 63\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 65 of 71\n\n\n\n\nRisks Related to Taxation\nWe expect the Company to be a passive foreign investment company (\u201cPFIC\u201d) and it could be a controlled foreign corporation (\u201cCFC\u201d) for U.S. federal income tax\npurposes, which may result in adverse tax considerations for U.S. shareholders.\nWe expect the Company to be treated as a PFIC and it could be treated as a CFC for U.S. federal income tax purposes. If you are a U.S. person and do not make a valid\nqualified electing fund (\u201cQEF\u201d) election with respect to us and each of our PFIC subsidiaries, then, unless we are a CFC and you own 10% or more of our shares (by vote or\nvalue), you would generally be subject to special deferred tax with respect to certain distributions on our shares, any gain realized on a disposition of our shares, and certain\nother events. The effect of this deferred tax could be materially adverse to you. Alternatively, if you are such a shareholder and make a valid QEF election for us and each of our\nPFIC subsidiaries, or if we are a CFC and you own 10% or more of our shares (by vote or value), you will generally not be subject to those taxes, but could recognize taxable\nincome in a taxable year with respect to our shares in excess of any distributions that we make to you in that year, thus giving rise to so called \u201cphantom income\u201d and to a\npotential out-of-pocket tax liability. No assurances can be given that any given shareholder will be able to make a valid QEF election with respect to us or our PFIC subsidiaries.\nSee \u201cU.S. Federal Income Tax Considerations -Considerations for U.S. Holders-PFIC Status and Related Tax Considerations.\u201d\nAssuming we are a PFIC, distributions made by us to a U.S. person will generally not be eligible for taxation at reduced tax rates generally applicable to \u201cqualified dividends\u201d\npaid by certain U.S. corporations and \u201cqualified foreign corporations\u201d to individuals. The more favorable rates applicable to other corporate dividends could cause individuals to\nperceive investment in our shares to be relatively less attractive than investment in the shares of other corporations, which could adversely affect the value of our shares.\nInvestors should consult their tax advisors regarding the potential impact of these rules on their investment in us.\nTo the extent we recognize income treated as effectively connected with a trade or business in the United States, we would be subject to U.S. federal income taxation on\na net income basis, which could adversely affect our business and result in decreased cash available for distribution to our shareholders.\nIf we are treated as engaged in a trade or business in the United States, the portion of our net income, if any, that is \u201ceffectively connected\u201d with such trade or business would\nbe subject to U.S. federal income taxation at maximum corporate rates, currently 21%. In addition, we may be subject to an additional U.S. federal branch profits tax on our\neffectively connected earnings and profits at a rate of 30%. The imposition of such taxes could adversely affect our business and would result in decreased cash available for\ndistribution to our shareholders. Although we (or one or more of our non-U.S. corporate subsidiaries) are expected to be treated as engaged in a U.S. trade or business, it is\ncurrently expected that only a small portion of our taxable income will be treated as effectively connected with such U.S. trade or business. However, no assurance can be given\nthat the amount of effectively connected income will not be greater than currently expected, whether due to a change in our operations or otherwise.\nIf there is not sufficient trading in our shares, or if 50% of our shares are held by certain 5% shareholders, we could lose our eligibility for an exemption from U.S. federal\nincome taxation on rental income from our aircraft or ships used in \u201cinternational traffic\u201d and could be subject to U.S. federal income taxation which would adversely\naffect our business and result in decreased cash available for distribution to our shareholders.\nWe expect that we will be eligible for an exemption under Section 883 of the Internal Revenue Code of 1986, as amended (the \u201cCode\u201d), which provides an exemption from U.S.\nfederal income taxation with respect to rental income derived from aircraft and ships used in international traffic by certain foreign corporations. No assurances can be given\nthat we will continue to be eligible for this exemption as changes in our ownership or the amount of our shares that are traded could cause us to cease to be eligible for such\nexemption. To qualify for this exemption in respect of rental income, the lessor of the aircraft or ships must be organized in a country that grants a comparable exemption to U.S.\nlessors. The Cayman Islands and the Marshall Islands grant such exemptions. Additionally, certain other requirements must be satisfied. We can satisfy these requirements in\nany year if, for more than half the days of such year, our shares are primarily and regularly traded on a recognized exchange and certain shareholders, each of whom owns 5%\nor more of our shares (applying certain attribution rules), do not collectively own more than 50% of our shares. Our shares will be considered to be primarily and regularly\ntraded on a recognized exchange in any year if: (i) the number of trades in our shares effected on such recognized stock exchanges exceed the number of our shares (or direct\ninterests in our shares) that are traded during the year on all securities markets\u037e (ii) trades in our shares are effected on such stock exchanges in more than de minimis\nquantities on at least 60 days during every calendar quarter in the year\u037e and (iii) the aggregate number of our shares traded on such stock exchanges during the taxable year is\nat least 10% of the average number of our shares outstanding in that class during that year. If we were not eligible for the exemption under Section 883 of the Code, we expect\nthat our U.S. source rental income would generally be subject to U.S. federal taxation, on a gross income basis, at a rate of not in excess of 4% as provided in Section 887 of\nthe Code. If, contrary to expectations, we or certain of our non-U.S. subsidiaries did not comply with certain administrative guidelines of the U.S. Internal Revenue Service (the\n\u201cIRS\u201d), such that 90% or more of the U.S. source rental income of the Company or any of such subsidiaries were attributable to the activities of personnel based in the United\nStates (in the case of bareboat leases), or from \u201cregularly scheduled transportation\u201d as defined in such administrative guidelines (in the case of time charter leases), our, or\nsuch subsidiary\u2019s, U.S. source rental income would be treated as income effectively connected with the conduct of a trade or business in the United States. In such case, such\nU.S. source rental income would be subject to U.S. federal income taxation at the maximum corporate rate as well as state and local taxation. In addition, the Company or such\nsubsidiary would be subject to the U.S. federal branch profits tax on its effectively\n\n\n 64\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 66 of 71\n\n\n\n\nconnected earnings and profits at a rate of 30%. The imposition of such taxes could adversely affect our business and would result in decreased cash available for distribution\nto our shareholders.\nWe or our subsidiaries may become subject to increased and/or unanticipated tax liabilities that may have a material adverse effect on our results of operations.\nSome of our subsidiaries are subject to income, withholding or other taxes in certain non-U.S. jurisdictions by reason of their jurisdiction of incorporation, activities and\noperations, where their assets are used or where the lessees of their assets (or others in possession of their assets) are located, and it is also possible that taxing authorities\nin any such jurisdictions could assert that we or our subsidiaries are subject to greater taxation than we currently face or otherwise anticipate. Further, the Organisation for\nEconomic Co-operation and Development (the \u201cOECD\u201d) is conducting a project focused on base erosion and profit shifting in international structures, which seeks to establish\ncertain international standards for taxing the worldwide income of multinational companies. In addition, the OECD is working on a \u201cBEPS 2.0\u201d initiative, which is aimed at (i)\nshifting taxing rights to the jurisdiction of the consumer and (ii) ensuring all companies pay a global minimum tax. On October 8, 2021, the OECD announced an agreement\namong over 140 countries delineating an implementation plan, on December 20, 2021, the OECD released model rules for the domestic implementation of a 15% global\nminimum tax, on December 15, 2022, the member states of the European Union unanimously voted to adopt the OECD\u2019s minimum tax rules and phase them into national law,\nand on February 2, 2023 the OECD released technical guidance on the global minimum tax which was agreed by consensus of the BEPS 2.0 signatory jurisdictions.\nNumerous countries, including European Union member states, have enacted or are expected to enact minimum tax legislation, and other countries may enact such\nlegislation in the future. Additionally, On December 27, 2023, Bermuda enacted a corporate tax regime with a 15% rate (the \u201cBermuda CIT\u201d) and with requirements similar to\nthose of the OECD\u2019s minimum tax proposal. The Bermuda CIT will be effective for tax years beginning on or after January 1, 2025 (see footnote 10 to our consolidated financial\nstatements entitled \u201cIncome Taxes\u201d included elsewhere in this Quarterly Report). As a result of these developments, the tax laws of certain countries in which we and our\naffiliates do business are expected to change (and could change on a retroactive basis) and certain of such changes are expected to increase our liabilities for taxes (and\npossibly interest and penalties) and therefore could harm our business, cash flows, results of operations and financial position. In addition, a portion of certain of our or our\nnon-U.S. corporate subsidiaries\u2019 income is treated as effectively connected with a U.S. trade or business and is accordingly subject to U.S. federal income tax or may be\nsubject to gross-basis U.S. withholding tax. It is possible that the IRS could assert that a greater portion of our or any such non-U.S. subsidiaries\u2019 income is effectively\nconnected income that should be subject to U.S. federal income tax or subject to withholding tax.\nRisks Related to Our Shares\nThe market price and trading volume of our ordinary and preferred shares may be volatile, which could result in rapid and substantial losses for our shareholders.\nThe market price of our ordinary and preferred shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our ordinary and\npreferred shares may fluctuate and cause significant price variations to occur. If the market price of our ordinary or preferred shares declines significantly, you may be unable to\nresell your shares at or above your purchase price, if at all. The market price of our ordinary and preferred shares may fluctuate or decline significantly in the future. Some of the\nfactors that could negatively affect our share price or result in fluctuations in the price or trading volume of our shares include:\n \u2022 a shift in our investor base\u037e\n \u2022 our quarterly or annual earnings, or those of other comparable companies\u037e\n \u2022 actual or anticipated fluctuations in our operating results\u037e\n \u2022 changes in accounting standards, policies, guidance, interpretations or principles\u037e\n \u2022 announcements by us or our competitors of significant investments, acquisitions or dispositions\u037e\n \u2022 the failure of securities analysts to cover our ordinary shares\u037e\n \u2022 changes in earnings estimates by securities analysts or our ability to meet those estimates\u037e\n \u2022 the operating and share price performance of other comparable companies\u037e\n \u2022 prevailing interest rates or rates of return being paid by other comparable companies and the market for securities similar to our preferred shares\u037e\n \u2022 additional issuances of preferred shares\u037e\n \u2022 whether we declare distributions on our preferred shares\u037e\n \u2022 overall market fluctuations\u037e\n \u2022 general economic conditions\u037e and\n \u2022 developments in the markets and market sectors in which we participate.\nStock markets in the United States have experienced extreme price and volume fluctuations. Market fluctuations, as well as general political and economic conditions, such as\nacts of terrorism, prolonged economic uncertainty, a recession or interest rate or currency rate fluctuations, could adversely affect the market price of our ordinary and preferred\nshares.\nAn increase in market interest rates may have an adverse effect on the market price of our shares.\n\n\n 65\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 67 of 71\n\n\n\n\nOne of the factors that investors may consider in deciding whether to buy or sell our shares is our distribution rate as a percentage of our share price relative to market interest\nrates. If the market price of our shares is based primarily on the earnings and return that we derive from our investments and income with respect to our investments and our\nrelated distributions to shareholders, and not from the market value of the investments themselves, then interest rate fluctuations and capital market conditions will likely affect\nthe market price of our shares. For instance, if market interest rates rise without an increase in our distribution rate, the market price of our shares could decrease, as potential\ninvestors may require a higher distribution yield on our shares or seek other securities paying higher distributions or interest. In addition, rising interest rates would result in\nincreased interest expense on our outstanding and future (variable and fixed) rate debt, thereby adversely affecting cash flows and our ability to service our indebtedness and\npay distributions.\nWe are required by Section 404 of the Sarbanes-Oxley Act to evaluate the effectiveness of our internal controls, and the outcome of that effort may adversely affect our\nresults of operations, financial condition and liquidity.\nAs a public company, we are required to comply with Section 404 (\u201cSection 404\u201d) of the Sarbanes-Oxley Act. Section 404 requires that we evaluate the effectiveness of our\ninternal control over financial reporting at the end of each fiscal year and to include a management report assessing the effectiveness of our internal controls over financial\nreporting in our Annual Report on Form 10-K for that fiscal year. Section 404 also requires an independent registered public accounting firm to attest to, and report on,\nmanagement\u2019s assessment of our internal controls over financial reporting. The outcome of our review and the report of our independent registered public accounting firm may\nadversely affect our results of operations, financial condition and liquidity. During the course of our review, we may identify control deficiencies of varying degrees of severity, and\nwe may incur significant costs to remediate those deficiencies or otherwise improve our internal controls. As a public company, we are required to report control deficiencies\nthat constitute a \u201cmaterial weakness\u201d in our internal control over financial reporting. If we discover a material weakness in our internal control over financial reporting, our share\nprice could decline and our ability to raise capital could be impaired.\nYour percentage ownership in us may be diluted in the future.\nYour percentage ownership in FTAI Aviation Ltd. may be diluted in the future because of equity awards that we expect will be granted to our directors, officers and employees, as\nwell as other equity instruments such as debt and equity financing.\nOur board of directors has adopted the Incentive Plan, which provides for the grant of equity-based awards, including restricted shares, stock options, stock appreciation rights,\nperformance awards, restricted share units, tandem awards and other equity-based and non-equity based awards, in each case the Former Manager, to the directors, officers,\nemployees, service providers, consultants and advisors of the Former Manager who performed services for us, and to our directors, officers, employees, service providers,\nconsultants and advisors. We initially reserved 30,000,000 ordinary shares for issuance under the Incentive Plan. As of September 30, 2024, rights relating to 112,343 of our\nordinary shares were outstanding under the Incentive Plan. In the future on the date of any equity issuance by us during the remaining portion of the ten-year term of the\nIncentive Plan (including in respect of securities issued as consideration in an acquisition), the maximum number of shares available for issuance under the Plan will be\nincreased to include an additional number of ordinary shares equal to ten percent (10%) of either (i) the total number of ordinary shares newly issued by us in such equity\nissuance or (ii) if such equity issuance relates to equity securities other than our ordinary shares, a number of our ordinary shares equal to 10% of (A) the gross capital raised\nin an equity issuance of equity securities other than ordinary shares during the ten-year term of the Incentive Plan, divided by (B) the fair market value of an ordinary share as of\nthe date of such equity issuance.\nSales or issuances of our ordinary shares could adversely affect the market price of our ordinary shares.\nSales of substantial amounts of our ordinary shares in the public market, or the perception that such sales might occur, could adversely affect the market price of our ordinary\nshares. The issuance of our ordinary shares in connection with property, portfolio or business acquisitions or the exercise of outstanding options or otherwise could also have\nan adverse effect on the market price of our ordinary shares.\nThe incurrence or issuance of debt, which ranks senior to our ordinary shares upon our liquidation, and future issuances of equity or equity-related securities, which\nwould dilute the holdings of our existing ordinary shareholders and may be senior to our ordinary shares for the purposes of making distributions, periodically or upon\nliquidation, may negatively affect the market price of our ordinary shares.\nWe have incurred and may in the future incur or issue debt or issue equity or equity-related securities to finance our operations, acquisitions or investments. Upon our\nliquidation, lenders and holders of our debt and holders of our preferred shares (if any) would receive a distribution of our available assets before ordinary shareholders. Any\nfuture incurrence or issuance of debt would increase our interest cost and could adversely affect our results of operations and cash flows. We are not required to offer any\nadditional equity securities to existing ordinary shareholders on a preemptive basis. Therefore, additional issuances of ordinary shares, directly or through convertible or\nexchangeable securities warrants or options, will dilute the holdings of our existing ordinary shareholders and such issuances, or the perception of such issuances, may\nreduce the market price of our ordinary shares. Any preferred shares issued by us would likely have a preference on distribution payments, periodically or upon liquidation,\nwhich could eliminate or otherwise limit our ability to make distributions to ordinary shareholders. Because our decision to incur or issue debt or issue equity or equity-related\nsecurities in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future\ncapital raising efforts. Thus, ordinary shareholders bear the risk that our future incurrence or issuance of debt or issuance of equity or equity-related securities will adversely\naffect the market price of our ordinary shares.\n\n\n 66\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 68 of 71\n\n\n\n\nOur determination of how much leverage to use to finance our acquisitions may adversely affect our return on our assets and may reduce funds available for\ndistribution.\nWe utilize leverage to finance many of our asset acquisitions, which entitles certain lenders to cash flows prior to retaining a return on our assets. While we target using only\nwhat we believe to be reasonable leverage, our strategy does not limit the amount of leverage we may incur with respect to any specific asset. The return we are able to earn on\nour assets and funds available for distribution to our shareholders may be significantly reduced due to changes in market conditions, which may cause the cost of our\nfinancing to increase relative to the income that can be derived from our assets.\nWhile we currently intend to pay regular quarterly dividends to our shareholders, we may change our dividend policy at any time.\nAlthough we currently intend to pay regular quarterly dividends to holders of our ordinary shares, we may change our dividend policy at any time. Our net cash provided by\noperating activities has been less than the amount of distributions to our shareholders. The declaration and payment of dividends to holders of our ordinary shares are at the\ndiscretion of our board of directors in accordance with applicable law after taking into account various factors, including actual results of operations, liquidity and financial\ncondition, net cash provided by operating activities, restrictions imposed by applicable law, our taxable income, our operating expenses and other factors our board of directors\ndeem relevant. There can be no assurance that we will continue to pay dividends in amounts or on a basis consistent with prior distributions to our investors, if at all. Because\nwe are a holding company and have no direct operations, we will only be able to pay dividends from our available cash on hand and any funds we receive from our\nsubsidiaries. Our indirect intermediate holding company subsidiary FTAI LLC is currently, and may in the future be, subject to certain covenants included in its financing\nagreements that limit its ability to make distributions to us. In addition, our existing indebtedness does, and our future indebtedness may, limit our ability to pay dividends on\nour ordinary and preferred shares. Furthermore, the terms of our preferred shares generally prevent us from declaring or paying dividends on or repurchasing our ordinary\nshares or other junior capital unless all accrued distributions on such preferred shares have been paid in full.\nAnti-takeover provisions in our Articles could delay or prevent a change in control.\nProvisions in our Articles may make it more difficult and expensive for a third party to acquire control of us even if a change of control would be beneficial to the interests of our\nshareholders. For example, our Articles provides for a staggered board, requires advance notice for proposals by shareholders and nominations, places limitations on\nconvening shareholder meetings, and authorizes the issuance of preferred shares that could be issued by our board of directors to thwart a takeover attempt. The market price\nof our shares could be adversely affected to the extent that provisions of our operating agreement discourage potential takeover attempts that our shareholders may favor.\nIf securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our ordinary shares, our\nshare price and trading volume could decline.\nThe trading market for our ordinary shares are influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the\nanalysts who cover us downgrades our ordinary units or publishes inaccurate or unfavorable research about our business, our ordinary share price may decline. If analysts\ncease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our ordinary share price or trading\nvolume to decline and our ordinary shares to be less liquid.\nItem 2. Unregistered Sales of Equity Securities and Use of Proceeds\nNone.\nItem 3. Defaults Upon Senior Securities\nNone.\nItem 4. Mine Safety Disclosures\nNot applicable.\nItem 5. Other Information\nNone.\n\n\n 67\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 69 of 71\n\n\n\n\nItem 6. Exhibits\n Exhibit No. Description\n 2.1 Agreement and Plan of Merger, dated as of August 12, 2022, by and among, FTAI, the Company and FTAI Aviation Merger Sub LLC (incorporated by reference to Annex A\n to FTAI\u2019s Registration Statement on Form S-4, filed on October 11, 2022).\n 2.2 Separation and Distribution Agreement, dated as of August 1, 2022, between FTAI Infrastructure Inc. and the Company (incorporated by reference to Exhibit 2.1 of the\n Company\u2019s Current Report on Form 8-K, filed on August 1, 2022).\n 3.1 Amended and Restated Memorandum and Articles of Association of the Company (incorporated by reference to Exhibit 3.1 of the Company\u2019s Current Report on Form 8-K,\n filed on November 14, 2022).\n 3.2 Share Designation with respect to the 8.00% Fixed-to-Floating Series B Cumulative Perpetual Redeemable Preferred Shares (included as part of Exhibit 3.1 hereto).\n 3.3 Share Designation with respect to the 8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares (included as part of Exhibit 3.1 hereto).\n 3.4 Share Designation with respect to the 9.500% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation Ltd. (incorporated by\n reference to Exhibit 4.1 of the Company\u2019s Registration Statement on Form 8-A, filed on March 15, 2023).\n 3.5 Form of Certificate representing the 8.00% Fixed-to-Floating Rate Series B Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation Ltd. (included as part of\n Exhibit 3.1 hereto).\n 3.6 Form of Certificate representing the 8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation Ltd. (included as part of Exhibit\n 3.1 hereto).\n 3.7 Form of certificate representing the 9.500% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation Ltd. (incorporated by\n reference to Exhibit 4.2 of the Company\u2019s Registration Statement on Form 8-A, filed on March 15, 2023).\n 4.1 Indenture, dated April 12, 2021, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s 5.50% senior unsecured notes due 2028\n (incorporated by reference to Exhibit 4.1 to the Company\u2019s Current Report on Form 8-K, filed on April 12, 2021).\n 4.2 Form of global note representing the Company\u2019s 5.50% senior unsecured notes due 2028 (included in Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n April 12, 2021).\n 4.3 First Supplemental Indenture, dated as of September 24, 2021, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s 5.50%\n senior unsecured notes due 2028 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on September 24, 2021).\n 4.4 2028 Notes Guarantee, dated November 10, 2022 (incorporated by reference to Exhibit 4.3 of the Company\u2019s Current Report on Form 8-K, filed on November 14, 2022).\n 4.5 Indenture, dated November 21, 2023, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s 7.875% senior unsecured notes\n due 2030 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on November 22, 2023).\n 4.6 Form of global note representing the Company\u2019s 7.875% senior unsecured notes due 2030 (included in Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n November 22, 2023).\n 4.7 Indenture, dated April 11, 2024, among Fortress Transportation and Infrastructure Investors LLC, the Company as guarantor, and U.S. Bank Trust Company, National\n Association, as trustee, relating to the Company\u2019s 7.000% senior unsecured notes due 2031 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on\n Form 8-K, filed on April 11, 2024).\n 4.8 Form of global note representing the Company\u2019s 7.000% senior unsecured notes due 2031 (included in Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n April 11, 2024).\n 4.9 Indenture, dated as of June 17, 2024, among Fortress Transportation and Infrastructure Investors LLC, FTAI Aviation Ltd. as guarantor, and U.S. Bank Trust Company,\n National Association, as trustee relating to the Company\u2019s 7.000% senior unsecured notes due 2032 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current\n Report on Form 8-K, filed on June 17, 2024).\n 4.10 Form of global note representing the Company\u2019s 7.000% senior unsecured notes due 2032 (included in Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n June 17, 2024).\n 4.11 Indenture, dated as of October 9, 2024, among Fortress Transportation and Infrastructure Investors LLC, FTAI Aviation Ltd. as guarantor, and U.S. Bank Trust Company,\n National Association, as trustee relating to the Company\u2019s 5.875% senior unsecured notes due 2033 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current\n Report on Form 8-K, filed on October 9, 2024).\n 4.12 Form of global note representing the Company\u2019s 5.875% senior unsecured notes due 2033 (included in Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n October 9, 2024).\n 4.13 Description of Securities Registered under Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.15 of the Company\u2019s Annual Report on Form 10-K, filed\n on February 26, 2024).\n\u2020 10.1 FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan, dated as of February 23, 2023 (incorporated in Exhibit 10.4 of the Company\u2019s Annual Report on\n Form 10-K, filed on February 27, 2023).\n\u2020 10.2 Form of FTAI Aviation Ltd. Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.6 to the Company\u2019s Registration Statement on Form S-4,\n filed on October 4, 2022).\n\u2020 10.3 Form of Director Award Agreement pursuant to the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.7 to the\n Company\u2019s Registration Statement on Form S-4, filed on October 4, 2022).\n\u2020 10.4 Form of Non-Director Award Agreement under the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan (incorporated by reference to Exhibit 10.8 to the\n Company\u2019s Registration Statement on Form S-4, filed on October 4, 2022).\n\u2020 10.5 Form of Restricted Stock Unit Award Agreement under the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan (incorporated in Exhibit 10.5 of the\n Company\u2019s Quarterly Report on Form 10-Q, filed on August 9, 2024).\n\n\n\n 68\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 70 of 71\n\n\n\n\n Exhibit No. Description\n 10.6 Trademark License Agreement, dated as of August 1, 2022, between Fortress Transportation and Infrastructure Investors LLC and FTAI Infrastructure Inc. (incorporated\n by reference to Exhibit 10.3 of the Company\u2019s Current Report on Form 8-K, filed on August 1, 2022).\n* 10.7 Third Amended and Restated Credit Agreement, dated as of May 22, 2024, between the Company, the lenders and issuing banks from time to time party thereto and\n JPMorgan Chase Bank, N.A., as administrative agent. (incorporated by reference to Exhibit 10.7 of the Company\u2019s Quarterly Report on Form 10-Q, filed on August 9, 2024.\n 10.8 Revolver Guarantee, dated November 10, 2022 (incorporated by reference to Exhibit 4.4 of the Company\u2019s Current Report on Form 8-K, filed on November 14, 2022).\n* 10.9 Internalization Agreement, dated May 28, 2024, by and among FTAI Aviation Ltd., FIG LLC and Fortress Worldwide Transportation and Infrastructure Master GP LLC\n (incorporated by reference to Exhibit 10.1 of the Company\u2019s Current Report on Form 8-K, filed on May 28, 2024).\n* 10.10 Transition Services Agreement, dated May 28, 2024, by and between FTAI Aviation Ltd. and FIG LLC (incorporated by reference to Exhibit 10.2 of the Company\u2019s Current\n Report on Form 8-K, filed on May 28, 2024).\n\u2020 10.11 Letter Agreement, dated May 27, 2024, by and among FTAI Aviation LLC, FTAI Aviation Ltd. and Joseph P. Adams, Jr. (incorporated by reference to Exhibit 10.11 of the\n Company\u2019s Quarterly Report on Form 10-Q, filed on August 9, 2024).\n\u2020 10.12 Letter Agreement, dated May 27, 2024, by and among FTAI Aviation LLC, FTAI Aviation Ltd. and Eun (Angela) Nam (incorporated by reference to Exhibit 10.12 of the\n Company\u2019s Quarterly Report on Form 10-Q, filed on August 9, 2024).\n 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\n 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\n 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\n 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\n 97.1 FTAI Aviation Ltd. Clawback Policy effective as of December 1, 2023 (incorporated by reference to Exhibit 10.7 of the Company\u2019s Annual Report on Form 10-K, filed on\n February 26, 2024).\n 101 The following financial information from the Company\u2019s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in iXBRL (Inline Extensible\n Business Reporting Language): (i) Consolidated Balance Sheets\u037e (ii) Consolidated Statements of Operations\u037e (iii) Consolidated Statements of Changes in Equity\u037e (iv)\n Consolidated Statements of Cash Flows\u037e and (v) Notes to Consolidated Financial Statements.\n 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)\n\u2020 Management contracts and compensatory plans or arrangements.\n* Certain schedules or similar attachments to this exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K.\n\n\n\n\n 69\n\f Case 1:25-cv-00541-JAV Document 70-10 Filed 11/20/25 Page 71 of 71\n\n\n\n\n SIGNATURES\n\n\nPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly\nauthorized:\nFTAI Aviation Ltd.\nBy: /s/ Joseph P. Adams, Jr. Date: November 12, 2024\n Joseph P. Adams, Jr.\n Chairman and Chief Executive Officer\n\nBy: /s/ Eun (Angela) Nam Date: November 12, 2024\n Eun (Angela) Nam\n Chief Financial Officer and Chief Accounting Officer\n\n\n\n\n 70\n\f","ocr_status":2,"date_upload":"2026-05-12T04:15:36.702106-07:00","document_number":"70","attachment_number":10,"pacer_doc_id":"127038602954","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit J - 3Q24 Form 10-Q","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874411/","id":478874411,"tags":[],"absolute_url":"/docket/69558488/70/11/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.527685-07:00","date_modified":"2026-05-14T07:10:43.559567-07:00","sha1":"6c434226e0da0e255bd4853754c20d4509598380","page_count":20,"file_size":495470,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.11.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.11.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 1 of 20\n\n\n\n\n Exhibit K\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 2 of 20\nAssets\n\n330 Inventory\n 10 Overall\n00 Status\n\n\n General Note:The Status Section identifies changes to this Subtopic resulting from Accounting\n Standards Updates. The Section provides references to the affected Codification content and links to\n the related Accounting Standards Updates. Nonsubstantive changes for items such as editorial, link\n and similar corrections are included separately in Maintenance Updates.\n\n\n\n\n General\n 330-10- The following table identifies the changes made to this Subtopic.\n 00-1\n Paragraph Action Accounting Standards Update Date\n\n Customer Added Accounting Standards Update No. 2014-09 05/28/2014\n Direct Effects of a\n Change in Accounting Amended Accounting Standards Update No. 2015-11 07/22/2015\n Principle\n Market (2nd def.) Amended Accounting Standards Update No. 2014-06 03/14/2014\n Net Realizable\n Superseded Accounting Standards Update No. 2014-06 03/14/2014\n Value (1st def.)\n Net Realizable\n Added Accounting Standards Update No. 2014-06 03/14/2014\n Value (2nd def.)\n Public Business Entity Amended Maintenance Update 2017-06 04/07/2017\n\n Public Business Entity Amended Maintenance Update 2016-11 06/27/2016\n Reseller (2nd def.) Added Accounting Standards Update No. 2014-09 05/28/2014\n Vendor Added Accounting Standards Update No. 2014-09 05/28/2014\n\n 330-10-30-8 Amended Accounting Standards Update No. 2014-09 05/28/2014\n 330-10-30-19 Superseded Accounting Standards Update No. 2014-09 05/28/2014\n 330-10-30-20 Added Accounting Standards Update No. 2014-09 05/28/2014\n 330-10-30-21 Added Accounting Standards Update No. 2014-09 05/28/2014\n 330-10-35-1 Superseded Accounting Standards Update No. 2015-11 07/22/2015\n 330-10-35-1A through\n Added Accounting Standards Update No. 2015-11 07/22/2015\n 35-1C\n 330-10-35-2 Amended Accounting Standards Update No. 2015-11 07/22/2015\n 330-10-35-6 Superseded Accounting Standards Update No. 2015-11 07/22/2015\n 330-10-35-7A Added Accounting Standards Update No. 2015-11 07/22/2015\n 330-10-35-8 through\n Amended Accounting Standards Update No. 2015-11 07/22/2015\n 35-11\n 330-10-35-21 Amended Accounting Standards Update No. 2014-09 05/28/2014\n 330-10-35-22 Amended Accounting Standards Update No. 2014-09 05/28/2014\n 330-10-45-2 Superseded Accounting Standards Update No. 2014-09 05/28/2014\n 330-10-50-1 Amended Accounting Standards Update No. 2012-04 10/01/2012\n 330-10-50-2 Amended Accounting Standards Update No. 2015-11 07/22/2015\n 330-10-50-5 Amended Accounting Standards Update No. 2024-03 11/04/2024\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 3 of 20\n 330-10-55-2 Amended Accounting Standards Update No. 2015-11 07/22/2015\n 330-10-55-5 through\n Superseded Accounting Standards Update No. 2017-07 03/10/2017\n 55-7\n 330-10-55-6A Added Accounting Standards Update No. 2017-07 03/10/2017\n 330-10-65-1 Added Accounting Standards Update No. 2015-11 07/22/2015\n\n\n\n\n05 Overview and Background\n\n\n General Note:The Overview and Background Section provides overview and background material for\n the guidance contained in the Subtopic. It does not provide the historical background or due process. It\n may contain certain material that users generally consider useful to understand the typical situations\n addressed by the standards. The Section does not summarize the accounting and reporting\n requirements.\n\n\n\n\n General\n 330-10- The Inventory Topic addresses the accounting principles and reporting practices applicable to inventory.\n 05-1\n\n 330-10- An inventory has financial significance because revenues may be obtained from its sale, or from the sale of\n 05-2\n the goods or services in the production of which it is used. Normally such revenues arise in a continuous\n repetitive process or cycle of operations in which goods are acquired, created, and sold, and further goods are\n acquired for additional sales.\n\n 330-10- Thus, the inventory at any given date is the balance of costs applicable to goods on hand remaining after the\n 05-3\n matching of absorbed costs with concurrent revenues. This balance is appropriately carried to future periods\n provided it does not exceed an amount properly chargeable against the revenues expected to be obtained\n from ultimate disposition of the goods carried forward. In practice, this balance is determined by the process of\n pricing the articles included in the inventory.\n\n\n\n\n10 Objectives\n\n\n General Note:The Objectives Section provides the high-level objectives that the Subtopic is intended to\n accomplish or attain. The Section does not summarize or discuss the main principles of accounting and\n reporting requirements.\n\n\n\n\n General\n 330-10- A major objective of accounting for inventories is the proper determination of income through the process of\n 10-1\n matching appropriate costs against revenues.\n\n\n\n\n15 Scope and Scope Exceptions\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 4 of 20\n\n General Note:The Scope and Scope Exceptions Section outlines the items (for example, the entities,\n transactions, instruments, or events) to which the guidance in the Subtopic does or does not apply. In\n some cases, the Section may contain definitional or other text to frame the scope.\n\n\n\n\n General\n > Overall Guidance\n 330-10- The Scope Section of the Overall Subtopic establishes the pervasive scope for the Inventory Topic.\n 15-1\n\n > Entities\n 330-10- The guidance in the Inventory Topic applies to all entities, with the following qualifications.\n 15-2\n\n 330-10- The guidance in this Topic is not necessarily applicable to the following entities:\n 15-3\n aNot-for-profit entities (NFPs)\n bRegulated utilities.\n\n\n\n\n20 Glossary\n\n\n General Note:The Master Glossary contains all terms identified as glossary terms throughout the\n Codification. Clicking on any term in the Master Glossary will display where the term is used. The\n Master Glossary may contain identical terms with different definitions, some of which may not be\n appropriate for a particular Subtopic. For any particular Subtopic, users should only use the glossary\n terms included in the particular Subtopic Glossary Section (Section 20).\n\n\n\n\n Customer\n\n A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary\n activities in exchange for consideration.\n\n Direct Effects of a Change in Accounting Principle\n\n Those recognized changes in assets or liabilities necessary to effect a change in accounting principle. An\n example of a direct effect is an adjustment to an inventory balance to effect a change in inventory valuation\n method. Related changes, such as an effect on deferred income tax assets or liabilities or an impairment\n adjustment resulting from applying the subsequent measurement guidance in Subtopic 330-10 to the adjusted\n inventory balance, also are examples of direct effects of a change in accounting principle.\n\n Inventory\n\n The aggregate of those items of tangible personal property that have any of the following characteristics:\n aHeld for sale in the ordinary course of business\n bIn process of production for such sale\n cTo be currently consumed in the production of goods or services to be available for sale.\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 5 of 20\n The term inventory embraces goods awaiting sale (the merchandise of a trading concern and the finished\n goods of a manufacturer), goods in the course of production (work in process), and goods to be consumed\n directly or indirectly in production (raw materials and supplies). This definition of inventories excludes long-\n term assets subject to depreciation accounting, or goods which, when put into use, will be so classified. The\n fact that a depreciable asset is retired from regular use and held for sale does not indicate that the item should\n be classified as part of the inventory. Raw materials and supplies purchased for production may be used or\n consumed for the construction of long-term assets or other purposes not related to production, but the fact that\n inventory items representing a small portion of the total may not be absorbed ultimately in the production\n process does not require separate classification. By trade practice, operating materials and supplies of certain\n types of entities such as oil producers are usually treated as inventory.\n\nMarket\n\n As used in the phrase lower of cost or market, the term market means current replacement cost (by purchase\n or by reproduction, as the case may be) provided that it meets both of the following conditions:\n aMarket shall not exceed the net realizable value\n bMarket shall not be less than net realizable value reduced by an allowance for an approximately normal\n profit margin.\n\n\nNet Realizable Value\n\n Estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion,\n disposal, and transportation.\n\nNot-for-Profit Entity\n\n An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business\n entity:\n aContributions of significant amounts of resources from resource providers who do not expect\n commensurate or proportionate pecuniary return\n bOperating purposes other than to provide goods or services at a profit\n cAbsence of ownership interests like those of business entities.\n Entities that clearly fall outside this definition include the following:\n aAll investor-owned entities\n bEntities that provide dividends, lower costs, or other economic benefits directly and proportionately to\n their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural\n electric cooperatives, and employee benefit plans.\n\n\nPublic Business Entity\n\n A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit\n entity nor an employee benefit plan is a business entity.\n aIt is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial\n statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including\n other entities whose financial statements or financial information are required to be or are included in a\n filing).\n bIt is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations\n promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the\n SEC.\n cIt is required to file or furnish financial statements with a foreign or domestic regulatory agency in\n preparation for the sale of or for purposes of issuing securities that are not subject to contractual\n restrictions on transfer.\n dIt has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange\n or an over-the-counter market.\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 6 of 20\n eIt has one or more securities that are not subject to contractual restrictions on transfer, and it is required\n by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make\n them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet\n both of these conditions to meet this criterion.\n An entity may meet the definition of a public business entity solely because its financial statements or financial\n information is included in another entity's filing with the SEC. In that case, the entity is only a public business\n entity for purposes of financial statements that are filed or furnished with the SEC.\n\n Reseller\n\n Any entity that purchases another vendor's products for resale, regardless of whether that entity is a distributor\n or wholesaler, a retailer, or other type of reseller.\n\n Security\n\n A share, participation, or other interest in property or in an entity of the issuer or an obligation of the issuer that\n has all of the following characteristics:\n aIt is either represented by an instrument issued in bearer or registered form or, if not represented by an\n instrument, is registered in books maintained to record transfers by or on behalf of the issuer.\n bIt is of a type commonly dealt in on securities exchanges or markets or, when represented by an\n instrument, is commonly recognized in any area in which it is issued or dealt in as a medium for\n investment.\n cIt either is one of a class or series or by its terms is divisible into a class or series of shares,\n participations, interests, or obligations.\n\n\n Vendor\n\n A service provider or product seller, such as a manufacturer, distributor, or reseller.\n\n\n\n\n30 Initial Measurement\n\n\n General Note:The Initial Measurement Section provides guidance on the criteria and amounts used to\n measure a particular item at the date of initial recognition.\n\n\n\n\n General Related Proposed ASUs\n\n\n > Cost Basis\n 330-10- The primary basis of accounting for inventories is cost, which has been defined generally as the price paid or\n 30-1\n consideration given to acquire an asset. As applied to inventories, cost means in principle the sum of the\n applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition\n and location. It is understood to mean acquisition and production cost, and its determination involves many\n considerations.\n\n 330-10- Although principles for the determination of inventory costs may be easily stated, their application, particularly\n 30-2\n to such inventory items as work in process and finished goods, is difficult because of the variety of\n considerations in the allocation of costs and charges.\n\n 330-10- For example, variable production overheads are allocated to each unit of production on the basis of the actual\n 30-3\n use of the production facilities. However, the allocation of fixed production overheads to the costs of\n conversion is based on the normal capacity of the production facilities. Normal capacity refers to a range of\n production levels. Normal capacity is the production expected to be achieved over a number of periods or\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 7 of 20\n seasons under normal circumstances, taking into account the loss of capacity resulting from planned\n maintenance. Some variation in production levels from period to period is expected and establishes the range\n of normal capacity.\n\n330-10- The range of normal capacity will vary based on business- and industry-specific factors. Judgment is required\n30-4\n to determine when a production level is abnormally low (that is, outside the range of expected variation in\n production).\n\n330-10- Examples of factors that might be anticipated to cause an abnormally low production level include significantly\n30-5\n reduced demand, labor and materials shortages, and unplanned facility or equipment downtime.\n\n330-10- The actual level of production may be used if it approximates normal capacity. In periods of abnormally high\n30-6\n production, the amount of fixed overhead allocated to each unit of production shall be decreased so that\n inventories are not measured above cost. The amount of fixed overhead allocated to each unit of production\n shall not be increased as a consequence of abnormally low production or idle plant.\n\n330-10- Unallocated overheads shall be recognized as an expense in the period in which they are incurred. Other\n30-7\n items such as abnormal freight, handling costs, and amounts of wasted materials (spoilage) require treatment\n as current period charges rather than as a portion of the inventory cost.\n\n330-10- Also, under most circumstances, general and administrative expenses shall be included as period charges,\n30-8\n except for the portion of such expenses that may be clearly related to production and thus constitute a part of\n inventory costs (product charges). Selling expenses constitute no part of inventory costs. The exclusion of all\n overheads from inventory costs does not constitute an accepted accounting procedure. The exercise of\n judgment in an individual situation involves a consideration of the adequacy of the procedures of the cost\n accounting system in use, the soundness of the principles thereof, and their consistent application. General\n and administrative expenses ordinarily shall be charged to expense as incurred.\n\n\n> Determination of Inventory Costs\n330-10- Cost for inventory purposes may be determined under any one of several assumptions as to the flow of cost\n30-9\n factors, such as first-in first-out (FIFO), average, and last-in first-out (LIFO). The major objective in selecting a\n method should be to choose the one which, under the circumstances, most clearly reflects periodic income.\n\n330-10- The cost to be matched against revenue from a sale may not be the identified cost of the specific item which is\n30-10\n sold, especially in cases in which similar goods are purchased at different times and at different prices. While\n in some lines of business specific lots are clearly identified from the time of purchase through the time of sale\n and are costed on this basis, ordinarily the identity of goods is lost between the time of acquisition and the\n time of sale.\n\n330-10- Accordingly, if the materials purchased in various lots are identical and interchangeable, the use of identified\n30-11\n cost of the various lots may not produce the most useful financial statements. This fact has resulted in the\n general acceptance of several assumptions with respect to the flow of cost factors such as FIFO, average, and\n LIFO to provide practical bases for the measurement of periodic income.\n\n330-10- Standard costs are acceptable if adjusted at reasonable intervals to reflect current conditions so that at the\n30-12\n balance-sheet date standard costs reasonably approximate costs computed under one of the recognized\n bases. In such cases descriptive language shall be used which will express this relationship, as, for instance,\n \"approximate costs determined on the first-in first-out basis,\" or, if it is desired to mention standard costs, \"at\n standard costs, approximating average costs.\"\n\n330-10- In some situations a reversed mark-up procedure of inventory pricing, such as the retail inventory method,\n30-13\n may be both practical and appropriate. The business operations in some cases may be such as to make it\n desirable to apply one of the acceptable methods of determining cost to one portion of the inventory or\n components thereof and another of the acceptable methods to other portions of the inventory.\n\n330-10- Although selection of the method should be made on the basis of the individual circumstances, financial\n30-14\n statements will be more useful if uniform methods of inventory pricing are adopted by all entities within a given\n industry.\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 8 of 20\n > Consistency Required\n 330-10- While the basis of stating inventories does not affect the overall gain or loss on the ultimate disposition of\n 30-15\n inventory items, any inconsistency in the selection or employment of a basis may improperly affect the periodic\n amounts of income or loss. Because of the common use and importance of periodic statements, a procedure\n adopted for the treatment of inventory items shall be consistently applied in order that the results reported may\n be fairly allocated between years.\n\n\n > Purchases and Sales of Inventory with the Same Counterparty\n 330-10- For a discussion of the initial measurement of inventory purchased from an entity to which it also sells\n 30-16\n inventory in the same line of business, see paragraphs 845-10-55-10 through 55-26.\n\n\n > Costs Resulting from Share-Based Payment Transactions\n 330-10- See paragraph 718-10-25-2 for a discussion of share-based payment capitalized as a part of inventory.\n 30-17\n\n > Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed\n 330-10- See Sections 985-20-25 and 985-20-35 and paragraphs 985-20-55-2 through 55-3 for a discussion of\n 30-18\n accounting for the costs of producing and acquiring computer software, including software that is marketed as\n part of a product or process.\n\n 330-10- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 30-19\n\n > Costs to Fulfill a Contract with a Customer\n 330-10- See paragraphs 340-40-25-5 through 25-8 and paragraphs 340-40-35-1 through 35-6 for the accounting for\n 30-20\n the costs to fulfill a contract with a customer if those costs are not in the scope of another Topic.\n\n\n > Indirect Contract Costs by Government Contractors\n 330-10- See paragraph 912-20-25-1 for the accounting for indirect contract costs by government contractors.\n 30-21\n\n\n\n\n35 Subsequent Measurement\n\n\n General Note:The Subsequent Measurement Section provides guidance on an entity's subsequent\n measurement and subsequent recognition of an item. Situations that may result in subsequent changes\n to carrying amount include impairment, credit losses, fair value adjustments, depreciation and\n amortization, and so forth.\n\n\n\n\n General\n 330-10- Paragraph superseded by Accounting Standards Update No. 2015-11.\n 35-1\n\n 330-10- The subsequent measurement of inventory depends on the cost method and is different for the following:\n 35-1A\n aInventory measured using any method other than last-in, first-out (LIFO) or the retail inventory method\n (see paragraph 330-10-35-1B)\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 9 of 20\n bInventory measured using LIFO or the retail inventory method (see paragraphs 330-10-35-1C through\n 35-7).\n Paragraphs 330-10-35-7A through 35-11 apply to all inventory.\n\n\n> Inventory Measured Using Any Method Other Than LIFO or the Retail\nInventory Method\n330-10- Inventory measured using any method other than LIFO or the retail inventory method (for example, inventory\n35-1B\n measured using first-in, first-out (FIFO) or average cost) shall be measured at the lower of cost and net\n realizable value. When evidence exists that the net realizable value of inventory is lower than its cost, the\n difference shall be recognized as a loss in earnings in the period in which it occurs. That loss may be required,\n for example, due to damage, physical deterioration, obsolescence, changes in price levels, or other causes.\n\n\n> Inventory Measured Using LIFO or the Retail Inventory Method\n330-10- A departure from the cost basis of pricing inventory measured using LIFO or the retail inventory method is\n35-1C\n required when the utility of the goods is no longer as great as their cost. Where there is evidence that the utility\n of goods, in their disposal in the ordinary course of business, will be less than cost, whether due to damage,\n physical deterioration, obsolescence, changes in price levels, or other causes, the difference shall be\n recognized as a loss of the current period. This is generally accomplished by stating such goods at a lower\n level commonly designated as market.\n\n330-10- The cost basis of recording inventory ordinarily achieves the objective of a proper matching of costs and\n35-2\n revenues. However, under certain circumstances cost may not be the amount properly chargeable against the\n revenues of future periods. A departure from cost is required in these circumstances because cost is\n satisfactory only if the utility of the goods has not diminished since their acquisition; a loss of utility shall be\n reflected as a charge against the revenues of the period in which it occurs. Thus, in accounting for inventories,\n a loss shall be recognized whenever the utility of goods is impaired by damage, deterioration, obsolescence,\n changes in price levels, or other causes. The measurement of such losses for inventory measured using LIFO\n or the retail inventory method shall be accomplished by applying the rule of pricing inventories at the lower of\n cost or market. This provides a practical means of measuring utility and thereby determining the amount of the\n loss to be recognized and accounted for in the current period.\n\n330-10- The rule of lower of cost or market is intended to provide a means of measuring the residual usefulness of an\n35-3\n inventory expenditure. The term market is therefore to be interpreted as indicating utility on the inventory date\n and may be thought of in terms of the equivalent expenditure which would have to be made in the ordinary\n course at that date to procure corresponding utility.\n\n330-10- As a general guide, utility is indicated primarily by the current cost of replacement of the goods as they would\n35-4\n be obtained by purchase or reproduction. In applying the rule, however, judgment must always be exercised\n and no loss shall be recognized unless the evidence indicates clearly that a loss has been sustained. There\n are therefore exceptions to such a standard. Replacement or reproduction prices would not be appropriate as\n a measure of utility when the estimated sales value, reduced by the costs of completion and disposal, is lower,\n in which case the realizable value so determined more appropriately measures utility.\n\n330-10- Furthermore, when the evidence indicates that cost will be recovered with an approximately normal profit upon\n35-5\n sale in the ordinary course of business, no loss shall be recognized even though replacement or reproduction\n costs are lower. This might be true, for example, in the case of production under firm sales contracts at fixed\n prices, or when a reasonable volume of future orders is assured at stable selling prices.\n\n330-10- Paragraph superseded by Accounting Standards Update No. 2015-11.\n35-6\n\n330-10- Because of the many variations of circumstances encountered in inventory pricing, the definition of market is\n35-7\n intended as a guide rather than a literal rule. It shall be applied realistically in light of the objectives expressed\n in this Subtopic and with due regard to the form, content, and composition of the inventory. For example, the\n retail inventory method, if adequate markdowns are currently taken, accomplishes the objectives described\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 10 of 20\n herein. It is also recognized that, if a business is expected to lose money for a sustained period, the inventory\n shall not be written down to offset a loss inherent in the subsequent operations.\n\n\n> Subsequent Measurement Guidance Applicable to All Inventory\n330-10- If inventory has been the hedged item in a fair value hedge, the inventory's cost basis for purposes of\n35-7A\n subsequent measurement shall reflect the effect of the adjustments of its carrying amount made pursuant to\n paragraph 815-25-35-1(b).\n\n330-10- Depending on the character and composition of the inventory, the guidance in paragraphs 330-10-35-1A\n35-8\n through 35-7 that is applicable to the inventory being measured may properly be applied either directly to each\n item or to the total of the inventory (or, in some cases, to the total of the components of each major category).\n The method shall be that which most clearly reflects periodic income.\n\n330-10- The purpose of reducing the carrying amount of inventory is to reflect fairly the income of the period. The most\n35-9\n common practice is to apply the applicable subsequent measurement guidance separately to each item of the\n inventory. However, if there is only one end-product category, the application of the applicable subsequent\n measurement guidance to inventory in its entirety may have the greatest significance for accounting purposes.\n Accordingly, the remeasurement of individual items may not always lead to the most useful result if the market\n value (for inventory measured using LIFO or the retail inventory method) or net realizable value (for all other\n inventory) of the total inventory is not below its cost. This might be the case, for example, if selling prices are\n not affected by temporary or small fluctuations in current costs of purchase or manufacture.\n\n330-10- Similarly, where more than one major product or operational category exists, the application of the applicable\n35-10\n subsequent measurement guidance to the total of the items included in such major categories may result in\n the most useful determination of income. When no loss of income is expected to take place as a result of a\n reduction of cost prices of certain goods because others forming components of the same general categories\n of finished products have a market value (for inventory measured using LIFO or the retail inventory method) or\n net realizable value (for all other inventory) equally in excess of cost, such components need not be adjusted\n to the extent that they are in balanced quantities. Thus, in such cases, the guidance on subsequent\n measurement may be applied directly to the totals of the entire inventory, rather than to the individual inventory\n items, if they enter into the same category of finished product and if they are in balanced quantities, provided\n the procedure is applied consistently from year to year.\n\n330-10- To the extent, however, that the stocks of particular materials or components are excessive in relation to\n35-11\n others, the more widely recognized procedure of applying the guidance on subsequent measurement to the\n individual items constituting the excess shall be followed. This would also apply in cases in which the items\n enter into the production of unrelated products or products having a material variation in the rate of turnover.\n Unless an effective method of classifying categories is practicable, the rule shall be applied to each item in the\n inventory.\n\n330-10- See paragraphs 330-10-30-9 through 30-14 for guidance on inventory pricing methods.\n35-12\n\n> Loss Due to Sales Incentive\n330-10- The offer of a sales incentive that will result in a loss on the sale of a product may indicate an impairment of\n35-13\n existing inventory under this Subtopic.\n\n\n> New Cost Basis\n330-10- In the case of goods which have been written down below cost at the close of a fiscal year, such reduced\n35-14\n amount is to be considered the cost for subsequent accounting purposes. Paragraph 270-10-45-6 provides\n guidance for preparing interim financial statements.\n\n\n> Stating Inventories Above Cost\n330-10- Only in exceptional cases may inventories properly be stated above cost. For example, precious metals\n35-15\n having a fixed monetary value with no substantial cost of marketing may be stated at such monetary value;\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 11 of 20\n any other exceptions must be justifiable by inability to determine appropriate approximate costs, immediate\n marketability at quoted market price, and the characteristic of unit interchangeability.\n\n 330-10- It is generally recognized that income accrues only at the time of sale, and that gains may not be anticipated\n 35-16\n by reflecting assets at their current sales prices. However, exceptions for reflecting assets at selling prices are\n permissible for both of the following:\n aInventories of gold and silver, when there is an effective government-controlled market at a fixed\n monetary value\n bInventories representing agricultural, mineral, and other products, with all of the following criteria:\n\n 1Units of which are interchangeable\n\n 2Units of which have an immediate marketability at quoted prices\n\n 3Units for which appropriate costs may be difficult to obtain.\n Where such inventories are stated at sales prices, they shall be reduced by expenditures to be incurred in\n disposal.\n\n\n > Purchase Commitments\n 330-10- A net loss on firm purchase commitments for goods for inventory, measured in the same way as are inventory\n 35-17\n losses, shall be recognized in the accounts. The recognition in a current period of losses arising from the\n decline in the utility of cost expenditures is equally applicable to similar losses which are expected to arise\n from firm, uncancelable, and unhedged commitments for the future purchase of inventory items.\n\n 330-10- The utility of such commitments is not impaired, and hence there is no loss, when the amounts to be realized\n 35-18\n from the disposition of the future inventory items are adequately protected by firm sales contracts or when\n there are other circumstances that reasonably assure continuing sales without price decline.\n\n\n > Accounting Changes\n 330-10- Paragraph 250-10-55-1 explains that a change in composition of the elements of cost included in inventory is\n 35-19\n an accounting change and provides related guidance.\n\n 330-10- The definition of direct effects of a change in accounting principle includes a change in inventory valuation\n 35-20\n methods as an accounting change.\n\n\n > Accounting for Consideration Payable to a Customer\n 330-10- See paragraphs 606-10-32-25 through 32-27 for a discussion of consideration given by an entity to\n 35-21\n a customer.\n\n\n > Accounting for Consideration Received from a Vendor\n 330-10- See Subtopic 705-20 on costs of sales and services for a discussion of accounting by an entity, that is, a\n 35-22\n customer (including a reseller) for, for consideration received from a vendor.\n\n\n > Interim Financial Reporting\n 330-10- See paragraph 270-10-45-6 for a discussion of practices used in determining costs of inventory on an interim\n 35-23\n basis.\n\n\n\n\n45 Other Presentation Matters\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 12 of 20\n\n General Note:The Other Presentation Matters Section provides guidance on other presentation\n matters not addressed in the Recognition, Initial Measurement, Subsequent Measurement, and\n Derecognition Sections. Other presentation matters may include items such as current or long-term\n balance sheet classification, cash flow presentation, earnings per share matters, and so forth. The\n FASB Codification also contains Presentation Topics, which provide guidance for general presentation\n and display items. See those Topics for general guidance.\n\n\n\n\n General\n > Change in Composition Is Accounting Change\n 330-10- See paragraph 330-10-35-19 for guidance on dealing with the effects of an accounting change resulting from a\n 45-1\n change in elements of cost included in inventory.\n\n 330-10- Paragraph superseded by Accounting Standards Update No. 2014-09.\n 45-2\n\n\n\n\n50 Disclosure\n\n\n General Note:The Disclosure Section provides guidance regarding the disclosure in the notes to\n financial statements. In some cases, disclosure may relate to disclosure on the face of the financial\n statements.\n\n\n\n\n General Related Proposed ASUs\n\n\n > Basis for Stating Inventories\n 330-10- The basis of stating inventories shall be consistently applied and shall be disclosed in the financial statements;\n 50-1\n whenever a significant change is made therein, there shall be disclosure of the nature of the change and, if\n material, the effect on income. A change of such basis may have an important effect upon the interpretation of\n the financial statements both before and after that change, and hence, in the event of a change, a full\n disclosure of its nature and of its effect, if material, upon income shall be made. See paragraph 210-10-50-1.\n\n\n > Losses from the Subsequent Measurement of Inventory\n 330-10- Substantial and unusual losses that result from the subsequent measurement of inventory (see\n 50-2\n paragraphs 330-10-35-1A through 35-11) should be disclosed in the financial statements.\n\n\n > Goods Stated Above Cost\n 330-10- Where goods are stated above cost this fact shall be fully disclosed.\n 50-3\n\n > Stating Inventories at Sales Prices\n 330-10- Where such inventories are stated at sales prices, the use of such basis shall be fully disclosed in the financial\n 50-4\n statements.\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 13 of 20\n > Losses on Firm Purchase Commitments\n 330-10- The amounts of net losses on firm purchase commitments accrued under paragraph 330-10-35-17 shall be\n 50-5\n disclosed separately in the income statement.\n\n PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 220-40-65-1\n The amounts of net losses on firm purchase commitments accrued under paragraph 330-10-35-17 shall\n be disclosed separately in the income statement. See paragraphs 220-40-50-21 through 50-25 for\n additional disclosure requirements.\n\n\n\n > Disclosure of Significant Estimates\n 330-10- See Example 1 (paragraph 330-10-55-8) for an illustration of the disclosure of significant estimates applicable\n 50-6\n to inventories as required by Section 275-10-50.\n\n\n\n\n55 Implementation Guidance and Illustrations\n\n\n General Note:The Implementation Guidance and Illustrations Section contains implementation\n guidance and illustrations that are an integral part of the Subtopic. The implementation guidance and\n illustrations do not address all possible variations. Users must consider carefully the actual facts and\n circumstances in relation to the requirements of the Subtopic.\n\n\n\n\n General Related Proposed ASUs\n\n\n 330-10- This Section, which is an integral part of the requirements of this Topic, provides general guidance to be used\n 55-1\n in accounting for inventory. Certain assumptions have been made to simplify the computations and focus on\n the issue at hand in each illustration.\n\n\n > Implementation Guidance\n \u00b7 > Market Decline in Interim Period\n 330-10- If near-term price recovery is uncertain, a decline in the market value (for inventory measured using LIFO or\n 55-2\n the retail inventory method) or net realizable value (for all other inventory) of inventory below cost during an\n interim period shall be accounted for consistent with annual periods, except as described in paragraph 270-10-\n 45-6.\n aSubparagraph superseded by Accounting Standards Update No. 2015-11.\n bSubparagraph superseded by Accounting Standards Update No. 2015-11.\n\n\n \u00b7 > Costs Capitalized to Inventory for Tax Purposes\n 330-10- The following provides guidance as to whether the types of costs that are required to be allocated to\n 55-3\n inventories for tax purposes under the Uniform Capitalization Rules for Inventory under the Tax Reform Act of\n 1986 would be capitalizable under generally accepted accounting principles (GAAP) and, if so, whether the\n costing method required for tax purposes is a preferable method for purposes of justifying a change in\n accounting principle.\n\n 330-10- The fact that a cost is capitalizable for tax purposes does not, in itself, indicate that it is preferable, or even\n 55-4\n appropriate, to capitalize that cost for financial reporting purposes. Certain of the additional costs that are\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 14 of 20\n required to be capitalized for tax purposes may also be capitalizable for financial reporting purposes,\n depending on factors such as the nature of the entity's operation and industry practice. That determination,\n however, can only be made after an analysis of the individual facts and circumstances.\n\n330-10- Paragraph superseded by Accounting Standards Update No. 2017-07.\n55-5\n\n330-10- Paragraph superseded by Accounting Standards Update No. 2017-07.\n55-6\n\n\u00b7 > Capitalizing into Inventory the Service Cost Component of Pension and Other Postretirement Benefit\nCosts\n330-10- The service cost component of net periodic pension cost and net periodic postretirement benefit cost is the\n55-6A\n only component directly arising from employees' services provided in the current period. Therefore, when it is\n appropriate to capitalize employee compensation in connection with the construction or production of an asset,\n the service cost component applicable to the pertinent employees for the period is the relevant amount to be\n considered for capitalization.\n\n330-10- Paragraph superseded by Accounting Standards Update No. 2017-07.\n55-7\n\n> Illustrations\n\u00b7 > Example 1: Disclosure of Significant Estimates\n330-10- This Example illustrates the guidance in paragraph 330-10-50-6 regarding the disclosure of significant\n55-8\n estimates related to inventory. Entity A manufactures high technology stereo equipment. In June 19X7, one of\n Entity A's competitors introduced a new model stereo system with the same features as Entity A's Model A.\n The competitor's version sells for significantly less than Entity A's suggested retail price for Model A. The\n introduction of this product resulted in a sharp decrease in the sales volume of Model A. As of December 31,\n 19X7, Entity A has accumulated significant inventory quantities beyond its normal short-term needs of its\n Model A system. Inventory for Model A ($6 million) represents approximately 20 percent of Entity A's inventory\n at that date. The remaining 80 percent of Entity A's inventory consists of products experiencing only normal\n competitive pressures. Entity A has established provisions for obsolescence for this latter group of products in\n the normal course of business.\n\n330-10- Management has developed a program to provide substantial dealer incentives on purchases of the Model A,\n55-9\n which it expects will result in the sale of this inventory in the near term. Because of the existing high profit\n margin on its stereo systems, Entity A would continue to earn a marginal profit on sales of the Model A under\n the new program. It is also reasonably possible, however, that the program will not be wholly successful, and,\n accordingly, a material loss could ultimately result on the disposal of the inventory.\n\n330-10- The entity would disclose the following.\n55-10\n As of December 31, 19X7, some portion of $6 million of inventory of one of the entity's products is in\n excess of Entity A's current requirements based on the recent level of sales. Management has developed\n a program to reduce this inventory to desired levels over the near term and believes no loss will be\n incurred on its disposition. No estimate can be made of a range of amounts of loss that are reasonably\n possible should the program not be successful.\n\n\n330-10- This situation meets the criteria for disclosure under paragraph 275-10-50-8 because circumstances that\n55-11\n existed at the date of the financial statements, including the decreasing sales volume and excessive quantities\n of inventory of Model A, make it at least reasonably possible that management's plan to liquidate its excess\n inventory without a loss will be less than fully successful and that such an outcome would have a near-term\n material effect on the entity's financial statements.\n\n330-10- In this Example, Entity A discloses the existence of potentially excess quantities of inventory at the date of the\n55-12\n financial statements and indicates that the uncertainty is expected to be resolved in the near term. The\n disclosure is intended to provide users with insight into management's assessment of recoverability of the cost\n of inventories existing at the date of the financial statements. Although disclosure of the $6 million carrying\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 15 of 20\n amount of the inventory of Model A is not required because, based on the facts presented, $6 million does not\n constitute a reasonable estimate of loss on the disposal of the inventory or the maximum amount in an\n estimated range of loss, disclosure of this amount is not misleading and may provide useful information.\n\n 330-10- Discussion of Entity A's provision for obsolescence for the remaining 80 percent of its inventory is not required\n 55-13\n because it is not considered reasonably possible that additional material losses on this inventory will occur.\n\n\n\n\n65 Transition and Open Effective Date Information\n\n\n General Note:The Transition Section contains a description of the required transition provisions and a\n list of the related paragraphs that have been modified. This Section will retain the transition content\n during the transition period. After the transition period, the transition content will be removed yet will be\n available in archived versions of the Section.\n\n\n\n\n General Related Proposed ASUs\n\n\n 330-10- Paragraph superseded on 06/20/2018 after the end of the transition period stated in Accounting Standards\n 65-1\n Update No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory.\n\n\n\n\nS00 Status\n\n\n General Note:The Status Section identifies changes to this Subtopic resulting from Accounting\n Standards Updates. The Section provides references to the affected Codification content and links to\n the related Accounting Standards Updates. Nonsubstantive changes for items such as editorial, link\n and similar corrections are included separately in Maintenance Updates.\n\n\n\n\n General\n 330-10- The following table identifies the changes made to this Subtopic.\n S00-1\n Paragraph Action Accounting Standards Update Date\n\n 330-10-S35-2 Amended Accounting Standards Update No. 2009-07 09/15/2009\n 330-10-S99-1 Amended Accounting Standards Update No. 2012-03 08/27/2012\n 330-10-S99-2 Amended Accounting Standards Update No. 2012-03 08/27/2012\n\n\n\n\nS35 Subsequent Measurement\n\n\n General Note:The Subsequent Measurement Section provides guidance on an entity's subsequent\n measurement and subsequent recognition of an item. Situations that may result in subsequent changes\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 16 of 20\n to carrying amount include impairment, credit losses, fair value adjustments, depreciation and\n amortization, and so forth.\n\n\n\n General\n > Restoration of Previously Written-Down Inventory Value\n 330-10- See paragraph 330-10-S99-2, SAB Topic 5.BB, for SEC Staff views on restoration of inventory value following\n S35-1\n a previous write-down to lower of cost or market.\n\n\n > Classification of Inventory Markdowns and Other Costs Associated with a\n Restructuring\n 330-10- See paragraph 420-10-S99-3, SEC Observer Comment: Classification of Inventory Markdowns and Other\n S35-2\n Costs Associated with Restructuring, for SEC Staff views on income statement classification of inventory\n markdowns associated with a restructuring.\n\n\n\n\nS45 Other Presentation Matters\n\n\n General Note:The Other Presentation Matters Section provides guidance on other presentation\n matters not addressed in the Recognition, Initial Measurement, Subsequent Measurement, and\n Derecognition Sections. Other presentation matters may include items such as current or long-term\n balance sheet classification, cash flow presentation, earnings per share matters, and so forth. The\n FASB Codification also contains Presentation Topics, which provide guidance for general presentation\n and display items. See those Topics for general guidance.\n\n\n\n\n General\n > Separate Presentation of Classes of Inventory\n 330-10- See paragraph 210-10-S99-1, Regulation S-X Rule 5-02.6, for requirements for inventory presentation on the\n S45-1\n balance sheet.\n\n\n\n\nS50 Disclosure\n\n\n General Note:The Disclosure Section provides guidance regarding the disclosure in the notes to\n financial statements. In some cases, disclosure may relate to disclosure on the face of the financial\n statements.\n\n\n\n\n General\n > Inventory Disclosure Requirements\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 17 of 20\n 330-10- See paragraph 210-10-S99-1, Regulation S-X Rules 5-02.6(b) through (d), for inventory disclosure\n S50-1\n requirements.\n\n\n > LIFO Liquidations\n 330-10- See paragraph 330-10-S99-3, SAB Topic 11.F, for SEC Staff views on disclosure of income realized as a result\n S50-2\n of a last-in, first-out (LIFO) liquidation.\n\n\n\n\nS55 Implementation Guidance and Illustrations\n\n\n General Note:The Implementation Guidance and Illustrations Section contains implementation\n guidance and illustrations that are an integral part of the Subtopic. The implementation guidance and\n illustrations do not address all possible variations. Users must consider carefully the actual facts and\n circumstances in relation to the requirements of the Subtopic.\n\n\n\n\n General\n > LIFO Inventory Practices\n 330-10- See paragraph 330-10-S99-1, SAB Topic 5.L, for SEC Staff views on appropriate last-in, first-out (LIFO)\n S55-1\n accounting practices.\n\n\n\n\nS99 SEC Materials\n\n\n General Note:As more fully described in About the Codification, the Codification includes selected SEC\n and SEC Staff content for reference by public companies. The Codification does not replace or affect\n how the SEC or SEC Staff issues or updates SEC content. SEC Staff content does not constitute\n Commission-approved rules or interpretations of the SEC.\n\n\n\n\n General\n > SEC Staff Guidance\n \u00b7 > Staff Accounting Bulletins\n\n \u00b7 \u00b7 > SAB Topic 5.L, LIFO Inventory Practices\n\n 330-10- The following is the text of SAB Topic 5.L, LIFO Inventory Practices.\n S99-1\n Facts: On November 30, 1984, AcSEC and its Task Force on LIFO Inventory Problems (task force) issued\n a paper, \"Identification and Discussion of Certain Financial Accounting and Reporting Issues Concerning\n LIFO Inventories.\" This paper identifies and discusses certain financial accounting and reporting issues\n related to the last-in, first-out (LIFO) inventory method for which authoritative accounting literature\n presently provides no definitive guidance. For some issues, the task force's advisory conclusions\n recommend changes in current practice to narrow the diversity which the task force believes exists. For\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 18 of 20\n other issues, the task force's advisory conclusions recommend that current practice should be continued\n for financial reporting purposes and that additional accounting guidance is unnecessary. Except as\n otherwise noted in the paper, AcSEC generally supports the task force's advisory conclusions. As stated\n in the issues paper, \"Issues papers of the AICPA's accounting standards division are developed primarily\n to identify financial accounting and reporting issues the division believes need to be addressed or clarified\n by the Financial Accounting Standards Board.\" On February 6, 1985, the FASB decided not to add to its\n agenda a narrow project on the subject of LIFO inventory practices.\n Question 1: What is the SEC staff's position on the issues paper?\n Interpretive Response: In the absence of existing authoritative literature on LIFO accounting, the staff\n believes that registrants and their independent accountants should look to the paper for guidance in\n determining what constitutes acceptable LIFO accounting practice. FN11 In this connection, the staff\n considers the paper to be an accumulation of existing acceptable LIFO accounting practices which does\n not establish any new standards and does not diverge from GAAP.\n\n FN11 In ASR 293 (July 2, 1981) see Financial Reporting Codification 205, the Commission expressed\n its concerns about the inappropriate use of Internal Revenue Service (IRS) LIFO practices for\n financial statement preparation. Because the IRS amended its regulations concerning the LIFO\n conformity rule on January 13, 1981, allowing companies to apply LIFO differently for financial\n reporting purposes than for tax purposes, the Commission strongly encouraged registrants and their\n independent accountants to examine their financial reporting LIFO practices. In that release, the\n Commission acknowledged the \"task force which has been established by AcSEC to accumulate\n information about [LIFO] application problems\" and noted that \"This type of effort, in addition to self-\n examination [of LIFO practices] by individual registrants, is appropriate...\"\n The staff also believes that the advisory conclusions recommended in the issues paper are generally\n consistent with conclusions previously expressed by the Commission, such as:\n\n 1. Pooling-paragraph 4-6 of the paper discusses LIFO inventory pooling and concludes \"establishing\n separate pools with the principal objective of facilitating inventory liquidations is unacceptable.\" In\n Accounting and Auditing Enforcement Release 35, August 13, 1984, the Commission stated that it\n believes that the Company improperly realigned its LIFO pools in such a way as to maximize the\n likelihood and magnitude of LIFO liquidations and thus, overstated net income.\n\n 2. New Items-paragraph 4-27 of the paper discusses determination of the cost of new items and\n concludes \"if the double extension or an index technique is used, the objective of LIFO is achieved by\n reconstructing the base year cost of new items added to existing pools.\" In ASR 293, the Commission\n stated that when the effects of inflation on the cost of new products are measured by making a\n comparison with current cost as the base-year cost, rather than a reconstructed base-year cost,\n income is improperly increased.\n Question 2: If a registrant utilizes a LIFO practice other than one recommended by an advisory conclusion\n in the issues paper, must the registrant change its practice to one specified in the paper?\n Interpretive Response: Now that the issues paper is available, the staff believes that a registrant and its\n independent accountants should re-examine previously adopted LIFO practices and compare them to the\n recommendations in the paper. In the event that the registrant and its independent accountants conclude\n that the registrant's LIFO practices are preferable in the circumstances, they should be prepared to justify\n their position in the event that a question is raised by the staff.\n Question 3: If a registrant elects to change its LIFO practices to be consistent with the guidance in the\n issues paper and discloses such changes in accordance with FASB ASC Topic 250, Accounting Changes\n and Error Corrections, will the registrant be requested by the staff to explain its past practices and its\n justification for those practices?\n Interpretive Response: The staff does not expect to routinely raise questions about changes in LIFO\n practices which are made to make a company's accounting consistent with the recommendations in the\n issues paper.\n\n\n\u00b7 \u00b7 > SAB Topic 5.BB, Inventory Valuation Allowance\n\n330-10- The following is the text of SAB Topic 5.BB, Inventory Valuation Allowance.\nS99-2\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 19 of 20\n Facts: FASB ASC paragraph 330-10-35-1 (Inventory Topic), specifies that: \"[a] departure from the cost\n basis of pricing the inventory is required when the utility of the goods is no longer as great as its cost.\n Where there is evidence that the utility of goods, in their disposal in the ordinary course of business, will\n be less than cost, whether due to physical deterioration, obsolescence, changes in price levels, or other\n causes, the difference shall be recognized as a loss of the current period. This is generally accomplished\n by stating such goods at a lower level commonly designated as market.\"\n\n FASB ASC paragraph 330-10-35-14 indicates that \"[i]n the case of goods which have been written\n down below cost at the close of a fiscal year, such reduced amount is to be considered the cost for\n subsequent accounting purposes.\"\n Lastly, the FASB ASC Master Glossary provides \"inventory obsolescence\" as one of the items subject to a\n change in accounting estimate.\n Question: Does the write-down of inventory to the lower of cost or market, as required by FASB ASC\n Topic 330, create a new cost basis for the inventory or may a subsequent change in facts and\n circumstances allow for restoration of inventory value, not to exceed original historical cost?\n Interpretive Response: Based on FASB ASC paragraph 330-10-35-14, the staff believes that a write-down\n of inventory to the lower of cost or market at the close of a fiscal period creates a new cost basis that\n subsequently cannot be marked up based on changes in underlying facts and circumstances. FN59\n\n FN59 See also disclosure requirement for inventory balances in Rule 5-02(6) of Regulation S-X.\n\n\u00b7 \u00b7 > SAB Topic 11.F, LIFO Liquidations\n\n330-10- The following is the text of SAB Topic 11.F, LIFO Liquidations.\nS99-3\n Facts: Registrant on LIFO basis of accounting liquidates a substantial portion of its LIFO inventory and as\n a result includes a material amount of income in its income statement which would not have been\n recorded had the inventory liquidation not taken place.\n Question: Is disclosure required of the amount of income realized as a result of the inventory liquidation?\n Interpretive Response: Yes. Such disclosure would be required in order to make the financial statements\n not misleading. Disclosure may be made either in a footnote or parenthetically on the face of the income\n statement.\n\f Case 1:25-cv-00541-JAV Document 70-11 Filed 11/20/25 Page 20 of 20\n\n\nCopyright\nCopyright \u00a9 2025 by Financial Accounting Foundation. All rights reserved. Certain portions may\ninclude material copyrighted by American Institute of Certified Public Accountants. Content\ncopyrighted by Financial Accounting Foundation, or any third parties who have not provided specific\npermission, may not be reproduced, stored in a retrieval system, or transmitted, in any form or by any\nmeans, electronic, mechanical, photocopying, recording, or otherwise, without the prior written\npermission of Financial Accounting Foundation or such applicable third party. Financial Accounting\nFoundation claims no copyright in any portion hereof that constitutes a work of the United States\nGovernment.\n\f","ocr_status":2,"date_upload":"2026-05-12T04:15:42.651349-07:00","document_number":"70","attachment_number":11,"pacer_doc_id":"127038602955","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit K - FASB ASC Topic 330","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874412/","id":478874412,"tags":[],"absolute_url":"/docket/69558488/70/12/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.537003-07:00","date_modified":"2026-05-14T07:08:03.194220-07:00","sha1":"1fefb0466eff8cae1149820e3181a6a76462e14f","page_count":69,"file_size":796729,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.12.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.12.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 1 of 69\n\n\n\n\n Exhibit L\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 2 of 69\n\n\n\n\n UNITED STATES SECURITIES AND EXCHANGE COMMISSION\n WASHINGTON, D.C. 20549\n FORM 10-Q\n\u2611 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n For the quarterly period ended June 30, 2024\n OR\n\u2610 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n\n For the transition period from ____ to ____\n Commission file number 001-37386\n\n\n\n\n FTAI AVIATION LTD.\n (Exact name of registrant as specified in its charter)\n Cayman Islands XX-XXXXXXX\n (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)\n\n 415 West 13th Street, 7th Floor New York NY 10014\n (Address of principal executive offices) (Zip Code)\n\n\n (Registrant\u2019s telephone number, including area code) (332) 239-7600\n (Former name, former address and former fiscal year, if changed since last report) N/A\n Securities registered pursuant to Section 12(b) of the Act:\n Title of each class: Trading Symbol: Name of exchange on which registered:\n Ordinary shares, $0.01 par value per share FTAI The Nasdaq Global Select Market\n 8.25% Fixed-to-Floating Rate Series A Cumulative Perpetual Redeemable Preferred Shares FTAIP The Nasdaq Global Select Market\n 8.00% Fixed-to-Floating Rate Series B Cumulative Perpetual Redeemable Preferred Shares FTAIO The Nasdaq Global Select Market\n 8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares FTAIN The Nasdaq Global Select Market\n 9.50% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares FTAIM The Nasdaq Global Select Market\n\nIndicate 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\nmonths (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 \u00fe No \u00a8\nIndicate 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\n(\u00a7232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes \u00fe No \u00a8\nIndicate 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\ncompany. See the definitions of \u201clarge accelerated filer,\u201d \u201caccelerated filer,\u201d \u201csmaller reporting company,\u201d and \u201cemerging growth company\u201d in Rule 12b-2 of the Exchange Act.\n\n Large accelerated filer \u00fe Accelerated filer \u00a8\n Non-accelerated filer \u00a8 Smaller reporting company \u2610\n Emerging growth company \u2610\n\nIf 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\naccounting standards provided pursuant to Section 13(a) of the Exchange Act. \u00a8\nIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes \u2610 No \u00fe\nThere were 102,211,402 ordinary shares outstanding representing limited liability company interests at August 7, 2024.\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 3 of 69\n\n\n\n\n FORWARD-LOOKING STATEMENTS AND RISK FACTORS SUMMARY\nThis report contains \u201cforward-looking statements\u201d within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of\nhistorical fact but instead are based on our present beliefs and assumptions and on information currently available to us. You can identify these forward-looking statements by\nthe use of forward-looking words such as \u201coutlook,\u201d \u201cbelieves,\u201d \u201cexpects,\u201d \u201cpotential,\u201d \u201ccontinues,\u201d \u201cmay,\u201d \u201cwill,\u201d \u201cshould,\u201d \u201ccould,\u201d \u201cseeks,\u201d \u201capproximately,\u201d \u201cpredicts,\u201d \u201cintends,\u201d\n\u201cplans,\u201d \u201cestimates,\u201d \u201canticipates,\u201d \u201ctarget,\u201d \u201cprojects,\u201d \u201ccontemplates\u201d or the negative version of those words or other comparable words. Any forward-looking statements\ncontained in this report are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The\ninclusion of this forward-looking information should not be regarded as a representation by us, that the future plans, estimates or expectations contemplated by us will be\nachieved.\nSuch forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business,\nprospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these\nstatements. The following is a summary of the principal risk factors that make investing in our securities risky and may materially adversely affect our business, financial\ncondition, results of operations and cash flows. This summary should be read in conjunction with the more complete discussion of the risk factors we face, which are set forth\nin Part II, Item 1A. \u201cRisk Factors\u201d of this report. We believe that these factors include, but are not limited to:\n \u2022 changes in economic conditions generally and specifically in our industry sectors, and other risks relating to the global economy, including, but not limited to, the\n Russia-Ukraine conflict, and any related responses or actions by businesses and governments\u037e\n \u2022 reductions in cash flows received from our assets, as well as contractual limitations on the use of our aviation assets to secure debt for borrowed money\u037e\n \u2022 our ability to take advantage of acquisition opportunities at favorable prices\u037e\n \u2022 a lack of liquidity surrounding our assets, which could impede our ability to vary our portfolio in an appropriate manner\u037e\n \u2022 the relative spreads between the yield on the assets we acquire and the cost of financing\u037e\n \u2022 adverse changes in the financing markets we access affecting our ability to finance our acquisitions\u037e\n \u2022 customer defaults on their obligations\u037e\n \u2022 our ability to renew existing contracts and enter into new contracts with existing or potential customers\u037e\n \u2022 the availability and cost of capital for future acquisitions\u037e\n \u2022 concentration of a particular type of asset or in a particular sector\u037e\n \u2022 competition within the aviation industry\u037e\n \u2022 the competitive market for acquisition opportunities\u037e\n \u2022 risks related to operating through joint ventures, partnerships, consortium arrangements or other collaborations with third parties\u037e\n \u2022 our ability to successfully integrate acquired businesses\u037e\n \u2022 obsolescence of our assets or our ability to sell, re-lease or re-charter our assets\u037e\n \u2022 exposure to uninsurable losses and force majeure events\u037e\n \u2022 the legislative/regulatory environment and exposure to increased economic regulation\u037e\n \u2022 exposure to the oil and gas industry\u2019s volatile oil and gas prices\u037e\n \u2022 difficulties in obtaining effective legal redress in jurisdictions in which we operate with less developed legal systems\u037e\n \u2022 our ability to maintain our exemption from registration under the Investment Company Act of 1940 and the fact that maintaining such exemption imposes limits on\n our operations\u037e\n \u2022 our ability to successfully utilize leverage in connection with our investments\u037e\n \u2022 foreign currency risk and risk management activities\u037e\n \u2022 effectiveness of our internal control over financial reporting\u037e\n \u2022 exposure to environmental risks, including natural disasters, increasing environmental legislation and the broader impacts of climate change\u037e\n \u2022 changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes\u037e\n \u2022 actions taken by national, state, or provincial governments, including nationalization, or the imposition of new taxes, could materially impact the financial\n performance or value of our assets\u037e\n \u2022 our ability to attract and retain highly skilled management and other personnel\u037e\n \u2022 risks relating to the Company entering into an Internalization Agreement (the \u201cInternalization Agreement\u201d) with FIG LLC (the \u201cFormer Manager\u201d) and the impact on the\n Company\u2019s management functions and business operations\u037e\n\n\n 2\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 4 of 69\n\n\n\n\n \u2022 volatility in the market price of our shares\u037e\n \u2022 the inability to pay dividends to our shareholders in the future\u037e\n \u2022 impacts from our past and future acquisitions, and our ability to successfully integrate acquired assets and assumed liabilities\u037e and\n \u2022 other risks described in the \u201cRisk Factors\u201d section of this report.\nThese factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. The forward-\nlooking statements made in this report relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review\nany forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise.\nIf one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we\nmay have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements.\nFurthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.\n\n\n 3\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 5 of 69\n\n\n\n\n FTAI AVIATION LTD.\n INDEX TO FORM 10-Q\n\n PART I - FINANCIAL INFORMATION\nItem 1. Unaudited Consolidated Financial Statements of FTAI Aviation Ltd.: 5\n Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 5\n Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 6\n Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2024 and 2023 7\n Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 9\n Notes to Consolidated Financial Statements 11\n Note 1: Organization 11\n Note 2: Summary of Significant Accounting Policies 11\n Note 3: Acquisition of QuickTurn 11\n Note 4: Leasing Equipment, net 15\n Note 5: Investments 16\n Note 6: Intangible Assets and Liabilities, net 17\n Note 7: Debt, net 18\n Note 8: Fair Value Measurements 19\n Note 9: Equity-Based Compensation 20\n Note 10: Income Taxes 21\n Note 11: Affiliate Transactions 21\n Note 12: Segment Information 23\n Note 13: Earnings per Share and Equity 33\n Note 14: Commitments and Contingencies 33\n Note 15: Restructuring Charges 34\n Note 16: Subsequent Events 34\nItem 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations 35\nItem 3. Quantitative and Qualitative Disclosures About Market Risk 50\nItem 4. Controls and Procedures 50\n\n PART II - OTHER INFORMATION\nItem 1. Legal Proceedings 51\nItem 1A. Risk Factors 51\nItem 2. Unregistered Sales of Equity Securities and Use of Proceeds 65\nItem 3. Defaults Upon Senior Securities 65\nItem 4. Mine Safety Disclosures 65\nItem 5. Other Information 65\nItem 6. Exhibits 66\n\n\n\n\n 4\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 6 of 69\n\n\n\n\n PART I-FINANCIAL INFORMATION\nItem 1. Financial Statements\n\nFTAI AVIATION LTD.\nCONSOLIDATED BALANCE SHEETS\n(Dollars in thousands, except share and per share data)\n\n (Unaudited)\n Notes June 30, 2024 December 31, 2023\nAssets\nCash and cash equivalents 2 $ 169,485 $ 90,756\nRestricted cash 150 150\nAccounts receivable, net 2 154,051 115,156\nLeasing equipment, net 4 2,202,866 2,032,413\nProperty, plant, and equipment, net 2 33,078 45,175\nInvestments 5 19,886 22,722\nIntangible assets, net 6 42,138 50,590\nGoodwill 3 4,630 4,630\nInventory, net 2 373,282 316,637\nOther assets 2 449,686 286,456\nTotal assets $ 3,449,252 $ 2,964,685\n\n\nLiabilities\nAccounts payable and accrued liabilities $ 128,708 $ 112,907\nDebt, net 7 3,077,596 2,517,343\nMaintenance deposits 2 75,939 65,387\nSecurity deposits 2 41,536 41,065\nOther liabilities 55,906 52,100\nTotal liabilities $ 3,379,685 $ 2,788,802\n\n\nCommitments and contingencies 14\n\n\nEquity\nOrdinary shares ($0.01 par value per share\u037e 2,000,000,000 shares authorized\u037e 102,211,402 and 100,245,905\nshares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively) $ 1,022 $ 1,002\nPreferred shares ($0.01 par value per share\u037e 200,000,000 shares authorized\u037e 15,920,000 and 15,920,000 shares\nissued and outstanding as of June 30, 2024 and December 31, 2023, respectively) 159 159\nAdditional paid in capital 330,419 255,973\nAccumulated deficit (262,033) (81,785)\nShareholders' equity 69,567 175,349\nNon-controlling interest in equity of consolidated subsidiaries - 534\nTotal equity 69,567 175,883\nTotal liabilities and equity $ 3,449,252 $ 2,964,685\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n 5\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 7 of 69\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)\n(Dollars in thousands, except share and per share data)\n\n\n\n Three Months Ended June 30, Six Months Ended June 30,\n Notes 2024 2023 2024 2023\nRevenues\nLease income $ 70,754 $ 59,541 $ 123,915 $ 115,519\nMaintenance revenue 51,187 42,065 96,977 77,206\nAsset sales revenue 72,433 76,836 111,040 185,527\nAerospace products revenue 245,200 92,725 434,257 177,838\nOther revenue 4,020 3,178 4,099 10,973\nTotal revenues 12 443,594 274,345 770,288 567,063\n\n\nExpenses\nCost of sales 205,857 104,532 348,661 250,202\nOperating expenses 2 29,099 24,797 54,416 47,331\nGeneral and administrative 2,969 3,188 6,652 7,255\nAcquisition and transaction expenses 8,019 2,672 14,198 5,934\nManagement fees and incentive allocation to affiliate 11 3,554 5,563 8,449 8,560\nInternalization fee to affiliate 15 300,000 - 300,000 -\nDepreciation and amortization 4, 6 56,691 38,514 106,611 79,440\nAsset impairment - - 962 1,220\nInterest expense 55,196 38,499 102,903 77,791\nTotal expenses 661,385 217,765 942,852 477,733\n\n\nOther (expense) income\nEquity in losses of unconsolidated entities 5 (694) (380) (1,361) (1,715)\nLoss on extinguishment of debt (13,920) - (13,920) -\nOther (expense) income (498) 408 136 416\nTotal other (expense) income (15,112) 28 (15,145) (1,299)\n(Loss) income before income taxes (232,903) 56,608 (187,709) 88,031\n(Benefit from) provision for income taxes 10 (13,033) 1,855 (7,461) 3,881\nNet (loss) income (219,870) 54,753 (180,248) 84,150\nLess: Dividends on preferred shares 8,335 8,335 16,670 15,126\nNet (loss) income attributable to shareholders $ (228,205) $ 46,418 $ (196,918) $ 69,024\n\n\n(Loss) Earnings per share: 13\nBasic $ (2.26) $ 0.47 $ (1.96) $ 0.69\nDiluted $ (2.26) $ 0.46 $ (1.96) $ 0.69\n\n\nWeighted average shares outstanding:\nBasic 100,958,524 99,732,179 100,602,214 99,730,223\nDiluted 100,958,524 100,462,277 100,602,214 100,314,508\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n 6\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 8 of 69\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)\n(Dollars in thousands)\n\n\n\n Three and Six Months Ended June 30, 2024\n Non-\n Controlling Interest in\n Ordinary Preferred Additional Paid In Accumulated Equity of Consolidated\n Shares Shares Capital Deficit Subsidiaries Total Equity\n Equity -\nDecember 31,\n2023 $ 1,002 $ 159 $ 255,973 $ (81,785) $ 534 $ 175,883\n Net\n income 39,622 39,622\n Total\ncomprehensive\nincome 39,622 39,622\n Dividends\ndeclared - ordinary\nshares (30,074) (30,074)\n Dividends\ndeclared -\npreferred shares (8,335) (8,335)\n Equity-\nbased\ncompensation 510 510\n Equity -\nMarch 31, 2024 $ 1,002 $ 159 $ 218,074 $ (42,163) $ 534 $ 177,606\n Net loss (219,870) (219,870)\n Total\ncomprehensive\nloss (219,870) (219,870)\n Purchase\nof non-controlling\ninterest (534) (534)\n Dividends\ndeclared - ordinary\nshares (30,074) (30,074)\n Dividends\ndeclared -\npreferred shares (8,335) (8,335)\n Issuance\nof ordinary shares 20 150,116 150,136\n Equity-\nbased\ncompensation 638 638\n Equity -\nJune 30, 2024 $ 1,022 $ 159 $ 330,419 $ (262,033) $ - $ 69,567\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n 7\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 9 of 69\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)\n(Dollars in thousands)\n\n\n\n Three and Six Months Ended June 30, 2023\n Non-Controlling\n Interest in Equity of\n Preferred Additional Paid Consolidated\n Ordinary Shares Shares In Capital Accumulated Deficit Subsidiaries Total Equity\nEquity - December 31, 2022 $ 997 $ 133 $ 343,350 $ (325,602) $ 524 $ 19,402\n Net income 29,397 29,397\nTotal comprehensive income 29,397 29,397\nIssuance of ordinary shares 230 230\nDividends declared - ordinary shares (29,919) (29,919)\nIssuance of preferred shares 26 61,703 61,729\nDividends declared - preferred shares (6,791) (6,791)\nEquity-based compensation 108 108\nEquity - March 31, 2023 $ 997 $ 159 $ 368,681 $ (296,205) $ 524 $ 74,156\n Net income 54,753 54,753\nTotal comprehensive income 54,753 54,753\nContributions from non-controlling interest 10 10\nIssuance of ordinary shares 159 159\nDividends declared - ordinary shares (29,935) (29,935)\nDividends declared - preferred shares (8,335) (8,335)\nEquity-based compensation 510 510\nEquity - June 30, 2023 $ 997 $ 159 $ 331,080 $ (241,452) $ 534 $ 91,318\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n 8\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 10 of 69\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)\n(Dollars in thousands)\n\n\n\n\n Six Months Ended June 30,\n 2024 2023\nCash flows from operating activities:\nNet (loss) income $ (180,248) $ 84,150\nAdjustments to reconcile net income to net cash (used in) provided by operating activities:\nEquity in losses of unconsolidated entities 1,361 1,715\nGain on sale of net assets (146,084) (75,960)\nSecurity deposits and maintenance claims included in earnings (5,298) (12,215)\nLoss on extinguishment of debt 13,920 -\nEquity-based compensation 1,148 618\nNon-cash termination fee to affiliate 150,000 -\nDepreciation and amortization 106,611 79,440\nAsset impairment 962 1,220\nChange in deferred income taxes (9,724) 3,127\nChange in fair value of guarantees (1,041) (1,902)\nAmortization of lease intangibles and incentives 18,320 18,264\nAmortization of deferred financing costs 5,107 4,190\nProvision for credit losses 120 1,032\nOther (157) (658)\nChange in:\n Accounts receivable (44,105) (21,918)\n Inventory (58,997) 11\n Other assets (10,426) (2,583)\n Accounts payable and accrued liabilities (19,659) (15,350)\n Management fees payable to affiliate (6,217) 1,892\n Other liabilities (3,229) 2,168\nNet cash (used in) provided by operating activities (187,636) 67,241\n\nCash flows from investing activities:\nInvestment in unconsolidated entities - (19,500)\nPrincipal collections on finance leases 866 1,939\nPrincipal collections on notes receivable 2,862 1,624\nAcquisition of leasing equipment (436,180) (325,462)\nInvestments in notes and financing receivable (19,750) -\nAcquisition of property, plant and equipment (2,471) (2,298)\nAcquisition of lease intangibles 1,174 (10,795)\nInvestment in promissory notes - (11,500)\nPurchase deposits for acquisitions (104,654) (11,200)\nProceeds from sale of net assets 333,660 273,229\nProceeds for deposit on sale of aircraft and engine 4,580 1,817\nReceipt of deposits for sale of aircraft and engine - 300\nReturn of purchase deposits 530 -\nNet cash used in investing activities $ (219,383) $ (101,846)\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n 9\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 11 of 69\n\nFTAI AVIATION LTD.\nCONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)\n(Dollars in thousands)\n\n\n\n Six Months Ended June 30,\n 2024 2023\nCash flows from financing activities:\nProceeds from debt $ 1,839,250 $ 325,000\nRepayment of debt (1,287,373) (330,000)\nPayment of deferred financing costs (10,245) (1,437)\nReceipt of security deposits 3,976 5,577\nReturn of security deposits - (1,295)\nReceipt of maintenance deposits 21,429 18,070\nRelease of maintenance deposits (3,938) -\nCapital contributions from non-controlling interests (534) 10\nProceeds from issuance of preferred shares, net of underwriter's discount and issuance costs - 61,729\nCash dividends - ordinary shares (60,148) (59,854)\nCash dividends - preferred shares (16,669) (15,126)\nNet cash provided by financing activities $ 485,748 $ 2,674\n\nNet increase (decrease) in cash and cash equivalents and restricted cash 78,729 (31,931)\nCash and cash equivalents and restricted cash, beginning of period 90,906 53,065\nCash and cash equivalents and restricted cash, end of period $ 169,635 $ 21,134\n\n\nSupplemental disclosure of non-cash investing and financing activities:\nTransfers from leasing equipment to inventory $ 70,897 $ (8,421)\nTransfers from inventory to leasing equipment (98,192) 73,329\nSale on and issuance of promissory notes 37,367 12,538\nAcquisition of leasing equipment in accrued expenses (17,975) (3,100)\nPurchase deposits reclassified to leasing equipment (12,108) (6,371)\nSettled security deposits (4,077) (2,406)\nSettled maintenance deposits (24,536) (11,532)\n\n\n\n\n See accompanying notes to consolidated financial statements.\n\n\n 10\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 12 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n\n1. ORGANIZATION\nFTAI Aviation Ltd. (\u201cwe\u201d, \u201cus\u201d, \u201cour\u201d or the \u201cCompany\u201d and formerly \u201cFortress Transportation and Infrastructure Investors LLC\u201d) is a Cayman Islands exempted company which\nthrough its subsidiaries owns, leases, and sells aviation equipment and also develops and manufactures, through a joint venture, and repairs and sells, through our\nmaintenance facility and exclusivity arrangements, aftermarket components for aircraft engines. Additionally, we own and lease offshore energy equipment. We have\ntwo reportable segments, (i) Aviation Leasing and (ii) Aerospace Products (see Note 12).\nPrior to May 28, 2024, FTAI Aviation Ltd. operated under a management agreement (the \u201cManagement Agreement\u201d) with FIG LLC (the \u201cFormer Manager\u201d), and Fortress\nWorldwide Transportation and Infrastructure Master GP LLC (the \u201cMaster GP\u201d), each an affiliate of Fortress Investment Group LLC (\u201cFortress\u201d). For their services, the Former\nManager was entitled to management fees and the Master GP was entitled to certain incentive allocations, both defined in, and in accordance with the terms of, the\nManagement Agreement. On May 28, 2024, the Company entered into an Internalization Agreement with the Former Manager and the Master GP (the \u201cInternalization\nAgreement\u201d), pursuant to which the Management Agreement was terminated effective May 28, 2024 (the \u201cEffective Date\u201d), except that certain indemnification and other\nobligations survive, and the Company internalized its management functions (such transactions, the \u201cInternalization\u201d). As a result of the Internalization, the Company ceased to\nbe externally managed and operates as an internally managed company. In connection with the termination of the Management Agreement, the Company (i) agreed to pay the\nFormer Manager (for itself and on behalf of the Master GP, as applicable) $150.0 million (the \u201cCash Consideration\u201d), the compensation accrued and payable, but not yet paid,\nunder the Management Agreement, and the expenses that were reimbursable, but not yet reimbursed, under the Management Agreement\u037e (ii) issued to the Former Manager\n(for itself and on behalf of the Master GP, as applicable) 1,866,949 ordinary shares of the Company (the \u201cShare Consideration\u201d)\u037e and (iii) purchased from Master GP all of its\npartnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the Company, in exchange for $30. In addition, the Former Manager will repay to the Company certain annual\nbonus payments due to certain employees of the Former Manager or its affiliates who provide services to the Company with respect to the 2024 calendar year on a pro rata\nbasis. The Company financed the cash payments through one or more debt financings, along with cash on hand.\nOn May 28, 2024, the Company also entered into a Transition Services Agreement (the \u201cTransition Services Agreement\u201d) with the Former Manager. Under the Transition\nServices Agreement, the Former Manager is required to continue to provide the Company and its affiliates with all of the services provided by the Former Manager to the\nCompany and its affiliates immediately prior to May 28, 2024 (the \u201cServices\u201d) for a transition period during which the Company will procure replacements for the Services. The\nServices will be provided to the Company for a fee equal to the Former Manager\u2019s cost of providing the Services, plus a mark-up of ten percent (10%). Unless the Transition\nServices Agreement is terminated earlier or the Company elects to terminate a Service by providing written notice to the Former Manager, the Former Manager is required to\nprovide certain Services to the Company until October 31, 2024. In addition, the Former Manager is required to continue to provide the services that are reasonably required by\nthe Company to prepare its quarterly and annual financial statements until May 31, 2025. The Transition Services Agreement may be terminated earlier (x) by mutual agreement\nof the parties, (y) by either the Former Manager or the Company in the event of a material breach by the non-terminating party that is not cured within thirty (30) days following\nwritten notification thereof, or (z) by the Former Manager if the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days.\n\n2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\n\nBasis of Accounting-The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (\u201cU.S. GAAP\u201d) and\ninclude the accounts of us and our subsidiaries. These financial statements and related notes should be read in conjunction with the Consolidated Financial Statements and\nrelated notes included in the Company\u2019s Annual Report on Form 10-K for the year ended December 31, 2023.\nPrinciples of Consolidation-We consolidate all entities in which we have a controlling financial interest and control over significant operating decisions. All adjustments\n(consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The ownership interest of other investors in consolidated\nsubsidiaries is recorded as non-controlling interest.\nWe use the equity method of accounting for investments in entities in which we exercise significant influence but which do not meet the requirements for consolidation. Under\nthe equity method, we record our proportionate share of the underlying net income (loss) of these entities.\nUse of Estimates-The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported\namounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues\nand expenses during the reporting period. Actual results could differ from those estimates.\nRestructuring Charges-The termination of the Management Agreement was a material change in the management structure of the business and is accounted for under ASC\n420, Exit or Disposal Cost Obligations. The termination fee payment to the\n\n\n 11\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 13 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nFormer Manager under the Internalization Agreement is recorded within Internalization Fee to Affiliate in the Consolidated Statements of Operations. See Note 15 for additional\ndiscussion of the restructuring charges related to the Internalization.\nReclassifications-Certain amounts from prior periods in the Company\u2019s consolidated financial statements have been reclassified to align with the presentation in the current\nperiod.\nRisks and Uncertainties-In the normal course of business, we encounter several significant types of economic risk including credit, market, and capital market risks. Credit\nrisk is the risk of the inability or unwillingness of a lessee or customer to make contractually required payments or to fulfill its other contractual obligations. Market risk reflects\nthe risk of a downturn or volatility in the underlying industry segments in which we operate, which could adversely impact the pricing of the services offered by us or a lessee\u2019s\nor customer\u2019s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of our leasing equipment or operating\nassets. Capital market risk is the risk that we are unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities. We,\nthrough our subsidiaries, also conduct operations outside of the United States\u037e such international operations are subject to the same risks as those associated with our\nUnited States operations as well as additional risks, including unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially\nadverse tax consequences and the burden of complying with foreign laws. We do not have significant exposure to foreign currency risk as all of our leasing arrangements are\ndenominated in U.S. dollars.\nCash and Cash Equivalents-We consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents.\nInventory, net-We hold aircraft engine modules, spare parts and used material inventory for trading, repairs and to support operations. Inventory is carried at the lower of cost\nor net realizable value.\nRevenues-We disaggregate our revenue by products and services. Revenues are within the scope of ASC 842, Leases, and ASC 606, Revenue from contracts with customers,\nunless otherwise noted. We have elected to exclude sales and other similar taxes from revenues.\nOperating Leases-We lease equipment pursuant to operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term\nof the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is\nplaced on non-accrual status and revenue is recognized when cash payments are received.\nGenerally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee\u2019s utilization of the\nleased asset or at the end of the lease. Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs and other operating expenses\nthroughout the term of the lease. These periodic maintenance payments accumulate over the term of the lease to fund major maintenance events, and we are contractually\nobligated to return maintenance payments to the lessee up to the cost of maintenance events paid by the lessee. In the event the total cost of maintenance events over the term\nof a lease is less than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee.\nMaintenance payments received for which we expect to repay to the lessee are presented as Maintenance deposits. All excess maintenance payments received that we do not\nexpect to repay to the lessee are recorded as Maintenance revenue. Estimates in recognizing revenue include mean time between removal, projected costs for engine\nmaintenance and forecasted utilization of aircraft which are affected by historical usage patterns and overall industry, market and economic conditions. Significant changes to\nthese estimates could have a material effect on the amount of revenue recognized in the period.\nFor purchase and lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based on the relative fair value of the\naircraft and lease and other related assets/liabilities acquired. The fair value of the lease may include a lease premium or discount, which is recorded as a favorable or\nunfavorable lease intangible.\nFinance Leases-From time to time we enter into finance lease arrangements that include a lessee obligation to purchase the leased equipment at the end of the lease term, a\nbargain purchase option, or provides for minimum lease payments with a present value that equals or exceeds substantially all of the fair value of the leased equipment at the\ndate of lease inception. Net investment in finance leases represents the minimum lease payments due from lessee, net of unearned income. The lease payments are\nsegregated into principal and interest components similar to a loan. Unearned income is recognized on an effective interest method over the lease term and is recorded as\nlease income. The principal component of the lease payment is reflected as a reduction to the net investment in finance leases. Revenue is not recognized when collection is\nnot reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are\nreceived.\nAsset sales revenue-Asset sales revenue primarily consists of the transaction price related to the sale of aircraft and aircraft engines from our Aviation Leasing segment. From\ntime to time, the Company may also assign the related lease agreements to the customer as part of the sale of these assets. We routinely sell leasing equipment to\ncustomers and such transactions are considered recurring and ordinary in nature to our business. As such, these sales are accounted for within the scope of ASC 606.\nRevenue is recognized when a performance obligation is satisfied by transferring control over an asset to a customer. Revenue is recorded with corresponding costs of sales,\npresented on a gross basis.\n\n\n 12\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 14 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nAerospace products revenue-Aerospace products revenue primarily consists of the transaction price related to the sale of repaired CFM56-7B, CFM56-5B and V2500 engines,\nengine modules, spare parts and used material inventory, and are accounted for within the scope of ASC 606. Revenue is recognized when a performance obligation is\nsatisfied by transferring control over the related asset to a customer. Revenue is recorded with corresponding costs of sales, presented on a gross basis. Aerospace products\nrevenue also consists of engine management service contracts, where the Company has a stand-ready obligation to provide replacement CFM56-7B and CFM56-5B engines\nto customers as they become unserviceable during the contract term. The Company recognizes revenue over time using a straight-line attribution method and the costs related\nto fulfilling the performance obligation are expensed as incurred.\nConcentration of Credit Risk-We are subject to concentrations of credit risk with respect to amounts due from customers. We attempt to limit our credit risk by performing\nongoing credit evaluations. We earned 19% and 13% of our revenue from one customer in the Aerospace Products segment during the three and six months ended June 30,\n2024. We earned 10% and 11% of our revenue from one customer in the Aviation Leasing segment during the three and six months ended June 30, 2023, respectively.\nAs of June 30, 2024, there was one customer in the Aerospace Products segment that represented 11% of total accounts receivable, net. As of December 31, 2023, no single\ncustomer accounted for greater than 10% of total accounts receivable, net.\nWe maintain cash and restricted cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial institutions. We\nmonitor the financial condition of these institutions and have not experienced any losses associated with these accounts.\nAllowance for Doubtful Accounts and Credit Losses-We determine the allowance for doubtful accounts based on our assessment of the collectability of our receivables on a\ncustomer-by-customer basis. The allowance for doubtful accounts was $\n72.2 million as of June 30, 2024 and December 31, 2023, respectively. We determine the credit loss reserve for note receivables, receivables related to finance leases and\ninventory sales. There was $0.1 million provision for credit losses for the three and six months ended June 30, 2024. There was provision for credit losses of $0.6 million and\n$1.0 million for the three and six months ended June 30, 2023, which is included in Operating expenses in the Consolidated Statements of Operations.\nComprehensive Income-Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and\ncircumstances, excluding those resulting from investments by and distributions to owners. Our comprehensive income represents net income, as presented in the\nConsolidated Statements of Operations.\nOther Assets-Other assets is primarily comprised of lease incentives of $57.7 million and $43.5 million, purchase deposits of $46.0 million and $23.9 million, notes\nreceivable of $125.2 million and $102.3 million, operating lease right-of-use assets, net of $3.3 million and $3.4 million, finance leases, net of $1.4 million and $3.0 million,\nmaintenance right assets of $14.0 million and $16.3 million and prepaid expenses of $77.4 million and $7.8 million as of June 30, 2024 and December 31, 2023, respectively.\nDividends-Dividends are recorded if and when declared by the Board of Directors. For the three and six months ended June 30, 2024 and 2023, the Board of Directors\ndeclared cash dividends of $0.30 and $0.60 per ordinary share, respectively.\nAdditionally, in the quarter ended June 30, 2024, the Board of Directors declared cash dividends on the Series A Preferred Shares, Series B Preferred Shares, Series C\nPreferred Shares and Series D Preferred Shares of $0.52, $0.50, $0.52 and $0.59 per share, respectively.\nRecent Accounting Pronouncements-In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment\nDisclosures. This ASU modifies the disclosure and presentation requirements of reportable segments. The new guidance requires the disclosure of significant segment\nexpenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit and loss. In addition, the new\nguidance enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new\nsegment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. This standard is effective retrospectively for all\npublic entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We\nare currently assessing the impact this guidance will have on our consolidated financial statements and related disclosures.\nIn December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. This ASU enhances the transparency and decision\nusefulness of income tax disclosures by expanding the disclosures of an entity\u2019s income tax rate reconciliation and disaggregation of income taxes paid and income tax\nexpense. Under the new guidance, public business entities must annually disclose specific categories in the rate reconciliation and provide additional information for\nreconciling items that meet a quantitative threshold, if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax\nincome (loss) by the applicable statutory income tax rate. This standard is effective prospectively for all public entities for annual periods beginning after December 15, 2024,\nwith early adoption and retrospective application permitted. We are currently assessing the impact this guidance will have on our consolidated financial statements and related\ndisclosures.\n\n\n 13\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 15 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nIn March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concept Statements. This ASU amends the\nCodification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the\nscope of the affected accounting guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. ASU\n2024-02 is effective January 1, 2025 and we are currently assessing the impact this guidance will have on our consolidated financial statements and related disclosures.\n\n3. ACQUISITION OF QUICKTURN\nOn December 1, 2023, we completed the acquisition of the remaining equity interest of Quick Turn Engine Center LLC (\u201cQuickTurn\u201d) from Unical Aviation Inc. (\u201cUnical\u201d) for total\ncash consideration of $\n30.3 million to obtain full ownership.\nWe acquired QuickTurn to better position the Company to have tighter integration over the development and delivery of aerospace products. QuickTurn is a hospital\nmaintenance and testing facility dedicated to the CFM56 engine located in Miami, Florida that operates within our Aerospace Products segment. The results of operations at\nQuickTurn have been included in the Consolidated Statements of Operations beginning on the acquisition date.\nIn accordance with ASC 805, Business Combinations. The following fair values were assigned to assets acquired and liabilities assumed based on management\u2019s estimates\nand assumptions and are preliminary. The significant assumptions used to estimate the fair value of the property, plant, and equipment included replacement cost estimates\nand market data for similar assets where available. The significant assumptions used to estimate the value of the customer relationship intangible assets included discount\nrate and future revenues and operating expenses. The final valuation and related allocation of the purchase price is subject to change as additional information is received and\nwill be completed no later than 12 months after the closing date. The final acquisition accounting adjustments may be materially different and may include (i) changes in fair\nvalues of Property, plant and equipment and associated salvage values\u037e (ii) changes in fair values of Inventory\u037e (iii) changes in allocations to Intangible assets, as well as\ngoodwill\u037e and, (iv) other changes to assets and liabilities, including working capital accounts.\nThe following table summarizes the preliminary allocation of the Net assets acquired as presented in our Consolidated Balance Sheets:\n\n December 1, 2023\nFair value of assets acquired:\nCash and cash equivalents $ 518\nRestricted cash 150\nAccounts receivable, net 5,133\nProperty, plant, and equipment, net 30,559\nIntangible assets 2,377\nInventory, net 9,332\nOther assets 4,301\nTotal assets 52,370\nFair value of liabilities assumed:\nAccounts payable and accrued liabilities 3,994\nOther liabilities 2,410\nTotal liabilities 6,404\nGoodwill (1) 4,630\nNet assets acquired $ 50,596\n\n________________________________________________________\n(1) Goodwill is primarily attributable to the assembled workforce of QuickTurn and the synergies expected to be achieved. This goodwill is assigned to the Aerospace Products segment and is\n\ndeductible for income tax purposes.\n\n\n\n\n 14\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 16 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table presents the identifiable intangible assets and their estimated useful lives:\n\n Estimated Fair\n Estimated useful life in years value\nAbove market leases 4 $ 470\nCustomer relationships 5 $ 1,907\nTotal $ 2,377\n\nThe following table presents the property, plant and equipment and their estimated useful lives:\n\n Estimated Fair\n Estimated useful life in years value\nLand N/A $ 2,840\nBuildings and improvements 49 13,790\nMachinery and equipment 6 - 23 13,631\nOther 5-7 298\nTotal $ 30,559\n\nThe financial information in the table below summarizes the combined results of operations of FTAI and QuickTurn on a pro forma basis. These pro forma results were based\non estimates and assumptions which we believe are reasonable. The pro forma adjustments are primarily comprised of the following:\n \u2022 The allocation of the purchase price and related adjustments, including adjustments to depreciation and amortization expense related to the fair value of property,\n plant and equipment and intangible assets acquired\u037e\n \u2022 Associated tax-related impacts of adjustments.\nThe following pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the\nacquisition had taken place as of January 1, 2023.\n\n Three Months Ended Six Months Ended\n June 30, 2023 June 30, 2023\nTotal revenue $ 281,545 $ 578,586\nNet income attributable to shareholders $ 45,198 $ 66,283\n\n4. LEASING EQUIPMENT, NET\n\nLeasing equipment, net is summarized as follows:\n\n June 30, 2024 December 31, 2023\nLeasing equipment $ 2,802,983 $ 2,574,394\nLess: Accumulated depreciation (600,117) (541,981)\nLeasing equipment, net $ 2,202,866 $ 2,032,413\n\nWe identified certain assets in our leasing equipment portfolio with indicators of impairment. As a result, we adjusted the carrying value of these assets to fair value and\nrecognized transactional impairment charges of $0.0 million and $1.0 million, net of redelivery compensation, for the three and six months ended June 30, 2024, respectively.\nIn comparison, for the three and six months ended June 30, 2023, respectively, the Company recognized transactional impairment charges of $0.0 million and $1.2 million, net\nof redelivery compensation.\nDepreciation expense for leasing equipment is summarized as follows:\n\n Three Months Ended June 30, Six Months Ended June 30,\n 2024 2023 2024 2023\nDepreciation expense for leasing equipment $ 55,658 $ 38,336 104,560 79,102\n\n\n\n 15\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 17 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n5. INVESTMENTS\n\nThe following table presents the ownership interests and carrying values of our investments:\n\n Carrying Value\n Investment Ownership Percentage June 30, 2024 December 31, 2023\nAdvanced Engine Repair JV Equity method 25% $ 19,886 $ 21,040\nFalcon MSN 177 LLC Equity method 50% - 1,682\nQuick Turn Engine Center LLC Equity method 50%* - -\n $ 19,886 $ 22,722\n\n____________________________________\n* 45% pro rata distribution of income until return of JV partner's initial investment\n\nWe did not recognize any other-than-temporary impairments for the three and six months ended June 30, 2024 and 2023.\nThe following table presents our proportionate share of equity in losses:\n\n Three Months Ended June 30, Six Months Ended June 30,\n 2024 2023 2024 2023\nAdvanced Engine Repair JV $ (633) $ 681 $ (1,154) $ 273\nFalcon MSN 177 LLC (61) (35) (207) (134)\nQuick Turn Engine Center LLC - (1,026) - (1,854)\nTotal $ (694) $ (380) $ (1,361) $ (1,715)\n\nEquity Method Investments\nAdvanced Engine Repair JV\nIn December 2016, we invested $15 million for a 25% interest in an advanced engine repair joint venture. This joint venture is focused on developing new cost savings\nprograms for engine repairs. We exercise significant influence over this investment and account for this investment as an equity method investment.\nIn August 2019, we expanded the scope of our joint venture and invested an additional $13.5 million and maintained a 25% interest.\nFalcon MSN 177 LLC\nIn November 2021, we invested $1.6 million for a 50% interest in Falcon MSN 177 LLC, an entity that consists of one Dassault Falcon 2000 aircraft. Falcon MSN 177 LLC\nleases the aircraft to charter operators on aircraft, crew maintenance, and insurance contracts. We account for our investment in Falcon as an equity method investment as we\nhave significant influence through our interest.\nOn May 3, 2024, we purchased the remaining interest from S7 Aerospace for total cash consideration of $0.8 million and obtained full ownership of the aircraft with a 100%\nequity interest. On the acquisition date, the Company accounted for the Falcon investment on a consolidated basis and derecognized it as an equity method investment.\nQuick Turn Engine Center LLC\nOn January 4, 2023, we invested $19.5 million for a 50% interest (45% pro rata distribution of income until return of the JV partner\u2019s initial investment) in Quick Turn Engine\nCenter LLC or \u201cQuickTurn\u201d (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. We account for our investment in\nQuickTurn as an equity method investment as we have significant influence through our interest.\nOn December 1, 2023, we purchased the remaining interest in QuickTurn from the joint venture partner for total cash consideration of $30.3 million to obtain full ownership with\na 100% equity interest. On the acquisition date, the Company accounted for QuickTurn on a consolidated basis and derecognized it as an equity method investment. See Note\n3 for additional information.\n\n\n 16\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 18 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n6. INTANGIBLE ASSETS AND LIABILITIES, NET\n\nIntangible assets and liabilities, net are summarized as follows:\n June 30, 2024 December 31, 2023\nIntangible assets\nAcquired favorable lease intangibles $ 66,535 $ 68,041\nLess: Accumulated amortization (26,082) (19,347)\nAcquired favorable lease intangibles, net 40,453 48,694\nAcquired customer relationships 1,907 1,907\nLess: Accumulated amortization (222) (11)\nAcquired customer relationships, net 1,685 1,896\nTotal intangible assets, net $ 42,138 $ 50,590\n\n\nIntangible liabilities\nAcquired unfavorable lease intangibles $ 3,209 $ 3,151\nLess: Accumulated amortization (871) (1,389)\nAcquired unfavorable lease intangibles, net $ 2,338 $ 1,762\n\n\nIntangible liabilities relate to unfavorable lease intangibles and are included as a component of Other liabilities.\nAmortization of intangible assets and liabilities is recorded as follows:\n Three Months Ended June 30, Six Months Ended June 30,\n Classification in Consolidated Statements\n of Operations 2024 2023 2024 2023\nLease intangibles Lease income $ 3,786 $ 3,616 $ 7,762 $ 7,599\nCustomer relationships Depreciation and amortization 95 - 212 -\nTotal $ 3,881 3,616 $ 7,974 7,599\n\n\nAs of June 30, 2024, estimated net annual amortization of intangibles is as follows:\n\nRemainder of 2024 $ 7,603\n2025 12,767\n2026 9,331\n2027 4,348\n2028 3,759\nThereafter 1,992\nTotal $ 39,800\n\n\n\n 17\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 19 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n7. DEBT, NET\n\nOur debt, net is summarized as follows:\n June 30, 2024 December 31, 2023\n Outstanding Outstanding\n Borrowings Stated Interest Rate Maturity Date Borrowings\nLoans payable\n (i) Base Rate + 1.75%\u037e or\nRevolving Credit Facility (1) $ - (ii) Adjusted Term SOFR Rate + 2.75% 5/22/27 $ -\nTotal loans payable - -\nBonds payable\nSenior Notes due 2025 (2) - 6.50% 10/1/25 652,043\nSenior Notes due 2027 130,907 9.75% 8/1/27 400,000\nSenior Notes due 2028 (3) 1,001,567 5.50% 5/1/28 1,001,746\nSenior Notes due 2030 (4) 496,884 7.88% 12/1/30 496,704\nSenior Notes due 2031 700,000 7.00% 5/1/31 -\nSenior Notes due 2032 800,000 7.00% 6/15/32 -\nTotal bonds payable 3,129,358 2,550,493\n\n\nDebt 3,129,358 2,550,493\nLess: Debt issuance costs (51,762) (33,150)\nTotal debt, net $ 3,077,596 $ 2,517,343\n\n\nTotal debt due within one year $ - $ -\n\n________________________________________________________\n(1) Requires a quarterly commitment fee at a rate of 0.50% on the average daily unused portion, as well as customary letter of credit fees and agency fees.\n\n(2) Includes an unamortized discount of $866 at December 31, 2023 and an unamortized premium of $2,908 at December 31, 2023.\n\n(3) Includes an unamortized premium of $1,567 and $1,746 at June 30, 2024 and December 31, 2023, respectively.\n\n(4) Includes unamortized discount of $3,116 and $3,296 at June 30, 2024 and December 31, 2023, respectively.\n\n\n\n\nRevolving Credit Facility-On May 23, 2024, the Company amended and restated its Revolving Credit Facility by executing a Third Amended and Restated Credit Agreement\n(the \u201cAmendment\u201d) to the Second Amended and Restated Credit Agreement, dated as of September 20, 2022. The Amendment provides for revolving loans to be made\navailable to the Company in an aggregate principal amount of up to $400.0 million, of which up to $25.0 million may be utilized for the issuance of letters of credit.\nSenior Notes due 2031-On April 11, 2024, we issued $700.0 million aggregate principal amount of senior unsecured notes due 2031 (the \u201cSenior Notes due 2031\u201d). The\nSenior Notes due 2031 bear interest at a rate of 7.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on November 1,\n2024. Using a portion of the net proceeds, the Company completed a cash tender offer for $324.6 million aggregate principal amount of 2025 Notes validly tendered on April\n11, 2024. Holders whose notes were accepted for purchase received equal consideration per $1,000 principal amount of 2025 Notes, plus accrued and unpaid interest to, but\nnot including, April 11, 2024. The Company used the remaining net proceeds to redeem the remaining $325.4 million aggregate principal amount of Senior Notes due 2025,\nplus accrued and unpaid interest, and recognized a loss on extinguishment of debt of $2.7 million. The remaining net proceeds were used for general corporate purposes,\nincluding the funding of acquisitions and investments.\n\n\n 18\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 20 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nSenior Notes due 2032-On June 17, 2024, we issued $800.0 million aggregate principal amount of senior unsecured notes due 2032 (the \u201cSenior Notes due 2032\u201d). These\nnotes bear interest at a rate of 7.00% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2024. The\nCompany utilized the net proceeds from the issuance for several purposes: (i) to fully repay outstanding amounts under our Revolving Credit Facility provided under the Third\nAmended and Restated Credit Agreement, dated as of May 23, 2024, without reduction in commitments, (ii) to fund the cash termination fee for the previously announced\nmanagement Internalization described in Note 11, (iii) to complete a cash tender offer for up to $300.0 million in aggregate principal amount of 2027 Notes validly tendered on\nJune 18, 2024, plus accrued and unpaid interest, and recognized a loss on extinguishment of debt of $11.2 million. Holders whose notes were accepted for purchase received\n$30.00 per $1,000 principal amount of 2027 Notes, plus accrued and unpaid interest to, but not including, June 21, 2024, (iv) to cover fees and expenses related to the\naforementioned transactions, and (v) for general corporate purposes.\nWe were in compliance with all debt covenants as of June 30, 2024.\n\n8. FAIR VALUE MEASUREMENTS\n\nFair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of\nunobservable inputs. These inputs are prioritized as follows:\n\u2022 Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.\n\u2022 Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or\n market corroborated inputs.\n\u2022 Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the\n asset or liability.\nThe valuation techniques that may be used to measure fair value are as follows:\n\u2022 Market approach-Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.\n\u2022 Income approach-Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts.\n\u2022 Cost approach-Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).\nOur cash and cash equivalents and restricted cash consist largely of demand deposit accounts with maturities of 90 days or less when purchased that are considered to be\nhighly liquid. These instruments are valued using inputs observable in active markets for identical instruments and are therefore classified as Level 1 within the fair value\nhierarchy.\nExcept as discussed below, our financial instruments other than cash and cash equivalents and restricted cash consist principally of accounts receivable, notes receivable,\naccounts payable and accrued liabilities, loans payable, security deposits, maintenance deposits and management fees payable, whose fair values approximate their carrying\nvalues based on an evaluation of pricing data, vendor quotes, and historical trading activity or due to their short maturity profiles.\nThe fair values of our bonds payable are presented in the table below and classified as Level 2 within the fair value hierarchy:\n June 30, 2024 December 31, 2023\nSenior Notes due 2025 $ - $ 649,383\nSenior Notes due 2027 134,701 416,432\nSenior Notes due 2028 972,100 963,630\nSenior Notes due 2030 524,610 521,440\nSenior Notes due 2031 715,582 -\nSenior Notes due 2032 812,664 -\n\nThe Company has contingent obligations under ASC 460, Guarantees, in connection with certain sales of aircraft on lease, which are measured at fair value. The guarantees\nare valued at $\n7.8 million and $6.8 million as of June 30, 2024 and December 31, 2023, respectively, and are reflected as a component of Other liabilities. The fair values of the guarantees\nare determined based on the estimated condition of the engines at the end of each lease term and the estimated cost of replacement and applicable discount rates and are\nclassified as Level 3. During the three and six months ended June 30, 2024, the Company recorded a $0.8 million and $1.0 million increase related to the change in fair value,\nwhich is recorded as Asset sales revenue. During the six months ended June 30, 2023, the Company recorded a $4.9 million increase in guarantees related to the sale of\nseven aircrafts and a $1.9 million decrease related to the change in fair value, which is recorded as Asset sales revenue. During the three and six months ended June 30,\n2024 and 2023, there were no significant transfers into or out of Level 3.\n\n\n 19\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 21 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nWe measure the fair value of certain assets on a non-recurring basis when U.S. GAAP requires the application of fair value, including events or changes in circumstances that\nindicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include intangible assets, property, plant and equipment and\nleasing equipment. We record such assets at fair value when it is determined the carrying value may not be recoverable. Fair value measurements for assets subject to\nimpairment tests are based on an income approach which uses Level 3 inputs, which include our assumptions as to future cash flows from operation of the leasing and\neventual sale of assets.\n\n9. EQUITY-BASED COMPENSATION\n\nWe have a Nonqualified Stock Option and Incentive Award Plan (\u201cIncentive Plan\u201d) which provides for the ability to award equity compensation awards in the form of stock\noptions to eligible employees, consultants, directors, and other individuals who provide services to us, each as determined by the Compensation Committee of the Board of\nDirectors.\nAs of June 30, 2024, the Incentive Plan provides for the issuance of up to 29.8 million shares. We account for equity-based compensation expense in accordance with ASC\n718, Compensation-Stock Compensation and is reported within operating expenses and general and administrative.\nThe Consolidated Statements of Operations includes the following expense related to our stock-based compensation arrangements:\n\n Remaining Expense To Be Weighted Average\n Three Months Ended June 30, Six Months Ended June 30, Recognized, If All Vesting Remaining Contractual Term\n 2024 2023 2024 2023 Conditions Are Met (in years)\nStock Options $ 42 $ - $ 42 $ - $ 2,032 4.0 years\nRestricted Shares 596 510 1,106 618 17,013 3.1 years\nTotal $ 638 $ 510 $ 1,148 $ 618 $ 19,045\n\nOptions\nDuring the six months ended June 30, 2024, the Former Manager transferred 37,343 of its options to certain of the Former Manager\u2019s employees.\nAdditionally, the Company granted options to select employees of FTAI Aviation LLC (a wholly owned subsidiary of the Company) related to\n60,000 ordinary shares at an exercise price of $79.13, which had a grant date fair value of $2.1 million. The assumptions used in valuing the options were: a 4.52% risk-free\nrate, a 1.50% dividend yield, a 43.00% volatility and a 6.8 year term.\nRestricted Shares\nDuring the six months ended June 30, 2024, we issued restricted shares of the Company to select employees of FTAI Aviation LLC that had a grant date fair value of $5.7\nmillion and vest over 4.0 years. These awards are subject to continued employment, and the compensation expense is recognized ratably over the vesting periods, with 50% of\nthe units vesting on June 30, 2027 and the remaining units vesting on June 30, 2028. The fair value of these awards were calculated based on the closing price of FTAI Aviation\nLtd.\u2019s ordinary shares on grant date of May 30, 2024.\nAdditionally, we issued restricted shares of the Company to select officers of FTAI Aviation LLC that had a grant date fair value of $5.5 million and vest over 3.0 years. These\nawards are subject to continued employment, and the compensation expense is recognized ratably over the three-year vesting period. The fair value of these awards were\ncalculated based on the closing price of FTAI Aviation Ltd.\u2019s ordinary shares on grant date of May 28, 2024.\n\n\n 20\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 22 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n10. INCOME TAXES\nThe current and deferred components of the income tax provision included in the Consolidated Statements of Operations are as follows:\n\n Three Months Ended June 30, Six Months Ended June 30,\n 2024 2023 2024 2023\nCurrent:\n Cayman Islands $ - $ - $ - $ -\n Bermuda - - - -\n United States: - - - -\n Federal 884 (92) 1,184 (45)\n State and local (289) (32) 289 (19)\n Non-U.S. 643 544 789 818\nTotal current provision 1,238 420 2,262 754\nDeferred:\n Cayman Islands - - - -\n Bermuda (11,265) - (7,826) -\n United States: - - - -\n Federal 543 590 1,311 823\n State and local 625 54 267 498\n Non-U.S. (4,174) 791 (3,475) 1,806\nTotal deferred provision (14,271) 1,435 (9,723) 3,127\nTotal (benefit from) provision for income taxes $ (13,033) $ 1,855 $ (7,461) $ 3,881\n\nThe Company is an exempted entity domiciled in the Cayman Islands where income taxes are not imposed. The Company is considered a Passive Foreign Investment\nCompany for U.S. income tax purposes and certain income taxes are imposed on our owners. Taxable income or loss generated by our corporate subsidiaries is subject to\ncorporate income tax in locations where they conduct business.\nHistorically, the Company\u2019s Bermuda operations have not been subject to Bermuda income tax. However, on December 27, 2023, the Government of Bermuda enacted a 15\npercent corporate income tax regime (the \u201cBermuda CIT\u201d) that applies to Bermuda businesses that are part of multinational enterprise groups with annual revenue of \u20ac750\nmillion or more and is effective for tax years beginning on or after January 1, 2025. As a result of the Bermuda CIT, the exemption of certain of the Company\u2019s Bermuda\nsubsidiaries from Bermuda corporate income taxes will cease in 2025. For the year ended December 31, 2023, we recorded a deferred tax asset of $72.2 million in connection\nwith the Bermuda law change. As of June 30, 2024, we project the Bermuda subsidiaries to generate a net operating loss for the year ended December 31, 2024. As such, the\nCompany recorded a tax benefit of $7.8 million to increase its Bermuda deferred tax asset.\nOur effective tax rate differs from the U.S. federal tax rate of 21% primarily due to a significant portion of our income not being subject to U.S. corporate tax rates, or being\ndeemed to be foreign sourced and thus either not taxable or taxable at effectively lower tax rates.\nAs of and for the six months ended June 30, 2024, we had not established a liability for uncertain tax positions as no such positions existed. In general, our tax returns and the\ntax returns of our corporate subsidiaries are subject to U.S. federal, state, local and foreign income tax examinations by tax authorities. Generally, we are not subject to\nexamination by taxing authorities for tax years prior to 2020. We do not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly\nchange within 12 months of the reporting date.\n\n11. AFFILIATE TRANSACTIONS\n\nOn May 28, 2024, the Company entered into definitive agreements with the Former Manager and Master GP to internalize the Company\u2019s management function. As part of the\ntermination of the Management Agreement, the Company (i) paid the Former Manager (for itself and on behalf of the Master GP, as applicable) the Cash Consideration, the\ncompensation accrued and payable, but not yet paid, under the Management Agreement and the expenses that were reimbursable, but not yet reimbursed, under the\nManagement Agreement\u037e (ii) issued to the Former Manager (for itself and on behalf of the Master GP, as applicable) the Share Consideration\u037e and (iii) purchased from Master\nGP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the Company, in exchange for $\n30. Following the Internalization, the Company no longer pays management fees or incentive distributions to the Former Manager and Master GP.\n\n\n 21\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 23 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nIn connection with the termination of the Management Agreement, the Company also entered into a Transition Services Agreement with the Former Manager. Under the\nTransition Services Agreement, the Former Manager is required to continue to provide the Company and its affiliates with all of the Services for a transition period during which\nthe Company will procure replacements for the Services. The Services will be provided to the Company for a fee equal to the Former Manager\u2019s cost of providing the Services,\nplus a mark-up of ten percent (10%). Unless the Transition Services Agreement is terminated earlier or the Company elects to terminate a Service by providing written notice to\nthe Former Manager, the Former Manager is required to provide certain Services to the Company until October 31, 2024. In addition, the Former Manager is required to continue\nto provide the services that are reasonably required by the Company to prepare its quarterly and annual financial statements until May 31, 2025. The Transition Services\nAgreement may be terminated earlier (x) by mutual agreement of the parties, (y) by either the Former Manager or the Company in the event of a material breach by the non-\nterminating party that is not cured within thirty (30) days following written notification thereof, or (z) by the Former Manager if the Company fails to pay any undisputed sum\noverdue and payable for a period of at least thirty (30) days. The Company incurred $3.4 million in costs for Transition Services during the three and six months ended June 30,\n2024, and these costs are reported in Acquisition and transaction expenses in the Consolidated Statements of Operations.\n\nPrior to the Internalization, the Former Manager was paid annual fees in exchange for advising us on various aspects of our business, formulating our investment strategies,\narranging for the acquisition and disposition of assets, arranging for financing, monitoring performance, and managing our day-to-day operations, inclusive of all costs\nincidental thereto. In addition, the Former Manager was reimbursed for various expenses incurred by the Former Manager on our behalf, including the costs of legal,\naccounting and other administrative activities. Additionally, we entered into certain incentive allocation arrangements with Master GP, which owned approximately 0.01% of FTAI\nAviation Holdco Ltd. (a wholly owned subsidiary of the Company).\n\nThe Former Manager was entitled to a management fee and reimbursement of certain expenses. The management fee was determined by taking the average value of total\nequity (excluding non-controlling interests) determined on a consolidated basis in accordance with U.S. GAAP at the end of the two most recently completed months multiplied\nby an annual rate of 1.50%, and is payable monthly in arrears in cash.\n\nPrior to the Internalization and the termination of the Management Agreement on May 28, 2024, Master GP, was entitled to incentive allocations (comprised of income incentive\nallocation and capital gains incentive allocation, defined below). The income incentive allocation was calculated and distributable quarterly in arrears based on the pre-\nincentive allocation net income for the immediately preceding calendar quarter (the \u201cIncome Incentive Allocation\u201d). For this purpose, pre-incentive allocation net income means,\nwith respect to a calendar quarter, net income attributable to shareholders during such quarter calculated in accordance with U.S. GAAP excluding our pro rata share of (1)\nrealized or unrealized gains and losses, and (2) certain non-cash or one-time items, and (3) any other adjustments as may be approved by our independent directors. Pre-\nincentive allocation net income did not include any Income Incentive Allocation or Capital Gains Incentive Allocation (described below) paid to Master GP during the relevant\nquarter.\n\nPrior to the Internalization, one of our subsidiaries allocated and distributed to Master GP an Income Incentive Allocation with respect to its pre-incentive allocation net income\nin each calendar quarter as follows: (1) no Income Incentive Allocation in any calendar quarter in which pre-incentive allocation net income, expressed as a rate of return on the\naverage value of our net equity capital (excluding non-controlling interests) at the end of the two most recently completed calendar quarters, does not exceed 2% for such\nquarter (8% annualized)\u037e (2) 100% of pre-incentive allocation net income with respect to that portion of such pre-incentive allocation net income, if any, that is equal to or\nexceeds 2% but does not exceed 2.2223% for such quarter\u037e and (3) 10% of the amount of pre-incentive allocation net income, if any, that exceeds 2.2223% for such quarter.\nThese calculations were prorated for any period of less than three months.\n\nPrior to the Internalization, Capital Gains Incentive Allocation was calculated and distributable in arrears as of the end of each calendar year and was equal to 10% of our pro\nrata share of cumulative realized gains from the date of the IPO through the end of the applicable calendar year, net of our pro rata share of cumulative realized or unrealized\nlosses, the cumulative non-cash portion of equity-based compensation expenses and all realized gains upon which prior performance-based Capital Gains Incentive\nAllocation payments were made to Master GP.\n\nThe following table summarizes the management fees, income incentive allocation and capital gains incentive allocation prior to the Internalization on May 28, 2024:\n\n Three Months Ended June 30, Six Months Ended June 30,\n 2024 2023 2024 2023\nManagement fees $ 405 $ 239 $ 992 $ 294\nIncome incentive allocation 3,148 5,324 7,456 8,266\nTotal $ 3,553 $ 5,563 $ 8,448 $ 8,560\n\n\n\n 22\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 24 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nWe pay all of our operating expenses, except those specifically required to be borne by the Former Manager under the Management Agreement. The expenses required to be\npaid by us include, but are not limited to, issuance and transaction costs incident to the acquisition, disposition and financing of our assets, legal and auditing fees and\nexpenses, the compensation and expenses of our independent directors, the costs associated with the establishment and maintenance of any credit facilities and other\nindebtedness of ours (including commitment fees, legal fees, closing costs, etc.), expenses associated with other securities offerings of ours, costs and expenses incurred in\ncontracting with third parties (including affiliates of the Former Manager), the costs of printing and mailing proxies and reports to our shareholders, costs incurred by the Former\nManager or its affiliates for travel on our behalf, costs associated with any computer software or hardware that is used by us, costs to obtain liability insurance to indemnify our\ndirectors and officers and the compensation and expenses of our transfer agent.\n\nWe paid or reimbursed the Former Manager and its affiliates for performing certain legal, accounting, due diligence tasks and other services that outside professionals or\noutside consultants otherwise would perform, provided that such costs and reimbursements are no greater than those which would be paid to outside professionals or\nconsultants. The Former Manager was responsible for all of its other costs incident to the performance of its duties under the Management Agreement, including\ncompensation of the Former Manager\u2019s employees, rent for facilities and other \u201coverhead\u201d expenses\u037e we did not reimburse the Former Manager for these expenses.\n\nThe following table summarizes our reimbursements to the Former Manager:\n Three Months Ended June 30, Six Months Ended June 30,\n 2024 2023 2024 2023\nClassification in the Consolidated Statements of Operations:\n General and administrative $ 1,608 $ 1,599 $ 3,558 $ 3,504\n Acquisition and transaction expenses 370 109 687 209\nTotal $ 1,978 $ 1,708 $ 4,245 $ 3,713\n\n\nUpon the successful completion of an offering of our ordinary shares or other equity securities (including securities issued as consideration in an acquisition), we granted the\nFormer Manager options to purchase ordinary shares in an amount equal to 10% of the number of ordinary shares being sold in the offering (or if the issuance relates to equity\nsecurities other than our ordinary shares, options to purchase a number of ordinary shares equal to 10% of the gross capital raised in the equity issuance divided by the fair\nmarket value of a ordinary share as of the date of issuance), with an exercise price equal to the offering price per share paid by the public or other ultimate purchaser or\nattributed to such securities in connection with an acquisition (or the fair market value of a ordinary share as of the date of the equity issuance if it relates to equity securities\nother than our ordinary shares). Any ultimate purchaser of ordinary shares for which such options are granted may have been an affiliate of the Former Manager.\n\nThe following table summarizes amounts due to the Former Manager, which are included within accounts payable and accrued liabilities in the Consolidated Balance Sheets:\n June 30, 2024 December 31, 2023\nAccrued management fees $ - $ 224\nOther payables 250 6,200\n\nAs of June 30, 2024 and December 31, 2023, there were no receivables from the Former Manager.\n\n12. SEGMENT INFORMATION\n\nThe key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and services. Our two\nreportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft\nengines, which it leases and sells to customers. The Aerospace Products segment develops and manufactures through a joint venture, and repairs and sells, through our\nmaintenance facility and exclusivity arrangements, aftermarket components for aircraft engines. During the fourth quarter of 2023, the Company changed the composition of its\noperating segments to include V2500 engines within the Aerospace Products segment. Prior periods have been restated to reflect the change in accordance with the\nrequirements ASC 280, Segment Reporting. See Note 2 for additional information.\n\nCorporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, internalization fee and management fees\nand incentive compensation pursuant to the Management Agreement prior to the Internalization effective May 28, 2024. Additionally, Corporate and Other also includes offshore\nenergy related assets, which consist of vessels and equipment that support offshore oil and gas activities and production which are typically subject to operating leases.\n\n\n 23\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 25 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe accounting policies of the segments are the same as those described in the summary of significant accounting policies\u037e however, financial information presented by\nsegment includes the impact of intercompany eliminations. Our Chief Executive Officer is our Chief Operating Decision Maker (\u201cCODM\u201d). Segment information is presented in\nthe same manner that our CODM reviews the operating results in assessing performance and allocating resources. The CODM evaluates performance for each reportable\nsegment primarily based on Adjusted EBITDA. Historically, the CODM\u2019s assessment of segment performance included asset information. The CODM determined that\nsegment asset information is not a key factor in measuring performance or allocating resources. Therefore, segment asset information is not included in the tables below as it\nis not provided to or reviewed by our CODM.\n\nAdjusted EBITDA is defined as net income (loss) attributable to shareholders, adjusted (a) to exclude the impact of provision for (benefit from) income taxes, equity-based\ncompensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-\nhedge derivative instruments, asset impairment charges, incentive allocations, depreciation and amortization expense, dividends on preferred shares and interest expense,\ninternalization fee to affiliate, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings\n(losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA.\n\nWe believe that net income (loss) attributable to shareholders, as defined by U.S. GAAP, is the most appropriate earnings measurement with which to reconcile Adjusted\nEBITDA. Adjusted EBITDA should not be considered as an alternative to net income (loss) attributable to shareholders as determined in accordance with U.S. GAAP.\nThe following tables set forth certain information for each reportable segment:\n\n\n\n\n 24\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 26 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nI. For the Three Months Ended June 30, 2024\n\n Three Months Ended June 30, 2024\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nLease income $ 60,759 $ - $ 9,995 $ 70,754\nMaintenance revenue 51,187 - - 51,187\nAsset sales revenue 72,433 - - 72,433\nAerospace products revenue - 245,200 - 245,200\nOther revenue 58 - 3,962 4,020\nTotal revenues $ 184,437 $ 245,200 $ 13,957 $ 443,594\n\n\nExpenses\nCost of sales 58,969 146,888 - 205,857\nOperating expenses 8,782 6,423 13,894 29,099\nGeneral and administrative - - 2,969 2,969\nAcquisition and transaction expenses 1,969 525 5,525 8,019\nManagement fees and incentive allocation to affiliate - - 3,554 3,554\nInternalization fee to affiliate - - 300,000 300,000\nDepreciation and amortization 52,672 938 3,081 56,691\nAsset impairment - - - -\nInterest expense - - 55,196 55,196\nTotal expenses 122,392 154,774 384,219 661,385\n\n\nOther expense\nEquity in losses of unconsolidated entities (61) (633) - (694)\nLoss on extinguishment of debt - - (13,920) (13,920)\nOther (expense) income (911) - 413 (498)\nTotal other expense (972) (633) (13,507) (15,112)\nIncome (loss) before income taxes 61,073 89,793 (383,769) (232,903)\nProvision for (benefit from) income taxes 8,293 4,918 (26,244) (13,033)\nNet income (loss) 52,780 84,875 (357,525) (219,870)\nLess: Dividends on preferred shares - - 8,335 8,335\nNet income (loss) attributable to shareholders $ 52,780 $ 84,875 $ (365,860) $ (228,205)\n\n\n\n 25\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 27 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table sets forth a reconciliation of Adjusted EBITDA to net income attributable to shareholders:\n\n Three Months Ended June 30, 2024\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nAdjusted EBITDA $ 124,981 $ 91,240 $ (2,317) $ 213,904\nAdd: Non-controlling share of Adjusted EBITDA -\nAdd: Equity in losses of unconsolidated entities (694)\nLess: Pro-rata share of Adjusted EBITDA from unconsolidated entities 617\nLess: Internalization fee to affiliate (300,000)\nLess: Interest expense and dividends on preferred shares (63,531)\nLess: Depreciation and amortization expense (65,809)\nLess: Incentive allocations (3,148)\nLess: Asset impairment charges -\nLess: Changes in fair value of non-hedge derivative instruments -\nLess: Losses on the modification or extinguishment of debt and capital lease obligations (13,920)\nLess: Acquisition and transaction expenses (8,019)\nLess: Equity-based compensation expense (638)\nLess: Benefit from income taxes 13,033\nNet loss attributable to shareholders $ (228,205)\n\n\n\n\nSummary information with respect to our geographic sources of revenue, based on location of customer, is as follows:\n\n Three Months Ended June 30, 2024\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nAfrica $ 1,255 $ 2,585 $ - $ 3,840\nAsia 33,642 28,530 13,957 $ 76,129\nEurope 107,573 104,900 - $ 212,473\nNorth America 26,162 105,770 - $ 131,932\nSouth America 15,805 3,415 - $ 19,220\nTotal revenues $ 184,437 $ 245,200 $ 13,957 $ 443,594\n\n\n\n\n 26\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 28 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nII. For the Six Months Ended June 30, 2024\n Six Months Ended June 30, 2024\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nLease income $ 111,605 $ - $ 12,310 $ 123,915\nMaintenance revenue 96,977 - - 96,977\nAsset sales revenue 111,040 - - 111,040\nAerospace products revenue - 434,257 - 434,257\nOther revenue 125 - 3,974 4,099\nTotal revenues $ 319,747 $ 434,257 $ 16,284 $ 770,288\n\n\nExpenses\nCost of sales 90,858 257,803 - 348,661\nOperating expenses 16,989 13,893 23,534 54,416\nGeneral and administrative - - 6,652 6,652\nAcquisition and transaction expenses 4,730 771 8,697 14,198\nManagement fees and incentive allocation to affiliate - - 8,449 8,449\nInternalization fee to affiliate - - 300,000 300,000\nDepreciation and amortization 98,756 1,871 5,984 106,611\nAsset impairment 962 - - 962\nInterest expense - - 102,903 102,903\nTotal expenses 212,295 274,338 456,219 942,852\n\n\nOther expense\nEquity in losses of unconsolidated entities (207) (1,154) - (1,361)\nLoss on extinguishment of debt - - (13,920) (13,920)\nOther (expense) income (542) - 678 136\nTotal other expense (749) (1,154) (13,242) (15,145)\nIncome (loss) before income taxes 106,703 158,765 (453,177) (187,709)\nProvision for (benefit from) income taxes 11,326 7,457 (26,244) (7,461)\nNet income (loss) 95,377 151,308 (426,933) (180,248)\nLess: Dividends on preferred shares - - 16,670 16,670\nNet income (loss) attributable to shareholders $ 95,377 $ 151,308 $ (443,603) $ (196,918)\n\n\n\n\n 27\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 29 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table sets forth a reconciliation of Adjusted EBITDA to net income attributable to shareholders:\n\n Six Months Ended June 30, 2024\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nAdjusted EBITDA $ 229,788 $ 161,517 $ (13,300) $ 378,005\nAdd: Non-controlling share of Adjusted EBITDA -\nAdd: Equity in losses of unconsolidated entities (1,361)\nLess: Pro-rata share of Adjusted EBITDA from unconsolidated entities 1,165\nLess: Internalization fee to affiliate (300,000)\nLess: Interest expense and dividends on preferred shares (119,573)\nLess: Depreciation and amortization expense (124,931)\nLess: Incentive allocations (7,456)\nLess: Asset impairment charges (962)\nLess: Changes in fair value of non-hedge derivative instruments -\nLess: Losses on the modification or extinguishment of debt and capital lease obligations (13,920)\nLess: Acquisition and transaction expenses (14,198)\nLess: Equity-based compensation expense (1,148)\nLess: Benefit from income taxes 7,461\nNet loss attributable to shareholders $ (196,918)\n\nSummary information with respect to our geographic sources of revenue, based on location of customer, is as follows:\n\n Six Months Ended June 30, 2024\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nAfrica $ 2,123 $ 8,271 $ - $ 10,394\nAsia 58,761 57,030 16,284 $ 132,075\nEurope 178,617 172,616 - $ 351,233\nNorth America 47,009 187,142 - $ 234,151\nSouth America 33,237 9,198 - $ 42,435\nTotal revenues $ 319,747 $ 434,257 $ 16,284 $ 770,288\n\n\nPresented below are the contracted minimum future annual revenues to be received under existing operating leases as of June 30, 2024:\n Operating Leases\nRemainder of 2024 $ 124,660\n2025 177,465\n2026 136,338\n2027 102,716\n2028 93,365\nThereafter 86,416\nTotal $ 720,960\n\n\n\n 28\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 30 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nIII. For the Three Months Ended June 30, 2023\n Three Months Ended June 30, 2023\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nLease income $ 48,167 $ - $ 11,374 $ 59,541\nMaintenance revenue 42,065 - - 42,065\nAsset sales revenue 76,836 - - 76,836\nAerospace products revenue - 92,725 - 92,725\nOther revenue 313 - 2,865 3,178\nTotal revenues $ 167,381 $ 92,725 $ 14,239 $ 274,345\n\n\nExpenses\nCost of sales 49,598 54,934 - 104,532\nOperating expenses 7,578 3,236 13,983 24,797\nGeneral and administrative - - 3,188 3,188\nAcquisition and transaction expenses 1,169 272 1,231 2,672\nManagement fees and incentive allocation to affiliate - - 5,563 5,563\nDepreciation and amortization 35,713 97 2,704 38,514\nInterest expense - - 38,499 38,499\nTotal expenses 94,058 58,539 65,168 217,765\n\n\nOther income (expense)\nEquity in losses of unconsolidated entities (35) (345) - (380)\nOther income 408 - - 408\nTotal other income (expense) 373 (345) - 28\nIncome (loss) before income taxes 73,696 33,841 (50,929) 56,608\nProvision for income taxes 1,087 584 184 1,855\nNet income (loss) 72,609 33,257 (51,113) 54,753\nLess: Dividends on preferred shares - - 8,335 8,335\nNet income (loss) attributable to shareholders $ 72,609 $ 33,257 $ (59,448) $ 46,418\n\n\n\n\n 29\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 31 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders:\n\n Three Months Ended June 30, 2023\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nAdjusted EBITDA $ 121,166 $ 34,747 $ (2,836) $ 153,077\nAdd: Non-controlling share of Adjusted EBITDA -\nAdd: Equity in losses of unconsolidated entities (380)\nLess: Pro-rata share of Adjusted EBITDA from unconsolidated entities (150)\nLess: Internalization fee to affiliate -\nLess: Interest expense and dividends on preferred shares (46,834)\nLess: Depreciation and amortization expense (48,934)\nLess: Incentive allocations (5,324)\nLess: Asset impairment charges -\nLess: Changes in fair value of non-hedge derivative instruments -\nLess: Losses on the modification or extinguishment of debt and capital lease obligations -\nLess: Acquisition and transaction expenses (2,672)\nLess: Equity-based compensation expense (510)\nLess: Provision for income taxes (1,855)\nNet income attributable to shareholders $ 46,418\n\n\nSummary information with respect to our geographic sources of revenue, based on location of customer, is as follows:\n\n Three Months Ended June 30, 2023\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nAfrica $ - $ - $ - $ -\nAsia 15,252 1,785 14,239 31,276\nEurope 79,454 23,620 - 103,074\nNorth America 65,735 64,150 - 129,885\nSouth America 6,940 3,170 - 10,110\nTotal $ 167,381 $ 92,725 $ 14,239 $ 274,345\n\n\n\n 30\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 32 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nIII. For the Six Months Ended June 30, 2023\n Six Months Ended June 30, 2023\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nLease income $ 96,997 $ - $ 18,522 $ 115,519\nMaintenance revenue 77,206 - - 77,206\nAsset sales revenue 185,527 - - 185,527\nAerospace products revenue - 177,838 - 177,838\nOther revenue 6,691 - 4,282 10,973\nTotal revenues $ 366,421 $ 177,838 $ 22,804 $ 567,063\n\n\nExpenses\nCost of sales 141,832 108,370 - 250,202\nOperating expenses 14,666 6,891 25,774 47,331\nGeneral and administrative - - 7,255 7,255\nAcquisition and transaction expenses 2,631 1,027 2,276 5,934\nManagement fees and incentive allocation to affiliate - - 8,560 8,560\nDepreciation and amortization 73,853 183 5,404 79,440\nAsset impairment 1,220 - - 1,220\nInterest expense - - 77,791 77,791\nTotal expenses 234,202 116,471 127,060 477,733\n\n\nOther income (expense)\nEquity in losses of unconsolidated entities (134) (1,581) - (1,715)\nOther income 416 - - 416\nTotal other income (expense) 282 (1,581) - (1,299)\nIncome (loss) before income taxes 132,501 59,786 (104,256) 88,031\nProvision for income taxes 2,082 1,500 299 3,881\nNet income (loss) 130,419 58,286 (104,555) 84,150\nLess: Net loss attributable to non-controlling interests in consolidated subsidiaries - - - -\nLess: Dividends on preferred shares - - 15,126 15,126\nNet income (loss) attributable to shareholders $ 130,419 $ 58,286 $ (119,681) $ 69,024\n\n\n\n\n 31\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 33 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\nThe following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders:\n\n Six Months Ended June 30, 2023\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nAdjusted EBITDA $ 228,722 $ 62,124 $ (10,113) $ 280,733\nAdd: Non-controlling share of Adjusted EBITDA -\nAdd: Equity in losses of unconsolidated entities (1,715)\nLess: Pro-rata share of Adjusted EBITDA from unconsolidated entities 546\nLess: Internalization fee to affiliate -\nLess: Interest expense and dividends on preferred shares (92,917)\nLess: Depreciation and amortization expense (97,704)\nLess: Incentive allocations (8,266)\nLess: Asset impairment charges (1,220)\nLess: Changes in fair value of non-hedge derivative instruments -\nLess: Losses on the modification or extinguishment of debt and capital lease obligations -\nLess: Acquisition and transaction expenses (5,934)\nLess: Equity-based compensation expense (618)\nLess: Provision for income taxes (3,881)\nNet income attributable to shareholders $ 69,024\n\n\nSummary information with respect to our geographic sources of revenue, based on location of customer, is as follows:\n\n Six Months Ended June 30, 2023\n Aerospace Corporate and\n Aviation Leasing Products Other Total\nRevenues\nAfrica $ - $ 875 $ - $ 875\nAsia 33,018 1,785 22,804 57,607\nEurope 131,819 49,586 - 181,405\nNorth America 181,400 121,146 - 302,546\nSouth America 20,184 4,446 - 24,630\nTotal $ 366,421 $ 177,838 $ 22,804 $ 567,063\n\n\nV. Location of Long-Lived Assets\nThe following tables sets forth the geographic location of property, plant and equipment and leasing equipment, net:\n\n June 30, 2024 December 31, 2023\nProperty, plant and equipment and leasing equipment, net\nAfrica $ 33,376 $ 18,380\nAsia 489,277 478,120\nEurope 1,052,721 934,817\nNorth America 451,420 416,811\nSouth America 209,150 229,460\nTotal property, plant and equipment and leasing equipment, net $ 2,235,944 $ 2,077,588\n\n\n\n 32\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 34 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n13. EARNINGS PER SHARE AND EQUITY\nBasic earnings per ordinary share (\u201cEPS\u201d) is calculated by dividing net income attributable to shareholders by the weighted average number of ordinary shares outstanding,\nplus any participating securities. Diluted EPS is calculated by dividing net income attributable to shareholders by the weighted average number of ordinary shares outstanding,\nplus any participating securities and potentially dilutive securities. Potentially dilutive securities are calculated using the treasury stock method.\n\nThe calculation of basic and diluted EPS is presented below:\n\n Three Months Ended June 30, Six Months Ended June 30,\n(in thousands, except share and per share data) 2024 2023 2024 2023\nNet (loss) income $ (219,870) $ 54,753 $ (180,248) $ 84,150\nLess: Dividends on preferred shares 8,335 8,335 16,670 15,126\nNet (loss) income attributable to shareholders $ (228,205) $ 46,418 $ (196,918) $ 69,024\nWeighted Average Ordinary Shares Outstanding - Basic 100,958,524 99,732,179 100,602,214 99,730,223\nWeighted Average Ordinary Shares Outstanding - Diluted 100,958,524 100,462,277 100,602,214 100,314,508\n\n\n(Loss) Earnings per share:\nBasic $ (2.26) $ 0.47 $ (1.96) $ 0.69\nDiluted $ (2.26) $ 0.46 $ (1.96) $ 0.69\n\nFor both the three months ended June 30, 2024 and 2023,\nzero shares and for the six months ended June 30, 2024 and 2023, 0 and 1,245 shares, respectively, have been excluded from the calculation of Diluted EPS because the\nimpact would be anti-dilutive.\nDuring the six months ended June 30, 2024 and 2023, we issued 4,370 and 18,457 ordinary shares to certain directors as compensation.\n\n14. COMMITMENTS AND CONTINGENCIES\nIn the normal course of business, the Company and its subsidiaries may be involved in various claims, legal proceedings, or may enter into contracts that contain a variety of\nrepresentations and warranties and which provide general indemnifications. Within our offshore energy business, a lessee did not fulfill its obligation under its charter\narrangement, therefore we are pursuing rights afforded to us under the charter and the range of potential losses against the obligation is $0.0 million to $3.3 million. Our\nmaximum exposure under other arrangements is unknown as no additional claims have been made. We believe the risk of loss in connection with such arrangements is\nremote.\nThe Company has contingent obligations under ASC 460, Guarantees, in connection with certain sales of aircraft on lease. Under the agreements, we provide certain\nguarantees at the end of the lease term for the condition of the aircraft engines that were sold to the buyer. The guarantees are valued at $\n7.8 million and $6.8 million as of June 30, 2024 and December 31, 2023, respectively, and are reflected as a component of Other liabilities.\nGiven variability in the condition of the engines at the end of the lease terms, which range from 4 to 9 years, the maximum potential amount of undiscounted future payments\nthat could be required under the guarantees at June 30, 2024 was $37.2 million, which is not reasonably expected.\nInternalization-During the second quarter of 2024, the Company entered into the Internalization Agreement with the Former Manager and Master GP. Pursuant to the\nInternalization Agreement, the Management Agreement was terminated effective May 28, 2024, except that certain indemnification and other obligations survive, and the\nCompany was no longer required to pay management fees or incentive distributions with respect to any period thereafter. As a result of the Internalization, the Company ceased\nto be externally managed and operates as an internally managed company. In connection with the termination of the Management Agreement, the Company (i) agreed to pay\nthe Former Manager (for itself and on behalf of the Master GP, as applicable) the Cash Consideration, the compensation accrued and payable, but not yet paid, under the\nManagement Agreement and the expenses that were reimbursable, but not yet reimbursed, under the Management Agreement\u037e (ii) issued to the Former Manager (for itself and\non behalf of the Master GP, as applicable) the Share Consideration\u037e and (iii) purchased from Master GP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary\nof the Company, in exchange for $30.\nLetter Agreements-Prior to May 28, 2024, the Company\u2019s Chief Executive Officer and Chief Financial Officer were provided by its Former Manager under the terms of the\nManagement Agreement. In addition, the Company relied on employees of its Former Manager and affiliates to conduct the Company\u2019s operations. Since May 28, 2024, the\nCompany entered into letter agreements with the Chief Executive Officer and Chief Financial Officer and is hiring certain employees of the Former Manager that serve in key\nroles at the Company, including, but not limited to, those who support the Company\u2019s investment, legal, accounting, tax and treasury operations.\n\n\n 33\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 35 of 69\n\nFTAI AVIATION LTD.\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)\n(Dollars in tables in thousands, unless otherwise noted)\n\n\n\n15. RESTRUCTURING CHARGES\nIn connection with the Internalization and termination of the Management Agreement, the Company agreed to pay a total of $\n300.0 million to its Former Manager (for itself and on behalf of the Master GP, as applicable). At closing, the Company issued 1,866,949 ordinary shares valued at $150.0\nmillion. The remaining balance was paid in cash on June 17, 2024. The restructuring charge paid in connection with the Internalization and termination of the Management\nAgreement is reflected in Internalization Fee to Affiliate expense in the Consolidated Statements of Operations for the three and six months ended June 30, 2024. See Note 11\nfor additional discussion. There were no restructuring charges recorded for the three and six months ended June 30, 2023.\n\n16. SUBSEQUENT EVENTS\nDividends\nOn July 23, 2024, our Board of Directors declared a cash dividend on our ordinary shares and eligible participating securities of $0.30 per share for the quarter ended June 30,\n2024, payable on August 20, 2024 to the holders of record on August 12, 2024.\nAdditionally, on July 23, 2024, our Board of Directors also declared cash dividends on the Series A Preferred Shares, Series B Preferred Shares, Series C Preferred Shares and\nSeries D Preferred Shares of $0.52, $0.50, $0.52 and $0.59 per share, respectively, payable on September 16, 2024 to the holders of record on September 6, 2024.\n\n\n 34\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 36 of 69\n\n\n\n\nItem 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations\nThe following Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations (\u201cMD&A\u201d) is intended to help you understand FTAI Aviation Ltd. (the\n\u201cCompany,\u201d \u201cwe,\u201d \u201cour\u201d or \u201cus\u201d). Our MD&A should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes, and with Part II,\nItem 1A, \u201cRisk Factors\u201d included elsewhere in this Quarterly Report on Form 10-Q.\nOverview\nWe own, lease and sell aviation equipment. We also develop and manufacture through a joint venture, and repair and sell, through our maintenance facility and exclusivity\narrangements, aftermarket components for aircraft engines. Additionally, we own and lease offshore energy equipment. We target assets that, on a combined basis, generate\nstrong cash flows with potential for earnings growth and asset appreciation. We believe that there is a large number of acquisition opportunities in our markets and that our\nexpertise and business and financing relationships, together with our access to capital, will allow us to take advantage of these opportunities. As of June 30, 2024, we had total\nconsolidated assets of $3.4 billion and total equity of $69.6 million.\nInternalization of Management\nOn May 28, 2024, the Company entered into definitive agreements with the Former Manager and Master GP to internalize the Company\u2019s management function. As part of the\ntermination of the Management Agreement, the Company (i) agreed to pay the Former Manager (for itself and on behalf of the Master GP, as applicable) the Cash\nConsideration, the compensation accrued and payable, but not yet paid, under the Management Agreement and the expenses that were reimbursable, but not yet reimbursed,\nunder the Management Agreement\u037e (ii) issued to the Former Manager (for itself and on behalf of the Master GP, as applicable) the Share Consideration\u037e (iii) purchased from\nMaster GP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the Company, in exchange for $30. Following the Internalization, the Company no longer\npays management fees or incentive distributions to the Former Manager and Master GP.\nIn connection with the termination of the Management Agreement, the Company also entered into a Transition Services Agreement with the Former Manager. Under the\nTransition Services Agreement, the Former Manager is required to continue to provide the Company and its affiliates with all of the Services for a transition period during which\nthe Company will procure replacements for the Services. The Services will be provided to the Company for a fee equal to the Former Manager\u2019s cost of providing the Services,\nincluding the allocated cost of, among other things, overhead, employee wages and compensation, rent and related real estate expenses and actually incurred out-of-pocket\nexpenses, plus a mark-up of ten percent (10%). The Company is required to use commercially reasonable efforts to make available to the Former Manager certain employees\nof the Company who were previously employees of the Former Manager to provide the Reverse Services, subject to certain exceptions. Unless the Transition Services\nAgreement is terminated earlier or the Company elects to terminate a Service by providing written notice to the Former Manager, the Former Manager is required to provide\ncertain Services to the Company until October 31, 2024. In addition, the Former Manager is required to continue to provide the services that are reasonably required by the\nCompany to prepare its quarterly and annual financial statements until May 31, 2025. The Company is required to continue to provide the Reverse Services until the later to\noccur of the dissolution or sale of the entities receiving Reverse Services. The Transition Services Agreement may be terminated earlier (x) by mutual agreement of the parties,\n(y) by either the Former Manager or the Company in the event of a material breach by the non-terminating party that is not cured within thirty (30) days following written\nnotification thereof, or (z) by the Former Manager if the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days. We incurred $3.4\nmillion in costs for Transition Services during the three and six months ended June 30, 2024, and these costs are reported in Acquisition and transaction expenses in the\nConsolidated Statements of Operations.\nImpact of Russia\u2019s Invasion of Ukraine\nEconomic sanctions and export controls against Russia and Russia\u2019s aviation industry were imposed due to its invasion of Ukraine during the three months ended March 31,\n2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines. We determined that it is unlikely that we will regain\npossession of the aircraft and engines that had not yet been recovered from Ukraine and Russia. As a result we recognized an impairment charge totaling $120.0 million, net\nof maintenance deposits, to write-off the entire carrying value of leasing equipment assets that we did not expect to recover from Ukraine and Russia. As of June 30, 2024,\neight aircraft and seventeen engines were still located in Russia.\nOur lessees are required to provide insurance coverage with respect to leased aircraft and engines, and we are named as insureds under those policies in the event of a total\nloss of an aircraft or engine. We also purchase insurance which provides us with coverage when our aircraft or engines are not subject to a lease or where a lessee\u2019s policy\nfails to indemnify us. The insured value of the aircraft and engines that remain in Russia is approximately $210.7 million. We intend to pursue all of our claims under these\npolicies. However, the timing and amount of any recoveries under these policies are uncertain.\nThe extent of the impact of Russia\u2019s invasion of Ukraine and the related sanctions on our operational and financial performance, including the ability for us to recover our\nleasing equipment in the region, will depend on future developments, including the duration of the conflict, sanctions and restrictions imposed by Russian and international\ngovernments, all of which remain uncertain.\n\n\n 35\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 37 of 69\n\n\n\n\nOperating Segments\nThe key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and services. Our two\nreportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft\nengines, which it leases and sells to customers. The Aerospace Products segment develops and manufactures through a joint venture, and repairs and sells, through our\nmaintenance facility and exclusivity arrangements, aircraft engines and aftermarket components for aircraft engines. During the fourth quarter of 2023, the Company changed\nthe composition of its operating segments to include product offerings for V2500 engines within the Aerospace Products segment. Prior periods have been restated to reflect\nthe change in accordance with the requirements of ASC 280, Segment Reporting.\nCorporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, and management fees. Additionally,\nCorporate and Other also includes offshore energy related assets, which consist of vessels and equipment that support offshore oil and gas activities and production which\nare typically subject to operating leases.\nResults of Operations\nAdjusted EBITDA (Non-GAAP)\nThe chief operating decision maker (\u201cCODM\u201d) utilizes Adjusted EBITDA as the key performance measure. Adjusted EBITDA is not a financial measure in accordance with U.S.\ngenerally accepted accounting principles (\u201cU.S. GAAP\u201d). This performance measure provides the CODM with the information necessary to assess operational performance\nand make resource and allocation decisions. We believe Adjusted EBITDA is a useful metric for investors and analysts for similar purposes of assessing our operational\nperformance.\nAdjusted EBITDA is defined as net income (loss) attributable to shareholders, adjusted (a) to exclude the impact of provision for (benefit from) income taxes, equity-based\ncompensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-\nhedge derivative instruments, asset impairment charges, incentive allocations, depreciation and amortization expense, dividends on preferred shares and interest expense,\ninternalization fee to affiliate, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities and (c) to exclude the impact of equity in earnings\n(losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA.\n\n\n\n\n 36\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 38 of 69\n\n\n\n\nComparison of the three and six months ended June 30, 2024 and 2023\nThe following table presents our consolidated results of operations:\n\n Six Months Ended\n Three Months Ended June 30, June 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nRevenues\nLease income $ 70,754 $ 59,541 $ 11,213 $ 123,915 $ 115,519 $ 8,396\nMaintenance revenue 51,187 42,065 9,122 96,977 77,206 19,771\nAsset sales revenue 72,433 76,836 (4,403) 111,040 185,527 (74,487)\nAerospace products revenue 245,200 92,725 152,475 434,257 177,838 256,419\nOther revenue 4,020 3,178 842 4,099 10,973 (6,874)\nTotal revenues 443,594 274,345 169,249 770,288 567,063 203,225\n\n\nExpenses\nCost of sales 205,857 104,532 101,325 348,661 250,202 98,459\nOperating expenses 29,099 24,797 4,302 54,416 47,331 7,085\nGeneral and administrative 2,969 3,188 (219) 6,652 7,255 (603)\nAcquisition and transaction expenses 8,019 2,672 5,347 14,198 5,934 8,264\nManagement fees and incentive allocation to affiliate 3,554 5,563 (2,009) 8,449 8,560 (111)\nInternalization fee to affiliate 300,000 - 300,000 300,000 - 300,000\nDepreciation and amortization 56,691 38,514 18,177 106,611 79,440 27,171\nAsset impairment - - - 962 1,220 (258)\nInterest expense 55,196 38,499 16,697 102,903 77,791 25,112\nTotal expenses 661,385 217,765 443,620 942,852 477,733 465,119\n\n\nOther (expense) income\nEquity in losses of unconsolidated entities (694) (380) (314) (1,361) (1,715) 354\nLoss on extinguishment of debt (13,920) - (13,920) (13,920) - (13,920)\nOther (expense) income (498) 408 (906) 136 416 (280)\nTotal other (expense) income (15,112) 28 (15,140) (15,145) (1,299) (13,846)\n(Loss) Income from before income taxes (232,903) 56,608 (289,511) (187,709) 88,031 (275,740)\n(Benefit from) provision for income taxes (13,033) 1,855 (14,888) (7,461) 3,881 (11,342)\nNet (loss) income (219,870) 54,753 (274,623) (180,248) 84,150 (264,398)\nLess: Dividends on preferred shares 8,335 8,335 - 16,670 15,126 1,544\nNet (loss) income attributable to shareholders $ (228,205) $ 46,418 $ (274,623) $ (196,918) $ 69,024 $ (265,942)\n\n\n\n\n 37\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 39 of 69\n\n\n\n\nThe following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:\n\n Six Months Ended\n Three Months Ended June 30, June 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nNet (loss) income attributable to shareholders $ (228,205) $ 46,418 $ (274,623) $ (196,918) $ 69,024 $ (265,942)\nAdd: (Benefit from) provision for income taxes (13,033) 1,855 (14,888) (7,461) 3,881 (11,342)\nAdd: Equity-based compensation expense 638 510 128 1,148 618 530\nAdd: Acquisition and transaction expenses 8,019 2,672 5,347 14,198 5,934 8,264\nAdd: Losses on the modification or extinguishment of debt and capital lease\nobligations 13,920 - 13,920 13,920 - 13,920\nAdd: Changes in fair value of non-hedge derivative instruments - - - - - -\nAdd: Asset impairment charges - - - 962 1,220 (258)\nAdd: Incentive allocations 3,148 5,324 (2,176) 7,456 8,266 (810)\nAdd: Depreciation and amortization expense (1) 65,809 48,934 16,875 124,931 97,704 27,227\nAdd: Interest expense and dividends on preferred shares 63,531 46,834 16,697 119,573 92,917 26,656\nAdd: Internalization fee to affiliate 300,000 - 300,000 300,000 - 300,000\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) (617) 150 (767) (1,165) (546) (619)\nLess: Equity in losses of unconsolidated entities 694 380 314 1,361 1,715 (354)\nLess: Non-controlling share of Adjusted EBITDA - - - - - -\nAdjusted EBITDA (non-GAAP) $ 213,904 $ 153,077 $ 60,827 $ 378,005 $ 280,733 $ 97,272\n\n________________________________________________________\n(1) Includes the following items for the three months ended June 30, 2024 and 2023: (i) depreciation and amortization expense of $56,691 and $38,514, (ii) lease intangible amortization of $3,786 and\n\n $3,616 and (iii) amortization for lease incentives of $5,332 and $6,804, respectively. Includes the following items for the six months ended June 30, 2024 and 2023: (i) depreciation and amortization\n expense of $106,611 and $79,440, (ii) lease intangible amortization of $7,762 and $7,599 and (iii) amortization for lease incentives of $10,558 and $10,665, respectively.\n(2) Includes the following items for the three months ended June 30, 2024 and 2023: (i) net loss of $694 and $380, (ii) depreciation and amortization expense of $77 and $435, and (iii) acquisition and\n\n transaction expenses of $0 and $95, respectively. Includes the following items for the six months ended June 30, 2024 and 2023: (i) net loss of $1,361 and $1,715, (ii) depreciation and\n amortization expense of $196 and $835, and (iii) acquisition and transaction expenses of $0 and $334, respectively.\n\nRevenues\nComparison of the three months ended June 30, 2024 and 2023\nTotal revenues increased $169.2 million primarily due to an increase in Aerospace products revenue, Lease income, and Maintenance revenue partially offset by decreases in\nAsset sales revenue.\nAerospace products revenue increased $152.5 million primarily driven by an increase in sales relating to the CFM56-7B, CFM56-5B and V2500 engines, engine modules,\nspare parts and used material inventory as operations continued to ramp-up in 2024.\nLease income increased $11.2 million primarily due to an increase in the number of engines placed on lease during the year, partially offset by an increase in the number of\naircraft and engines redelivered and sold.\nMaintenance revenue increased $9.1 million primarily due to an increase in the number of aircraft and engines placed on lease and higher aircraft and engine utilization.\nAsset sales revenue decreased $4.4 million primarily due to a decrease in the sale of commercial aircraft and engines in our Aviation Leasing segment.\nComparison of the six months ended June 30, 2024 and 2023\nTotal revenues increased $203.2 million primarily due to an increase in Aerospace products revenue, Maintenance revenue, and Lease income partially offset by decreases in\nAsset sales revenue and Other revenue.\nAerospace products revenue increased $256.4 million primarily driven by an increase in sales relating to the CFM56-7B, CFM56-5B and V2500 engines, engine modules,\nspare parts and used material inventory as operations continued to ramp-up in 2024.\nMaintenance revenue increased $19.8 million primarily due to an increase in the number of aircraft and engines placed on lease and higher aircraft and engine utilization.\n\n\n 38\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 40 of 69\n\n\n\n\nLease income increased $8.4 million primarily due to an increase in the number of aircraft and engines placed on lease during the year, partially offset by an increase in the\nnumber of aircraft and engines redelivered.\nAsset sales revenue decreased $74.5 million primarily due to a decrease in the sale of commercial aircraft and engines in our Aviation Leasing segment.\nOther revenue decreased $6.9 million primarily due to a decrease in end-of-lease redelivery compensation.\nExpenses\nComparison of the three months ended June 30, 2024 and 2023\nTotal expenses increased $443.6 million, primarily due to higher (i) Internalization fee to affiliate, (ii) Cost of sales, (iii) Depreciation and amortization, (iv) Interest expense, (v)\nAcquisition and transaction expenses, and (vi) Operating expenses. This increase was partially offset by lower (vii) Management fees and incentive allocation to affiliate.\nInternalization fee to affiliate increased $300.0 million relating to the Internalization effective May 28, 2024.\nCost of sales increased $101.3 million primarily as a result of an increase in Aerospace Products Sales.\nDepreciation and amortization increased $18.2 million primarily driven by an increase in the number of assets owned and on lease, partially offset by an increase in the\nnumber of aircraft redelivered and parted out into our engine leasing pool.\nInterest expense increased $16.7 million, which reflects an increase in the average debt outstanding of approximately $756.8 million primarily due to an increase in the (i)\nSenior Notes due 2031 of $700.0 million, which were issued in April 2024, (ii) Senior Notes due 2030 of $496.8 million, which were issued in November 2023, (iii) Senior\nNotes due 2032 of $266.7 million, which were issued in June 2024, and the (iv) Revolving Credit Facility of $33.3 million, partially offset by decreases in the (v) Senior Notes\ndue 2025 of $650.0 million, which were redeemed in April 2024, and the (vi) Senior Notes due 2027 of $89.7 million, which were partially redeemed in June 2024.\nAcquisition and transaction expenses increased $5.3 million primarily due to higher professional fees related to strategic transactions and fees associated with the\nInternalization.\nOperating expenses increased $4.3 million which primarily reflects an increase in commission expenses due to higher sales from the used material program, increases in\nshipping and storage fees, professional fees and other operating expenses in the Aerospace Products segment, an increase in professional fees and repairs and\nmaintenance expenses in the Aviation Leasing Segment.\nManagement fees and incentive allocation to affiliate decreased $2.0 million primarily due to the Internalization of the Company as of May 28, 2024.\nComparison of the six months ended June 30, 2024 and 2023\nTotal expenses increased $465.1 million, primarily due to higher (i) Internalization to affiliate, (ii) Cost of Sales, (iii) Depreciation and amortization, (iv) Interest expense, (v)\nAcquisition and transaction expenses, and (vi) Operating expenses. This increase was partially offset by lower (vii) General and administrative, (viii) Asset impairment, and (ix)\nManagement fees and incentive allocation to affiliate.\nInternalization fee to affiliate increased $300.0 million relating to the Internalization effective May 28, 2024.\nCost of sales increased $98.5 million primarily as a result an increase in Aerospace Product Sales, partially offset by a decrease in Asset sales.\nDepreciation and amortization increased $27.2 million primarily driven by an increase in the number of assets owned and on lease, partially offset by an increase in the\nnumber of aircraft redelivered and parted out into our engine leasing pool.\nInterest expense increased $25.1 million, which reflects an increase in the average debt outstanding of approximately $585.6 million primarily due to an increase in the (i)\nSenior Notes due 2030 of $496.8 million, (ii) Senior Notes due 2031 of $350.0 million issued in April 2024, (iii) Senior Notes due 2032 of $133.3 million, which were issued in\nJune 2024, partially offset by decreases in the (iv) Senior Notes due 2025 of $326.8 million, which were redeemed in April 2024, the (v) Senior Notes due 2027 of $44.8 million,\nwhich were partially redeemed in June 2024, and a decrease in the (vi) Revolving Credit Facility of $22.5 million.\nAcquisition and transaction expenses increased $8.3 million primarily due to higher professional fees related to strategic transactions and fees associated with the\nInternalization.\nOperating expenses increased $7.1 million which primarily reflects an increase in commission expenses due to higher sales from the used material program, increases in\nshipping and storage fees, professional fees and other operating expenses in the Aerospace Products segment, an increase in professional fees and repairs and\nmaintenance expenses in the Aviation Leasing Segment.\n\n\n\n\n 39\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 41 of 69\n\n\n\n\nOther (expense) income\nTotal other expense increased $15.1 million during the three months ended June 30, 2024 primarily due to a $13.9 million increase in the loss on extinguishment of debt, a\n$0.9 million increase in other expense and a $0.3 million increase in the proportionate share of unconsolidated entities\u2019 net loss.\nTotal other expense increased $13.8 million during the six months ended June 30, 2024 primarily due to a $13.9 million increase in the loss on extinguishment of debt.\n(Benefit from) provision for income taxes\nThe benefit from income taxes increased $14.9 million and $11.3 million during the three and six months ended June 30, 2024, respectively, primarily due to the expected tax\nbenefit from the Internalization fee paid to affiliate.\nNet income (loss)\nNet income decreased $274.6 million and $264.4 million for the three and six months ended June 30, 2024 as compared to prior years primarily due to the changes noted\nabove.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased $60.8 million and $97.3 million during the three and six months ended June 30, 2024, respectively, primarily due to the changes noted above.\n\n\n\nAviation Leasing Segment\n\nAs of June 30, 2024, in our Aviation Leasing segment, we own and manage 391 aviation assets, consisting of 99 commercial aircraft and 292 engines, including eight aircraft\nand seventeen engines that were still located in Russia.\nAs of June 30, 2024, 88 of our commercial aircraft and 175 of our engines were leased to operators or other third parties. Aviation assets currently off lease are either\nundergoing repair and/or maintenance, being prepared to go on lease or held in short term storage awaiting a future lease. Our aviation equipment was approximately 81%\nutilized during the six months ended June 30, 2024, based on the percent of days on-lease in the quarter weighted by the monthly average equity value of our aviation leasing\nequipment, excluding airframes. Our aircraft currently have a weighted average remaining lease term of 45 months, and our engines currently on-lease have an average\nremaining lease term of 22 months. The table below provides additional information on the assets in our Aviation Leasing segment:\n\nAviation Assets Widebody Narrowbody Total\nAircraft\nAssets at January 1, 2024 5 91 96\nPurchases - 24 24\nSales - - -\nTransfers - (21) (21)\nAssets at June 30, 2024 5 94 99\n\n\nEngines\nAssets at January 1, 2024 32 235 267\nPurchases 2 48 50\nSales (9) (1) (10)\nTransfers - (15) (15)\nAssets at June 30, 2024 25 267 292\n\n\n\n\n 40\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 42 of 69\n\n\n\n\nThe following table presents our results of operations for our Aviation Leasing segment:\n\n Six Months Ended\n Three Months Ended June 30, June 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nRevenues\nLease income $ 60,759 $ 48,167 $ 12,592 $ 111,605 $ 96,997 $ 14,608\nMaintenance revenue 51,187 42,065 9,122 96,977 77,206 19,771\nAsset sales revenue 72,433 76,836 (4,403) 111,040 185,527 (74,487)\nOther revenue 58 313 (255) 125 6,691 (6,566)\nTotal revenues 184,437 167,381 17,056 319,747 366,421 (46,674)\n\n\nExpenses\nCost of sales 58,969 49,598 9,371 90,858 141,832 (50,974)\nOperating expenses 8,782 7,578 1,204 16,989 14,666 2,323\nAcquisition and transaction expenses 1,969 1,169 800 4,730 2,631 2,099\nDepreciation and amortization 52,672 35,713 16,959 98,756 73,853 24,903\nAsset impairment - - - 962 1,220 (258)\nTotal expenses 122,392 94,058 28,334 212,295 234,202 (21,907)\n\n\nOther (expense) income\nEquity in losses of unconsolidated entities (61) (35) (26) (207) (134) (73)\nOther (expense) income (911) 408 (1,319) (542) 416 (958)\nTotal other (expense) income (972) 373 (1,345) (749) 282 (1,031)\nIncome before income taxes 61,073 73,696 (12,623) 106,703 132,501 (25,798)\nProvision for income taxes 8,293 1,087 7,206 11,326 2,082 9,244\nNet income attributable to shareholders $ 52,780 $ 72,609 $ (19,829) $ 95,377 $ 130,419 $ (35,042)\n\n\n\n\n 41\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 43 of 69\n\n\n\n\nThe following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:\n\n Six Months Ended\n Three Months Ended June 30, June 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nNet income attributable to shareholders $ 52,780 $ 72,609 $ (19,829) $ 95,377 $ 130,419 $ (35,042)\nAdd: Provision for income taxes 8,293 1,087 7,206 11,326 2,082 9,244\nAdd: Equity-based compensation expense 128 105 23 233 127 106\nAdd: Acquisition and transaction expenses 1,969 1,169 800 4,730 2,631 2,099\nAdd: Losses on the modification or extinguishment of debt and capital lease\nobligations - - - - - -\nAdd: Changes in fair value of non-hedge derivative instruments - - - - - -\nAdd: Asset impairment charges - - - 962 1,220 (258)\nAdd: Incentive allocations - - - - - -\nAdd: Depreciation and amortization expense (1) 61,790 46,133 15,657 117,076 92,117 24,959\nAdd: Interest expense and dividends on preferred shares - - - - - -\nAdd: Internalization fee to affiliate - - - - - -\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) (40) 28 (68) (123) (8) (115)\nLess: Equity in losses of unconsolidated entities 61 35 26 207 134 73\nLess: Non-controlling share of Adjusted EBITDA - - - - - -\nAdjusted EBITDA (non-GAAP) $ 124,981 $ 121,166 $ 3,815 $ 229,788 $ 228,722 $ 1,066\n\n________________________________________________________\n(1) Includes the following items for the three months ended June 30, 2024 and 2023: (i) depreciation expense of $52,672 and $35,713, (ii) lease intangible amortization of $3,786 and $3,616 and (iii)\n\n amortization for lease incentives of $5,332 and $6,804, respectively. Includes the following items for the six months ended June 30, 2024 and 2023: (i) depreciation expense of $98,756 and\n $73,853, (ii) lease intangible amortization of $7,762 and $7,599 and (iii) amortization for lease incentives of $10,558 and $10,665, respectively.\n(2) Includes the following items for the three months ended June 30, 2024 and 2023: (i) net loss of $61 and $35 and (ii) depreciation and amortization of $21 and $63, respectively. Includes the\n\n following items for the six months ended June 30, 2024 and 2023: (i) net loss of $207 and $134 and (ii) depreciation and amortization of $84 and $126, respectively.\nRevenues\nComparison of the three months ended June 30, 2024 and 2023\nTotal revenue increased $17.1 million driven by an increase in Lease income and Maintenance revenue, partially offset by a decrease in Asset sales revenue.\n \u2022 Lease income increased $12.6 million primarily due to an increase in the number of aircraft and engines placed on lease during the year, partially offset by an\n increase in the number of aircraft and engines redelivered.\n \u2022 Maintenance revenue increased $9.1 million primarily due to an increase in the number of aircraft and engines placed on lease and higher aircraft and engine\n utilization.\n \u2022 Asset sales revenue decreased $4.4 million primarily due to a decrease in the sale of commercial aircraft and engines.\nComparison of the six months ended June 30, 2024 and 2023\nTotal revenue decreased $46.7 million driven by a decrease in Asset sales revenue and Other revenue, partially offset by an increase in Maintenance revenue and Leas e\nincome.\n \u2022 Asset sales revenue decreased $74.5 million primarily due to a decrease in the sale of commercial aircraft and engines.\n \u2022 Other revenue decreased $6.6 million primarily due to a decrease in end-of-lease redelivery compensation.\n \u2022 Maintenance revenue increased $19.8 million primarily due to an increase in the number of aircraft and engines placed on lease and higher aircraft and engine\n utilization.\n \u2022 Lease income increased $14.6 million primarily due to an increase in the number of aircraft and engines placed on lease during the year, partially offset by an\n increase in the number of aircraft and engines redelivered.\n\n\n 42\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 44 of 69\n\n\n\n\nExpenses\nComparison of the three months ended June 30, 2024 and 2023\nTotal expenses increased $28.3 million primarily driven by an increase in Depreciation and amortization, Cost of sales, Operating expenses, and Acquisition and transaction\nexpenses.\n \u2022 Depreciation and amortization expense increased $17.0 million driven by an increase in the number of assets owned and on lease, partially offset by an increase in\n the number of aircraft redelivered and parted out into our engine leasing pool.\n \u2022 Cost of sales increased $9.4 million primarily as a result of an increase in asset sales.\n \u2022 Operating expenses increased $1.2 million driven by an increase in professional fees and repairs and maintenance expenses, partially offset by a decrease in\n shipping and storage fees and insurance expense.\n \u2022 Acquisition and transaction expenses increased $0.8 million driven by related costs associated with the acquisition of aviation leasing equipment.\nComparison of the six months ended June 30, 2024 and 2023\nTotal expenses decreased $21.9 million primarily driven by a decrease in Cost of sales, partially offset by an increase in Depreciation and amortization, Operating expenses,\nand Acquisition and transaction expenses.\n \u2022 Cost of sales decreased $51.0 million primarily as a result of a decrease in asset sales.\n \u2022 Depreciation and amortization expense increased $24.9 million driven by an increase in the number of assets owned and on lease, partially offset by an increase in\n the number of aircraft redelivered and parted out into our engine leasing pool.\n \u2022 Operating expenses increased $2.3 million driven by an increase in professional fees, shipping and storage fees and repairs and maintenance expenses, partially\n offset by a decrease in insurance expense.\n \u2022 Acquisition and transaction expenses increased $2.1 million driven by higher compensation and related costs associated with the acquisition of aviation leasing\n equipment.\nOther (expense) income\nTotal other expense increased $1.3 million and $1.0 million during the three and six months ended June 30, 2024 primarily due to an increase in other expense and an\nincrease in the proportionate share of unconsolidated entities\u2019 net loss.\nProvision for income taxes\nThe provision for income taxes increased $7.2 million and $9.2 million during the three and six months ended June 30, 2024, respectively, primarily due to taxable income in\neach period.\nNet income\nNet income decreased $19.8 million and $35.0 million during the three and six months ended June 30, 2024, respectively, primarily due to the changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased $3.8 million and $1.1 million primarily due to the changes noted above.\n\n\n\nAerospace Products Segment\nThe Aerospace Products segment develops and manufactures through a joint venture, repairs and sells through our maintenance facility and exclusivity arrangements, aircraft\nengines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines. Our engine and module sales are facilitated through The\nModule Factory, a dedicated commercial maintenance program, designed to focus on modular repair and refurbishment of CFM56-7B and CFM56-5B engines, performed by a\nthird party. Used serviceable material is sold through our exclusive partnership with AAR Corp, who is responsible for the teardown, repair, marketing and sales of spare parts\nfrom our CFM56 engine pool. In December 2023, we acquired the remaining interest in Quick Turn Engine Center LLC or \u201cQuickTurn\u201d (previously iAero Thrust LLC), a hospital\nmaintenance and testing facility dedicated to the CFM56 engine. Refer to Note 3 \u201cAcquisition of QuickTurn\u201d, for additional information. We also hold a 25% interest in the\nAdvanced Engine Repair JV which focuses on developing new cost savings programs for engine repairs.\n\n\n\n\n 43\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 45 of 69\n\n\n\n\nThe following table presents our results of operations:\n\n Six Months Ended\n Three Months Ended June 30, June 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nAerospace products revenue $ 245,200 $ 92,725 $ 152,475 $ 434,257 $ 177,838 $ 256,419\n\n\nExpenses\nCost of sales 146,888 54,934 91,954 257,803 108,370 149,433\nOperating expenses 6,423 3,236 3,187 13,893 6,891 7,002\nAcquisition and transaction expenses 525 272 253 771 1,027 (256)\nDepreciation and amortization 938 97 841 1,871 183 1,688\nTotal expenses 154,774 58,539 96,235 274,338 116,471 157,867\n\n\nOther expense\nEquity in losses of unconsolidated entities (633) (345) (288) (1,154) (1,581) 427\nTotal other expense (633) (345) (288) (1,154) (1,581) 427\nIncome before income taxes 89,793 33,841 55,952 158,765 59,786 98,979\nProvision for income taxes 4,918 584 4,334 7,457 1,500 5,957\nNet income attributable to shareholders $ 84,875 $ 33,257 $ 51,618 $ 151,308 $ 58,286 $ 93,022\n\nThe following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:\n\n Six Months Ended\n Three Months Ended June 30, June 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nNet income attributable to shareholders $ 84,875 $ 33,257 $ 51,618 $ 151,308 $ 58,286 $ 93,022\nAdd: Provision for income taxes 4,918 584 4,334 7,457 1,500 5,957\nAdd: Equity-based compensation expense (72) 70 (142) (2) 85 (87)\nAdd: Acquisition and transaction expenses 525 272 253 771 1,027 (256)\nAdd: Losses on the modification or extinguishment of debt and capital lease\nobligations - - - - - -\nAdd: Changes in fair value of non-hedge derivative instruments - - - - - -\nAdd: Asset impairment charges - - - - - -\nAdd: Incentive allocations - - - - - -\nAdd: Depreciation and amortization expense 938 97 841 1,871 183 1,688\nAdd: Interest expense and dividends on preferred shares - - - - - -\nAdd: Internalization fee to affiliate - - - - - -\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) (577) 122 (699) (1,042) (538) (504)\nLess: Equity in losses of unconsolidated entities 633 345 288 1,154 1,581 (427)\nLess: Non-controlling share of Adjusted EBITDA - - - - - -\nAdjusted EBITDA (non-GAAP) $ 91,240 $ 34,747 $ 56,493 $ 161,517 $ 62,124 $ 99,393\n\n________________________________________________________\n(1) Includes the following items for the three months ended June 30, 2024 and 2023: (i) net loss of $633 and $345, (ii) depreciation and amortization expense of $56 and $372, and (iii) acquisition and\n\n transaction expenses of $0 and $95, respectively. Includes the following items for the six months ended June 30, 2024 and 2023: (i) net loss of $1,154 and $1,581, (ii) depreciation and\n amortization expense of $112 and $709, and (iii) acquisition and transaction expenses of $0 and $334, respectively.\nRevenues\nTotal Aerospace Products revenue increased $152.5 million and $256.4 million during the three and six months ended June 30, 2024 primarily driven by an increase in sales\nrelating to the CFM56-7B, CFM56-5B and V2500 engines, engine modules, spare parts and used material inventory as operations continued to ramp-up in 2024.\n\n\n\n\n 44\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 46 of 69\n\n\n\n\nExpenses\nComparison of the three months ended June 30, 2024 and 2023\nTotal expenses increased $96.2 million primarily due to an increase in Costs of sales and Operating expenses.\n \u2022 Cost of sales increased $92.0 million primarily as a result of an increase in Aerospace Product sales.\n \u2022 Operating expenses increased $3.2 million primarily driven by an increase in commission expenses due to the increase in sales from the used material program as\n well as increases in shipping and storage fees, professional fees and other operating expenses.\nComparison of the six months ended June 30, 2024 and 2023\nTotal expenses increased $157.9 million primarily due to an increase in Costs of sales and Operating expenses.\n \u2022 Cost of sales increased $149.4 million primarily as a result of an increase in Aerospace Product sales.\n \u2022 Operating expenses increased $7.0 million primarily driven by an increase in commission expenses due to the increase in sales from the used material program as\n well as increases in shipping and storage fees, professional fees and other operating expenses.\nOther expense\nTotal other expense increased $0.3 million during the three months ended June 30, 2024 due to an increase in our proportionate share of unconsolidated entities\u2019 net loss.\nTotal other expense decreased $0.4 million during the six months ended June 30, 2024 due to a decrease in our proportionate share of unconsolidated entities\u2019 net loss.\nProvision for income taxes\nThe provision for income taxes increased $4.3 million and $6.0 million during the three and six months ended June 30, 2024, respectively, primarily due to the increase in net\nincome.\nNet income\nNet income increased $51.6 million and $93.0 million during the three and six months ended June 30, 2024, respectively, primarily due to the changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased $56.5 million and $99.4 million during the three and six months ended June 30, 2024, respectively, primarily due to the changes noted above.\n\n\n 45\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 47 of 69\n\n\n\n\nCorporate and Other\nThe following table presents our results of operations:\n\n Six Months Ended\n Three Months Ended June 30, June 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nRevenues\nLease income $ 9,995 $ 11,374 $ (1,379) $ 12,310 $ 18,522 $ (6,212)\nOther revenue 3,962 2,865 1,097 3,974 4,282 (308)\nTotal revenues 13,957 14,239 (282) 16,284 22,804 (6,520)\n\n\nExpenses\nOperating expenses 13,894 13,983 (89) 23,534 25,774 (2,240)\nGeneral and administrative 2,969 3,188 (219) 6,652 7,255 (603)\nAcquisition and transaction expenses 5,525 1,231 4,294 8,697 2,276 6,421\nManagement fees and incentive allocation to affiliate 3,554 5,563 (2,009) 8,449 8,560 (111)\nInternalization fee to affiliate 300,000 - 300,000 300,000 - 300,000\nDepreciation and amortization 3,081 2,704 377 5,984 5,404 580\nInterest expense 55,196 38,499 16,697 102,903 77,791 25,112\nTotal expenses 384,219 65,168 319,051 456,219 127,060 329,159\n\n\nOther (expense) income\nLoss on extinguishment of debt (13,920) - (13,920) (13,920) - (13,920)\nOther income 413 - 413 678 - 678\nTotal other expense (13,507) - (13,507) (13,242) - (13,242)\nLoss before income taxes (383,769) (50,929) (332,840) (453,177) (104,256) (348,921)\n(Benefit from) provision for income taxes (26,244) 184 (26,428) (26,244) 299 (26,543)\nNet loss (357,525) (51,113) (306,412) (426,933) (104,555) (322,378)\nLess: Dividends on preferred shares 8,335 8,335 - 16,670 15,126 1,544\nNet loss attributable to shareholders $ (365,860) $ (59,448) $ (306,412) $ (443,603) $ (119,681) $ (323,922)\n\n\n\n 46\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 48 of 69\n\n\n\n\nThe following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:\n\n Six Months Ended\n Three Months Ended June 30, June 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nNet loss attributable to shareholders $ (365,860) $ (59,448) $ (306,412) $ (443,603) $ (119,681) $ (323,922)\nAdd: (Benefit from) provision for income taxes (26,244) 184 (26,428) (26,244) 299 (26,543)\nAdd: Equity-based compensation expense 582 335 247 917 406 511\nAdd: Acquisition and transaction expenses 5,525 1,231 4,294 8,697 2,276 6,421\nAdd: Losses on the modification or extinguishment of debt and capital lease\nobligations 13,920 - 13,920 13,920 - 13,920\nAdd: Changes in fair value of non-hedge derivative instruments - - - - - -\nAdd: Asset impairment charges - - - - - -\nAdd: Incentive allocations 3,148 5,324 (2,176) 7,456 8,266 (810)\nAdd: Depreciation and amortization expense 3,081 2,704 377 5,984 5,404 580\nAdd: Interest expense and dividends on preferred shares 63,531 46,834 16,697 119,573 92,917 26,656\nAdd: Internalization fee to affiliate 300,000 - 300,000 300,000 - 300,000\nAdd: Pro-rata share of Adjusted EBITDA from unconsolidated entities - - - - - -\nLess: Equity in losses (earnings) of unconsolidated entities - - - - - -\nLess: Non-controlling share of Adjusted EBITDA - - - - - -\nAdjusted EBITDA (non-GAAP) $ (2,317) $ (2,836) $ 519 $ (13,300) $ (10,113) $ (3,187)\n\nRevenues\nTotal revenues decreased $0.3 million and $6.5 million during the three and six months ended June 30, 2024 primarily due to a decrease in the Offshore Energy business as\none of our vessels was off-hire in 2024 compared to on-hire in 2023.\nExpenses\nComparison of the three months ended June 30, 2024 and 2023\nTotal expenses increased $319.1 million primarily due to higher (i) Internalization fee to affiliate, (ii) Interest expense, and (iii) Acquisition and Transaction expenses partially\noffset by lower (iv) Management Fees and incentive allocation to affiliate, and (v) Operating expenses.\n \u2022 Internalization fee to affiliate increased $300.0 million relating to the Internalization effective May 28, 2024.\n \u2022 Interest expense increased $16.7 million, which reflects an increase in the average debt outstanding of approximately $756.8 million primarily due to an increase in\n the (i) Senior Notes due 2031 of $700.0 million, which were issued in April 2024, (ii) Senior Notes due 2030 of $496.8 million, which were issued in November 2023,\n (iii) Senior Notes due 2032 of $266.7 million, which were issued in June 2024, and the (iv) Revolving Credit Facility of $33.3 million, partially offset by decreases in the\n (v) Senior Notes due 2025 of $650.0 million, which were redeemed in April 2024, and the (vi) Senior Notes due 2027 of $89.7 million, which were partially redeemed in\n June 2024.\n \u2022 Acquisition and transaction expense increased $4.3 million primarily due to higher professional fees associated with the Internalization.\n \u2022 Management fees and incentive allocation to affiliate decreased $2.0 million, primarily due to a decrease in the incentive fee due to the Former Manager, driven by the\n Internalization effective May 28, 2024.\n \u2022 Operating expenses decreased $0.1 million primarily due to decreases in the Offshore Energy business in crew expenses, project costs and other operating\n expenses as one of our vessels was off-hire in Q1 2024.\nComparison of the six months ended June 30, 2024 and 2023\nTotal expenses increased $329.2 million primarily due to higher (i) Internalization fee to affiliate, (ii) Interest expense, and (iii) Acquisition and transaction expenses, partially\noffset by lower (v) Operating expenses.\n \u2022 Internalization fee to affiliate increased $300.0 million relating to the Internalization effective May 28, 2024.\n \u2022 Interest expense increased $25.1 million, which reflects an increase in the average debt outstanding of approximately $585.6 million primarily due to an increase in\n the (i) Senior Notes due 2030 of $496.8 million, (ii) Senior Notes due 2031 of $350.0 million, issued in April 2024 (iii) Senior Notes due 2032 of $133.3 million, which\n were issued in June 2024,\n\n\n 47\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 49 of 69\n\n\n\n\n partially offset by decreases in the (iv) Senior Notes due 2025 of $326.8 million, which were redeemed in April 2024, the (v) Senior Notes due 2027 of $44.8 million,\n which were partially redeemed in June 2024, and a decrease in the (vi) Revolving Credit Facility of $22.5 million.\n \u2022 Acquisition and transaction expense increased $6.4 million primarily due to higher professional fees associated with the Internalization.\n \u2022 Operating expenses decreased $2.2 million primarily due to decreases in the Offshore Energy business in crew expenses, project costs and other operating\n expenses for one of our vessels driven by fewer days on-hire.\nOther (expense) income\nTotal other expense increased $13.5 million during the three months ended June 30, 2024, primarily due to a $13.9 million increase in the loss on extinguishment of debt.\nTotal other expense increased $13.2 million during the six months ended June 30, 2024, primarily due to a $13.9 million increase in the loss on extinguishment of debt.\nBenefit from income taxes\nThe benefit from income taxes increased $26.4 million and $26.5 million during the three and six months ended June 30, 2024, respectively, primarily due to the tax benefit\nfrom the Internalization fee paid to affiliate.\nNet loss\nNet loss increased $306.4 million and $322.4 million during the three and six months ended June 30, 2024, respectively, primarily due to the changes noted above.\nAdjusted EBITDA (Non-GAAP)\nAdjusted EBITDA increased $0.5 million and decreased $3.2 million during the three and six months ended June 30, 2024, respectively, primarily due to the changes noted\nabove.\n\n\nLiquidity and Capital Resources\nWe believe we have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that\nour business can continue to operate during various environments. This includes limiting discretionary spending across the organization and re-prioritizing our investments as\nnecessary.\nOur principal uses of liquidity have been and continue to be (i) acquisitions of aircraft and engines, (ii) dividends to our ordinary and preferred shareholders, (iii) expenses\nassociated with our operating activities, and (iv) debt service obligations associated with our investments.\n \u2022 Cash used for the purpose of making investments was $563.1 million and $380.8 million during the six months ended June 30, 2024 and 2023, respectively.\n \u2022 Distributions to shareholders, including cash dividends, were $76.8 million and $75.0 million during the six months ended June 30, 2024 and 2023, respectively.\n \u2022 Uses of liquidity associated with our operating expenses are captured on a net basis in our cash flows from operating activities. Uses of liquidity associated with our\n debt obligations are captured in our cash flows from financing activities.\nOur principal sources of liquidity to fund these uses have been and continue to be (i) revenues from our aviation assets (including maintenance reserve collections) net of\noperating expenses, (ii) proceeds from borrowings or the issuance of securities and (iii) proceeds from asset sales.\n \u2022 Cash flows used in operating activities, plus the principal collections on finance leases and maintenance reserve collections were $165.3 million during the six\n months ended June 30, 2024. Cash flows from operating activities, plus the principal collections on finance leases and maintenance reserve collections were $87.3\n million during the six months ended June 30, 2023.\n \u2022 During the six months ended June 30, 2024, additional borrowings and total principal repayments in connection with the Revolving Credit Facility were $360.0 million\n and $360.0 million, respectively. During the six months ended June 30, 2023, additional borrowings and total principal repayments in connection with the Revolving\n Credit Facility were $325.0 million and $330.0 million, respectively.\n \u2022 Proceeds from the sale of assets were $333.7 million and $273.2 million during the six months ended June 30, 2024 and 2023, respectively.\n \u2022 Proceeds from the issuance of preferred shares, net of underwriter\u2019s discount and issuance costs, were $61.7 million during the six months ended June 30, 2023.\nOn May 28, 2024, we entered into definitive agreements with the Former Manager and Master GP to internalize our management function. As part of the termination of the\nManagement Agreement, we agreed to pay $150.0 million to the Former\n\n\n 48\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 50 of 69\n\n\n\n\nManager. Following the internalization of management on May 28, 2024, we no longer pay a management fee or incentive distribution to the Former Manager or Master GP.\nConsequently, we have assumed general and administrative, and compensation and benefit expenses directly. We anticipate a savings in operation costs as a result of the\nInternalization.\nWe are currently evaluating several potential transactions and related financings, including, but not limited to, certain additional acquisitions of assets and operating\ncompanies in the aviation section or debt and equity financings, which could occur within the next 12 months. None of these potential transactions, negotiations, or financings\nare definitive or included within our planned liquidity needs. We cannot assure if or when any such transaction will be consummated or the terms of any such transaction or\nrelated financing.\nHistorical Cash Flow\nComparison of the six months ended June 30, 2024 and 2023\nThe following table compares the historical cash flow for the six months ended June 30, 2024 and 2023:\n\n\n Six Months Ended June 30,\n(in thousands) 2024 2023\nCash Flow Data:\nNet cash (used in) provided by operating activities $ (187,636) $ 67,241\nNet cash used in investing activities (219,383) (101,846)\nNet cash provided by financing activities 485,748 2,674\n\n\nNet cash used in operating activities increased $254.9 million, which primarily reflects an increase in (i) Net loss of $264.4 million and certain adjustments to reconcile net\nincome to cash provided by operating activities including a decrease in (ii) Changes in net working capital of $106.9 million, an increase in (iii) Gain on sale of net assets of\n$70.1 million, and a decrease in (iv) Change in deferred income taxes of $12.9 million, partially offset by increases in (v) Non-cash termination fee to affiliate of $150.0 million,\n(vi) Depreciation and amortization of $27.2 million, (vii) Loss on extinguishment of debt of $13.9 million, and (viii) Security deposits and maintenance claims included in\nearnings of $6.9 million.\nNet cash used in investing activities increased $117.5 million, primarily due to increases in (i) Acquisitions of leasing equipment of $110.7 million, (ii) Purchase deposits for\nacquisitions of $93.5 million, and (iii) Investments in notes and financing receivable of $19.8 million partially offset by higher (iv) Proceeds from the sale of net assets of $60.4\nmillion, decreases in (v) Investment in unconsolidated entities of $19.5 million, (vi) Acquisitions of lease intangibles of $12.0 million, and (vii) Investment in promissory notes of\n$11.5 million and higher (viii) Proceeds for deposit on sale of aircraft and engine of $2.8 million.\nNet cash provided by financing activities increased $483.1 million, primarily due to increases in (i) Proceeds from debt of $1.5 billion and (ii) Receipt of maintenance deposits\nof $3.4 million, partially offset by an increase in (iii) Repayment of debt of $957.4 million, a decrease in (iv) Proceeds from the issuance of preferred shares, net of underwriter\u2019s\ndiscount and issuance costs of $61.7 million, and increases in (v) Payment of deferred financing costs of $8.8 million and (vi) Release of maintenance deposits of $3.9 million.\nContractual Obligations\nOur material cash requirements include the following contractual and other obligations:\nDebt Obligations-As of June 30, 2024, we had outstanding principal and interest payment obligations of $3.1 billion and $1.3 billion, respectively, of which only interest\npayments of $208.3 million are due in the next twelve months. See Note 7 to the consolidated financial statements for additional information about our debt obligations.\nLease Obligations-As of June 30, 2024, we had outstanding operating and finance lease obligations of $1.9 million, of which $0.9 million is due in the next twelve months.\nOther Cash Requirements-In addition to our contractual obligations, we pay quarterly cash dividends on our ordinary shares and preferred shares, which are subject to\nchange at the discretion of our Board of Directors. During the last twelve months, we declared cash dividends of $120.1 million and $33.3 million on our ordinary shares and\npreferred shares, respectively.\nWe expect to meet our future short-term liquidity requirements through cash on hand, unused borrowing capacity or future financings and net cash provided by our current\noperations. We expect that our operating subsidiaries will generate sufficient cash flow to cover operating expenses and the payment of principal and interest on our\nindebtedness as they become due. We may elect to meet certain long-term liquidity requirements or to continue to pursue strategic opportunities through utilizing cash on\nhand, cash generated from our current operations and the issuance of securities in the future. Management believes adequate capital and borrowings are available from\nvarious sources to fund our commitments to the extent required.\nCritical Accounting Estimates and Policies\nThere were no material changes to our critical accounting estimates described in our Annual Report on Form 10-K for the year ended December 31, 2023.\n\n\n 49\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 51 of 69\n\n\n\n\nRecent Accounting Pronouncements\nSee Note 2 to our Consolidated Financial Statements for recent accounting pronouncements.\nItem 3. Quantitative and Qualitative Disclosures About Market Risk\nMarket risk represents the risk of changes in value of a financial instrument, caused by fluctuations in interest rates and foreign exchange rates. Changes in these factors could\ncause fluctuations in our results of operations and cash flows. We are exposed to the market risks described below.\nInterest Rate Risk\nInterest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Interest rate risk is highly sensitive\nto many factors, including the U.S. government\u2019s monetary and tax policies, global economic factors and other factors beyond our control. We are exposed to changes in the\nlevel of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate exposure relates to our term loan arrangements.\nLIBOR and other indices which are deemed \u201cbenchmarks\u201d are the subject of recent national, international, and other regulatory guidance and proposals for reform. The ICE\nBenchmark Administration ceased publication of one-week and two-month USD LIBOR settings after December 31, 2021 and the remaining USD LIBOR settings after June\n30, 2023, other than certain USD LIBOR settings that are expected to continue to be published under a synthetic methodology until September 2024. In anticipation of LIBOR\u2019s\nphase out, we amended our revolving credit facility to incorporate SOFR as the successor rate to LIBOR. We continue to monitor related reform proposals and evaluate the\nrelated risks\u037e however, it is not possible to predict the effects of any of these developments, and any future initiatives to regulate, reform or change the manner of administration\nof LIBOR, SOFR or other benchmark indices could result in adverse consequences to the rate of interest payable and receivable on, market value of and market liquidity for\nfinancial instruments tied to variable interest rate indices.\nOur borrowing agreements generally require payments based on a variable interest rate index, such as SOFR. Therefore, to the extent our borrowing costs are not fixed,\nincreases in interest rates may reduce our net income by increasing the cost of our debt without any corresponding increase in rents or cash flow from our leases. We may\nelect to manage our exposure to interest rate movements through the use of interest rate derivatives (interest rate swaps and caps).\nThe following discussion about the potential effects of changes in interest rates is based on a sensitivity analysis, which models the effects of hypothetical interest rate shifts\non our financial condition and results of operations. Although we believe a sensitivity analysis provides the most meaningful analysis permitted by the rules and regulations of\nthe SEC, it is constrained by several factors, including the necessity to conduct the analysis based on a single point in time and by the inability to include the extraordinarily\ncomplex market reactions that normally would arise from the market shifts modeled. Although the following results of a sensitivity analysis for changes in interest rates may\nhave some limited use as a benchmark, they should not be viewed as a forecast. This forward-looking disclosure also is selective in nature and addresses only the potential\ninterest expense impacts on our financial instruments and, in particular, does not address the mark-to-market impact on our interest rate derivatives, if any. It also does not\ninclude a variety of other potential factors that could affect our business as a result of changes in interest rates. In addition, the following discussion does not take into account\nour Series A and Series B preferred shares, on which distributions currently accrue interest at a fixed rate but will accrue interest at a floating rate based on a certain variable\ninterest rate index plus a spread from and after September 15, 2024.\nAs of June 30, 2024, assuming we do not hedge our exposure to interest rate fluctuations related to our outstanding floating rate debt, a hypothetical 100-basis point\nincrease/decrease in our variable interest rate on our borrowings would not have increased or decreased interest expense over the next 12 months.\nItem 4. Controls and Procedures\nDisclosure Controls and Procedures\nAs of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief\nExecutive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of\n1934 (the \u201cExchange Act\u201d)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures\nwere effective as of and for the period covered by this report.\nInternal Control over Financial Reporting\nThere have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal\nquarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.\n\n\n 50\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 52 of 69\n\n\n\n\n PART II-OTHER INFORMATION\nItem 1. Legal Proceedings\nWe are and may become involved in legal proceedings, including but not limited to regulatory investigations and inquiries, in the ordinary course of our business. Although we\nare unable to predict with certainty the eventual outcome of any litigation, regulatory investigation or inquiry, in the opinion of management, we do not expect our current and any\nthreatened legal proceedings to have a material adverse effect on our business, financial position or results of operations. Given the inherent unpredictability of these types of\nproceedings, however, it is possible that future adverse outcomes could have a material adverse effect on our financial results.\nItem 1A. Risk Factors\nYou should carefully consider the following risks and other information in this Form 10-Q in evaluating us and our shares. Any of the following risks, as well as additional risks\nand uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition. The risk\nfactors generally have been separated into the following categories: risks related to our business, risks related to taxation and risks related to the Company\u2019s shares. However,\nthese categories do overlap and should not be considered exclusive.\nRisks Related to Our Business\nWe may not realize some or all of the targeted benefits of the Internalization.\nIn connection with the Internalization, we entered into a Transition Services Agreement with the Former Manager. Under the Transition Services Agreement, the Former Manager\nis required to continue to provide the Company and its affiliates with all of the Services for a transition period during which the Company will procure replacements for the\nServices. The Services will be provided to the Company for a fee equal to the Former Manager\u2019s cost of providing the Services, including the allocated cost of, among other\nthings, overhead, employee wages and compensation, rent and related real estate expenses and actually incurred out-of-pocket expenses, plus a mark-up of ten percent\n(10%). The Company is required to use commercially reasonable efforts to make available to the Former Manager certain employees of the Company who were previously\nemployees of the Former Manager to provide the Reverse Services, subject to certain exceptions. Unless the Transition Services Agreement is terminated earlier or the\nCompany elects to terminate a Service by providing written notice to the Former Manager, the Former Manager is required to provide certain Services to the Company until\nOctober 31, 2024. In addition, the Former Manager is required to continue to provide the services that are reasonably required by the Company to prepare its quarterly and\nannual financial statements until May 31, 2025. The Company is required to continue to provide the Reverse Services until the later to occur of the dissolution or sale of the\nentities receiving Reverse Services. The Transition Services Agreement may be terminated earlier (x) by mutual agreement of the parties, (y) by either the Former Manager or\nthe Company in the event of a material breach by the non-terminating party that is not cured within thirty (30) days following written notification thereof, or (z) by the Former\nManager if the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days. The failure to effectively complete the transition of these\nservices to a fully internal basis, efficiently manage the transition with the Former Manager or find adequate internal replacements for these services, could impede our ability to\nachieve the targeted cost savings of the Internalization and adversely affect our operations. In addition, complexities arising from the Internalization could increase our overhead\ncosts and detract from management\u2019s ability to focus on operating our business. There can be no assurance we will be able to realize the expected cost savings of the\nInternalization.\nWe are reliant on certain transition services provided by the Former Manager under the Transition Services Agreement, and may not find a suitable provider for these\ntransition services if the Former Manager no longer provides the transition services to which we are entitled under the Transition Services Agreement.\nWe remain reliant on the Former Manager during the period of the Transition Services Agreement, and the loss of these transition services could adversely affect our\noperations. We are subject to the risk that the Former Manager will default on its obligation to provide the transition services to which we are entitled under the Transition\nServices Agreement, or that we or the Former Manager will terminate the Transition Services Agreement pursuant to its termination provisions, and that we will not be able to\nfind a suitable replacement for the transition services provided under the Transition Services Agreement in a timely manner, at a reasonable cost or at all. In addition, the\nFormer Manager\u2019s liability to us if it defaults on its obligation to provide transition services to us during the transition period is limited by the terms of the Transition Services\nAgreement, and we may not recover the full cost of any losses related to such a default. We may also be adversely affected by operational risks, including cybersecurity attacks,\nthat could disrupt the Former Manager\u2019s financial, accounting and other data processing systems during the period of the transition services.\nUncertainty relating to macroeconomic conditions may reduce the demand for our assets, result in non-performance of contracts by our lessees or charterers, limit our\nability to obtain additional capital to finance new investments, or have other unforeseen negative effects.\nUncertainty and negative trends in general economic conditions in the United States and abroad, including significant tightening of credit markets and commodity price volatility,\nhistorically have created difficult operating environments for owners and operators in the transportation industries. Many factors, including factors that are beyond our control,\nmay impact our operating results or financial condition and/or affect the lessees and charterers that form our customer base. For some years, the world has experienced\nweakened economic conditions and volatility following adverse changes in global capital markets. Excess supply in\n\n\n 51\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 53 of 69\n\n\n\n\noil and gas markets can put significant downward pressure on prices for these commodities, and may affect demand for assets used in production, refining and transportation\nof oil and gas. In the past, a significant decline in oil prices has led to lower offshore exploration and production budgets worldwide. These conditions have resulted in\nsignificant contraction, deleveraging and reduced liquidity in the credit markets. A number of governments have implemented, or are considering implementing, a broad variety\nof governmental actions or new regulations for the financial markets. In addition, limitations on the availability of capital, higher costs of capital for financing expenditures or the\ndesire to preserve liquidity, may cause our current or prospective customers to make reductions in future capital budgets and spending.\nFurther, demand for our assets is related to passenger and cargo traffic growth, which in turn is dependent on general business and economic conditions. Global economic\ndownturns could have an adverse impact on passenger and cargo traffic levels and consequently our lessees\u2019 and charterers\u2019 business, which may in turn result in a\nsignificant reduction in revenues, earnings and cash flows, difficulties accessing capital and a deterioration in the value of our assets. We have in the past been exposed to\nincreased credit risk from our customers and third parties who have obligations to us, which resulted in non-performance of contracts by our lessees and adversely impacted\nour business, financial condition, results of operations and cash flows. We cannot assure you that similar loss events may not occur in the future.\nInstability in geographies where we have assets or where we derive revenue could have a material adverse effect on our business, customers, operations and financial\nresults.\nEconomic, civil, military and political uncertainty exists and may increase in regions where we operate and derive our revenue. Various countries in which we operate are\nexperiencing and may continue to experience military action and civil and political unrest. We have assets in the emerging market economies of Eastern Europe, including\nsome assets in Russia. In late February 2022, Russian military forces launched significant military action against Ukraine. The conflict remains ongoing and sustained conflict\nand disruption in the region is likely. The impact to Russia and Ukraine, as well as actions taken by other countries, including new and stricter export controls and sanctions by\nCanada, the United Kingdom, the European Union, the U.S. and other countries and organizations against officials, individuals, regions, and industries in Russia and Ukraine,\nand each country\u2019s potential response to such sanctions, tensions and military actions, could have a material adverse effect on our business and delay or prevent us from\naccessing certain of our assets. We are actively monitoring the security of our remaining assets in the region.\nThe aviation industry has experienced periods of oversupply during which lease rates and asset values have declined, particularly during the most recent economic\ndownturn, and any future oversupply could materially adversely affect our results of operations and cash flows.\nThe oversupply of a specific asset is likely to depress the lease or charter rates for and the value of that type of asset and result in decreased utilization of our assets, and the\nindustries in which we operate have experienced periods of oversupply during which rates and asset values have declined, particularly during the most recent economic\ndownturn. Factors that could lead to such oversupply include, without limitation:\n \u2022 general demand for the type of assets that we purchase\u037e\n \u2022 general macroeconomic conditions, including market prices for commodities that our assets may serve\u037e\n \u2022 geopolitical events, including war, prolonged armed conflict and acts of terrorism\u037e\n \u2022 outbreaks of communicable diseases and natural disasters\u037e\n \u2022 governmental regulation\u037e\n \u2022 interest rates\u037e\n \u2022 the availability of credit\u037e\n \u2022 potential reduced cash flows and financial condition, including potential liquidity restraints\u037e\n \u2022 restructurings and bankruptcies of companies in the industries in which we operate, including our customers\u037e\n \u2022 manufacturer production levels and technological innovation\u037e\n \u2022 manufacturers merging or exiting the industry or ceasing to produce certain asset types\u037e\n \u2022 retirement and obsolescence of the assets that we own\u037e\n \u2022 increases in supply levels of assets in the market due to the sale or merging of operating lessors\u037e and\n \u2022 reintroduction of previously unused or dormant assets into the industries in which we operate.\nThese and other related factors are generally outside of our control and could lead to persistence of, or increase in, the oversupply of the types of assets that we acquire or\ndecreased utilization of our assets, either of which could materially adversely affect our results of operations and cash flow. In addition, aviation lessees may redeliver our\nassets to locations where there is oversupply, which may lead to additional repositioning costs for us if we move them to areas with higher demand. Positioning expenses vary\ndepending on geographic location, distance, rates and other factors, and may not be fully covered by drop-off charges collected from the last lessees of the equipment or pick-\nup charges paid by the new lessees. Positioning expenses can be significant if a large portion of our assets are returned to locations with weak demand, which could\nmaterially adversely affect our business, prospects, financial condition, results of operations and cash flows.\n\n\n 52\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 54 of 69\n\n\n\n\nThe airline industry is heavily regulated, and if we fail to comply with applicable requirements, our results of operations could suffer.\nThe Federal Aviation Administration (\u201cFAA\u201d) and equivalent regulatory agencies have increasingly focused on the need to assure that airline industry products are designed with\nsufficient cybersecurity controls to protect against unauthorized access or other unwanted compromise. A failure to meet these evolving expectations could negatively impact\nsales into the industry and expose us to legal or contractual liability.\nGovernmental agencies throughout the world, including the FAA, prescribe standards and qualification requirements for aircraft components, including virtually all commercial\nairline and general aviation products. Specific regulations vary from country to country, although compliance with FAA requirements generally satisfies regulatory requirements\nin other countries. If any material authorization or approval qualifying us to supply our products is revoked or suspended, then sale of the product would be prohibited by law,\nwhich would have an adverse effect on our business, financial condition and results of operations.\nFrom time to time, the FAA or equivalent regulatory agencies in other countries propose new regulations or changes to existing regulations, which often are more stringent than\nexisting regulations. If such proposals are adopted and enacted, we may incur significant additional costs to achieve compliance, which could have a material adverse effect\non our business, financial condition and results of operations.\nRecent trends by China\u2019s aviation authority to relax restrictions on airspace may be reversed, and anticipated new regulations loosening airspace restrictions may not\nmaterialize, which could impact sales prospects in China for our commercial aerospace businesses.\nThe retirement or prolonged grounding of commercial aircraft could reduce our revenues and the value of any related inventory.\nWe sell aircraft components and replacement parts. If aircraft or engines for which we offer aircraft components and replacement parts are retired or grounded for prolonged\nperiods of time and there are fewer aircraft that require these components or parts, our revenues may decline as well as the value of any related inventory.\nContractual defaults may adversely affect our business, prospects, financial condition, results of operations and cash flows by decreasing revenues and increasing\nstorage, positioning, collection, recovery and lost equipment expenses.\nThe success of our business depends in large part on the success of the operators in the sectors in which we participate. Cash flows from our assets are substantially\nimpacted by our ability to collect compensation and other amounts to be paid in respect of such assets from the customers with whom we enter into leases, charters or other\ncontractual arrangements. Inherent in the nature of the leases, charters and other arrangements for the use of such assets is the risk that we may not receive, or may\nexperience delay in realizing, such amounts to be paid. While we target the entry into contracts with credit-worthy counterparties, no assurance can be given that such\ncounterparties will perform their obligations during the term of the leases, charters or other contractual arrangements. In addition, when counterparties default, we may fail to\nrecover all of our assets, and the assets we do recover may be returned in damaged condition or to locations where we will not be able to efficiently lease, charter or sell them.\nIn most cases, we maintain, or require our lessees to maintain, certain insurances to cover the risk of damages or loss of our assets. However, these insurance policies may\nnot be sufficient to protect us against a loss.\nDepending on the specific sector, the risk of contractual defaults may be elevated due to excess capacity as a result of oversupply during the most recent economic downturn.\nWe lease assets to our customers pursuant to fixed-price contracts, and our customers then seek to utilize those assets to transport goods and provide services. If the price at\nwhich our customers receive for their transportation services decreases as a result of an oversupply in the marketplace, then our customers may be forced to reduce their\nprices in order to attract business (which may have an adverse effect on their ability to meet their contractual lease obligations to us), or may seek to renegotiate or terminate\ntheir contractual lease arrangements with us to pursue a lower-priced opportunity with another lessor, which may have a direct, adverse effect on us. See \u201c-The industries in\nwhich we operate have experienced periods of oversupply during which lease rates and asset values have declined, particularly during the most recent economic downturn,\nand any future oversupply could materially adversely affect our results of operations and cash flows.\u201d Any default by a material customer would have a significant impact on our\nprofitability at the time the customer defaulted, which could materially adversely affect our operating results and growth prospects. In addition, some of our counterparties may\nreside in jurisdictions with legal and regulatory regimes that make it difficult and costly to enforce such counterparties\u2019 obligations.\nWe acquire a high concentration of a particular type of asset, or concentrate our investments in a particular sector, and our business, prospects, financial condition,\nresults of operations and cash flows could be adversely affected by changes in market demand or problems specific to that asset or sector.\nIf we acquire a high concentration of a particular asset, or concentrate our investments in a particular sector, and our business and financial results could be adversely affected\nby sector-specific or asset-specific factors. If the market demand for a particular asset declines, it is redesigned or replaced by its manufacturer or it experiences design or\ntechnical problems, the value and rates relating to such asset may decline, and we may be unable to lease such asset on favorable terms, if at all. Any decrease in the value\nand rates of our assets may have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.\n\n\n 53\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 55 of 69\n\n\n\n\nWe operate in highly competitive markets.\nThe business of acquiring aviation assets is highly competitive. Market competition for opportunities includes traditional transportation companies, commercial and investment\nbanks, as well as a growing number of non-traditional participants, such as hedge funds, private equity funds and other private investors, including Fortress-related entities.\nSome of these competitors may have access to greater amounts of capital and/or to capital that may be committed for longer periods of time or may have different return\nthresholds than us, and thus these competitors may have certain advantages not shared by us. In addition, competitors may have incurred, or may in the future incur, leverage\nto finance their debt investments at levels or on terms more favorable than those available to us. Strong competition for investment opportunities could result in fewer such\nopportunities for us, as certain of these competitors have established and are establishing investment vehicles that target the same types of assets that we intend to purchase.\nIn addition, some of our competitors may have longer operating histories, greater financial resources and lower costs of capital than us, and consequently, may be able to\ncompete more effectively in one or more of our target markets. We likely will not always be able to compete successfully with our competitors and competitive pressures or\nother factors may also result in significant price competition, particularly during industry downturns, which could have a material adverse effect on our business, prospects,\nfinancial condition, results of operations and cash flows.\nOur business could suffer if we fail to attract and retain management and other highly skilled personnel.\nOur future success will depend on our ability to identify, hire, develop, motivate and retain highly qualified management and other personnel for all areas of the Company.\nTrained and experienced personnel are in high demand and may be in short supply in some areas. We may not be able to attract, develop and maintain an adequate skilled\nmanagement and workforce necessary to operate our businesses and labor expenses may increase as a result of a shortage in the supply of qualified personnel. If we are\nunable to attract and retain such personnel, we may not be able to take advantage of acquisitions and other growth opportunities that may be presented to us and this could\nhave a material adverse effect on our business, financial condition, liquidity and results of operations.\nCertain liens may arise on our assets.\nCertain of our assets are currently subject to liens under separate financing arrangements entered into by certain subsidiaries in connection with acquisitions of assets. In the\nevent of a default under such arrangements by the applicable subsidiary, the lenders thereunder would be permitted to take possession of or sell such assets. In addition, our\ncurrently owned assets and assets that we purchase in the future may be subject to other liens based on the industry practices relating to such assets. Until they are\ndischarged, these liens could impair our ability to repossess, re-lease or sell our assets, and to the extent our lessees or charterers do not comply with their obligations to\ndischarge any liens on the applicable assets, we may find it necessary to pay the claims secured by such liens in order to repossess such assets. Such payments could\nmaterially adversely affect our operating results and growth prospects.\nThe values of our assets may fluctuate due to various factors.\nThe fair market values of our assets may decrease or increase depending on a number of factors, including the prevailing level of charter or lease rates from time to time,\ngeneral economic and market conditions affecting our target markets, type and age of assets, supply and demand for assets, competition, new governmental or other\nregulations and technological advances, all of which could impact our profitability and our ability to lease, develop, operate, or sell such assets. In addition, our assets\ndepreciate as they age and may generate lower revenues and cash flows. We must be able to replace such older, depreciated assets with newer assets, or our ability to\nmaintain or increase our revenues and cash flows will decline. In addition, if we dispose of an asset for a price that is less than the depreciated book value of the asset on our\nbalance sheet or if we determine that an asset\u2019s value has been impaired, we will recognize a related charge in our consolidated statement of operations and such charge\ncould be material.\nWe may not generate a sufficient amount of cash or generate sufficient free cash flow to fund our operations or repay our indebtedness.\nOur ability to make payments on our indebtedness as required depends on our ability to generate cash flow in the future. This ability, to a certain extent, is subject to general\neconomic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we do not generate sufficient free cash flow to satisfy our debt\nobligations, including interest payments and the payment of principal at maturity, we may have to undertake alternative financing plans, such as refinancing or restructuring our\ndebt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot provide assurance that any refinancing would be possible, that\nany assets could be sold, or, if sold, of the timeliness and amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at\nall, or that additional financing would be permitted under the terms of our various debt instruments then in effect. Furthermore, our ability to refinance would depend upon the\ncondition of the finance and credit markets. Our inability to generate sufficient free cash flow to satisfy our debt obligations, or to refinance our obligations on commercially\nreasonable terms or on a timely basis, would materially affect our business, financial condition and results of operations.\nOur use of joint ventures or partnerships may present unforeseen obstacles or costs.\nWe have acquired and may in the future acquire interests in certain assets in cooperation with third-party partners or co-investors through jointly-owned acquisition vehicles,\njoint ventures or other structures. In these co-investment situations, our ability to\n\n\n 54\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 56 of 69\n\n\n\n\ncontrol the management of such assets depends upon the nature and terms of the joint arrangements with such partners and our relative ownership stake in the asset, each\nof which will be determined by negotiation at the time of the investment. . Such arrangements present risks not present with wholly-owned assets, such as the possibility that a\nco-investor becomes bankrupt, develops business interests or goals that conflict with our interests and goals in respect of the assets, all of which could materially adversely\naffect our business, prospects, financial condition, results of operations and cash flows.\nIn addition, we expect to utilize third-party contractors to perform services and functions related to the operation and leasing of our assets. These functions may include billing,\ncollections, recovery and asset monitoring. Because we do not directly control these third parties, there can be no assurance that the services they provide will be delivered at a\nlevel commensurate with our expectations, or at all. The failure of any such third-party contractors to perform in accordance with our expectations could materially adversely\naffect our business, prospects, financial condition, results of operations and cash flows.\nWe are subject to the risks and costs of obsolescence of our assets.\nTechnological and other improvements expose us to the risk that certain of our assets may become technologically or commercially obsolete. For example, as manufacturers\nintroduce technological innovations and new types of aircraft, some of our assets could become less desirable to potential lessees. Such technological innovations may\nincrease the rate of obsolescence of existing aircraft faster than currently anticipated by us. In addition, the imposition of increased regulation regarding stringent noise or\nemissions restrictions may make some of our aircraft less desirable and less valuable in the marketplace. In our offshore energy business, development and construction of\nnew, sophisticated, high-specification assets could cause our assets to become less desirable to potential charterers, and insurance rates may also increase with the age of\na vessel, making older vessels less desirable to potential charterers. Any of these risks may adversely affect our ability to lease, charter or sell our assets on favorable terms, if\nat all, which could materially adversely affect our operating results and growth prospects.\nThe inability to obtain certain components from suppliers could harm our business.\nOur business is affected by the availability and price of the component parts that we use to maintain our products or to manufacture products. Our ability to manage inventory\nand meet delivery requirements may be constrained by our suppliers\u2019 ability to adjust delivery of long-lead time products during times of volatile demand. The supply chains for\nour business could also be disrupted by external events such as natural disasters, extreme weather events, pandemics, labor disputes, governmental actions and legislative\nor regulatory changes. As a result, our suppliers may fail to perform according to specifications when required and we may be unable to identify alternate suppliers or to\notherwise mitigate the consequences of their non-performance.\nTransitions to new suppliers may result in significant costs and delays, including those related to the required recertification of parts obtained from new suppliers with our\ncustomers and/or regulatory agencies. Our inability to fill our supply needs could jeopardize our ability to fulfill obligations under customer contracts, which could result in\nreduced revenues and profits, contract penalties or terminations, and damage to customer relationships. Further, increased costs of such components could reduce our profits\nif we were unable to pass along such price in-creases to our customers.\nWe could be negatively impacted by environmental, social, and governance (ESG) and sustainability-related matters.\nGovernments, investors, customers, employees and other stakeholders are increasingly focusing on corporate ESG practices and disclosures, and expectations in this area\nare rapidly evolving. We have announced, and may in the future announce, sustainability-focused investments, partnerships and other initiatives and goals. These initiatives,\naspirations, targets or objectives reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our efforts to accomplish and accurately\nreport on these initiatives and goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material negative impact,\nincluding on our reputation and stock price.\nIn addition, the standards for tracking and reporting on ESG matters are relatively new, have not been harmonized and continue to evolve. Our selection of disclosure\nframeworks that seek to align with various voluntary reporting standards may change from time to time and may result in a lack of comparative data from period to period.\nMoreover, our processes and controls may not always align with evolving voluntary standards for identifying, measuring, and reporting ESG metrics, our interpretation of\nreporting standards may differ from those of others, and such standards may change over time, any of which could result in significant revisions to our goals or reported\nprogress in achieving such goals. In this regard, the criteria by which our ESG practices and disclosures are assessed may change due to the quickly evolving landscape,\nwhich could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. The increasing attention to corporate ESG initiatives\ncould also result in increased investigations and litigation or threats thereof. If we are unable to satisfy such new criteria, investors may conclude that our ESG and\nsustainability practices are inadequate. If we fail or are perceived to have failed to achieve previously announced initiatives or goals or to accurately disclose our progress on\nsuch initiatives or goals, our reputation, business, financial condition and results of operations could be adversely impacted.\nWe may be affected by fluctuating prices for fuel and energy.\nVolatility in energy prices could have a significant effect on a variety of items including, but not limited to, the economy and demand for transportation services.\nInternational, political, and economic factors, events and conditions, including current sanctions against Russia related to its invasion of Ukraine, affect the volatility of fuel\nprices and supplies. Weather can also affect fuel supplies and limit domestic\n\n\n 55\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 57 of 69\n\n\n\n\nrefining capacity. A severe shortage of, or disruption to, domestic fuel supplies could have a material adverse effect on our results of operations, financial condition, and\nliquidity.\nOur assets generally require routine maintenance, and we may be exposed to unforeseen maintenance costs.\nWe may be exposed to unforeseen maintenance costs for our assets associated with a lessee\u2019s or charterer\u2019s failure to properly maintain the asset. We enter into leases and\ncharters with respect to some of our assets pursuant to which the lessees are primarily responsible for many obligations, which generally include complying with all\ngovernmental requirements applicable to the lessee or charterer, including operational, maintenance, government agency oversight, registration requirements and other\napplicable directives. Failure of a lessee or charterer to perform required maintenance during the term of a lease or charter could result in a decrease in value of an asset, an\ninability to re-lease or charter an asset at favorable rates, if at all, or a potential inability to utilize an asset. Maintenance failures would also likely require us to incur\nmaintenance and modification costs upon the termination of the applicable lease or charter\u037e such costs to restore the asset to an acceptable condition prior to re-leasing,\ncharter or sale could be substantial. Any failure by our lessees or charterers to meet their obligations to perform required scheduled maintenance or our inability to maintain\nour assets could materially adversely affect our business, prospects, financial condition, results of operations and cash flows.\nSome of our customers operate in highly regulated industries and changes in laws or regulations, including laws with respect to international trade, may adversely\naffect our ability to lease, charter or sell our assets.\nSome of our customers operate in highly regulated industries such as aviation and offshore energy. A number of our contractual arrangements-for example, our leasing aircraft\nengines or offshore energy equipment to third-party operators-require the operator (our customer) to obtain specific governmental or regulatory licenses, consents or\napprovals. These include consents for certain payments under such arrangements and for the export, import or re-export of the related assets. Failure by our customers or, in\ncertain circumstances, by us, to obtain certain licenses and approvals could negatively affect our ability to conduct our business. In addition, the shipment of goods, services\nand technology across international borders subjects the operation of our assets to international trade laws and regulations. Moreover, many countries, including the United\nStates, control the export and re-export of certain goods, services and technology and impose related export recordkeeping and reporting obligations. Governments also may\nimpose economic sanctions against certain countries, persons and other entities that may restrict or prohibit transactions involving such countries, persons and entities. If any\nsuch regulations or sanctions affect the asset operators that are our customers, our business, prospects, financial condition, results of operations and cash flows may be\nmaterially adversely affected.\nCertain of our assets are subject to purchase options held by the charterer or lessee of the asset which, if exercised, could reduce the size of our asset base and our\nfuture revenues.\nWe have granted purchase options to the charterers and lessees of certain of our assets. The market values of these assets may change from time to time depending on a\nnumber of factors, such as general economic and market conditions affecting the industries in which we operate, competition, cost of construction, governmental or other\nregulations, technological changes and prevailing levels of charter or lease rates from time to time. The purchase price under a purchase option may be less than the asset\u2019s\nmarket value at the time the option may be exercised. In addition, we may not be able to obtain a replacement asset for the price at which the asset is sold. In such cases, our\nbusiness, prospects, financial condition, results of operations and cash flows may be materially adversely affected.\nThe profitability of our offshore energy assets may be impacted by the profitability of the offshore oil and gas industry generally, which is significantly affected by,\namong other things, volatile oil and gas prices.\nDemand for assets in the offshore energy business and our ability to secure charter contracts for our assets at favorable charter rates following expiry or termination of existing\ncharters will depend, among other things, on the level of activity in the offshore oil and gas industry. The offshore oil and gas industry is cyclical and volatile, and demand for oil-\nservice assets depends on, among other things, the level of development and activity in oil and gas exploration, as well as the identification and development of oil and gas\nreserves and production in offshore areas worldwide. The availability of high quality oil and gas prospects, exploration success, relative production costs, the stage of reservoir\ndevelopment, political concerns and regulatory requirements all affect the level of activity for charterers of oil-service vessels. Accordingly, oil and gas prices and market\nexpectations of potential changes in these prices significantly affect the level of activity and demand for oil-service assets. Oil and gas prices can be extremely volatile and are\naffected by numerous factors beyond our control, such as: worldwide demand for oil and gas\u037e costs of exploring, developing, producing and delivering oil and gas\u037e expectations\nregarding future energy prices\u037e the ability of the Organization of Petroleum Exporting Countries (\u201cOPEC\u201d) to set and maintain production levels and impact pricing\u037e the level of\nproduction in non-OPEC countries\u037e governmental regulations and policies regarding development of oil and gas reserves\u037e local and international political, economic and\nweather conditions\u037e domestic and foreign tax or trade policies\u037e political and military conflicts in oil-producing and other countries\u037e and the development and exploration of\nalternative fuels. Any reduction in the demand for our assets due to these or other factors could materially adversely affect our operating results and growth prospects.\n\n\n 56\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 58 of 69\n\n\n\n\nWe may not be able to renew or obtain new or favorable charters or leases, which could adversely affect our business, prospects, financial condition, results of\noperations and cash flows.\nOur operating leases are subject to greater residual risk than direct finance leases because we will own the assets at the expiration of an operating lease term and we may be\nunable to renew existing charters or leases at favorable rates, or at all, or sell the leased or chartered assets, and the residual value of the asset may be lower than anticipated.\nIn addition, our ability to renew existing charters or leases or obtain new charters or leases will also depend on prevailing market conditions, and upon expiration of the\ncontracts governing the leasing or charter of the applicable assets, we may be exposed to increased volatility in terms of rates and contract provisions. For example, we do not\ncurrently have long-term charters for our construction support vessel and our ROV support vessel. Likewise, our customers may reduce their activity levels or seek to terminate\nor renegotiate their charters or leases with us. If we are not able to renew or obtain new charters or leases in direct continuation, or if new charters or leases are entered into at\nrates substantially below the existing rates or on terms otherwise less favorable compared to existing contractual terms, or if we are unable to sell assets for which we are\nunable to obtain new contracts or leases, our business, prospects, financial condition, results of operations and cash flows could be materially adversely affected.\nLitigation to enforce our contracts and recover our assets has inherent uncertainties that are increased by the location of our assets in jurisdictions that have less\ndeveloped legal systems.\nWhile some of our contractual arrangements are governed by New York law and provide for the non-exclusive jurisdiction of the courts located in the state of New York, our\nability to enforce our counterparties\u2019 obligations under such contractual arrangements is subject to applicable laws in the jurisdiction in which enforcement is sought. While\nsome of our existing assets are used in specific jurisdictions, transportation and aviation assets by their nature generally move throughout multiple jurisdictions in the ordinary\ncourse of business. As a result, it is not possible to predict, with any degree of certainty, the jurisdictions in which enforcement proceedings may be commenced. Litigation and\nenforcement proceedings have inherent uncertainties in any jurisdiction and are expensive. These uncertainties are enhanced in countries that have less developed legal\nsystems where the interpretation of laws and regulations is not consistent, may be influenced by factors other than legal merits and may be cumbersome, time-consuming\nand even more expensive. For example, repossession from defaulting lessees may be difficult and more expensive in jurisdictions whose laws do not confer the same\nsecurity interests and rights to creditors and lessors as those in the United States and where the legal system is not as well developed. As a result, the remedies available and\nthe relative success and expedience of collection and enforcement proceedings with respect to the owned assets in various jurisdictions cannot be predicted. To the extent\nmore of our business shifts to areas outside of the United States and Europe, such as Asia and the Middle East, it may become more difficult and expensive to enforce our\nrights and recover our assets.\nOur international operations involve additional risks, which could adversely affect our business, prospects, financial condition, results of operations and cash flows.\nWe and our customers operate in various regions throughout the world. As a result, we may, directly or indirectly, be exposed to political and other uncertainties, including risks\nof:\n \u2022 terrorist acts, armed hostilities, war and civil disturbances\u037e\n \u2022 acts of piracy\u037e\n \u2022 potential cybersecurity attacks\u037e\n \u2022 significant governmental influence over many aspects of local economies\u037e\n \u2022 seizure, nationalization or expropriation of property or equipment\u037e\n \u2022 repudiation, nullification, modification or renegotiation of contracts\u037e\n \u2022 limitations on insurance coverage, such as war risk coverage, in certain areas\u037e\n \u2022 political unrest\u037e\n \u2022 foreign and U.S. monetary policy and foreign currency fluctuations and devaluations\u037e\n \u2022 the inability to repatriate income or capital\u037e\n \u2022 complications associated with repairing and replacing equipment in remote locations\u037e\n \u2022 import-export quotas, wage and price controls, imposition of trade barriers\u037e\n \u2022 U.S. and foreign sanctions or trade embargoes\u037e\n \u2022 restrictions on the transfer of funds into or out of countries in which we operate\u037e\n \u2022 compliance with U.S. Treasury sanctions regulations restricting doing business with certain nations or specially designated nationals\u037e\n \u2022 regulatory or financial requirements to comply with foreign bureaucratic actions\u037e\n \u2022 compliance with applicable anti-corruption laws and regulations\u037e\n \u2022 changing taxation policies, including confiscatory taxation\u037e\n \u2022 other forms of government regulation and economic conditions that are beyond our control\u037e and\n \u2022 governmental corruption.\nAny of these or other risks could adversely impact our customers\u2019 international operations which could materially adversely impact our operating results and growth\nopportunities.\n\n\n 57\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 59 of 69\n\n\n\n\nWe may make acquisitions in emerging markets throughout the world, and investments in emerging markets are subject to greater risks than developed markets and\ncould adversely affect our business, prospects, financial condition, results of operations and cash flows.\nTo the extent that we acquire assets in emerging markets-which we may do throughout the world-additional risks may be encountered that could adversely affect our business.\nEmerging market countries have less developed economies and infrastructure and are often more vulnerable to economic and geopolitical challenges and may experience\nsignificant fluctuations in gross domestic product, interest rates and currency exchange rates, as well as civil disturbances, government instability, nationalization and\nexpropriation of private assets and the imposition of taxes or other charges by government authorities. In addition, the currencies in which investments are denominated may\nbe unstable, may be subject to significant depreciation and may not be freely convertible or may be subject to the imposition of other monetary or fiscal controls and\nrestrictions.\nEmerging markets are still in relatively early stages of their development and accordingly may not be highly or efficiently regulated. Moreover, emerging markets tend to be\nshallower and less liquid than more established markets which may adversely affect our ability to realize profits from our assets in emerging markets when we desire to do so\nor receive what we perceive to be their fair value in the event of a realization. In some cases, a market for realizing profits from an investment may not exist locally. In addition,\nissuers based in emerging markets are not generally subject to uniform accounting and financial reporting standards, practices and requirements comparable to those\napplicable to issuers based in more developed countries, thereby potentially increasing the risk of fraud and other deceptive practices. Settlement of transactions may be\nsubject to greater delay and administrative uncertainties than in developed markets and less complete and reliable financial and other information may be available to\ninvestors in emerging markets than in developed markets. In addition, economic instability in emerging markets could adversely affect the value of our assets subject to leases\nor charters in such countries, or the ability of our lessees or charters, which operate in these markets, to meet their contractual obligations. As a result, lessees or charterers\nthat operate in emerging market countries may be more likely to default under their contractual obligations than those that operate in developed countries. Liquidity and volatility\nlimitations in these markets may also adversely affect our ability to dispose of our assets at the best price available or in a timely manner.\nAs we have and may continue to acquire assets located in emerging markets throughout the world, we may be exposed to any one or a combination of these risks, which could\nadversely affect our operating results.\nWe are actively evaluating potential acquisitions of assets and operating companies in other aviation sectors which could result in additional risks and uncertainties for\nour business and unexpected regulatory compliance costs.\nWhile our existing portfolio primarily consists of assets in the aviation sector, we are actively evaluating potential acquisitions of assets and operating companies in sectors of\nthe aviation market in which we do not currently operate and we plan to be flexible as other attractive opportunities arise over time. To the extent we make acquisitions in other\nsectors, we will face numerous risks and uncertainties, including risks associated with the required investment of capital and other resources and with combining or\nintegrating operational and management systems and controls. Entry into certain lines of business may subject us to new laws and regulations and may lead to increased\nlitigation and regulatory risk. Many types of transportation assets, including certain aviation assets, are subject to registration requirements by U.S. governmental agencies, as\nwell as foreign governments if such assets are to be used outside of the United States. Failing to register the assets, or losing such registration, could result in substantial\npenalties, forced liquidation of the assets and/or the inability to operate and, if applicable, lease the assets. We may need to incur significant costs to comply with the laws and\nregulations applicable to any such new acquisition. The failure to comply with these laws and regulations could cause us to incur significant costs, fines or penalties or require\nthe assets to be removed from service for a period of time resulting in reduced income from these assets. In addition, if our acquisitions in other sectors produce insufficient\nrevenues, or produce investment losses, or if we are unable to efficiently manage our expanded operations, our results of operations will be adversely affected, and our\nreputation and business may be harmed.\nThe agreements governing our indebtedness place restrictions on us and our subsidiaries, reducing operational flexibility and creating default risks.\nThe agreements governing our indebtedness, including, but not limited to, the indentures governing our senior unsecured notes due 2027, 2028, 2030 and 2031 (\u201cSenior\nNotes\u201d) and the second amended and restated revolving credit facility entered into on September 20, 2022, as (the \u201cRevolving Credit Facility\u201d), contain covenants that place\nrestrictions on us and our subsidiaries. The indentures governing our Senior Notes and the Revolving Credit Facility restrict among other things, our and certain of our\nsubsidiaries\u2019 ability to:\n \u2022 merge, consolidate or transfer all, or substantially all, of our assets\u037e\n \u2022 incur additional debt or issue preferred shares\u037e\n \u2022 make certain investments or acquisitions\u037e\n \u2022 create liens on our or our subsidiaries\u2019 assets\u037e\n \u2022 sell assets\u037e\n \u2022 make distributions on or repurchase our shares\u037e\n \u2022 enter into transactions with affiliates\u037e and\n \u2022 create dividend restrictions and other payment restrictions that affect our subsidiaries.\n\n\n 58\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 60 of 69\n\n\n\n\nThese covenants could impair our ability to grow our business, take advantage of attractive business opportunities, pay dividends on our ordinary shares or successfully\ncompete. A breach of any of these covenants could result in an event of default. Cross-default provisions in our debt agreements could cause an event of default under one\ndebt agreement to trigger an event of default under our other debt agreements. Upon the occurrence of an event of default under any of our debt agreements, the lenders or\nholders thereof could elect to declare all outstanding debt under such agreements to be immediately due and payable.\nTerrorist attacks or other hostilities could negatively impact our operations and our profitability and may expose us to liability and reputational damage.\nTerrorist attacks may negatively affect our operations. Such attacks have contributed to economic instability in the United States and elsewhere, and further acts of terrorism,\nviolence or war could similarly affect world trade and the industries in which we and our customers operate. In addition, terrorist attacks or hostilities may directly impact\nairports or aircraft or our physical facilities or those of our customers. In addition, it is also possible that our assets could be involved in a terrorist attack or other hostilities. The\nconsequences of any terrorist attacks or hostilities are unpredictable, and we may not be able to foresee events that could have a material adverse effect on our operations.\nAlthough our lease and charter agreements generally require the counterparties to indemnify us against all damages arising out of the use of our assets, and we carry\ninsurance to potentially offset any costs in the event that our customer indemnifications prove to be insufficient, our insurance does not cover certain types of terrorist attacks,\nand we may not be fully protected from liability or the reputational damage that could arise from a terrorist attack which utilizes our assets.\nProjects in the aerospace products and services sector are exposed to a variety of unplanned interruptions which could cause our results of operations to suffer.\nProjects in the aerospace products and services sector are exposed to unplanned interruptions caused by breakdown or failure of equipment, aging infrastructure, employee\nerror or contractor or subcontractor failure, limitations that may be imposed by equipment conditions or environmental, safety or other regulatory requirements, fuel supply or\nfuel transportation reductions or interruptions, labor or legal disputes, difficulties with the implementation or operation of information systems, power outages, pipeline or\nelectricity line ruptures, catastrophic events, such as hurricanes, cyclones, earthquakes, landslides, floods, explosions, fires, or other disasters. Any equipment or system\noutage or constraint can, among other things, reduce sales, increase costs and affect the ability to meet regulatory service metrics, customer expectations and regulatory\nreliability and security requirements. Operational disruption, as well as supply disruption, and increased government oversight could adversely impact the cash flows available\nfrom these assets. In addition, the cost of repairing or replacing damaged assets could be considerable. Repeated or prolonged interruption may result in temporary or\npermanent loss of customers, substantial litigation or penalties for regulatory or contractual non-compliance, and any loss from such events may not be recoverable under\nrelevant insurance policies. Although we believe that we are adequately insured against these types of events, no assurance can be given that the occurrence of any such event\nwill not materially adversely affect us.\nOur leases and charters typically require payments in U.S. dollars, but many of our customers operate in other currencies\u037e if foreign currencies devalue against the\nU.S. dollar, our lessees or charterers may be unable to meet their payment obligations to us in a timely manner.\nOur current leases and charters typically require that payments be made in U.S. dollars. If the currency that our lessees or charterers typically use in operating their businesses\ndevalues against the U.S. dollar, our lessees or charterers could encounter difficulties in making payments to us in U.S. dollars. Furthermore, many foreign countries have\ncurrency and exchange laws regulating international payments that may impede or prevent payments from being paid to us in U.S. dollars. Future leases or charters may\nprovide for payments to be made in euros or other foreign currencies. Any change in the currency exchange rate that reduces the amount of U.S. dollars obtained by us upon\nconversion of future lease payments denominated in euros or other foreign currencies, may, if not appropriately hedged by us, have a material adverse effect on us and\nincrease the volatility of our earnings.\nOur inability to obtain sufficient capital would constrain our ability to grow our portfolio and to increase our revenues.\nOur business is capital intensive, and we have used and may continue to employ leverage to finance our operations. Accordingly, our ability to successfully execute our\nbusiness strategy and maintain our operations depends on the availability and cost of debt and equity capital. Additionally, our ability to borrow against our assets is\ndependent, in part, on the appraised value of such assets. If the appraised value of such assets declines, we may be required to reduce the principal outstanding under our\ndebt facilities or otherwise be unable to incur new borrowings.\nWe can give no assurance that the capital we need will be available to us on favorable terms, or at all. Our inability to obtain sufficient capital, or to renew or expand our credit\nfacilities, could result in increased funding costs and would limit our ability to:\n \u2022 meet the terms and maturities of our existing and future debt facilities\u037e\n \u2022 purchase new assets or refinance existing assets\u037e\n \u2022 fund our working capital needs and maintain adequate liquidity\u037e and\n \u2022 finance other growth initiatives.\nIn addition, we conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment Company Act of\n1940 (the \u201cInvestment Company Act\u201d). As such, certain forms of financing such as finance leases may not be available to us. Please see \u201c- If we are deemed an \u201cinvestment\ncompany\u201d under the Investment\n\n\n 59\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 61 of 69\n\n\n\n\nCompany Act, it could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.\u201d\nThe effects of various environmental regulations may negatively affect the industries in which we operate which could have a material adverse effect on our financial\ncondition, results of operations and cash flows.\nWe are subject to federal, state, local and foreign laws and regulations relating to the protection of the environment, including those governing the discharge of pollutants to air\nand water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites and noise and emission levels and greenhouse gas\nemissions. Legislative and regulatory measures currently under consideration or being implemented by government authorities to address climate change could require\nreductions in our greenhouse gas or other emissions, establish a carbon tax or increase fuel or energy taxes. These legal requirements are expected to result in increased\ncapital expenditures and compliance costs, and could result in higher costs and may require us to acquire emission credits or carbon offsets. These costs and restrictions\ncould harm our business and results of operations by increasing our expenses or requiring us to alter our operations. The inconsistent international, regional and/or national\nrequirements associated with climate change regulations also create economic and regulatory uncertainty.\nUnder some environmental laws in the United States and certain other countries, strict liability may be imposed on the owners or operators of assets, which could render us\nliable for environmental and natural resource damages without regard to negligence or fault on our part. We could incur substantial costs, including cleanup costs, fines and\nthird-party claims for property damage and personal injury, as a result of violations of or liabilities under environmental laws and regulations in connection with our or our\nlessee\u2019s or charterer\u2019s current or historical operations, any of which could have a material adverse effect on our results of operations and financial condition. In addition, a\nvariety of new legislation is being enacted, or considered for enactment, at the federal, state and local levels relating to greenhouse gas emissions and climate change. While\nthere has historically been a lack of consistent climate change legislation, as climate change concerns continue to grow, further legislation and regulations are expected to\ncontinue in areas such as greenhouse gas emissions control, emission disclosure requirements and building codes or other infrastructure requirements that impose energy\nefficiency standards. Government mandates, standards or regulations intended to mitigate or reduce greenhouse gas emissions or projected climate change impacts could\nresult in increased energy and transportation costs, and increased compliance expenses and other financial obligations to meet permitting or development requirements that\nwe may be unable to fully recover (due to market conditions or other factors), any of which could result in reduced profits and adversely affect our results of operations. While we\ntypically maintain liability insurance coverage and typically require our lessees to provide us with indemnity against certain losses, the insurance coverage is subject to large\ndeductibles, limits on maximum coverage and significant exclusions and may not be sufficient or available to protect against any or all liabilities and such indemnities may not\ncover or be sufficient to protect us against losses arising from environmental damage. In addition, changes to environmental standards or regulations in the industries in\nwhich we operate could limit the economic life of the assets we acquire or reduce their value, and also require us to make significant additional investments in order to\nmaintain compliance, which would negatively impact our cash flows and results of operations.\nThe discontinuation of the LIBOR benchmark interest rate may have an impact on our business.\nOn July 27, 2017, the U.K. Financial Conduct Authority (the \"FCA\"), which regulates LIBOR, announced that it will no longer persuade or compel banks to submit rates for the\ncalculation of LIBOR rates after 2021. On November 30, 2020, ICE Benchmark Administration, or the IBA, the administrator of LIBOR, with the support of the United States\nFederal Reserve and the FCA, announced plans to consult on ceasing publication of LIBOR on December 31, 2021, for only the one-week and two-month LIBOR tenors, and\non June 30, 2023, for all other LIBOR tenors. The U.S. Federal Reserve concurrently issued a statement advising banks to stop new LIBOR issuances by the end of 2021. The\nIBA ceased publication of one-week and two-month USD LIBOR settings after December 31, 2021, and the remaining USD LIBOR settings after June 30, 2023, other than\ncertain USD LIBOR settings that are expected to continue to be published under a synthetic methodology until September 2024.\nIn the United States, the Alternative Reference Rate Committee (\u201cARRC\u201d), a group of diverse private-market participants assembled by the Federal Reserve Board and the\nFederal Reserve Bank of New York, was tasked with identifying alternative reference rates to replace LIBOR. The Secured Overnight Finance Rate (\u201cSOFR\u201d) has emerged as\nthe ARRC's preferred alternative rate for LIBOR. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities in the repurchase\nagreement market. At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates.\nA cyberattack that bypasses our information technology (\u201cIT\u201d), security systems or the IT security systems of our third-party providers, causing an IT security breach,\nmay lead to a disruption of our IT systems and the loss of business information which may hinder our ability to conduct our business effectively and may result in lost\nrevenues and additional costs.\nParts of our business depend on the secure operation of our IT systems and the IT systems of our third-party providers to manage, process, store, and transmit information\nassociated with aircraft leasing. We have, from time to time, experienced threats to our data and systems, including malware and computer virus attacks. A cyberattack that\nbypasses our IT security systems or the IT security systems of our third-party providers, causing an IT security breach, could adversely impact our daily operations and lead to\nthe loss of sensitive information, including our own proprietary information and that of our customers, suppliers and employees. Such losses could harm our reputation and\nresult in competitive disadvantages, litigation, regulatory enforcement actions, lost revenues, additional costs and liabilities. While we devote substantial resources to\nmaintaining\n\n\n 60\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 62 of 69\n\n\n\n\nadequate levels of cybersecurity, our resources and technical sophistication may not be adequate to prevent all types of cyberattacks.\nIf we are deemed an \u201cinvestment company\u201d under the Investment Company Act, it could have a material adverse effect on our business, prospects, financial condition,\nresults of operations and cash flows.\nWe conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment Company Act. Section 3(a)\n(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily, or proposes to engage primarily, in\nthe business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged\nor proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value\nexceeding 40% of the value of the issuer\u2019s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Excluded from the term\n\u201cinvestment securities,\u201d among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment\ncompanies and are not relying on the exception from the definition of investment company for certain privately-offered investment vehicles set forth in Section 3(c)(1) or Section\n3(c)(7) of the Investment Company Act.\nWe are a holding company that is not an investment company because we are engaged in the business of holding securities of our wholly-owned and majority-owned\nsubsidiaries, which are engaged in transportation and related businesses which lease assets pursuant to operating leases and finance leases. The Investment Company Act\nmay limit our and our subsidiaries\u2019 ability to enter into financing leases and engage in other types of financial activity because less than 40% of the value of our and our\nsubsidiaries\u2019 total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis can consist of \u201cinvestment securities.\u201d\nIf we or any of our subsidiaries were required to register as an investment company under the Investment Company Act, the registered entity would become subject to\nsubstantial regulation that would significantly change our operations, and we would not be able to conduct our business as described in this report. We have not obtained a\nformal determination from the SEC as to our status under the Investment Company Act and, consequently, any violation of the Investment Company Act would subject us to\nmaterial adverse consequences.\nBecause we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through\nthe U.S. federal courts may be limited.\nWe are an exempted company incorporated under the laws of the Cayman Islands. As a result, it may be difficult for investors to effect service of process within the United\nStates upon our directors or officers, or enforce judgments obtained in the United States courts against our directors or officers.\nOur corporate affairs are governed by our Articles, the Companies Act (As Revised) of the Cayman Islands (the \u2018\u2018Cayman Companies Act\u2019\u2019) and the common law of the Cayman\nIslands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman\nIslands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited\njudicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the\nCayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are different from what they would be under\nstatutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws as compared to the United\nStates, and certain states, such as Delaware, may have more fully developed and judicially interpreted bodies of corporate law. In addition, Cayman Islands companies may\nnot have standing to initiate a shareholders derivative action in a federal court of the United States.\nWe have been advised by Maples and Calder (Cayman) LLP, our Cayman Islands legal counsel, that the courts of the Cayman Islands are unlikely (1) to recognize or enforce\nagainst us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state\u037e and (2) in original\nactions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the federal securities laws of the United States or any\nstate, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of\njudgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction\nwithout retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which\njudgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and\nfor a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the\ngrounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or\nmultiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought\nelsewhere.\nAs a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of\ndirectors or controlling shareholders than they would as public shareholders of a United States company.\n\n\n 61\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 63 of 69\n\n\n\n\nRisks Related to Taxation\nWe expect the Company to be a passive foreign investment company (\u201cPFIC\u201d) and it could be a controlled foreign corporation (\u201cCFC\u201d) for U.S. federal income tax\npurposes, which may result in adverse tax considerations for U.S. shareholders.\nWe expect the Company to be treated as a PFIC and it could be treated as a CFC for U.S. federal income tax purposes. If you are a U.S. person and do not make a valid\nqualified electing fund (\u201cQEF\u201d) election with respect to us and each of our PFIC subsidiaries, then, unless we are a CFC and you own 10% or more of our shares (by vote or\nvalue), you would generally be subject to special deferred tax with respect to certain distributions on our shares, any gain realized on a disposition of our shares, and certain\nother events. The effect of this deferred tax could be materially adverse to you. Alternatively, if you are such a shareholder and make a valid QEF election for us and each of our\nPFIC subsidiaries, or if we are a CFC and you own 10% or more of our shares (by vote or value), you will generally not be subject to those taxes, but could recognize taxable\nincome in a taxable year with respect to our shares in excess of any distributions that we make to you in that year, thus giving rise to so called \u201cphantom income\u201d and to a\npotential out-of-pocket tax liability. No assurances can be given that any given shareholder will be able to make a valid QEF election with respect to us or our PFIC subsidiaries.\nSee \u201cU.S. Federal Income Tax Considerations -Considerations for U.S. Holders-PFIC Status and Related Tax Considerations.\u201d\nAssuming we are a PFIC, distributions made by us to a U.S. person will generally not be eligible for taxation at reduced tax rates generally applicable to \u201cqualified dividends\u201d\npaid by certain U.S. corporations and \u201cqualified foreign corporations\u201d to individuals. The more favorable rates applicable to other corporate dividends could cause individuals to\nperceive investment in our shares to be relatively less attractive than investment in the shares of other corporations, which could adversely affect the value of our shares.\nInvestors should consult their tax advisors regarding the potential impact of these rules on their investment in us.\nTo the extent we recognize income treated as effectively connected with a trade or business in the United States, we would be subject to U.S. federal income taxation on\na net income basis, which could adversely affect our business and result in decreased cash available for distribution to our shareholders.\nIf we are treated as engaged in a trade or business in the United States, the portion of our net income, if any, that is \u201ceffectively connected\u201d with such trade or business would\nbe subject to U.S. federal income taxation at maximum corporate rates, currently 21%. In addition, we may be subject to an additional U.S. federal branch profits tax on our\neffectively connected earnings and profits at a rate of 30%. The imposition of such taxes could adversely affect our business and would result in decreased cash available for\ndistribution to our shareholders. Although we (or one or more of our non-U.S. corporate subsidiaries) are expected to be treated as engaged in a U.S. trade or business, it is\ncurrently expected that only a small portion of our taxable income will be treated as effectively connected with such U.S. trade or business. However, no assurance can be given\nthat the amount of effectively connected income will not be greater than currently expected, whether due to a change in our operations or otherwise.\nIf there is not sufficient trading in our shares, or if 50% of our shares are held by certain 5% shareholders, we could lose our eligibility for an exemption from U.S. federal\nincome taxation on rental income from our aircraft or ships used in \u201cinternational traffic\u201d and could be subject to U.S. federal income taxation which would adversely\naffect our business and result in decreased cash available for distribution to our shareholders.\nWe expect that we will be eligible for an exemption under Section 883 of the Internal Revenue Code of 1986, as amended (the \u201cCode\u201d), which provides an exemption from U.S.\nfederal income taxation with respect to rental income derived from aircraft and ships used in international traffic by certain foreign corporations. No assurances can be given\nthat we will continue to be eligible for this exemption as changes in our ownership or the amount of our shares that are traded could cause us to cease to be eligible for such\nexemption. To qualify for this exemption in respect of rental income, the lessor of the aircraft or ships must be organized in a country that grants a comparable exemption to U.S.\nlessors. The Cayman Islands and the Marshall Islands grant such exemptions. Additionally, certain other requirements must be satisfied. We can satisfy these requirements in\nany year if, for more than half the days of such year, our shares are primarily and regularly traded on a recognized exchange and certain shareholders, each of whom owns 5%\nor more of our shares (applying certain attribution rules), do not collectively own more than 50% of our shares. Our shares will be considered to be primarily and regularly\ntraded on a recognized exchange in any year if: (i) the number of trades in our shares effected on such recognized stock exchanges exceed the number of our shares (or direct\ninterests in our shares) that are traded during the year on all securities markets\u037e (ii) trades in our shares are effected on such stock exchanges in more than de minimis\nquantities on at least 60 days during every calendar quarter in the year\u037e and (iii) the aggregate number of our shares traded on such stock exchanges during the taxable year is\nat least 10% of the average number of our shares outstanding in that class during that year. If we were not eligible for the exemption under Section 883 of the Code, we expect\nthat our U.S. source rental income would generally be subject to U.S. federal taxation, on a gross income basis, at a rate of not in excess of 4% as provided in Section 887 of\nthe Code. If, contrary to expectations, we or certain of our non-U.S. subsidiaries did not comply with certain administrative guidelines of the U.S. Internal Revenue Service (the\n\u201cIRS\u201d), such that 90% or more of the U.S. source rental income of the Company or any of such subsidiaries were attributable to the activities of personnel based in the United\nStates (in the case of bareboat leases), or from \u201cregularly scheduled transportation\u201d as defined in such administrative guidelines (in the case of time charter leases), our, or\nsuch subsidiary\u2019s, U.S. source rental income would be treated as income effectively connected with the conduct of a trade or business in the United States. In such case, such\nU.S. source rental income would be subject to U.S. federal income taxation at the maximum corporate rate as well as state and local taxation. In addition, the Company or such\nsubsidiary would be subject to the U.S. federal branch profits tax on its effectively\n\n\n 62\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 64 of 69\n\n\n\n\nconnected earnings and profits at a rate of 30%. The imposition of such taxes could adversely affect our business and would result in decreased cash available for distribution\nto our shareholders.\nWe or our subsidiaries may become subject to increased and/or unanticipated tax liabilities that may have a material adverse effect on our results of operations.\nSome of our subsidiaries are subject to income, withholding or other taxes in certain non-U.S. jurisdictions by reason of their jurisdiction of incorporation, activities and\noperations, where their assets are used or where the lessees of their assets (or others in possession of their assets) are located, and it is also possible that taxing authorities\nin any such jurisdictions could assert that we or our subsidiaries are subject to greater taxation than we currently face or otherwise anticipate. Further, the Organisation for\nEconomic Co-operation and Development (the \u201cOECD\u201d) is conducting a project focused on base erosion and profit shifting in international structures, which seeks to establish\ncertain international standards for taxing the worldwide income of multinational companies. In addition, the OECD is working on a \u201cBEPS 2.0\u201d initiative, which is aimed at (i)\nshifting taxing rights to the jurisdiction of the consumer and (ii) ensuring all companies pay a global minimum tax. On October 8, 2021, the OECD announced an agreement\namong over 140 countries delineating an implementation plan, on December 20, 2021, the OECD released model rules for the domestic implementation of a 15% global\nminimum tax, on December 15, 2022, the member states of the European Union unanimously voted to adopt the OECD\u2019s minimum tax rules and phase them into national law,\nand on February 2, 2023 the OECD released technical guidance on the global minimum tax which was agreed by consensus of the BEPS 2.0 signatory jurisdictions.\nNumerous countries, including European Union member states, have enacted or are expected to enact minimum tax legislation, and other countries may enact such\nlegislation in the future. Additionally, On December 27, 2023, Bermuda enacted a corporate tax regime with a 15% rate (the \u201cBermuda CIT\u201d) and with requirements similar to\nthose of the OECD\u2019s minimum tax proposal. The Bermuda CIT will be effective for tax years beginning on or after January 1, 2025 (see footnote 10 to our consolidated financial\nstatements entitled \u201cIncome Taxes\u201d included elsewhere in this Quarterly Report). As a result of these developments, the tax laws of certain countries in which we and our\naffiliates do business are expected to change (and could change on a retroactive basis) and certain of such changes are expected to increase our liabilities for taxes (and\npossibly interest and penalties) and therefore could harm our business, cash flows, results of operations and financial position. In addition, a portion of certain of our or our\nnon-U.S. corporate subsidiaries\u2019 income is treated as effectively connected with a U.S. trade or business and is accordingly subject to U.S. federal income tax or may be\nsubject to gross-basis U.S. withholding tax. It is possible that the IRS could assert that a greater portion of our or any such non-U.S. subsidiaries\u2019 income is effectively\nconnected income that should be subject to U.S. federal income tax or subject to withholding tax.\nRisks Related to Our Shares\nThe market price and trading volume of our ordinary and preferred shares may be volatile, which could result in rapid and substantial losses for our shareholders.\nThe market price of our ordinary and preferred shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our ordinary and\npreferred shares may fluctuate and cause significant price variations to occur. If the market price of our ordinary or preferred shares declines significantly, you may be unable to\nresell your shares at or above your purchase price, if at all. The market price of our ordinary and preferred shares may fluctuate or decline significantly in the future. Some of the\nfactors that could negatively affect our share price or result in fluctuations in the price or trading volume of our shares include:\n \u2022 a shift in our investor base\u037e\n \u2022 our quarterly or annual earnings, or those of other comparable companies\u037e\n \u2022 actual or anticipated fluctuations in our operating results\u037e\n \u2022 changes in accounting standards, policies, guidance, interpretations or principles\u037e\n \u2022 announcements by us or our competitors of significant investments, acquisitions or dispositions\u037e\n \u2022 the failure of securities analysts to cover our ordinary shares\u037e\n \u2022 changes in earnings estimates by securities analysts or our ability to meet those estimates\u037e\n \u2022 the operating and share price performance of other comparable companies\u037e\n \u2022 prevailing interest rates or rates of return being paid by other comparable companies and the market for securities similar to our preferred shares\u037e\n \u2022 additional issuances of preferred shares\u037e\n \u2022 whether we declare distributions on our preferred shares\u037e\n \u2022 overall market fluctuations\u037e\n \u2022 general economic conditions\u037e and\n \u2022 developments in the markets and market sectors in which we participate.\nStock markets in the United States have experienced extreme price and volume fluctuations. Market fluctuations, as well as general political and economic conditions, such as\nacts of terrorism, prolonged economic uncertainty, a recession or interest rate or currency rate fluctuations, could adversely affect the market price of our ordinary and preferred\nshares.\nAn increase in market interest rates may have an adverse effect on the market price of our shares.\n\n\n 63\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 65 of 69\n\n\n\n\nOne of the factors that investors may consider in deciding whether to buy or sell our shares is our distribution rate as a percentage of our share price relative to market interest\nrates. If the market price of our shares is based primarily on the earnings and return that we derive from our investments and income with respect to our investments and our\nrelated distributions to shareholders, and not from the market value of the investments themselves, then interest rate fluctuations and capital market conditions will likely affect\nthe market price of our shares. For instance, if market interest rates rise without an increase in our distribution rate, the market price of our shares could decrease, as potential\ninvestors may require a higher distribution yield on our shares or seek other securities paying higher distributions or interest. In addition, rising interest rates would result in\nincreased interest expense on our outstanding and future (variable and fixed) rate debt, thereby adversely affecting cash flows and our ability to service our indebtedness and\npay distributions.\nWe are required by Section 404 of the Sarbanes-Oxley Act to evaluate the effectiveness of our internal controls, and the outcome of that effort may adversely affect our\nresults of operations, financial condition and liquidity.\nAs a public company, we are required to comply with Section 404 (\u201cSection 404\u201d) of the Sarbanes-Oxley Act. Section 404 requires that we evaluate the effectiveness of our\ninternal control over financial reporting at the end of each fiscal year and to include a management report assessing the effectiveness of our internal controls over financial\nreporting in our Annual Report on Form 10-K for that fiscal year. Section 404 also requires an independent registered public accounting firm to attest to, and report on,\nmanagement\u2019s assessment of our internal controls over financial reporting. The outcome of our review and the report of our independent registered public accounting firm may\nadversely affect our results of operations, financial condition and liquidity. During the course of our review, we may identify control deficiencies of varying degrees of severity, and\nwe may incur significant costs to remediate those deficiencies or otherwise improve our internal controls. As a public company, we are required to report control deficiencies\nthat constitute a \u201cmaterial weakness\u201d in our internal control over financial reporting. If we discover a material weakness in our internal control over financial reporting, our share\nprice could decline and our ability to raise capital could be impaired.\nYour percentage ownership in us may be diluted in the future.\nYour percentage ownership in FTAI Aviation Ltd. may be diluted in the future because of equity awards that we expect will be granted to our directors, officers and employees, as\nwell as other equity instruments such as debt and equity financing.\nOur board of directors has adopted the Incentive Plan, which provides for the grant of equity-based awards, including restricted shares, stock options, stock appreciation rights,\nperformance awards, restricted share units, tandem awards and other equity-based and non-equity based awards, in each case the Former Manager, to the directors, officers,\nemployees, service providers, consultants and advisors of the Former Manager who performed services for us, and to our directors, officers, employees, service providers,\nconsultants and advisors. We have initially reserved 30,000,000 ordinary shares for issuance under the Incentive Plan. As of June 30, 2024, rights relating to 544,634 of our\nordinary shares were outstanding under the Incentive Plan. In the future on the date of any equity issuance by us during the remaining portion of the ten-year term of the\nIncentive Plan (including in respect of securities issued as consideration in an acquisition), the maximum number of shares available for issuance under the Plan will be\nincreased to include an additional number of ordinary shares equal to ten percent (10%) of either (i) the total number of ordinary shares newly issued by us in such equity\nissuance or (ii) if such equity issuance relates to equity securities other than our ordinary shares, a number of our ordinary shares equal to 10% of (A) the gross capital raised\nin an equity issuance of equity securities other than ordinary shares during the ten-year term of the Incentive Plan, divided by (B) the fair market value of an ordinary share as of\nthe date of such equity issuance.\nSales or issuances of our ordinary shares could adversely affect the market price of our ordinary shares.\nSales of substantial amounts of our ordinary shares in the public market, or the perception that such sales might occur, could adversely affect the market price of our ordinary\nshares. The issuance of our ordinary shares in connection with property, portfolio or business acquisitions or the exercise of outstanding options or otherwise could also have\nan adverse effect on the market price of our ordinary shares.\nThe incurrence or issuance of debt, which ranks senior to our ordinary shares upon our liquidation, and future issuances of equity or equity-related securities, which\nwould dilute the holdings of our existing ordinary shareholders and may be senior to our ordinary shares for the purposes of making distributions, periodically or upon\nliquidation, may negatively affect the market price of our ordinary shares.\nWe have incurred and may in the future incur or issue debt or issue equity or equity-related securities to finance our operations, acquisitions or investments. Upon our\nliquidation, lenders and holders of our debt and holders of our preferred shares (if any) would receive a distribution of our available assets before ordinary shareholders. Any\nfuture incurrence or issuance of debt would increase our interest cost and could adversely affect our results of operations and cash flows. We are not required to offer any\nadditional equity securities to existing ordinary shareholders on a preemptive basis. Therefore, additional issuances of ordinary shares, directly or through convertible or\nexchangeable securities warrants or options, will dilute the holdings of our existing ordinary shareholders and such issuances, or the perception of such issuances, may\nreduce the market price of our ordinary shares. Any preferred shares issued by us would likely have a preference on distribution payments, periodically or upon liquidation,\nwhich could eliminate or otherwise limit our ability to make distributions to ordinary shareholders. Because our decision to incur or issue debt or issue equity or equity-related\nsecurities in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future\ncapital raising efforts. Thus, ordinary shareholders bear the risk that our future incurrence or issuance of debt or issuance of equity or equity-related securities will adversely\naffect the market price of our ordinary shares.\n\n\n 64\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 66 of 69\n\n\n\n\nOur determination of how much leverage to use to finance our acquisitions may adversely affect our return on our assets and may reduce funds available for\ndistribution.\nWe utilize leverage to finance many of our asset acquisitions, which entitles certain lenders to cash flows prior to retaining a return on our assets. While we target using only\nwhat we believe to be reasonable leverage, our strategy does not limit the amount of leverage we may incur with respect to any specific asset. The return we are able to earn on\nour assets and funds available for distribution to our shareholders may be significantly reduced due to changes in market conditions, which may cause the cost of our\nfinancing to increase relative to the income that can be derived from our assets.\nWhile we currently intend to pay regular quarterly dividends to our shareholders, we may change our dividend policy at any time.\nAlthough we currently intend to pay regular quarterly dividends to holders of our ordinary shares, we may change our dividend policy at any time. Our net cash provided by\noperating activities has been less than the amount of distributions to our shareholders. The declaration and payment of dividends to holders of our ordinary shares are at the\ndiscretion of our board of directors in accordance with applicable law after taking into account various factors, including actual results of operations, liquidity and financial\ncondition, net cash provided by operating activities, restrictions imposed by applicable law, our taxable income, our operating expenses and other factors our board of directors\ndeem relevant. There can be no assurance that we will continue to pay dividends in amounts or on a basis consistent with prior distributions to our investors, if at all. Because\nwe are a holding company and have no direct operations, we will only be able to pay dividends from our available cash on hand and any funds we receive from our\nsubsidiaries. Our indirect intermediate holding company subsidiary FTAI LLC is currently, and may in the future be, subject to certain covenants included in its financing\nagreements that limit its ability to make distributions to us. In addition, our existing indebtedness does, and our future indebtedness may, limit our ability to pay dividends on\nour ordinary and preferred shares. Furthermore, the terms of our preferred shares generally prevent us from declaring or paying dividends on or repurchasing our ordinary\nshares or other junior capital unless all accrued distributions on such preferred shares have been paid in full.\nAnti-takeover provisions in our Articles could delay or prevent a change in control.\nProvisions in our Articles may make it more difficult and expensive for a third party to acquire control of us even if a change of control would be beneficial to the interests of our\nshareholders. For example, our Articles provides for a staggered board, requires advance notice for proposals by shareholders and nominations, places limitations on\nconvening shareholder meetings, and authorizes the issuance of preferred shares that could be issued by our board of directors to thwart a takeover attempt. The market price\nof our shares could be adversely affected to the extent that provisions of our operating agreement discourage potential takeover attempts that our shareholders may favor.\nIf securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our ordinary shares, our\nshare price and trading volume could decline.\nThe trading market for our ordinary shares are influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the\nanalysts who cover us downgrades our ordinary units or publishes inaccurate or unfavorable research about our business, our ordinary share price may decline. If analysts\ncease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our ordinary share price or trading\nvolume to decline and our ordinary shares to be less liquid.\nItem 2. Unregistered Sales of Equity Securities and Use of Proceeds\nNone.\nItem 3. Defaults Upon Senior Securities\nNone.\nItem 4. Mine Safety Disclosures\nNot applicable.\nItem 5. Other Information\nNone.\n\n\n 65\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 67 of 69\n\n\n\n\nItem 6. Exhibits\n Exhibit No. Description\n 2.1 Agreement and Plan of Merger, dated as of August 12, 2022, by and among, FTAI, the Company and FTAI Aviation Merger Sub LLC (incorporated by reference to Annex A\n to FTAI\u2019s Registration Statement on Form S-4, filed on October 11, 2022).\n 2.2 Separation and Distribution Agreement, dated as of August 1, 2022, between FTAI Infrastructure Inc. and the Company (incorporated by reference to Exhibit 2.1 of the\n Company\u2019s Current Report on Form 8-K, filed on August 1, 2022).\n 3.1 Amended and Restated Memorandum and Articles of Association of the Company (incorporated by reference to Exhibit 3.1 of the Company\u2019s Current Report on Form 8-K,\n filed on November 14, 2022).\n 3.2 Share Designation with respect to the 8.25% Fixed-to-Floating Series A Cumulative Perpetual Redeemable Preferred Shares (included as part of Exhibit 3.1 hereto).\n 3.3 Share Designation with respect to the 8.00% Fixed-to-Floating Series B Cumulative Perpetual Redeemable Preferred Shares (included as part of Exhibit 3.1 hereto).\n 3.4 Share Designation with respect to the 8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares (included as part of Exhibit 3.1 hereto).\n 3.5 Share Designation with respect to the 9.500% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation Ltd. (incorporated by\n reference to Exhibit 4.1 of the Company\u2019s Registration Statement on Form 8-A, filed on March 15, 2023).\n 3.6 Form of Certificate representing the 8.25% Fixed-to-Floating Rate Series A Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation Ltd. (included as part of\n Exhibit 3.1 hereto).\n 3.7 Form of Certificate representing the 8.00% Fixed-to-Floating Rate Series B Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation Ltd. (included as part of\n Exhibit 3.1 hereto).\n 3.8 Form of Certificate representing the 8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation Ltd. (included as part of Exhibit\n 3.1 hereto).\n 3.9 Form of certificate representing the 9.500% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares of FTAI Aviation Ltd. (incorporated by\n reference to Exhibit 4.2 of the Company\u2019s Registration Statement on Form 8-A, filed on March 15, 2023).\n 4.1 Indenture, dated July 28, 2020, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s 9.75% senior unsecured notes due 2027\n (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on July 28, 2020).\n 4.2 Form of global note representing the Company\u2019s 9.75% senior unsecured notes due 2027 (included in Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n July 28, 2020).\n 4.3 2027 Notes Guarantee, dated November 10, 2022 (incorporated by reference to Exhibit 4.2 of the Company\u2019s Current Report on Form 8-K, filed on November 14, 2022).\n 4.4 Indenture, dated April 12, 2021, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s 5.50% senior unsecured notes due 2028\n (incorporated by reference to Exhibit 4.1 to the Company\u2019s Current Report on Form 8-K, filed on April 12, 2021).\n 4.5 Form of global note representing the Company\u2019s 5.50% senior unsecured notes due 2028 (included in Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n April 12, 2021).\n 4.6 First Supplemental Indenture, dated as of September 24, 2021, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s 5.50%\n senior unsecured notes due 2028 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on September 24, 2021).\n 4.7 2028 Notes Guarantee, dated November 10, 2022 (incorporated by reference to Exhibit 4.3 of the Company\u2019s Current Report on Form 8-K, filed on November 14, 2022).\n 4.8 Indenture, dated November 21, 2023, between the Company and U.S. Bank National Association, as trustee, relating to the Company\u2019s 7.875% senior unsecured notes\n due 2030 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on November 22, 2023).\n 4.9 Form of global note representing the Company\u2019s 7.875% senior unsecured notes due 2030 (included in Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n November 22, 2023).\n 4.10 Indenture, dated April 11, 2024, among Fortress Transportation and Infrastructure Investors LLC, the Company as guarantor, and U.S. Bank Trust Company, National\n Association, as trustee, relating to the Company\u2019s 7.000% senior unsecured notes due 2031 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current Report on\n Form 8-K, filed on April 11, 2024).\n 4.11 Form of global note representing the Company\u2019s 7.000% senior unsecured notes due 2031 (included in Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n April 11, 2024).\n 4.12 Indenture, dated as of June 17, 2024, among Fortress Transportation and Infrastructure Investors LLC, FTAI Aviation Ltd. as guarantor, and U.S. Bank Trust Company,\n National Association, as trustee relating to the Company\u2019s 7.000% senior unsecured notes due 2032 (incorporated by reference to Exhibit 4.1 of the Company\u2019s Current\n Report on Form 8-K, filed on June 17, 2024).\n 4.13 Form of global note representing the Company\u2019s 7.000% senior unsecured notes due 2032 (included in Exhibit 4.1 of the Company\u2019s Current Report on Form 8-K, filed on\n June 17, 2024).\n 4.14 Description of Securities Registered under Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.15 of the Company\u2019s Annual Report on Form 10-K, filed\n on February 26, 2024).\n\u2020 10.1 FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan, dated as of February 23, 2023.\n\u2020 10.2 Form of FTAI Aviation Ltd. Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.6 to the Company\u2019s Registration Statement on Form S-4,\n filed on October 4, 2022).\n\u2020 10.3 Form of Director Award Agreement pursuant to the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.7 to the\n Company\u2019s Registration Statement on Form S-4, filed on October 4, 2022).\n\n\n\n 66\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 68 of 69\n\n\n\n\n Exhibit No. Description\n\u2020 10.4 Form of Non-Director Award Agreement under the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan (incorporated by reference to Exhibit 10.8 to the\n Company\u2019s Registration Statement on Form S-4, filed on October 4, 2022).\n\u2020 10.5 Form of Restricted Stock Unit Award Agreement under the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan.\n 10.6 Trademark License Agreement, dated as of August 1, 2022, between Fortress Transportation and Infrastructure Investors LLC and FTAI Infrastructure Inc. (incorporated\n by reference to Exhibit 10.3 of the Company\u2019s Current Report on Form 8-K, filed on August 1, 2022).\n* 10.7 Third Amended and Restated Credit Agreement, dated as of May 22, 2024, between the Company, the lenders and issuing banks from time to time party thereto and\n JPMorgan Chase Bank, N.A., as administrative agent.\n 10.8 Revolver Guarantee, dated November 10, 2022 (incorporated by reference to Exhibit 4.4 of the Company\u2019s Current Report on Form 8-K, filed on November 14, 2022).\n* 10.9 Internalization Agreement, dated May 28, 2024, by and among FTAI Aviation Ltd., FIG LLC and Fortress Worldwide Transportation and Infrastructure Master GP LLC\n (incorporated by reference to Exhibit 10.1 of the Company\u2019s Current Report on Form 8-K, filed on May 28, 2024).\n* 10.10 Transition Services Agreement, dated May 28, 2024, by and between FTAI Aviation Ltd. and FIG LLC (incorporated by reference to Exhibit 10.2 of the Company\u2019s Current\n Report on Form 8-K, filed on May 28, 2024).\n\u2020 10.11 Letter Agreement, dated May 27, 2024, by and among FTAI Aviation LLC, FTAI Aviation Ltd. and Joseph P. Adams, Jr.\n\u2020 10.12 Letter Agreement, dated May 27, 2024, by and among FTAI Aviation LLC, FTAI Aviation Ltd. and Eun (Angela) Nam.\n 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\n 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\n 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\n 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\n 97.1 FTAI Aviation Ltd. Clawback Policy effective as of December 1, 2023.\n 101 The following financial information from the Company\u2019s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in iXBRL (Inline Extensible Business\n Reporting Language): (i) Consolidated Balance Sheets\u037e (ii) Consolidated Statements of Operations\u037e (iii) Consolidated Statements of Changes in Equity\u037e (iv) Consolidated\n Statements of Cash Flows\u037e and (v) Notes to Consolidated Financial Statements.\n 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)\n\u2020 Management contracts and compensatory plans or arrangements.\n* Certain schedules or similar attachments to this exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K.\n\n\n\n\n 67\n\f Case 1:25-cv-00541-JAV Document 70-12 Filed 11/20/25 Page 69 of 69\n\n\n\n\n SIGNATURES\n\n\nPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly\nauthorized:\nFTAI Aviation Ltd.\nBy: /s/ Joseph P. Adams, Jr. Date: August 9, 2024\n Joseph P. Adams, Jr.\n Chairman and Chief Executive Officer\n\nBy: /s/ Eun (Angela) Nam Date: August 9, 2024\n Eun (Angela) Nam\n Chief Financial Officer and Chief Accounting Officer\n\n\n\n\n 68\n\f","ocr_status":2,"date_upload":"2026-05-12T04:15:43.555665-07:00","document_number":"70","attachment_number":12,"pacer_doc_id":"127038602956","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit L - 2Q24 Form 10-Q","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874413/","id":478874413,"tags":[],"absolute_url":"/docket/69558488/70/13/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.547931-07:00","date_modified":"2026-05-14T07:08:06.710509-07:00","sha1":"c7e2586e12ec2bb7d9dbe6b95f1b1dec58c25bf5","page_count":123,"file_size":2173339,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.13.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.13.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 1 of 123\n\n\n\n\n Exhibit M\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 2 of 123\nRevenue\n\n606 Revenue from Contracts with Customers\n 10 Overall\n00 Status\n\n\n General Note:The Status Section identifies changes to this Subtopic resulting from Accounting\n Standards Updates. The Section provides references to the affected Codification content and links to\n the related Accounting Standards Updates. Nonsubstantive changes for items such as editorial, link\n and similar corrections are included separately in Maintenance Updates.\n\n\n\n\n General\n 606-10- The following table identifies the changes made to this Subtopic.\n 00-1\n Paragraph Action Accounting Standards Update Date\n\n Award Added Accounting Standards Update No. 2019-08 11/11/2019\n Contract Added Accounting Standards Update No. 2014-09 05/28/2014\n Contract Asset Added Accounting Standards Update No. 2014-09 05/28/2014\n Contract Liability Added Accounting Standards Update No. 2014-09 05/28/2014\n Customer Added Accounting Standards Update No. 2014-09 05/28/2014\n Grant Date Added Accounting Standards Update No. 2019-08 11/11/2019\n Lease Added Accounting Standards Update No. 2016-02 02/25/2016\n Not-for-Profit Entity Added Accounting Standards Update No. 2014-09 05/28/2014\n Performance\n Amended Accounting Standards Update No. 2025-04 05/15/2025\n Condition\n Performance\n Added Accounting Standards Update No. 2019-08 11/11/2019\n Condition\n Performance\n Added Accounting Standards Update No. 2014-09 05/28/2014\n Obligation\n Probable (2nd def.) Added Accounting Standards Update No. 2014-09 05/28/2014\n Public Business Entity Amended Maintenance Update 2017-06 04/07/2017\n\n Public Business Entity Amended Maintenance Update 2016-11 06/27/2016\n Public Business Entity Added Accounting Standards Update No. 2014-09 05/28/2014\n Revenue Amended Accounting Standards Update No. 2014-09 05/28/2014\n Service Condition Added Accounting Standards Update No. 2019-08 11/11/2019\n Share-Based\n Payment Added Accounting Standards Update No. 2025-04 05/15/2025\n Arrangements\n Standalone Selling\n Added Accounting Standards Update No. 2014-09 05/28/2014\n Price\n Transaction Price Added Accounting Standards Update No. 2014-09 05/28/2014\n\n 606-10-05-1 through\n Added Accounting Standards Update No. 2014-09 05/28/2014\n 05-6\n 606-10-10-1 through\n Added Accounting Standards Update No. 2014-09 05/28/2014\n 10-4\n 606-10-15-1 through\n Added Accounting Standards Update No. 2014-09 05/28/2014\n 15-5\n\fCase 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 3 of 123\n 606-10-15-2 Amended Maintenance Update 2021-02 01/19/2021\n 606-10-15-2 Amended Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-15-2 Amended Accounting Standards Update No. 2016-02 02/25/2016\n 606-10-15-2 Amended Accounting Standards Update No. 2016-01 01/05/2016\n 606-10-15-2A Added Accounting Standards Update No. 2018-08 06/21/2018\n 606-10-15-3 Amended Accounting Standards Update No. 2018-18 11/05/2018\n 606-10-15-3A Added Accounting Standards Update No. 2025-07 09/29/2025\n 606-10-25-1 Amended Accounting Standards Update No. 2016-12 05/09/2016\n 606-10-25-1 through\n Added Accounting Standards Update No. 2014-09 05/28/2014\n 25-37\n 606-10-25-3 Amended Accounting Standards Update No. 2016-12 05/09/2016\n 606-10-25-5 Amended Accounting Standards Update No. 2016-12 05/09/2016\n 606-10-25-7 Amended Accounting Standards Update No. 2016-12 05/09/2016\n 606-10-25-16 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-25-16A Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-25-16B Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-25-17 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-25-18 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-25-18A Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-25-18B Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-25-18C Added Accounting Standards Update No. 2021-02 01/28/2021\n 606-10-25-19 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-25-21 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-32-1 through\n Added Accounting Standards Update No. 2014-09 05/28/2014\n 32-45\n 606-10-32-2A Added Accounting Standards Update No. 2016-12 05/09/2016\n 606-10-32-21 Amended Accounting Standards Update No. 2016-12 05/09/2016\n 606-10-32-23 Amended Accounting Standards Update No. 2016-12 05/09/2016\n 606-10-32-25 Amended Accounting Standards Update No. 2025-04 05/15/2025\n 606-10-32-25 Amended Accounting Standards Update No. 2019-08 11/11/2019\n 606-10-32-25 Amended Accounting Standards Update No. 2018-07 06/20/2018\n 606-10-32-25A Amended Accounting Standards Update No. 2025-04 05/15/2025\n 606-10-32-25A Added Accounting Standards Update No. 2019-08 11/11/2019\n 606-10-45-1 through\n Added Accounting Standards Update No. 2014-09 05/28/2014\n 45-5\n 606-10-45-3 Amended Accounting Standards Update No. 2016-13 06/16/2016\n 606-10-45-4 Amended Accounting Standards Update No. 2016-13 06/16/2016\n 606-10-50-1 through\n Added Accounting Standards Update No. 2014-09 05/28/2014\n 50-23\n 606-10-50-4 Amended Accounting Standards Update No. 2016-13 06/16/2016\n 606-10-50-8 Amended Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-50-11 Amended Maintenance Update 2017-08 05/01/2017\n 606-10-50-12A Added Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-50-14 Amended Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-50-14A Added Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-50-14B Added Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-50-15 Amended Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-55-1 through\n Added Accounting Standards Update No. 2014-09 05/28/2014\n 55-413\n 606-10-55-3 Amended Accounting Standards Update No. 2025-04 05/15/2025\n\fCase 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 4 of 123\n 606-10-55-3 Amended Accounting Standards Update No. 2019-08 11/11/2019\n 606-10-55-3 Amended Accounting Standards Update No. 2016-12 05/09/2016\n 606-10-55-3 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-3A through\n Added Accounting Standards Update No. 2016-12 05/09/2016\n 55-3C\n 606-10-55-36 Amended Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-36A Added Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-37 Amended Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-37A Added Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-37B Added Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-38 Amended Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-39 Amended Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-39A Added Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-40 Amended Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-54 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-55 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-57 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-58 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-58A\n Added Accounting Standards Update No. 2016-10 04/14/2016\n through 55-58C\n 606-10-55-59 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-60 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-61 Superseded Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-62 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-63 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-63A Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-64 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-64A Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-65A Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-65B Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-68 Amended Accounting Standards Update No. 2016-02 02/25/2016\n 606-10-55-72 Amended Accounting Standards Update No. 2016-02 02/25/2016\n 606-10-55-88A Amended Accounting Standards Update No. 2025-04 05/15/2025\n 606-10-55-88A Added Accounting Standards Update No. 2019-08 11/11/2019\n 606-10-55-88AA\n Added Accounting Standards Update No. 2025-04 05/15/2025\n through 55-88AC\n 606-10-55-88B Amended Accounting Standards Update No. 2025-04 05/15/2025\n 606-10-55-88B Added Accounting Standards Update No. 2019-08 11/11/2019\n 606-10-55-88C Added Accounting Standards Update No. 2025-04 05/15/2025\n 606-10-55-93 Amended Accounting Standards Update No. 2025-07 09/29/2025\n 606-10-55-93 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-93 Amended Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-94 through\n Amended Accounting Standards Update No. 2016-12 05/09/2016\n 55-98\n 606-10-55-98A\n Added Accounting Standards Update No. 2016-12 05/09/2016\n through 55-98L\n 606-10-55-108 Amended Accounting Standards Update No. 2016-13 06/16/2016\n 606-10-55-109 Amended Accounting Standards Update No. 2016-13 06/16/2016\n 606-10-55-125 Amended Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-55-127 Amended Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-55-128 Amended Accounting Standards Update No. 2016-20 12/21/2016\n\fCase 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 5 of 123\n 606-10-55-136 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-137 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-139 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-140A\n Added Accounting Standards Update No. 2016-10 04/14/2016\n through 55-140F\n 606-10-55-142 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-143 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-145 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-147\n Amended Accounting Standards Update No. 2016-10 04/14/2016\n through 55-150\n 606-10-55-150A\n Added Accounting Standards Update No. 2016-10 04/14/2016\n through 55-150K\n 606-10-55-153 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-153A Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-155 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-156 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-157A\n Added Accounting Standards Update No. 2016-10 04/14/2016\n through 55-157E\n 606-10-55-231 Amended Accounting Standards Update No. 2016-13 06/16/2016\n 606-10-55-237 Amended Accounting Standards Update No. 2016-13 06/16/2016\n 606-10-55-239 Amended Accounting Standards Update No. 2016-13 06/16/2016\n 606-10-55-247 Amended Accounting Standards Update No. 2025-07 09/29/2025\n 606-10-55-248 Amended Accounting Standards Update No. 2025-07 09/29/2025\n 606-10-55-250 Amended Accounting Standards Update No. 2016-12 05/09/2016\n 606-10-55-250A\n Added Accounting Standards Update No. 2025-07 09/29/2025\n through 55-250D\n 606-10-55-285 Amended Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-55-286 Amended Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-55-293 Amended Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-55-300 Amended Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-55-305A Added Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-55-309 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-311\n Amended Accounting Standards Update No. 2016-10 04/14/2016\n through 55-313\n 606-10-55-316\n Amended Accounting Standards Update No. 2016-08 03/17/2016\n through 55-318\n 606-10-55-318A\n Added Accounting Standards Update No. 2016-08 03/17/2016\n through 55-318C\n 606-10-55-323 Amended Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-323A Added Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-323B Added Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-324 Amended Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-324A\n Added Accounting Standards Update No. 2016-08 03/17/2016\n through 55-324G\n 606-10-55-326\n Amended Accounting Standards Update No. 2016-08 03/17/2016\n through 55-328\n 606-10-55-328A\n Added Accounting Standards Update No. 2016-08 03/17/2016\n through 55-328C\n 606-10-55-329\n Amended Accounting Standards Update No. 2016-08 03/17/2016\n through 55-331\n 606-10-55-333 Amended Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-333A Added Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-333B Added Accounting Standards Update No. 2016-08 03/17/2016\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 6 of 123\n 606-10-55-334 Amended Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-55-334A\n Added Accounting Standards Update No. 2016-08 03/17/2016\n through 55-334F\n 606-10-55-361 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-363 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-363A Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-363B Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-364 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-365 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-365A Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-366\n Amended Accounting Standards Update No. 2016-10 04/14/2016\n through 55-368\n 606-10-55-370\n Amended Accounting Standards Update No. 2016-10 04/14/2016\n through 55-372\n 606-10-55-372A Added Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-373\n Amended Accounting Standards Update No. 2016-10 04/14/2016\n through 55-383\n 606-10-55-385\n Amended Accounting Standards Update No. 2016-10 04/14/2016\n through 55-392\n 606-10-55-392A\n Added Accounting Standards Update No. 2016-10 04/14/2016\n through 55-392D\n 606-10-55-393 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-394 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-55-396\n Amended Accounting Standards Update No. 2016-10 04/14/2016\n through 55-399\n 606-10-55-399A\n Added Accounting Standards Update No. 2016-10 04/14/2016\n through 55-399O\n 606-10-55-407 Amended Accounting Standards Update No. 2016-02 02/25/2016\n 606-10-60-1 through\n Added Accounting Standards Update No. 2014-09 05/28/2014\n 60-16\n 606-10-65-1 Amended Accounting Standards Update No. 2020-05 06/03/2020\n 606-10-65-1 Amended Accounting Standards Update No. 2017-13 09/29/2017\n 606-10-65-1 Amended Accounting Standards Update No. 2017-05 02/22/2017\n 606-10-65-1 Amended Accounting Standards Update No. 2017-03 01/23/2017\n 606-10-65-1 Amended Accounting Standards Update No. 2016-20 12/21/2016\n 606-10-65-1 Amended Accounting Standards Update No. 2016-12 05/09/2016\n 606-10-65-1 Amended Accounting Standards Update No. 2016-10 04/14/2016\n 606-10-65-1 Amended Accounting Standards Update No. 2016-08 03/17/2016\n 606-10-65-1 Amended Accounting Standards Update No. 2015-14 08/12/2015\n 606-10-65-1 Added Accounting Standards Update No. 2014-09 05/28/2014\n 606-10-65-2 Added Accounting Standards Update No. 2025-04 05/15/2025\n 606-10-65-3 Added Accounting Standards Update No. 2025-07 09/29/2025\n\n\n\n\n05 Overview and Background\n\n\n General Note:The Overview and Background Section provides overview and background material for\n the guidance contained in the Subtopic. It does not provide the historical background or due process. It\n may contain certain material that users generally consider useful to understand the typical situations\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 7 of 123\n addressed by the standards. The Section does not summarize the accounting and reporting\n requirements.\n\n\n\nGeneral\n606-10- This Topic specifies the accounting for revenue from contracts with customers.\n05-1\n\n606-10- This Topic establishes principles for reporting useful information to users of financial statements about the\n05-2\n nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity's contracts with\n customers.\n\n606-10- The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or\n05-3\n services to customers in an amount that reflects the consideration to which the entity expects to be entitled in\n exchange for those goods or services.\n\n606-10- An entity recognizes revenue in accordance with that core principle by applying the following steps:\n05-4\n aStep 1: Identify the contract(s) with a customer\u2014A contract is an agreement between two or more\n parties that creates enforceable rights and obligations. The guidance in this Topic applies to each contract\n that has been agreed upon with a customer and meets specified criteria. In some cases, this Topic\n requires an entity to combine contracts and account for them as one contract. This Topic also provides\n requirements for the accounting for contract modifications. (See paragraphs 606-10-25-1 through 25-13.)\n bStep 2: Identify the performance obligations in the contract\u2014A contract includes promises to transfer\n goods or services to a customer. If those goods or services are distinct, the promises are performance\n obligations and are accounted for separately. A good or service is distinct if the customer can benefit from\n the good or service on its own or together with other resources that are readily available to the customer\n and the entity's promise to transfer the good or service to the customer is separately identifiable from\n other promises in the contract. (See paragraphs 606-10-25-14 through 25-22.)\n cStep 3: Determine the transaction price\u2014The transaction price is the amount of consideration in a\n contract to which an entity expects to be entitled in exchange for transferring promised goods or services\n to a customer. The transaction price can be a fixed amount of customer consideration, but it may\n sometimes include variable consideration or consideration in a form other than cash. The transaction price\n also is adjusted for the effects of the time value of money if the contract includes a significant financing\n component and for any consideration payable to the customer. If the consideration is variable, an entity\n estimates the amount of consideration to which it will be entitled in exchange for the promised goods or\n services. The estimated amount of variable consideration will be included in the transaction price only to\n the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will\n not occur when the uncertainty associated with the variable consideration is subsequently resolved. (See\n paragraphs 606-10-32-2 through 32-27.)\n dStep 4: Allocate the transaction price to the performance obligations in the contract\u2014An entity typically\n allocates the transaction price to each performance obligation on the basis of the relative standalone\n selling prices of each distinct good or service promised in the contract. If a standalone selling price is not\n observable, an entity estimates it. Sometimes, the transaction price includes a discount or a variable\n amount of consideration that relates entirely to a part of the contract. The requirements specify when an\n entity allocates the discount or variable consideration to one or more, but not all, performance obligations\n (or distinct goods or services) in the contract. (See paragraphs 606-10-32-28 through 32-41.)\n eStep 5: Recognize revenue when (or as) the entity satisfies a performance obligation\u2014An entity\n recognizes revenue when (or as) it satisfies a performance obligation by transferring a promised good or\n service to a customer (which is when the customer obtains control of that good or service). The amount of\n revenue recognized is the amount allocated to the satisfied performance obligation. A performance\n obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or\n over time (typically for promises to transfer services to a customer). For performance obligations satisfied\n over time, an entity recognizes revenue over time by selecting an appropriate method for measuring the\n entity's progress toward complete satisfaction of that performance obligation. (See paragraphs 606-10-25-\n 23 through 25-30.)\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 8 of 123\n 606-10- This Topic also includes a cohesive set of disclosure requirements that would result in an entity providing\n 05-5\n users of financial statements with comprehensive information about the nature, amount, timing, and\n uncertainty of revenue and cash flows arising from the entity's contracts with customers. Specifically,\n Section 606-10-50 requires an entity to provide information about:\n aRevenue recognized from contracts with customers, including the disaggregation of revenue into\n appropriate categories\n bContract balances, including the opening and closing balances of receivables, contract assets,\n and contract liabilities\n cPerformance obligations, including when the entity typically satisfies its performance obligations and the\n transaction price that is allocated to the remaining performance obligations in a contract\n dSignificant judgments, and changes in judgments, made in applying the requirements to those contracts.\n Additionally, Section 340-40-50 requires an entity to provide quantitative and/or qualitative information about\n assets recognized from the costs to obtain or fulfill a contract with a customer.\n\n 606-10- Paragraphs presented in bold type in this Topic state the main principles. All paragraphs have equal authority.\n 05-6\n\n\n\n\n10 Objectives\n\n\n General Note:The Objectives Section provides the high-level objectives that the Subtopic is intended to\n accomplish or attain. The Section does not summarize or discuss the main principles of accounting and\n reporting requirements.\n\n\n\n\n General\n 606-10- The objective of the guidance in this Topic is to establish the principles that an entity shall apply to\n 10-1\n report useful information to users of financial statements about the nature, amount, timing, and\n uncertainty of revenue and cash flows arising from a contract with a customer.\n\n\n > Meeting the Objective\n 606-10- To meet the objective in paragraph 606-10-10-1, the core principle of the guidance in this Topic is that an entity\n 10-2\n shall recognize revenue to depict the transfer of promised goods or services to customers in an amount that\n reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.\n\n 606-10- An entity shall consider the terms of the contract and all relevant facts and circumstances when applying this\n 10-3\n guidance. An entity shall apply this guidance, including the use of any practical expedients, consistently to\n contracts with similar characteristics and in similar circumstances.\n\n 606-10- This guidance specifies the accounting for an individual contract with a customer. However, as a practical\n 10-4\n expedient, an entity may apply this guidance to a portfolio of contracts (or performance obligations) with\n similar characteristics if the entity reasonably expects that the effects on the financial statements of applying\n this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts\n (or performance obligations) within that portfolio. When accounting for a portfolio, an entity shall use estimates\n and assumptions that reflect the size and composition of the portfolio.\n\n\n\n\n15 Scope and Scope Exceptions\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 9 of 123\n\n General Note:The Scope and Scope Exceptions Section outlines the items (for example, the entities,\n transactions, instruments, or events) to which the guidance in the Subtopic does or does not apply. In\n some cases, the Section may contain definitional or other text to frame the scope.\n\n\n\n\nGeneral\n> Entities\n606-10- The guidance in this Subtopic applies to all entities.\n15-1\n\n> Transactions\n606-10- An entity shall apply the guidance in this Topic to all contracts with customers, except the following:\n15-2\n aLease contracts within the scope of Topic 842, Leases.\n bContracts within the scope of Topic 944, Financial Services\u2014Insurance.\n cFinancial instruments and other contractual rights or obligations within the scope of the following Topics:\n\n 1Topic 310, Receivables\n\n 2Topic 320, Investments\u2014Debt Securities\n\n 2aTopic 321, Investments\u2014Equity Securities\n\n 3Topic 323, Investments\u2014Equity Method and Joint Ventures\n\n 4Topic 325, Investments\u2014Other\n\n 5Topic 405, Liabilities\n\n 6Topic 470, Debt\n\n 7Topic 815, Derivatives and Hedging\n\n 8Topic 825, Financial Instruments\n\n 9Topic 860, Transfers and Servicing.\n dGuarantees (other than product or service warranties) within the scope of Topic 460, Guarantees.\n eNonmonetary exchanges between entities in the same line of business to facilitate sales to customers or\n potential customers. For example, this Topic would not apply to a contract between two oil companies that\n agree to an exchange of oil to fulfill demand from their customers in different specified locations on a\n timely basis. Topic 845 on nonmonetary transactions may apply to nonmonetary exchanges that are not\n within the scope of this Topic.\n\n606-10- An entity shall consider the guidance in Subtopic 958-605 on not-for-profit entities\u2014revenue recognition\u2014\n15-2A\n contributions when determining whether a transaction is a contribution within the scope of Subtopic 958-605 or\n a transaction within the scope of this Topic.\n\n606-10- An entity shall apply the guidance in this Topic to a contract (other than a contract listed in paragraph 606-10-\n15-3\n 15-2) only if the counterparty to the contract is a customer. A customer is a party that has contracted with an\n entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for\n consideration.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 10 of 123\n 606-10-\n 15-3A PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-3\n An entity shall apply the guidance in this Topic, including the guidance on noncash consideration in\n paragraphs 606-10-32-21 through 32-24, to a contract with share-based noncash consideration (for\n example, shares, share options, or other equity instruments) from a customer for the transfer of goods or\n services. The guidance in other Topics (including Topic 815 on derivatives and hedging and Topic 321 on\n equity securities) does not apply to share-based noncash consideration from a customer for the transfer\n of goods or services unless and until the entity\u2019s right to receive or retain the share-based noncash\n consideration is unconditional under this Topic. To assess whether the right is unconditional under this\n Topic, only the contract terms that relate to the entity\u2019s performance obligations (or a specific outcome of\n the entity\u2019s performance) within the scope of this Topic are evaluated. The determination of whether the\n right is unconditional is consistent with the guidance in paragraph 606-10-45-4, which states that a right to\n consideration is unconditional if only the passage of time is required before payment of that consideration\n is due.\n\n\n 606-10- A contract with a customer may be partially within the scope of this Topic and partially within the scope of other\n 15-4\n Topics listed in paragraph 606-10-15-2.\n aIf the other Topics specify how to separate and/or initially measure one or more parts of the contract,\n then an entity shall first apply the separation and/or measurement guidance in those Topics. An entity\n shall exclude from the transaction price the amount of the part (or parts) of the contract that are initially\n measured in accordance with other Topics and shall apply paragraphs 606-10-32-28 through 32-41 to\n allocate the amount of the transaction price that remains (if any) to each performance obligation within the\n scope of this Topic and to any other parts of the contract identified by paragraph 606-10-15-4(b).\n bIf the other Topics do not specify how to separate and/or initially measure one or more parts of the\n contract, then the entity shall apply the guidance in this Topic to separate and/or initially measure the part\n (or parts) of the contract.\n\n 606-10- Subtopic 340-40 on other assets and deferred costs from contracts with customers includes guidance on\n 15-5\n accounting for the incremental costs of obtaining a contract with a customer and for the costs incurred to fulfill\n a contract with a customer if those costs are not within the scope of another Topic (see Subtopic 340-40). An\n entity shall apply that guidance only to the costs incurred that relate to a contract with a customer (or part of\n that contract) that is within the scope of the guidance in this Topic.\n\n\n\n\n20 Glossary\n\n\n General Note:The Master Glossary contains all terms identified as glossary terms throughout the\n Codification. Clicking on any term in the Master Glossary will display where the term is used. The\n Master Glossary may contain identical terms with different definitions, some of which may not be\n appropriate for a particular Subtopic. For any particular Subtopic, users should only use the glossary\n terms included in the particular Subtopic Glossary Section (Section 20).\n\n\n\n\n Award\n\n The collective noun for multiple instruments with the same terms and conditions granted at the same time\n either to a single grantee or to a group of grantees. An award may specify multiple vesting dates, referred to\n as graded vesting, and different parts of an award may have different expected terms. References to an award\n also apply to a portion of an award.\n\n Contract\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 11 of 123\n An agreement between two or more parties that creates enforceable rights and obligations.\n\nContract Asset\n\n An entity's right to consideration in exchange for goods or services that the entity has transferred to\n a customer when that right is conditioned on something other than the passage of time (for example, the\n entity's future performance).\n\nContract Liability\n\n An entity's obligation to transfer goods or services to a customer for which the entity has received\n consideration (or the amount is due) from the customer.\n\nCustomer\n\n A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary\n activities in exchange for consideration.\n\nGrant Date\n\n The date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a\n share-based payment award. The grantor becomes contingently obligated on the grant date to issue equity\n instruments or transfer assets to a grantee who delivers goods or renders services or purchases goods or\n services as a customer. Awards made under an arrangement that is subject to shareholder approval are not\n deemed to be granted until that approval is obtained unless approval is essentially a formality (or perfunctory),\n for example, if management and the members of the board of directors control enough votes to approve the\n arrangement. Similarly, individual awards that are subject to approval by the board of directors, management,\n or both are not deemed to be granted until all such approvals are obtained. The grant date for an award of\n equity instruments is the date that a grantee begins to benefit from, or be adversely affected by, subsequent\n changes in the price of the grantor's equity shares. Paragraph 718-10-25-5 provides guidance on determining\n the grant date. See Service Inception Date.\n\nLease\n\n A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or\n equipment (an identified asset) for a period of time in exchange for consideration.\n\nNot-for-Profit Entity\n\n An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business\n entity:\n aContributions of significant amounts of resources from resource providers who do not expect\n commensurate or proportionate pecuniary return\n bOperating purposes other than to provide goods or services at a profit\n cAbsence of ownership interests like those of business entities.\n Entities that clearly fall outside this definition include the following:\n aAll investor-owned entities\n bEntities that provide dividends, lower costs, or other economic benefits directly and proportionately to\n their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural\n electric cooperatives, and employee benefit plans.\n\n\nPerformance Condition\n\n A condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining\n the fair value of an award that relates to both of the following:\n aRendering service or delivering goods for a specified (either explicitly or implicitly) period of time\n bAchieving a specified performance target that is defined solely by reference to the grantor's own\n operations (or activities) or by reference to the grantee's performance related to the grantor's own\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 12 of 123\n operations (or activities).\n Attaining a specified growth rate in return on assets, obtaining regulatory approval to market a specified\n product, selling shares in an initial public offering or other financing event, and a change in control are\n examples of performance conditions. A performance target also may be defined by reference to the same\n performance measure of another entity or group of entities. For example, attaining a growth rate in earnings\n per share (EPS) that exceeds the average growth rate in EPS of other entities in the same industry is a\n performance condition. A performance target might pertain to the performance of the entity as a whole or to\n some part of the entity, such as a division, or to the performance of the grantee if such performance is in\n accordance with the terms of the award and solely relates to the grantor's own operations (or activities).\n\n PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-2\n 1For share-based payments in which a grantor acquires goods or services to be used or consumed\n in the grantor\u2019s own operations, a condition affecting the vesting, exercisability, exercise price, or\n other pertinent factors used in determining the fair value of an award that relates to both of the\n following:\n aRendering service or delivering goods for a specified (either explicitly or implicitly) period of\n time\n bAchieving a specified performance target that is defined solely by reference to the grantor's own\n operations (or activities) or by reference to the grantee's performance related to the grantor's\n own operations (or activities).\n Attaining a specified growth rate in return on assets, obtaining regulatory approval to market a\n specified product, selling shares in an initial public offering or other financing event, and a change in\n control are examples of performance conditions. A performance target also may be defined by\n reference to the same performance measure of another entity or group of entities. For example,\n attaining a growth rate in earnings per share (EPS) that exceeds the average growth rate in EPS of\n other entities in the same industry is a performance condition. A performance target might pertain to\n the performance of the entity as a whole or to some part of the entity, such as a division, or to the\n performance of the grantee if such performance is in accordance with the terms of the award and\n solely relates to the grantor's own operations (or activities).\n 2For share-based consideration payable to a customer that can result in a reduction of the\n transaction price in accordance with Topic 606, a condition affecting the vesting, exercisability,\n exercise price, or other pertinent factors used in determining the fair value of an award that relates to\n any of the following:\n aAchieving a specified performance target that is defined solely by reference to the grantor\u2019s\n own operations (or activities) or by reference to the grantee\u2019s (the customer\u2019s) performance\n related to the grantor\u2019s own operations (or activities)\n bThe grantee\u2019s purchase (or potential purchase) of the grantor\u2019s goods or services from either\n the grantor or the grantor\u2019s customers\n cA purchase (or potential purchase) of the grantor\u2019s goods or services from either the grantee or\n the grantee\u2019s customers.\n The performance targets listed in this definition for employee and nonemployee awards (for example,\n a change in control) are also examples of performance conditions for share-based consideration\n payable to a customer.\n\n\n\nPerformance Obligation\n\n A promise in a contract with a customer to transfer to the customer either:\n aA good or service (or a bundle of goods or services) that is distinct\n bA series of distinct goods or services that are substantially the same and that have the same pattern of\n transfer to the customer.\n\n\nProbable\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 13 of 123\n The future event or events are likely to occur.\n\nPublic Business Entity\n\n A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit\n entity nor an employee benefit plan is a business entity.\n aIt is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial\n statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including\n other entities whose financial statements or financial information are required to be or are included in a\n filing).\n bIt is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations\n promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the\n SEC.\n cIt is required to file or furnish financial statements with a foreign or domestic regulatory agency in\n preparation for the sale of or for purposes of issuing securities that are not subject to contractual\n restrictions on transfer.\n dIt has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange\n or an over-the-counter market.\n eIt has one or more securities that are not subject to contractual restrictions on transfer, and it is required\n by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make\n them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet\n both of these conditions to meet this criterion.\n An entity may meet the definition of a public business entity solely because its financial statements or financial\n information is included in another entity's filing with the SEC. In that case, the entity is only a public business\n entity for purposes of financial statements that are filed or furnished with the SEC.\n\nRevenue\n\n Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both)\n from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing\n major or central operations.\n\nSecurity\n\n A share, participation, or other interest in property or in an entity of the issuer or an obligation of the issuer that\n has all of the following characteristics:\n aIt is either represented by an instrument issued in bearer or registered form or, if not represented by an\n instrument, is registered in books maintained to record transfers by or on behalf of the issuer.\n bIt is of a type commonly dealt in on securities exchanges or markets or, when represented by an\n instrument, is commonly recognized in any area in which it is issued or dealt in as a medium for\n investment.\n cIt either is one of a class or series or by its terms is divisible into a class or series of shares,\n participations, interests, or obligations.\n\n\nService Condition\n\n A condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining\n the fair value of an award that depends solely on an employee rendering service to the employer for the\n requisite service period or a nonemployee delivering goods or rendering services to the grantor over a vesting\n period. A condition that results in the acceleration of vesting in the event of a grantee's death, disability, or\n termination without cause is a service condition.\n\nService Inception Date\n\n The date at which the employee's requisite service period or the nonemployee's vesting period begins. The\n service inception date usually is the grant date, but the service inception date may differ from the grant date\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 14 of 123\n (see Example 6 [see paragraph 718-10-55-107] for an illustration of the application of this term to an employee\n award).\n\n Share-Based Payment Arrangements\n\n An arrangement under which either of the following conditions is met:\n aOne or more suppliers of goods or services (including employees) receive awards of equity shares,\n equity share options, or other equity instruments.\n bThe entity incurs liabilities to suppliers that meet either of the following conditions:\n\n 1The amounts are based, at least in part, on the price of the entity's shares or other equity\n instruments. (The phrase at least in part is used because an award may be indexed to both the price\n of the entity's shares and something other than either the price of the entity's shares or a market,\n performance, or service condition.)\n\n 2The awards require or may require settlement by issuance of the entity's shares.\n The term shares includes various forms of ownership interest that may not take the legal form of securities (for\n example, partnership interests), as well as other interests, including those that are liabilities in substance but\n not in form. Equity shares refers only to shares that are accounted for as equity.\n Also called share-based compensation arrangements.\n\n Standalone Selling Price\n\n The price at which an entity would sell a promised good or service separately to a customer.\n\n Transaction Price\n\n The amount of consideration to which an entity expects to be entitled in exchange for transferring promised\n goods or services to a customer, excluding amounts collected on behalf of third parties.\n\n\n\n\n25 Recognition\n\n\n General Note:The Recognition Section provides guidance on the required criteria, timing, and location\n (within the financial statements) for recording a particular item in the financial statements. Disclosure is\n not recognition.\n\n\n\n\n General Related Proposed ASUs\n\n\n > Identifying the Contract\n 606-10- An entity shall account for a contract with a customer that is within the scope of this Topic only when\n 25-1\n all of the following criteria are met:\n aThe parties to the contract have approved the contract (in writing, orally, or in accordance with\n other customary business practices) and are committed to perform their respective obligations.\n bThe entity can identify each party's rights regarding the goods or services to be transferred.\n cThe entity can identify the payment terms for the goods or services to be transferred.\n dThe contract has commercial substance (that is, the risk, timing, or amount of the entity's future\n cash flows is expected to change as a result of the contract).\n eIt is probable that the entity will collect substantially all of the consideration to which it will be\n entitled in exchange for the goods or services that will be transferred to the customer (see\n paragraphs 606-10-55-3A through 55-3C). In evaluating whether collectibility of an amount of\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 15 of 123\n consideration is probable, an entity shall consider only the customer's ability and intention to pay\n that amount of consideration when it is due. The amount of consideration to which the entity will\n be entitled may be less than the price stated in the contract if the consideration is variable\n because the entity may offer the customer a price concession (see paragraph 606-10-32-7).\n\n606-10- A contract is an agreement between two or more parties that creates enforceable rights and obligations.\n25-2\n Enforceability of the rights and obligations in a contract is a matter of law. Contracts can be written, oral, or\n implied by an entity's customary business practices. The practices and processes for establishing contracts\n with customers vary across legal jurisdictions, industries, and entities. In addition, they may vary within an\n entity (for example, they may depend on the class of customer or the nature of the promised goods or\n services). An entity shall consider those practices and processes in determining whether and when an\n agreement with a customer creates enforceable rights and obligations.\n\n606-10- Some contracts with customers may have no fixed duration and can be terminated or modified by either party\n25-3\n at any time. Other contracts may automatically renew on a periodic basis that is specified in the contract. An\n entity shall apply the guidance in this Topic to the duration of the contract (that is, the contractual period) in\n which the parties to the contract have present enforceable rights and obligations. In evaluating the criterion in\n paragraph 606-10-25-1(e), an entity shall assess the collectibility of the consideration promised in a contract\n for the goods or services that will be transferred to the customer rather than assessing the collectibility of the\n consideration promised in the contract for all of the promised goods or services (see paragraphs 606-10-55-3A\n through 55-3C). However, if an entity determines that all of the criteria in paragraph 606-10-25-1 are met, the\n remainder of the guidance in this Topic shall be applied to all of the promised goods or services in the contract.\n\n606-10- For the purpose of applying the guidance in this Topic, a contract does not exist if each party to the contract\n25-4\n has the unilateral enforceable right to terminate a wholly unperformed contract without compensating the other\n party (or parties). A contract is wholly unperformed if both of the following criteria are met:\n aThe entity has not yet transferred any promised goods or services to the customer.\n bThe entity has not yet received, and is not yet entitled to receive, any consideration in exchange for\n promised goods or services.\n\n\n606-10- If a contract with a customer meets the criteria in paragraph 606-10-25-1 at contract inception, an entity shall\n25-5\n not reassess those criteria unless there is an indication of a significant change in facts and circumstances. For\n example, if a customer's ability to pay the consideration deteriorates significantly, an entity would reassess\n whether it is probable that the entity will collect the consideration to which the entity will be entitled in\n exchange for the remaining goods or services that will be transferred to the customer (see paragraphs 606-10-\n 55-3A through 55-3C).\n\n606-10- If a contract with a customer does not meet the criteria in paragraph 606-10-25-1, an entity shall continue to\n25-6\n assess the contract to determine whether the criteria in paragraph 606-10-25-1 are subsequently met.\n\n606-10- When a contract with a customer does not meet the criteria in paragraph 606-10-25-1 and an entity receives\n25-7\n consideration from the customer, the entity shall recognize the consideration received as revenue only when\n one or more of the following events have occurred:\n aThe entity has no remaining obligations to transfer goods or services to the customer, and all, or\n substantially all, of the consideration promised by the customer has been received by the entity and is\n nonrefundable.\n bThe contract has been terminated, and the consideration received from the customer is nonrefundable.\n cThe entity has transferred control of the goods or services to which the consideration that has been\n received relates, the entity has stopped transferring goods or services to the customer (if applicable) and\n has no obligation under the contract to transfer additional goods or services, and the consideration\n received from the customer is nonrefundable.\n\n\n606-10- An entity shall recognize the consideration received from a customer as a liability until one of the events in\n25-8\n paragraph 606-10-25-7 occurs or until the criteria in paragraph 606-10-25-1 are subsequently met (see\n paragraph 606-10-25-6). Depending on the facts and circumstances relating to the contract, the liability\n recognized represents the entity's obligation to either transfer goods or services in the future or refund the\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 16 of 123\n consideration received. In either case, the liability shall be measured at the amount of consideration received\n from the customer.\n\n\n> Combination of Contracts\n606-10- An entity shall combine two or more contracts entered into at or near the same time with the\n25-9\n same customer (or related parties of the customer) and account for the contracts as a single contract if one or\n more of the following criteria are met:\n aThe contracts are negotiated as a package with a single commercial objective.\n bThe amount of consideration to be paid in one contract depends on the price or performance of the other\n contract.\n cThe goods or services promised in the contracts (or some goods or services promised in each of the\n contracts) are a single performance obligation in accordance with paragraphs 606-10-25-14 through 25-\n 22.\n\n\n> Contract Modifications\n606-10- A contract modification is a change in the scope or price (or both) of a contract that is approved by the parties\n25-10\n to the contract. In some industries and jurisdictions, a contract modification may be described as a change\n order, a variation, or an amendment. A contract modification exists when the parties to a contract approve a\n modification that either creates new or changes existing enforceable rights and obligations of the parties to the\n contract. A contract modification could be approved in writing, by oral agreement, or implied by customary\n business practices. If the parties to the contract have not approved a contract modification, an entity shall\n continue to apply the guidance in this Topic to the existing contract until the contract modification is approved.\n\n606-10- A contract modification may exist even though the parties to the contract have a dispute about the scope or\n25-11\n price (or both) of the modification or the parties have approved a change in the scope of the contract but have\n not yet determined the corresponding change in price. In determining whether the rights and obligations that\n are created or changed by a modification are enforceable, an entity shall consider all relevant facts and\n circumstances including the terms of the contract and other evidence. If the parties to a contract have\n approved a change in the scope of the contract but have not yet determined the corresponding change in\n price, an entity shall estimate the change to the transaction price arising from the modification in accordance\n with paragraphs 606-10-32-5 through 32-9 on estimating variable consideration and paragraphs 606-10-32-11\n through 32-13 on constraining estimates of variable consideration.\n\n606-10- An entity shall account for a contract modification as a separate contract if both of the following conditions are\n25-12\n present:\n aThe scope of the contract increases because of the addition of promised goods or services that are\n distinct (in accordance with paragraphs 606-10-25-18 through 25-22).\n bThe price of the contract increases by an amount of consideration that reflects the entity's standalone\n selling prices of the additional promised goods or services and any appropriate adjustments to that price\n to reflect the circumstances of the particular contract. For example, an entity may adjust the standalone\n selling price of an additional good or service for a discount that the customer receives, because it is not\n necessary for the entity to incur the selling-related costs that it would incur when selling a similar good or\n service to a new customer.\n\n\n606-10- If a contract modification is not accounted for as a separate contract in accordance with paragraph 606-10-25-\n25-13\n 12, an entity shall account for the promised goods or services not yet transferred at the date of the contract\n modification (that is, the remaining promised goods or services) in whichever of the following ways is\n applicable:\n aAn entity shall account for the contract modification as if it were a termination of the existing contract,\n and the creation of a new contract, if the remaining goods or services are distinct from the goods or\n services transferred on or before the date of the contract modification. The amount of consideration to be\n allocated to the remaining performance obligations (or to the remaining distinct goods or services in a\n single performance obligation identified in accordance with paragraph 606-10-25-14(b)) is the sum of:\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 17 of 123\n 1The consideration promised by the customer (including amounts already received from the\n customer) that was included in the estimate of the transaction price and that had not been recognized\n as revenue and\n\n 2The consideration promised as part of the contract modification.\n bAn entity shall account for the contract modification as if it were a part of the existing contract if the\n remaining goods or services are not distinct and, therefore, form part of a single performance obligation\n that is partially satisfied at the date of the contract modification. The effect that the contract modification\n has on the transaction price, and on the entity's measure of progress toward complete satisfaction of the\n performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction\n of revenue) at the date of the contract modification (that is, the adjustment to revenue is made on a\n cumulative catch-up basis).\n cIf the remaining goods or services are a combination of items (a) and (b), then the entity shall account for\n the effects of the modification on the unsatisfied (including partially unsatisfied) performance obligations in\n the modified contract in a manner that is consistent with the objectives of this paragraph.\n\n\n> Identifying Performance Obligations\n606-10- At contract inception, an entity shall assess the goods or services promised in a contract with\n25-14\n a customer and shall identify as a performance obligation each promise to transfer to the customer\n either:\n aA good or service (or a bundle of goods or services) that is distinct\n bA series of distinct goods or services that are substantially the same and that have the same\n pattern of transfer to the customer (see paragraph 606-10-25-15).\n\n\n606-10- A series of distinct goods or services has the same pattern of transfer to the customer if both of the following\n25-15\n criteria are met:\n aEach distinct good or service in the series that the entity promises to transfer to the customer would\n meet the criteria in paragraph 606-10-25-27 to be a performance obligation satisfied over time.\n bIn accordance with paragraphs 606-10-25-31 through 25-32, the same method would be used to\n measure the entity's progress toward complete satisfaction of the performance obligation to transfer each\n distinct good or service in the series to the customer.\n\n\n\u00b7 > Promises in Contracts with Customers\n606-10- A contract with a customer generally explicitly states the goods or services that an entity promises to transfer\n25-16\n to a customer. However, the promised goods and services identified in a contract with a customer may not be\n limited to the goods or services that are explicitly stated in that contract. This is because a contract with a\n customer also may include promises that are implied by an entity's customary business practices, published\n policies, or specific statements if, at the time of entering into the contract, those promises create a reasonable\n expectation of the customer that the entity will transfer a good or service to the customer.\n\n606-10- An entity is not required to assess whether promised goods or services are performance obligations if they are\n25-16A\n immaterial in the context of the contract with the customer. If the revenue related to a performance obligation\n that includes goods or services that are immaterial in the context of the contract is recognized before those\n immaterial goods or services are transferred to the customer, then the related costs to transfer those goods or\n services shall be accrued.\n\n606-10- An entity shall not apply the guidance in paragraph 606-10-25-16A to a customer option to acquire additional\n25-16B\n goods or services that provides the customer with a material right, in accordance with paragraphs 606-10-55-\n 41 through 55-45.\n\n606-10- Promised goods or services do not include activities that an entity must undertake to fulfill a contract unless\n25-17\n those activities transfer a good or service to a customer. For example, a services provider may need to\n perform various administrative tasks to set up a contract. The performance of those tasks does not transfer a\n service to the customer as the tasks are performed. Therefore, those setup activities are not promised goods\n or services in the contract with the customer.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 18 of 123\n606-10- Depending on the contract, promised goods or services may include, but are not limited to, the following:\n25-18\n aSale of goods produced by an entity (for example, inventory of a manufacturer)\n bResale of goods purchased by an entity (for example, merchandise of a retailer)\n cResale of rights to goods or services purchased by an entity (for example, a ticket resold by an entity\n acting as a principal, as described in paragraphs 606-10-55-36 through 55-40)\n dPerforming a contractually agreed-upon task (or tasks) for a customer\n eProviding a service of standing ready to provide goods or services (for example, unspecified updates to\n software that are provided on a when-and-if-available basis) or of making goods or services available for\n a customer to use as and when the customer decides\n fProviding a service of arranging for another party to transfer goods or services to a customer (for\n example, acting as an agent of another party, as described in paragraphs 606-10-55-36 through 55-40)\n gGranting rights to goods or services to be provided in the future that a customer can resell or provide to\n its customer (for example, an entity selling a product to a retailer promises to transfer an additional good\n or service to an individual who purchases the product from the retailer)\n hConstructing, manufacturing, or developing an asset on behalf of a customer\n iGranting licenses (see paragraphs 606-10-55-54 through 55-60 and paragraphs 606-10-55-62 through\n 55-65B)\n jGranting options to purchase additional goods or services (when those options provide a customer with a\n material right, as described in paragraphs 606-10-55-41 through 55-45).\n\n606-10- An entity that promises a good to a customer also might perform shipping and handling activities related to\n25-18A\n that good. If the shipping and handling activities are performed before the customer obtains control of the good\n (see paragraphs 606-10-25-23 through 25-30 for guidance on satisfying performance obligations), then the\n shipping and handling activities are not a promised service to the customer. Rather, shipping and handling are\n activities to fulfill the entity's promise to transfer the good.\n\n606-10- If shipping and handling activities are performed after a customer obtains control of the good, then the entity\n25-18B\n may elect to account for shipping and handling as activities to fulfill the promise to transfer the good. The entity\n shall apply this accounting policy election consistently to similar types of transactions. An entity that makes this\n election would not evaluate whether shipping and handling activities are promised services to its customers. If\n revenue is recognized for the related good before the shipping and handling activities occur, the related costs\n of those shipping and handling activities shall be accrued. An entity that applies this accounting policy election\n shall comply with the accounting policy disclosure requirements in paragraphs 235-10-50-1 through 50-6.\n\n606-10- See Subtopic 952-606, Franchisors\u2014Revenue from Contracts with Customers, for additional guidance and a\n25-18C\n practical expedient for entities within the scope of that guidance that are not public business entities.\n\n\u00b7 > Distinct Goods or Services\n606-10- A good or service that is promised to a customer is distinct if both of the following criteria are met:\n25-19\n aThe customer can benefit from the good or service either on its own or together with other resources that\n are readily available to the customer (that is, the good or service is capable of being distinct).\n bThe entity's promise to transfer the good or service to the customer is separately identifiable from other\n promises in the contract (that is, the promise to transfer the good or service is distinct within the context of\n the contract).\n\n\n606-10- A customer can benefit from a good or service in accordance with paragraph 606-10-25-19(a) if the good or\n25-20\n service could be used, consumed, sold for an amount that is greater than scrap value, or otherwise held in a\n way that generates economic benefits. For some goods or services, a customer may be able to benefit from a\n good or service on its own. For other goods or services, a customer may be able to benefit from the good or\n service only in conjunction with other readily available resources. A readily available resource is a good or\n service that is sold separately (by the entity or another entity) or a resource that the customer has already\n obtained from the entity (including goods or services that the entity will have already transferred to the\n customer under the contract) or from other transactions or events. Various factors may provide evidence that\n the customer can benefit from a good or service either on its own or in conjunction with other readily available\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 19 of 123\n resources. For example, the fact that the entity regularly sells a good or service separately would indicate that\n a customer can benefit from the good or service on its own or with other readily available resources.\n\n606-10- In assessing whether an entity's promises to transfer goods or services to the customer are separately\n25-21\n identifiable in accordance with paragraph 606-10-25-19(b), the objective is to determine whether the nature of\n the promise, within the context of the contract, is to transfer each of those goods or services individually or,\n instead, to transfer a combined item or items to which the promised goods or services are inputs. Factors that\n indicate that two or more promises to transfer goods or services to a customer are not separately identifiable\n include, but are not limited to, the following:\n aThe entity provides a significant service of integrating goods or services with other goods or services\n promised in the contract into a bundle of goods or services that represent the combined output or outputs\n for which the customer has contracted. In other words, the entity is using the goods or services as inputs\n to produce or deliver the combined output or outputs specified by the customer. A combined output or\n outputs might include more than one phase, element, or unit.\n bOne or more of the goods or services significantly modifies or customizes, or are significantly modified or\n customized by, one or more of the other goods or services promised in the contract.\n cThe goods or services are highly interdependent or highly interrelated. In other words, each of the goods\n or services is significantly affected by one or more of the other goods or services in the contract. For\n example, in some cases, two or more goods or services are significantly affected by each other because\n the entity would not be able to fulfill its promise by transferring each of the goods or services\n independently.\n\n\n606-10- If a promised good or service is not distinct, an entity shall combine that good or service with other promised\n25-22\n goods or services until it identifies a bundle of goods or services that is distinct. In some cases, that would\n result in the entity accounting for all the goods or services promised in a contract as a single performance\n obligation.\n\n\n> Satisfaction of Performance Obligations\n606-10- An entity shall recognize revenue when (or as) the entity satisfies a performance obligation by\n25-23\n transferring a promised good or service (that is, an asset) to a customer. An asset is transferred when\n (or as) the customer obtains control of that asset.\n\n606-10- For each performance obligation identified in accordance with paragraphs 606-10-25-14 through 25-22, an\n25-24\n entity shall determine at contract inception whether it satisfies the performance obligation over time (in\n accordance with paragraphs 606-10-25-27 through 25-29) or satisfies the performance obligation at a point in\n time (in accordance with paragraph 606-10-25-30). If an entity does not satisfy a performance obligation over\n time, the performance obligation is satisfied at a point in time.\n\n606-10- Goods and services are assets, even if only momentarily, when they are received and used (as in the case of\n25-25\n many services). Control of an asset refers to the ability to direct the use of, and obtain substantially all of the\n remaining benefits from, the asset. Control includes the ability to prevent other entities from directing the use\n of, and obtaining the benefits from, an asset. The benefits of an asset are the potential cash flows (inflows or\n savings in outflows) that can be obtained directly or indirectly in many ways, such as by:\n aUsing the asset to produce goods or provide services (including public services)\n bUsing the asset to enhance the value of other assets\n cUsing the asset to settle liabilities or reduce expenses\n dSelling or exchanging the asset\n ePledging the asset to secure a loan\n fHolding the asset.\n\n606-10- When evaluating whether a customer obtains control of an asset, an entity shall consider any agreement to\n25-26\n repurchase the asset (see paragraphs 606-10-55-66 through 55-78).\n\n\u00b7 > Performance Obligations Satisfied Over Time\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 20 of 123\n606-10- An entity transfers control of a good or service over time and, therefore, satisfies a performance obligation and\n25-27\n recognizes revenue over time, if one of the following criteria is met:\n aThe customer simultaneously receives and consumes the benefits provided by the entity's performance\n as the entity performs (see paragraphs 606-10-55-5 through 55-6).\n bThe entity's performance creates or enhances an asset (for example, work in process) that the customer\n controls as the asset is created or enhanced (see paragraph 606-10-55-7).\n cThe entity's performance does not create an asset with an alternative use to the entity (see\n paragraph 606-10-25-28), and the entity has an enforceable right to payment for performance completed\n to date (see paragraph 606-10-25-29).\n\n606-10- An asset created by an entity's performance does not have an alternative use to an entity if the entity is either\n25-28\n restricted contractually from readily directing the asset for another use during the creation or enhancement of\n that asset or limited practically from readily directing the asset in its completed state for another use. The\n assessment of whether an asset has an alternative use to the entity is made at contract inception. After\n contract inception, an entity shall not update the assessment of the alternative use of an asset unless the\n parties to the contract approve a contract modification that substantively changes the performance obligation.\n Paragraphs 606-10-55-8 through 55-10 provide guidance for assessing whether an asset has an alternative\n use to an entity.\n\n606-10- An entity shall consider the terms of the contract, as well as any laws that apply to the contract, when\n25-29\n evaluating whether it has an enforceable right to payment for performance completed to date in accordance\n with paragraph 606-10-25-27(c). The right to payment for performance completed to date does not need to be\n for a fixed amount. However, at all times throughout the duration of the contract, the entity must be entitled to\n an amount that at least compensates the entity for performance completed to date if the contract is terminated\n by the customer or another party for reasons other than the entity's failure to perform as promised.\n Paragraphs 606-10-55-11 through 55-15 provide guidance for assessing the existence and enforceability of a\n right to payment and whether an entity's right to payment would entitle the entity to be paid for its performance\n completed to date.\n\n\u00b7 > Performance Obligations Satisfied at a Point in Time\n606-10- If a performance obligation is not satisfied over time in accordance with paragraphs 606-10-25-27 through 25-\n25-30\n 29, an entity satisfies the performance obligation at a point in time. To determine the point in time at which\n a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity\n shall consider the guidance on control in paragraphs 606-10-25-23 through 25-26. In addition, an entity shall\n consider indicators of the transfer of control, which include, but are not limited to, the following:\n aThe entity has a present right to payment for the asset\u2014If a customer presently is obliged to pay for an\n asset, then that may indicate that the customer has obtained the ability to direct the use of, and obtain\n substantially all of the remaining benefits from, the asset in exchange.\n bThe customer has legal title to the asset\u2014Legal title may indicate which party to a contract has the\n ability to direct the use of, and obtain substantially all of the remaining benefits from, an asset or to restrict\n the access of other entities to those benefits. Therefore, the transfer of legal title of an asset may indicate\n that the customer has obtained control of the asset. If an entity retains legal title solely as protection\n against the customer's failure to pay, those rights of the entity would not preclude the customer from\n obtaining control of an asset.\n cThe entity has transferred physical possession of the asset\u2014The customer's physical possession of an\n asset may indicate that the customer has the ability to direct the use of, and obtain substantially all of the\n remaining benefits from, the asset or to restrict the access of other entities to those benefits. However,\n physical possession may not coincide with control of an asset. For example, in some repurchase\n agreements and in some consignment arrangements, a customer or consignee may have physical\n possession of an asset that the entity controls. Conversely, in some bill-and-hold arrangements, the entity\n may have physical possession of an asset that the customer controls. Paragraphs 606-10-55-66 through\n 55-78, 606-10-55-79 through 55-80, and 606-10-55-81 through 55-84 provide guidance on accounting for\n repurchase agreements, consignment arrangements, and bill-and-hold arrangements, respectively.\n dThe customer has the significant risks and rewards of ownership of the asset\u2014The transfer of the\n significant risks and rewards of ownership of an asset to the customer may indicate that the customer has\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 21 of 123\n obtained the ability to direct the use of, and obtain substantially all of the remaining benefits from, the\n asset. However, when evaluating the risks and rewards of ownership of a promised asset, an entity shall\n exclude any risks that give rise to a separate performance obligation in addition to the performance\n obligation to transfer the asset. For example, an entity may have transferred control of an asset to a\n customer but not yet satisfied an additional performance obligation to provide maintenance services\n related to the transferred asset.\n eThe customer has accepted the asset\u2014The customer's acceptance of an asset may indicate that it has\n obtained the ability to direct the use of, and obtain substantially all of the remaining benefits from, the\n asset. To evaluate the effect of a contractual customer acceptance clause on when control of an asset is\n transferred, an entity shall consider the guidance in paragraphs 606-10-55-85 through 55-88.\n\n \u00b7 > Measuring Progress toward Complete Satisfaction of a Performance Obligation\n 606-10- For each performance obligation satisfied over time in accordance with paragraphs 606-10-25-27 through 25-\n 25-31\n 29, an entity shall recognize revenue over time by measuring the progress toward complete satisfaction of that\n performance obligation. The objective when measuring progress is to depict an entity's performance in\n transferring control of goods or services promised to a customer (that is, the satisfaction of an entity's\n performance obligation).\n\n 606-10- An entity shall apply a single method of measuring progress for each performance obligation satisfied over\n 25-32\n time, and the entity shall apply that method consistently to similar performance obligations and in similar\n circumstances. At the end of each reporting period, an entity shall remeasure its progress toward complete\n satisfaction of a performance obligation satisfied over time.\n\n \u00b7 \u00b7 > Methods for Measuring Progress\n\n 606-10- Appropriate methods of measuring progress include output methods and input methods. Paragraphs 606-10-\n 25-33\n 55-16 through 55-21 provide guidance for using output methods and input methods to measure an entity's\n progress toward complete satisfaction of a performance obligation. In determining the appropriate method for\n measuring progress, an entity shall consider the nature of the good or service that the entity promised to\n transfer to the customer.\n\n 606-10- When applying a method for measuring progress, an entity shall exclude from the measure of progress any\n 25-34\n goods or services for which the entity does not transfer control to a customer. Conversely, an entity shall\n include in the measure of progress any goods or services for which the entity does transfer control to a\n customer when satisfying that performance obligation.\n\n 606-10- As circumstances change over time, an entity shall update its measure of progress to reflect any changes in\n 25-35\n the outcome of the performance obligation. Such changes to an entity's measure of progress shall be\n accounted for as a change in accounting estimate in accordance with Subtopic 250-10 on accounting changes\n and error corrections.\n\n \u00b7 \u00b7 > Reasonable Measures of Progress\n\n 606-10- An entity shall recognize revenue for a performance obligation satisfied over time only if the entity can\n 25-36\n reasonably measure its progress toward complete satisfaction of the performance obligation. An entity would\n not be able to reasonably measure its progress toward complete satisfaction of a performance obligation if it\n lacks reliable information that would be required to apply an appropriate method of measuring progress.\n\n 606-10- In some circumstances (for example, in the early stages of a contract), an entity may not be able to reasonably\n 25-37\n measure the outcome of a performance obligation, but the entity expects to recover the costs incurred in\n satisfying the performance obligation. In those circumstances, the entity shall recognize revenue only to the\n extent of the costs incurred until such time that it can reasonably measure the outcome of the performance\n obligation.\n\n\n\n\n32 Measurement\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 22 of 123\n\n General Note:The Measurement Section provides guidance on both the initial and subsequent\n measurement. Specifically, this Section provides the criteria and amounts used to measure a particular\n item at the date of initial recognition. In addition, this Section provides guidance on an entity's\n subsequent measurement and subsequent recognition of an item. Situations that may result in\n subsequent changes to carrying amount include impairment, fair value adjustments, depreciation and\n amortization, and so forth.\n\n\n\n\nGeneral Related Proposed ASUs\n\n\n606-10- When (or as) a performance obligation is satisfied, an entity shall recognize as revenue the amount of\n32-1\n the transaction price (which excludes estimates of variable consideration that are constrained in\n accordance with paragraphs 606-10-32-11 through 32-13) that is allocated to that performance\n obligation.\n\n\n> Determining the Transaction Price\n606-10- An entity shall consider the terms of the contract and its customary business practices to determine\n32-2\n the transaction price. The transaction price is the amount of consideration to which an entity expects\n to be entitled in exchange for transferring promised goods or services to a customer, excluding\n amounts collected on behalf of third parties (for example, some sales taxes). The consideration\n promised in a contract with a customer may include fixed amounts, variable amounts, or both.\n\n606-10- An entity may make an accounting policy election to exclude from the measurement of the transaction price all\n32-2A\n taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-\n producing transaction and collected by the entity from a customer (for example, sales, use, value added, and\n some excise taxes). Taxes assessed on an entity's total gross receipts or imposed during the inventory\n procurement process shall be excluded from the scope of the election. An entity that makes this election shall\n exclude from the transaction price all taxes in the scope of the election and shall comply with the applicable\n accounting policy guidance, including the disclosure requirements in paragraphs 235-10-50-1 through 50-6.\n\n606-10- The nature, timing, and amount of consideration promised by a customer affect the estimate of the transaction\n32-3\n price. When determining the transaction price, an entity shall consider the effects of all of the following:\n aVariable consideration (see paragraphs 606-10-32-5 through 32-10 and 606-10-32-14)\n bConstraining estimates of variable consideration (see paragraphs 606-10-32-11 through 32-13)\n cThe existence of a significant financing component in the contract (see paragraphs 606-10-32-15\n through 32-20)\n dNoncash consideration (see paragraphs 606-10-32-21 through 32-24)\n eConsideration payable to a customer (see paragraphs 606-10-32-25 through 32-27).\n\n606-10- For the purpose of determining the transaction price, an entity shall assume that the goods or services will be\n32-4\n transferred to the customer as promised in accordance with the existing contract and that the contract will not\n be cancelled, renewed, or modified.\n\n\u00b7 > Variable Consideration\n606-10- If the consideration promised in a contract includes a variable amount, an entity shall estimate the amount of\n32-5\n consideration to which the entity will be entitled in exchange for transferring the promised goods or services to\n a customer.\n\n606-10- An amount of consideration can vary because of discounts, rebates, refunds, credits, price concessions,\n32-6\n incentives, performance bonuses, penalties, or other similar items. The promised consideration also can vary if\n an entity's entitlement to the consideration is contingent on the occurrence or nonoccurrence of a future event.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 23 of 123\n For example, an amount of consideration would be variable if either a product was sold with a right of return or\n a fixed amount is promised as a performance bonus on achievement of a specified milestone.\n\n606-10- The variability relating to the consideration promised by a customer may be explicitly stated in the contract. In\n32-7\n addition to the terms of the contract, the promised consideration is variable if either of the following\n circumstances exists:\n aThe customer has a valid expectation arising from an entity's customary business practices, published\n policies, or specific statements that the entity will accept an amount of consideration that is less than the\n price stated in the contract. That is, it is expected that the entity will offer a price concession. Depending\n on the jurisdiction, industry, or customer this offer may be referred to as a discount, rebate, refund, or\n credit.\n bOther facts and circumstances indicate that the entity's intention, when entering into the contract with the\n customer, is to offer a price concession to the customer.\n\n\n606-10- An entity shall estimate an amount of variable consideration by using either of the following methods,\n32-8\n depending on which method the entity expects to better predict the amount of consideration to which it will be\n entitled:\n aThe expected value\u2014The expected value is the sum of probability-weighted amounts in a range of\n possible consideration amounts. An expected value may be an appropriate estimate of the amount of\n variable consideration if an entity has a large number of contracts with similar characteristics.\n bThe most likely amount\u2014The most likely amount is the single most likely amount in a range of possible\n consideration amounts (that is, the single most likely outcome of the contract). The most likely amount\n may be an appropriate estimate of the amount of variable consideration if the contract has only two\n possible outcomes (for example, an entity either achieves a performance bonus or does not).\n\n\n606-10- An entity shall apply one method consistently throughout the contract when estimating the effect of an\n32-9\n uncertainty on an amount of variable consideration to which the entity will be entitled. In addition, an entity\n shall consider all the information (historical, current, and forecast) that is reasonably available to the entity and\n shall identify a reasonable number of possible consideration amounts. The information that an entity uses to\n estimate the amount of variable consideration typically would be similar to the information that the entity's\n management uses during the bid-and-proposal process and in establishing prices for promised goods or\n services.\n\n\u00b7 \u00b7 > Refund Liabilities\n\n606-10- An entity shall recognize a refund liability if the entity receives consideration from a customer and expects to\n32-10\n refund some or all of that consideration to the customer. A refund liability is measured at the amount of\n consideration received (or receivable) for which the entity does not expect to be entitled (that is, amounts not\n included in the transaction price). The refund liability (and corresponding change in the transaction price and,\n therefore, the contract liability) shall be updated at the end of each reporting period for changes in\n circumstances. To account for a refund liability relating to a sale with a right of return, an entity shall apply the\n guidance in paragraphs 606-10-55-22 through 55-29.\n\n\u00b7 \u00b7 > Constraining Estimates of Variable Consideration\n\n606-10- An entity shall include in the transaction price some or all of an amount of variable consideration estimated in\n32-11\n accordance with paragraph 606-10-32-8 only to the extent that it is probable that a significant reversal in the\n amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable\n consideration is subsequently resolved.\n\n606-10- In assessing whether it is probable that a significant reversal in the amount of cumulative revenue recognized\n32-12\n will not occur once the uncertainty related to the variable consideration is subsequently resolved, an entity\n shall consider both the likelihood and the magnitude of the revenue reversal. Factors that could increase the\n likelihood or the magnitude of a revenue reversal include, but are not limited to, any of the following:\n aThe amount of consideration is highly susceptible to factors outside the entity's influence. Those factors\n may include volatility in a market, the judgment or actions of third parties, weather conditions, and a high\n risk of obsolescence of the promised good or service.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 24 of 123\n bThe uncertainty about the amount of consideration is not expected to be resolved for a long period of\n time.\n cThe entity's experience (or other evidence) with similar types of contracts is limited, or that experience\n (or other evidence) has limited predictive value.\n dThe entity has a practice of either offering a broad range of price concessions or changing the payment\n terms and conditions of similar contracts in similar circumstances.\n eThe contract has a large number and broad range of possible consideration amounts.\n\n606-10- An entity shall apply paragraph 606-10-55-65 to account for consideration in the form of a sales-based or\n32-13\n usage-based royalty that is promised in exchange for a license of intellectual property.\n\n\u00b7 \u00b7 > Reassessment of Variable Consideration\n\n606-10- At the end of each reporting period, an entity shall update the estimated transaction price (including updating\n32-14\n its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the\n circumstances present at the end of the reporting period and the changes in circumstances during the\n reporting period. The entity shall account for changes in the transaction price in accordance with\n paragraphs 606-10-32-42 through 32-45.\n\n\u00b7 > The Existence of a Significant Financing Component in the Contract\n606-10- In determining the transaction price, an entity shall adjust the promised amount of consideration for the effects\n32-15\n of the time value of money if the timing of payments agreed to by the parties to the contract (either explicitly or\n implicitly) provides the customer or the entity with a significant benefit of financing the transfer of goods or\n services to the customer. In those circumstances, the contract contains a significant financing component. A\n significant financing component may exist regardless of whether the promise of financing is explicitly stated in\n the contract or implied by the payment terms agreed to by the parties to the contract.\n\n606-10- The objective when adjusting the promised amount of consideration for a significant financing component is for\n32-16\n an entity to recognize revenue at an amount that reflects the price that a customer would have paid for the\n promised goods or services if the customer had paid cash for those goods or services when (or as) they\n transfer to the customer (that is, the cash selling price). An entity shall consider all relevant facts and\n circumstances in assessing whether a contract contains a financing component and whether that financing\n component is significant to the contract, including both of the following:\n aThe difference, if any, between the amount of promised consideration and the cash selling price of the\n promised goods or services\n bThe combined effect of both of the following:\n\n 1The expected length of time between when the entity transfers the promised goods or services to\n the customer and when the customer pays for those goods or services\n\n 2The prevailing interest rates in the relevant market.\n\n\n606-10- Notwithstanding the assessment in paragraph 606-10-32-16, a contract with a customer would not have a\n32-17\n significant financing component if any of the following factors exist:\n aThe customer paid for the goods or services in advance, and the timing of the transfer of those goods or\n services is at the discretion of the customer.\n bA substantial amount of the consideration promised by the customer is variable, and the amount or\n timing of that consideration varies on the basis of the occurrence or nonoccurrence of a future event that\n is not substantially within the control of the customer or the entity (for example, if the consideration is a\n sales-based royalty).\n cThe difference between the promised consideration and the cash selling price of the good or service (as\n described in paragraph 606-10-32-16) arises for reasons other than the provision of finance to either the\n customer or the entity, and the difference between those amounts is proportional to the reason for the\n difference. For example, the payment terms might provide the entity or the customer with protection from\n the other party failing to adequately complete some or all of its obligations under the contract.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 25 of 123\n606-10- As a practical expedient, an entity need not adjust the promised amount of consideration for the effects of a\n32-18\n significant financing component if the entity expects, at contract inception, that the period between when the\n entity transfers a promised good or service to a customer and when the customer pays for that good or service\n will be one year or less.\n\n606-10- To meet the objective in paragraph 606-10-32-16 when adjusting the promised amount of consideration for a\n32-19\n significant financing component, an entity shall use the discount rate that would be reflected in a separate\n financing transaction between the entity and its customer at contract inception. That rate would reflect the\n credit characteristics of the party receiving financing in the contract, as well as any collateral or security\n provided by the customer or the entity, including assets transferred in the contract. An entity may be able to\n determine that rate by identifying the rate that discounts the nominal amount of the promised consideration to\n the price that the customer would pay in cash for the goods or services when (or as) they transfer to the\n customer. After contract inception, an entity shall not update the discount rate for changes in interest rates or\n other circumstances (such as a change in the assessment of the customer's credit risk).\n\n606-10- An entity shall present the effects of financing (interest income or interest expense) separately from revenue\n32-20\n from contracts with customers in the statement of comprehensive income (statement of activities). Interest\n income or interest expense is recognized only to the extent that a contract asset (or receivable) or a contract\n liability is recognized in accounting for a contract with a customer. In accounting for the effects of the time\n value of money, an entity also shall consider the subsequent measurement guidance in Subtopic 835-30,\n specifically the guidance in paragraphs 835-30-45-1A through 45-3 on presentation of the discount and\n premium in the financial statements and the guidance in paragraphs 835-30-55-2 through 55-3 on the\n application of the interest method.\n\n\u00b7 > Noncash Consideration\n606-10- To determine the transaction price for contracts in which a customer promises consideration in a form other\n32-21\n than cash, an entity shall measure the estimated fair value of the noncash consideration at contract inception\n (that is, the date at which the criteria in paragraph 606-10-25-1 are met).\n\n606-10- If an entity cannot reasonably estimate the fair value of the noncash consideration, the entity shall measure\n32-22\n the consideration indirectly by reference to the standalone selling price of the goods or services promised to\n the customer (or class of customer) in exchange for the consideration.\n\n606-10- The fair value of the noncash consideration may vary after contract inception because of the form of the\n32-23\n consideration (for example, a change in the price of a share to which an entity is entitled to receive from a\n customer). Changes in the fair value of noncash consideration after contract inception that are due to the form\n of the consideration are not included in the transaction price. If the fair value of the noncash consideration\n promised by a customer varies for reasons other than the form of the consideration (for example, the exercise\n price of a share option changes because of the entity's performance), an entity shall apply the guidance on\n variable consideration in paragraphs 606-10-32-5 through 32-14. If the fair value of the noncash consideration\n varies because of the form of the consideration and for reasons other than the form of the consideration, an\n entity shall apply the guidance in paragraphs 606-10-32-5 through 32-14 on variable consideration only to the\n variability resulting from reasons other than the form of the consideration.\n\n606-10- If a customer contributes goods or services (for example, materials, equipment, or labor) to facilitate an entity's\n32-24\n fulfillment of the contract, the entity shall assess whether it obtains control of those contributed goods or\n services. If so, the entity shall account for the contributed goods or services as noncash consideration\n received from the customer.\n\n\u00b7 > Consideration Payable to a Customer\n\n606-10- Consideration payable to a customer includes:\n32-25\n aCash amounts that an entity pays, or expects to pay, to the customer (or to other parties that purchase\n the entity's goods or services from the customer)\n bCredit or other items (for example, a coupon or voucher) that can be applied against amounts owed to\n the entity (or to other parties that purchase the entity's goods or services from the customer)\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 26 of 123\n cEquity instruments (liability or equity classified) granted in conjunction with selling goods or services (for\n example, shares, share options, or other equity instruments).\n An entity shall account for consideration payable to a customer as a reduction of the transaction price and,\n therefore, of revenue unless the payment to the customer is in exchange for a distinct good or service (as\n described in paragraphs 606-10-25-18 through 25-22) that the customer transfers to the entity. If the\n consideration payable to a customer includes a variable amount, an entity shall estimate the transaction price\n (including assessing whether the estimate of variable consideration is constrained) in accordance with\n paragraphs 606-10-32-5 through 32-13.\n\n PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-2\n Consideration payable to a customer includes:\n aCash amounts that an entity pays, or expects to pay, to the customer (or to other parties that\n purchase the entity's goods or services from the customer)\n bCredit or other items (for example, a coupon or voucher) that can be applied against amounts owed\n to the entity (or to other parties that purchase the entity's goods or services from the customer)\n cShare-based consideration (liability or equity classified) granted to the customer (or to other parties\n that purchase the grantor\u2019s goods or services from the customer) in conjunction with selling goods or\n services. Share-based consideration encompasses the same instruments as share-based payment\n arrangements (for example, shares, cash-settled stock appreciation rights, share options and\n warrants, or other equity instruments), but the grantee (as a customer) need not be a supplier of\n goods or services to the grantor.\n An entity shall account for consideration payable to a customer as a reduction of the transaction\n price and, therefore, of revenue unless the payment to the customer is in exchange for a distinct good or\n service (as described in paragraphs 606-10-25-18 through 25-22) that the customer transfers to the entity.\n If the consideration payable to a customer (other than share-based consideration) includes a variable\n amount, an entity shall estimate the transaction price (including assessing whether the estimate of\n variable consideration is constrained) in accordance with paragraphs 606-10-32-5 through 32-13. See\n paragraph 606-10-32-25A for guidance applicable to share-based consideration payable to a customer.\n\n\n606-10- Equity instruments granted by an entity in conjunction with selling goods or services shall be measured and\n32-25A\n classified under Topic 718 on stock compensation. The equity instrument shall be measured at the grant\n date in accordance with Topic 718 (for both equity-classified and liability-classified share-based payment\n awards). Changes in the measurement of the equity instrument (through the application of Topic 718) after the\n grant date that are due to the form of the consideration shall not be included in the transaction price. Any\n changes due to the form of the consideration shall be reflected elsewhere in the grantor's income statement.\n See paragraphs 606-10-55-88A through 55-88B for implementation guidance on equity instruments granted as\n consideration payable to a customer.\n\n PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-2\n Share-based consideration granted by an entity in conjunction with selling goods or services shall be\n measured and classified under Topic 718 on stock compensation. The share-based consideration shall be\n measured at the grant date in accordance with Topic 718 (for both equity-classified and liability-classified\n awards). Changes in the measurement of the share-based consideration (through the application of\n Topic 718) after the grant date that are due to the form of the consideration shall not be included in the\n transaction price. Any changes due to the form of the consideration shall be reflected elsewhere in the\n grantor's income statement. See paragraphs 606-10-55-88A through 55-88C for implementation guidance\n on share-based consideration payable to a customer.\n\n\n606-10- If consideration payable to a customer is a payment for a distinct good or service from the customer, then an\n32-26\n entity shall account for the purchase of the good or service in the same way that it accounts for other\n purchases from suppliers. If the amount of consideration payable to the customer exceeds the fair value of the\n distinct good or service that the entity receives from the customer, then the entity shall account for such an\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 27 of 123\n excess as a reduction of the transaction price. If the entity cannot reasonably estimate the fair value of the\n good or service received from the customer, it shall account for all of the consideration payable to the\n customer as a reduction of the transaction price.\n\n606-10- Accordingly, if consideration payable to a customer is accounted for as a reduction of the transaction price, an\n32-27\n entity shall recognize the reduction of revenue when (or as) the later of either of the following events occurs:\n aThe entity recognizes revenue for the transfer of the related goods or services to the customer.\n bThe entity pays or promises to pay the consideration (even if the payment is conditional on a future\n event). That promise might be implied by the entity's customary business practices.\n\n\n> Allocating the Transaction Price to Performance Obligations\n606-10- The objective when allocating the transaction price is for an entity to allocate the transaction price to\n32-28\n each performance obligation (or distinct good or service) in an amount that depicts the amount of\n consideration to which the entity expects to be entitled in exchange for transferring the promised\n goods or services to the customer.\n\n606-10- To meet the allocation objective, an entity shall allocate the transaction price to each performance obligation\n32-29\n identified in the contract on a relative standalone selling price basis in accordance with paragraphs 606-10-32-\n 31 through 32-35, except as specified in paragraphs 606-10-32-36 through 32-38 (for allocating discounts)\n and paragraphs 606-10-32-39 through 32-41 (for allocating consideration that includes variable amounts).\n\n606-10- Paragraphs 606-10-32-31 through 32-41 do not apply if a contract has only one performance obligation.\n32-30\n However, paragraphs 606-10-32-39 through 32-41 may apply if an entity promises to transfer a series of\n distinct goods or services identified as a single performance obligation in accordance with paragraph 606-10-\n 25-14(b) and the promised consideration includes variable amounts.\n\n\u00b7 > Allocation Based on Standalone Selling Prices\n\n606-10- To allocate the transaction price to each performance obligation on a relative standalone selling price basis, an\n32-31\n entity shall determine the standalone selling price at contract inception of the distinct good or service\n underlying each performance obligation in the contract and allocate the transaction price in proportion to those\n standalone selling prices.\n\n606-10- The standalone selling price is the price at which an entity would sell a promised good or service separately to\n32-32\n a customer. The best evidence of a standalone selling price is the observable price of a good or service when\n the entity sells that good or service separately in similar circumstances and to similar customers. A\n contractually stated price or a list price for a good or service may be (but shall not be presumed to be) the\n standalone selling price of that good or service.\n\n606-10- If a standalone selling price is not directly observable, an entity shall estimate the standalone selling price at\n32-33\n an amount that would result in the allocation of the transaction price meeting the allocation objective in\n paragraph 606-10-32-28. When estimating a standalone selling price, an entity shall consider all information\n (including market conditions, entity-specific factors, and information about the customer or class of customer)\n that is reasonably available to the entity. In doing so, an entity shall maximize the use of observable inputs and\n apply estimation methods consistently in similar circumstances.\n\n606-10- Suitable methods for estimating the standalone selling price of a good or service include, but are not limited to,\n32-34\n the following:\n aAdjusted market assessment approach\u2014An entity could evaluate the market in which it sells goods or\n services and estimate the price that a customer in that market would be willing to pay for those goods or\n services. That approach also might include referring to prices from the entity's competitors for similar\n goods or services and adjusting those prices as necessary to reflect the entity's costs and margins.\n bExpected cost plus a margin approach\u2014An entity could forecast its expected costs of satisfying a\n performance obligation and then add an appropriate margin for that good or service.\n cResidual approach\u2014An entity may estimate the standalone selling price by reference to the total\n transaction price less the sum of the observable standalone selling prices of other goods or services\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 28 of 123\n promised in the contract. However, an entity may use a residual approach to estimate, in accordance with\n paragraph 606-10-32-33, the standalone selling price of a good or service only if one of the following\n criteria is met:\n\n 1The entity sells the same good or service to different customers (at or near the same time) for a\n broad range of amounts (that is, the selling price is highly variable because a representative\n standalone selling price is not discernible from past transactions or other observable evidence).\n\n 2The entity has not yet established a price for that good or service, and the good or service has not\n previously been sold on a standalone basis (that is, the selling price is uncertain).\n\n606-10- A combination of methods may need to be used to estimate the standalone selling prices of the goods or\n32-35\n services promised in the contract if two or more of those goods or services have highly variable or uncertain\n standalone selling prices. For example, an entity may use a residual approach to estimate the aggregate\n standalone selling price for those promised goods or services with highly variable or uncertain standalone\n selling prices and then use another method to estimate the standalone selling prices of the individual goods or\n services relative to that estimated aggregate standalone selling price determined by the residual approach.\n When an entity uses a combination of methods to estimate the standalone selling price of each promised good\n or service in the contract, the entity shall evaluate whether allocating the transaction price at those estimated\n standalone selling prices would be consistent with the allocation objective in paragraph 606-10-32-28 and the\n guidance on estimating standalone selling prices in paragraph 606-10-32-33.\n\n\u00b7 > Allocation of a Discount\n\n606-10- A customer receives a discount for purchasing a bundle of goods or services if the sum of the standalone\n32-36\n selling prices of those promised goods or services in the contract exceeds the promised consideration in a\n contract. Except when an entity has observable evidence in accordance with paragraph 606-10-32-37 that the\n entire discount relates to only one or more, but not all, performance obligations in a contract, the entity shall\n allocate a discount proportionately to all performance obligations in the contract. The proportionate allocation\n of the discount in those circumstances is a consequence of the entity allocating the transaction price to each\n performance obligation on the basis of the relative standalone selling prices of the underlying distinct goods or\n services.\n\n606-10- An entity shall allocate a discount entirely to one or more, but not all, performance obligations in the contract if\n32-37\n all of the following criteria are met:\n aThe entity regularly sells each distinct good or service (or each bundle of distinct goods or services) in\n the contract on a standalone basis.\n bThe entity also regularly sells on a standalone basis a bundle (or bundles) of some of those distinct\n goods or services at a discount to the standalone selling prices of the goods or services in each bundle.\n cThe discount attributable to each bundle of goods or services described in (b) is substantially the same\n as the discount in the contract, and an analysis of the goods or services in each bundle provides\n observable evidence of the performance obligation (or performance obligations) to which the entire\n discount in the contract belongs.\n\n606-10- If a discount is allocated entirely to one or more performance obligations in the contract in accordance with\n32-38\n paragraph 606-10-32-37, an entity shall allocate the discount before using the residual approach to estimate\n the standalone selling price of a good or service in accordance with paragraph 606-10-32-34(c).\n\n\u00b7 > Allocation of Variable Consideration\n\n606-10- Variable consideration that is promised in a contract may be attributable to the entire contract or to a specific\n32-39\n part of the contract, such as either of the following:\n aOne or more, but not all, performance obligations in the contract (for example, a bonus may be\n contingent on an entity transferring a promised good or service within a specified period of time)\n bOne or more, but not all, distinct goods or services promised in a series of distinct goods or services that\n forms part of a single performance obligation in accordance with paragraph 606-10-25-14(b) (for example,\n the consideration promised for the second year of a two-year cleaning service contract will increase on\n the basis of movements in a specified inflation index).\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 29 of 123\n 606-10- An entity shall allocate a variable amount (and subsequent changes to that amount) entirely to a performance\n 32-40\n obligation or to a distinct good or service that forms part of a single performance obligation in accordance with\n paragraph 606-10-25-14(b) if both of the following criteria are met:\n aThe terms of a variable payment relate specifically to the entity's efforts to satisfy the performance\n obligation or transfer the distinct good or service (or to a specific outcome from satisfying the performance\n obligation or transferring the distinct good or service).\n bAllocating the variable amount of consideration entirely to the performance obligation or the distinct good\n or service is consistent with the allocation objective in paragraph 606-10-32-28 when considering all of the\n performance obligations and payment terms in the contract.\n\n 606-10- The allocation requirements in paragraphs 606-10-32-28 through 32-38 shall be applied to allocate the\n 32-41\n remaining amount of the transaction price that does not meet the criteria in paragraph 606-10-32-40.\n\n\n > Changes in the Transaction Price\n 606-10- After contract inception, the transaction price can change for various reasons, including the resolution of\n 32-42\n uncertain events or other changes in circumstances that change the amount of consideration to which an\n entity expects to be entitled in exchange for the promised goods or services.\n\n 606-10- An entity shall allocate to the performance obligations in the contract any subsequent changes in the\n 32-43\n transaction price on the same basis as at contract inception. Consequently, an entity shall not reallocate the\n transaction price to reflect changes in standalone selling prices after contract inception. Amounts allocated to a\n satisfied performance obligation shall be recognized as revenue, or as a reduction of revenue, in the period in\n which the transaction price changes.\n\n 606-10- An entity shall allocate a change in the transaction price entirely to one or more, but not all, performance\n 32-44\n obligations or distinct goods or services promised in a series that forms part of a single performance obligation\n in accordance with paragraph 606-10-25-14(b) only if the criteria in paragraph 606-10-32-40 on allocating\n variable consideration are met.\n\n 606-10- An entity shall account for a change in the transaction price that arises as a result of a contract modification in\n 32-45\n accordance with paragraphs 606-10-25-10 through 25-13. However, for a change in the transaction price that\n occurs after a contract modification, an entity shall apply paragraphs 606-10-32-42 through 32-44 to allocate\n the change in the transaction price in whichever of the following ways is applicable:\n aAn entity shall allocate the change in the transaction price to the performance obligations identified in the\n contract before the modification if, and to the extent that, the change in the transaction price is attributable\n to an amount of variable consideration promised before the modification and the modification is accounted\n for in accordance with paragraph 606-10-25-13(a).\n bIn all other cases in which the modification was not accounted for as a separate contract in accordance\n with paragraph 606-10-25-12, an entity shall allocate the change in the transaction price to the\n performance obligations in the modified contract (that is, the performance obligations that were\n unsatisfied or partially unsatisfied immediately after the modification).\n\n\n\n\n45 Other Presentation Matters\n\n\n General Note:The Other Presentation Matters Section provides guidance on other presentation\n matters not addressed in the Recognition, Initial Measurement, Subsequent Measurement, and\n Derecognition Sections. Other presentation matters may include items such as current or long-term\n balance sheet classification, cash flow presentation, earnings per share matters, and so forth. The\n FASB Codification also contains Presentation Topics, which provide guidance for general presentation\n and display items. See those Topics for general guidance.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 30 of 123\n\n General\n 606-10- When either party to a contract has performed, an entity shall present the contract in the statement of\n 45-1\n financial position as a contract asset or a contract liability, depending on the relationship between the\n entity's performance and the customer's payment. An entity shall present any unconditional rights to\n consideration separately as a receivable.\n\n 606-10- If a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional\n 45-2\n (that is, a receivable), before the entity transfers a good or service to the customer, the entity shall present the\n contract as a contract liability when the payment is made or the payment is due (whichever is earlier). A\n contract liability is an entity's obligation to transfer goods or services to a customer for which the entity has\n received consideration (or an amount of consideration is due) from the customer.\n\n 606-10- If an entity performs by transferring goods or services to a customer before the customer pays consideration\n 45-3\n or before payment is due, the entity shall present the contract as a contract asset, excluding any amounts\n presented as a receivable. A contract asset is an entity's right to consideration in exchange for goods or\n services that the entity has transferred to a customer. An entity shall assess a contract asset for credit losses\n in accordance with Subtopic 326-20 on financial instruments measured at amortized cost. A credit loss of a\n contract asset shall be measured, presented, and disclosed in accordance with Subtopic 326-20 (see also\n paragraph 606-10-50-4(b)).\n\n 606-10- A receivable is an entity's right to consideration that is unconditional. A right to consideration is unconditional if\n 45-4\n only the passage of time is required before payment of that consideration is due. For example, an entity would\n recognize a receivable if it has a present right to payment even though that amount may be subject to refund\n in the future. An entity shall account for a receivable in accordance with Topic 310 and Subtopic 326-20. Upon\n initial recognition of a receivable from a contract with a customer, any difference between the measurement of\n the receivable in accordance with Subtopic 326-20 and the corresponding amount of revenue recognized shall\n be presented as a credit loss expense.\n\n 606-10- This guidance uses the terms contract asset and contract liability but does not prohibit an entity from using\n 45-5\n alternative descriptions in the statement of financial position for those items. If an entity uses an alternative\n description for a contract asset, the entity shall provide sufficient information for a user of the financial\n statements to distinguish between receivables and contract assets.\n\n\n\n\n50 Disclosure\n\n\n General Note:The Disclosure Section provides guidance regarding the disclosure in the notes to\n financial statements. In some cases, disclosure may relate to disclosure on the face of the financial\n statements.\n\n\n\n\n General Related Proposed ASUs\n\n\n 606-10- The objective of the disclosure requirements in this Topic is for an entity to disclose sufficient\n 50-1\n information to enable users of financial statements to understand the nature, amount, timing, and\n uncertainty of revenue and cash flows arising from contracts with customers. To achieve that\n objective, an entity shall disclose qualitative and quantitative information about all of the following:\n aIts contracts with customers (see paragraphs 606-10-50-4 through 50-16)\n bThe significant judgments, and changes in the judgments, made in applying the guidance in this\n Topic to those contracts (see paragraphs 606-10-50-17 through 50-21)\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 31 of 123\n cAny assets recognized from the costs to obtain or fulfill a contract with a customer in accordance\n with paragraph 340-40-25-1 or 340-40-25-5 (see paragraphs 340-40-50-1 through 50-6).\n\n606-10- An entity shall consider the level of detail necessary to satisfy the disclosure objective and how much\n50-2\n emphasis to place on each of the various requirements. An entity shall aggregate or disaggregate disclosures\n so that useful information is not obscured by either the inclusion of a large amount of insignificant detail or the\n aggregation of items that have substantially different characteristics.\n\n606-10- Amounts disclosed are for each reporting period for which a statement of comprehensive income (statement of\n50-3\n activities) is presented and as of each reporting period for which a statement of financial position is presented.\n An entity need not disclose information in accordance with the guidance in this Topic if it has provided the\n information in accordance with another Topic.\n\n\n> Contracts with Customers\n606-10- An entity shall disclose all of the following amounts for the reporting period unless those amounts are\n50-4\n presented separately in the statement of comprehensive income (statement of activities) in accordance with\n other Topics:\n aRevenue recognized from contracts with customers, which the entity shall disclose separately from its\n other sources of revenue\n bCredit losses recorded (in accordance with Subtopic 326-20 on financial instruments measured at\n amortized cost) on any receivables or contract assets arising from an entity's contracts with customers,\n which the entity shall disclose separately from credit losses from other contracts.\n\n\n\u00b7 > Disaggregation of Revenue\n606-10- An entity shall disaggregate revenue recognized from contracts with customers into categories that depict how\n50-5\n the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. An\n entity shall apply the guidance in paragraphs 606-10-55-89 through 55-91 when selecting the categories to\n use to disaggregate revenue.\n\n606-10- In addition, an entity shall disclose sufficient information to enable users of financial statements to understand\n50-6\n the relationship between the disclosure of disaggregated revenue (in accordance with paragraph 606-10-50-5)\n and revenue information that is disclosed for each reportable segment, if the entity applies Topic 280 on\n segment reporting.\n\n606-10- An entity, except for a public business entity, a not-for-profit entity that has issued, or is a conduit bond obligor\n50-7\n for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee\n benefit plan that files or furnishes financial statements with or to the Securities and Exchange Commission\n (SEC), may elect not to apply the quantitative disaggregation disclosure guidance in paragraphs 606-10-50-5\n through 50-6 and 606-10-55-89 through 55-91. If an entity elects not to provide those disclosures, the entity\n shall disclose, at a minimum, revenue disaggregated according to the timing of transfer of goods or services\n (for example, revenue from goods or services transferred to customers at a point in time and revenue from\n goods or services transferred to customers over time) and qualitative information about how economic factors\n (such as type of customer, geographical location of customers, and type of contract) affect the nature, amount,\n timing, and uncertainty of revenue and cash flows.\n\n\u00b7 > Contract Balances\n\n606-10- An entity shall disclose all of the following:\n50-8\n aThe opening and closing balances of receivables, contract assets, and contract\n liabilities from contracts with customers, if not otherwise separately presented or disclosed\n bRevenue recognized in the reporting period that was included in the contract liability balance at the\n beginning of the period\n cSubparagraph superseded by Accounting Standards Update No. 2016-20.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 32 of 123\n606-10- An entity shall explain how the timing of satisfaction of its performance obligations (see paragraph 606-10-50-\n50-9\n 12(a)) relates to the typical timing of payment (see paragraph 606-10-50-12(b)) and the effect that those\n factors have on the contract asset and the contract liability balances. The explanation provided may use\n qualitative information.\n\n606-10- An entity shall provide an explanation of the significant changes in the contract asset and the contract liability\n50-10\n balances during the reporting period. The explanation shall include qualitative and quantitative information.\n Examples of changes in the entity's balances of contract assets and contract liabilities include any of the\n following:\n aChanges due to business combinations\n bCumulative catch-up adjustments to revenue that affect the corresponding contract asset or contract\n liability, including adjustments arising from a change in the measure of progress, a change in an estimate\n of the transaction price (including any changes in the assessment of whether an estimate of variable\n consideration is constrained), or a contract modification\n cImpairment of a contract asset\n dA change in the time frame for a right to consideration to become unconditional (that is, for a contract\n asset to be reclassified to a receivable)\n eA change in the time frame for a performance obligation to be satisfied (that is, for the recognition of\n revenue arising from a contract liability).\n\n606-10- An entity, except for a public business entity, a not-for-profit entity that has issued, or is a conduit bond obligor\n50-11\n for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee\n benefit plan that files or furnishes financial statements with or to the SEC, may elect not to provide any or all of\n the disclosures in paragraphs 606-10-50-8 through 50-10 and 606-10-50-12A. However, if an entity elects not\n to provide the disclosures in paragraphs 606-10-50-8 through 50-10 and 606-10-50-12A, the entity shall\n provide the disclosure in paragraph 606-10-50-8(a), which requires the disclosure of the opening and closing\n balances of receivables, contract assets, and contract liabilities from contracts with customers, if not otherwise\n separately presented or disclosed.\n\n\u00b7 > Performance Obligations\n\n606-10- An entity shall disclose information about its performance obligations in contracts with customers, including a\n50-12\n description of all of the following:\n aWhen the entity typically satisfies its performance obligations (for example, upon shipment, upon\n delivery, as services are rendered, or upon completion of service) including when performance obligations\n are satisfied in a bill-and-hold arrangement\n bThe significant payment terms (for example, when payment typically is due, whether the contract has a\n significant financing component, whether the consideration amount is variable, and whether the estimate\n of variable consideration is typically constrained in accordance with paragraphs 606-10-32-11 through 32-\n 13)\n cThe nature of the goods or services that the entity has promised to transfer, highlighting any\n performance obligations to arrange for another party to transfer goods or services (that is, if the entity is\n acting as an agent)\n dObligations for returns, refunds, and other similar obligations\n eTypes of warranties and related obligations.\n\n606-10- An entity shall disclose revenue recognized in the reporting period from performance obligations satisfied (or\n50-12A\n partially satisfied) in previous periods (for example, changes in transaction price).\n\n\u00b7 > Transaction Price Allocated to the Remaining Performance Obligations\n606-10- An entity shall disclose the following information about its remaining performance obligations:\n50-13\n aThe aggregate amount of the transaction price allocated to the performance obligations that are\n unsatisfied (or partially unsatisfied) as of the end of the reporting period\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 33 of 123\n bAn explanation of when the entity expects to recognize as revenue the amount disclosed in accordance\n with paragraph 606-10-50-13(a), which the entity shall disclose in either of the following ways:\n\n 1On a quantitative basis using the time bands that would be most appropriate for the duration of the\n remaining performance obligations\n\n 2By using qualitative information.\n\n606-10- An entity need not disclose the information in paragraph 606-10-50-13 for a performance obligation if either of\n50-14\n the following conditions is met:\n aThe performance obligation is part of a contract that has an original expected duration of one year or\n less.\n bThe entity recognizes revenue from the satisfaction of the performance obligation in accordance with\n paragraph 606-10-55-18.\n\n\n606-10- An entity need not disclose the information in paragraph 606-10-50-13 for variable consideration for which\n50-14A\n either of the following conditions is met:\n aThe variable consideration is a sales-based or usage-based royalty promised in exchange for a license\n of intellectual property accounted for in accordance with paragraphs 606-10-55-65 through 55-65B.\n bThe variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a\n wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance\n obligation in accordance with paragraph 606-10-25-14(b), for which the criteria in paragraph 606-10-32-\n 40 have been met.\n\n606-10- The optional exemptions in paragraphs 606-10-50-14(b) and 606-10-50-14A shall not be applied to fixed\n50-14B\n consideration.\n\n606-10- An entity shall disclose which optional exemptions in paragraphs 606-10-50-14 through 50-14A it is\n50-15\n applying. In addition, an entity applying the optional exemptions in paragraphs 606-10-50-14 through 50-\n 14A shall disclose the nature of the performance obligations, the remaining duration (see paragraph 606-10-\n 25-3), and a description of the variable consideration (for example, the nature of the variability and how that\n variability will be resolved) that has been excluded from the information disclosed in accordance with\n paragraph 606-10-50-13. This information shall include sufficient detail to enable users of financial statements\n to understand the remaining performance obligations that the entity excluded from the information disclosed in\n accordance with paragraph 606-10-50-13. In addition, an entity shall explain whether any consideration from\n contracts with customers is not included in the transaction price and, therefore, not included in the information\n disclosed in accordance with paragraph 606-10-50-13. For example, an estimate of the transaction price\n would not include any estimated amounts of variable consideration that are constrained (see paragraphs 606-\n 10-32-11 through 32-13).\n\n606-10- An entity, except for a public business entity, a not-for-profit entity that has issued, or is a conduit bond obligor\n50-16\n for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee\n benefit plan that files or furnishes financial statements with or to the SEC, may elect not to provide the\n disclosures in paragraphs 606-10-50-13 through 50-15.\n\n\n> Significant Judgments in the Application of the Guidance in This Topic\n606-10- An entity shall disclose the judgments, and changes in the judgments, made in applying the guidance in this\n50-17\n Topic that significantly affect the determination of the amount and timing\n of revenue from contracts with customers. In particular, an entity shall explain the judgments, and changes in\n the judgments, used in determining both of the following:\n aThe timing of satisfaction of performance obligations (see paragraphs 606-10-50-18 through 50-19)\n bThe transaction price and the amounts allocated to performance obligations (see paragraph 606-10-50-\n 20).\n\n\n\u00b7 > Determining the Timing of Satisfaction of Performance Obligations\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 34 of 123\n 606-10- For performance obligations that an entity satisfies over time, an entity shall disclose both of the following:\n 50-18\n aThe methods used to recognize revenue (for example, a description of the output methods or input\n methods used and how those methods are applied)\n bAn explanation of why the methods used provide a faithful depiction of the transfer of goods or services.\n\n\n 606-10- For performance obligations satisfied at a point in time, an entity shall disclose the significant judgments made\n 50-19\n in evaluating when a customer obtains control of promised goods or services.\n\n \u00b7 > Determining the Transaction Price and the Amounts Allocated to Performance Obligations\n\n 606-10- An entity shall disclose information about the methods, inputs, and assumptions used for all of the following:\n 50-20\n aDetermining the transaction price, which includes, but is not limited to, estimating variable consideration,\n adjusting the consideration for the effects of the time value of money, and measuring noncash\n consideration\n bAssessing whether an estimate of variable consideration is constrained\n cAllocating the transaction price, including estimating standalone selling prices of promised goods or\n services and allocating discounts and variable consideration to a specific part of the contract (if\n applicable)\n dMeasuring obligations for returns, refunds, and other similar obligations.\n\n 606-10- An entity except for a public business entity, a not-for-profit entity that has issued, or is a conduit bond obligor\n 50-21\n for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee\n benefit plan that files or furnishes financial statements with or to the SEC, may elect not to provide any or all of\n the following disclosures:\n aParagraph 606-10-50-18(b), which states that an entity shall disclose, for performance\n obligations satisfied over time, an explanation of why the methods used to recognize revenue provide a\n faithful depiction of the transfer of goods or services to a customer\n bParagraph 606-10-50-19, which states that an entity shall disclose, for performance obligations satisfied\n at a point in time, the significant judgments made in evaluating when a customer obtains control of\n promised goods or services\n cParagraph 606-10-50-20, which states that an entity shall disclose the methods, inputs, and assumptions\n used to determine the transaction price and to allocate the transaction price. However, if an entity elects\n not to provide the disclosures in paragraph 606-10-50-20, the entity shall provide the disclosure in\n paragraph 606-10-50-20(b), which states that an entity shall disclose the methods, inputs, and\n assumptions used to assess whether an estimate of variable consideration is constrained.\n\n\n > Practical Expedients\n 606-10- If an entity elects to use the practical expedient in either paragraph 606-10-32-18 (about the existence of a\n 50-22\n significant financing component) or paragraph 340-40-25-4 (about the incremental costs of obtaining\n a contract), the entity shall disclose that fact.\n\n 606-10- An entity, except for a public business entity, a not-for-profit entity that has issued, or is a conduit bond obligor\n 50-23\n for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee\n benefit plan that files or furnishes financial statements with or to the SEC, may elect not to provide the\n disclosures in paragraph 606-10-50-22.\n\n\n\n\n55 Implementation Guidance and Illustrations\n\n\n General Note:The Implementation Guidance and Illustrations Section contains implementation\n guidance and illustrations that are an integral part of the Subtopic. The implementation guidance and\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 35 of 123\n illustrations do not address all possible variations. Users must consider carefully the actual facts and\n circumstances in relation to the requirements of the Subtopic.\n\n\n\nGeneral Related Proposed ASUs\n\n\n606-10- The Implementation Guidance and Illustrations Section is organized as follows:\n55-1\n aImplementation guidance is provided in paragraphs 606-10-55-2 through 55-91 with a listing of contents\n in paragraph 606-10-55-3.\n bIllustrations are provided in paragraphs 606-10-55-92 through 55-413 with a listing of contents in\n paragraph 606-10-55-93.\n\n\n> Implementation Guidance\n606-10- Paragraphs 606-10-55-2 through 55-91 are an integral part of this Topic. These paragraphs provide additional\n55-2\n guidance that addresses the application of the guidance on revenue from contracts with customers.\n\n606-10- This implementation guidance is organized into the following categories:\n55-3\n aAssessing collectibility (paragraphs 606-10-55-3A through 55-3C)\n aaPerformance obligations satisfied over time (paragraphs 606-10-55-4 through 55-15)\n bMethods for measuring progress toward complete satisfaction of a performance obligation\n (paragraphs 606-10-55-16 through 55-21)\n cSale with a right of return (paragraphs 606-10-55-22 through 55-29)\n dWarranties (paragraphs 606-10-55-30 through 55-35)\n ePrincipal versus agent considerations (paragraphs 606-10-55-36 through 55-40)\n fCustomer options for additional goods or services (paragraphs 606-10-55-41 through 55-45)\n gCustomers' unexercised rights (paragraphs 606-10-55-46 through 55-49)\n hNonrefundable upfront fees (and some related costs) (paragraphs 606-10-55-50 through 55-53)\n iLicensing (paragraphs 606-10-55-54 through 55-60 and 606-10-55-62 through 55-65B)\n jRepurchase agreements (paragraphs 606-10-55-66 through 55-78)\n kConsignment arrangements (paragraphs 606-10-55-79 through 55-80)\n lBill-and-hold arrangements (paragraphs 606-10-55-81 through 55-84)\n mCustomer acceptance (paragraphs 606-10-55-85 through 55-88)\n mmEquity instruments granted as consideration payable to a customer (paragraphs 606-10-55-88A\n through 55-88B)\n nDisclosure of disaggregated revenue (paragraphs 606-10-55-89 through 55-91).\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 36 of 123\n PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-2\n This implementation guidance is organized into the following categories:\n aAssessing collectibility (paragraphs 606-10-55-3A through 55-3C)\n aaPerformance obligations satisfied over time (paragraphs 606-10-55-4 through 55-15)\n bMethods for measuring progress toward complete satisfaction of a performance obligation\n (paragraphs 606-10-55-16 through 55-21)\n cSale with a right of return (paragraphs 606-10-55-22 through 55-29)\n dWarranties (paragraphs 606-10-55-30 through 55-35)\n ePrincipal versus agent considerations (paragraphs 606-10-55-36 through 55-40)\n fCustomer options for additional goods or services (paragraphs 606-10-55-41 through 55-45)\n gCustomers' unexercised rights (paragraphs 606-10-55-46 through 55-49)\n hNonrefundable upfront fees (and some related costs) (paragraphs 606-10-55-50 through 55-53)\n iLicensing (paragraphs 606-10-55-54 through 55-60 and 606-10-55-62 through 55-65B)\n jRepurchase agreements (paragraphs 606-10-55-66 through 55-78)\n kConsignment arrangements (paragraphs 606-10-55-79 through 55-80)\n lBill-and-hold arrangements (paragraphs 606-10-55-81 through 55-84)\n mCustomer acceptance (paragraphs 606-10-55-85 through 55-88)\n mmShare-based consideration payable to a customer (paragraphs 606-10-55-88A through 55-88C)\n nDisclosure of disaggregated revenue (paragraphs 606-10-55-89 through 55-91).\n\n\n\n\u00b7 > Assessing Collectibility\n\n606-10- Paragraph 606-10-25-1(e) requires an entity to assess whether it is probable that the entity will collect\n55-3A\n substantially all of the consideration to which it will be entitled in exchange for the goods or services that will\n be transferred to the customer. The assessment, which is part of identifying whether there is a contract with a\n customer, is based on whether the customer has the ability and intention to pay the consideration to which the\n entity will be entitled in exchange for the goods or services that will be transferred to the customer. The\n objective of this assessment is to evaluate whether there is a substantive transaction between the entity and\n the customer, which is a necessary condition for the contract to be accounted for under the revenue model in\n this Topic.\n\n606-10- The collectibility assessment in paragraph 606-10-25-1(e) is partly a forward-looking assessment. It requires\n55-3B\n an entity to use judgment and consider all of the facts and circumstances, including the entity's customary\n business practices and its knowledge of the customer, in determining whether it is probable that the entity will\n collect substantially all of the consideration to which it will be entitled in exchange for the goods or services\n that the entity expects to transfer to the customer. The assessment is not necessarily based on the customer's\n ability and intention to pay the entire amount of promised consideration for the entire duration of the contract.\n\n606-10- When assessing whether a contract meets the criterion in paragraph 606-10-25-1(e), an entity should\n55-3C\n determine whether the contractual terms and its customary business practices indicate that the entity's\n exposure to credit risk is less than the entire consideration promised in the contract because the entity has the\n ability to mitigate its credit risk. Examples of contractual terms or customary business practices that might\n mitigate the entity's credit risk include the following:\n aPayment terms\u2014In some contracts, payment terms limit an entity's exposure to credit risk. For example,\n a customer may be required to pay a portion of the consideration promised in the contract before the\n entity transfers promised goods or services to the customer. In those cases, any consideration that will be\n received before the entity transfers promised goods or services to the customer would not be subject to\n credit risk.\n bThe ability to stop transferring promised goods or services\u2014An entity may limit its exposure to credit risk\n if it has the right to stop transferring additional goods or services to a customer in the event that the\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 37 of 123\n customer fails to pay consideration when it is due. In those cases, an entity should assess only the\n collectibility of the consideration to which it will be entitled in exchange for the goods or services that will\n be transferred to the customer on the basis of the entity's rights and customary business practices.\n Therefore, if the customer fails to perform as promised and, consequently, the entity would respond to the\n customer's failure to perform by not transferring additional goods or services to the customer, the entity\n would not consider the likelihood of payment for the promised goods or services that will not be\n transferred under the contract.\n An entity's ability to repossess an asset transferred to a customer should not be considered for the purpose of\n assessing the entity's ability to mitigate its exposure to credit risk.\n\n\u00b7 > Performance Obligations Satisfied Over Time\n\n606-10- In accordance with paragraph 606-10-25-27, a performance obligation is satisfied over time if one of the\n55-4\n following criteria is met:\n aThe customer simultaneously receives and consumes the benefits provided by the entity's performance\n as the entity performs (see paragraphs 606-10-55-5 through 55-6).\n bThe entity's performance creates or enhances an asset (for example, work in process) that the customer\n controls as the asset is created or enhanced (see paragraph 606-10-55-7).\n cThe entity's performance does not create an asset with an alternative use to the entity (see\n paragraphs 606-10-55-8 through 55-10), and the entity has an enforceable right to payment for\n performance completed to date (see paragraphs 606-10-55-11 through 55-15).\n\n\n\u00b7 \u00b7 > Simultaneous Receipt and Consumption of the Benefits of the Entity's Performance (paragraph 606-10-25-27(a))\n\n606-10- For some types of performance obligations, the assessment of whether a customer receives the benefits of an\n55-5\n entity's performance as the entity performs and simultaneously consumes those benefits as they are received\n will be straightforward. Examples include routine or recurring services (such as a cleaning service) in which\n the receipt and simultaneous consumption by the customer of the benefits of the entity's performance can be\n readily identified.\n\n606-10- For other types of performance obligations, an entity may not be able to readily identify whether a customer\n55-6\n simultaneously receives and consumes the benefits from the entity's performance as the entity performs. In\n those circumstances, a performance obligation is satisfied over time if an entity determines that another entity\n would not need to substantially reperform the work that the entity has completed to date if that other entity\n were to fulfill the remaining performance obligation to the customer. In determining whether another entity\n would not need to substantially reperform the work the entity has completed to date, an entity should make\n both of the following assumptions:\n aDisregard potential contractual restrictions or practical limitations that otherwise would prevent the entity\n from transferring the remaining performance obligation to another entity\n bPresume that another entity fulfilling the remainder of the performance obligation would not have the\n benefit of any asset that is presently controlled by the entity and that would remain controlled by the entity\n if the performance obligation were to transfer to another entity.\n\n\n\u00b7 \u00b7 > Customer Controls the Asset As It Is Created or Enhanced (paragraph 606-10-25-27(b))\n\n606-10- In determining whether a customer controls an asset as it is created or enhanced in accordance with\n55-7\n paragraph 606-10-25-27(b), an entity should apply the guidance on control in paragraphs 606-10-25-23\n through 25-26 and 606-10-25-30. The asset that is being created or enhanced (for example, a work in process\n asset) could be either tangible or intangible.\n\n\u00b7 \u00b7 > Entity's Performance Does Not Create an Asset with an Alternative Use (paragraph 606-10-25-27(c))\n\n606-10- In assessing whether an asset has an alternative use to an entity in accordance with paragraph 606-10-25-28,\n55-8\n an entity should consider the effects of contractual restrictions and practical limitations on the entity's ability to\n readily direct that asset for another use, such as selling it to a different customer. The possibility of\n the contract with the customer being terminated is not a relevant consideration in assessing whether the entity\n would be able to readily direct the asset for another use.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 38 of 123\n606-10- A contractual restriction on an entity's ability to direct an asset for another use must be substantive for the\n55-9\n asset not to have an alternative use to the entity. A contractual restriction is substantive if a customer could\n enforce its rights to the promised asset if the entity sought to direct the asset for another use. In contrast, a\n contractual restriction is not substantive if, for example, an asset is largely interchangeable with other assets\n that the entity could transfer to another customer without breaching the contract and without incurring\n significant costs that otherwise would not have been incurred in relation to that contract.\n\n606-10- A practical limitation on an entity's ability to direct an asset for another use exists if an entity would incur\n55-10\n significant economic losses to direct the asset for another use. A significant economic loss could arise\n because the entity either would incur significant costs to rework the asset or would only be able to sell the\n asset at a significant loss. For example, an entity may be practically limited from redirecting assets that either\n have design specifications that are unique to a customer or are located in remote areas.\n\n\u00b7 \u00b7 > Right to Payment for Performance Completed to Date (paragraph 606-10-25-27(c))\n\n606-10- In accordance with paragraph 606-10-25-29, an entity has a right to payment for performance completed to\n55-11\n date if the entity would be entitled to an amount that at least compensates the entity for its performance\n completed to date in the event that the customer or another party terminates the contract for reasons other\n than the entity's failure to perform as promised. An amount that would compensate an entity for performance\n completed to date would be an amount that approximates the selling price of the goods or services transferred\n to date (for example, recovery of the costs incurred by an entity in satisfying the performance obligation plus a\n reasonable profit margin) rather than compensation for only the entity's potential loss of profit if the contract\n were to be terminated. Compensation for a reasonable profit margin need not equal the profit margin expected\n if the contract was fulfilled as promised, but an entity should be entitled to compensation for either of the\n following amounts:\n aA proportion of the expected profit margin in the contract that reasonably reflects the extent of the entity's\n performance under the contract before termination by the customer (or another party)\n bA reasonable return on the entity's cost of capital for similar contracts (or the entity's typical operating\n margin for similar contracts) if the contract-specific margin is higher than the return the entity usually\n generates from similar contracts.\n\n606-10- An entity's right to payment for performance completed to date need not be a present unconditional right to\n55-12\n payment. In many cases, an entity will have an unconditional right to payment only at an agreed-upon\n milestone or upon complete satisfaction of the performance obligation. In assessing whether it has a right to\n payment for performance completed to date, an entity should consider whether it would have an enforceable\n right to demand or retain payment for performance completed to date if the contract were to be terminated\n before completion for reasons other than the entity's failure to perform as promised.\n\n606-10- In some contracts, a customer may have a right to terminate the contract only at specified times during the life\n55-13\n of the contract or the customer might not have any right to terminate the contract. If a customer acts to\n terminate a contract without having the right to terminate the contract at that time (including when a customer\n fails to perform its obligations as promised), the contract (or other laws) might entitle the entity to continue to\n transfer to the customer the goods or services promised in the contract and require the customer to pay the\n consideration promised in exchange for those goods or services. In those circumstances, an entity has a right\n to payment for performance completed to date because the entity has a right to continue to perform its\n obligations in accordance with the contract and to require the customer to perform its obligations (which\n include paying the promised consideration).\n\n606-10- In assessing the existence and enforceability of a right to payment for performance completed to date, an\n55-14\n entity should consider the contractual terms as well as any legislation or legal precedent that could\n supplement or override those contractual terms. This would include an assessment of whether:\n aLegislation, administrative practice, or legal precedent confers upon the entity a right to payment for\n performance to date even though that right is not specified in the contract with the customer.\n bRelevant legal precedent indicates that similar rights to payment for performance completed to date in\n similar contracts have no binding legal effect.\n cAn entity's customary business practices of choosing not to enforce a right to payment has resulted in\n the right being rendered unenforceable in that legal environment. However, notwithstanding that an entity\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 39 of 123\n may choose to waive its right to payment in similar contracts, an entity would continue to have a right to\n payment to date if, in the contract with the customer, its right to payment for performance to date remains\n enforceable.\n\n606-10- The payment schedule specified in a contract does not necessarily indicate whether an entity has an\n55-15\n enforceable right to payment for performance completed to date. Although the payment schedule in a contract\n specifies the timing and amount of consideration that is payable by a customer, the payment schedule might\n not necessarily provide evidence of the entity's right to payment for performance completed to date. This is\n because, for example, the contract could specify that the consideration received from the customer is\n refundable for reasons other than the entity failing to perform as promised in the contract.\n\n\u00b7 > Methods for Measuring Progress toward Complete Satisfaction of a Performance Obligation\n606-10- Methods that can be used to measure an entity's progress toward complete satisfaction of a performance\n55-16\n obligation satisfied over time in accordance with paragraphs 606-10-25-27 through 25-29 include the following:\n aOutput methods (see paragraphs 606-10-55-17 through 55-19)\n bInput methods (see paragraphs 606-10-55-20 through 55-21).\n\n\n\u00b7 \u00b7 > Output Methods\n\n606-10- Output methods recognize revenue on the basis of direct measurements of the value to the customer of the\n55-17\n goods or services transferred to date relative to the remaining goods or services promised under the contract.\n Output methods include methods such as surveys of performance completed to date, appraisals of results\n achieved, milestones reached, time elapsed, and units produced or units delivered. When an entity evaluates\n whether to apply an output method to measure its progress, the entity should consider whether the output\n selected would faithfully depict the entity's performance toward complete satisfaction of the performance\n obligation. An output method would not provide a faithful depiction of the entity's performance if the output\n selected would fail to measure some of the goods or services for which control has transferred to the\n customer. For example, output methods based on units produced or units delivered would not faithfully depict\n an entity's performance in satisfying a performance obligation if, at the end of the reporting period, the entity's\n performance has produced work in process or finished goods controlled by the customer that are not included\n in the measurement of the output.\n\n606-10- As a practical expedient, if an entity has a right to consideration from a customer in an amount that\n55-18\n corresponds directly with the value to the customer of the entity's performance completed to date (for example,\n a service contract in which an entity bills a fixed amount for each hour of service provided), the entity may\n recognize revenue in the amount to which the entity has a right to invoice.\n\n606-10- The disadvantages of output methods are that the outputs used to measure progress may not be directly\n55-19\n observable and the information required to apply them may not be available to an entity without undue cost.\n Therefore, an input method may be necessary.\n\n\u00b7 \u00b7 > Input Methods\n\n606-10- Input methods recognize revenue on the basis of the entity's efforts or inputs to the satisfaction of\n55-20\n a performance obligation (for example, resources consumed, labor hours expended, costs incurred, time\n elapsed, or machine hours used) relative to the total expected inputs to the satisfaction of that performance\n obligation. If the entity's efforts or inputs are expended evenly throughout the performance period, it may be\n appropriate for the entity to recognize revenue on a straight-line basis.\n\n606-10- A shortcoming of input methods is that there may not be a direct relationship between an entity's inputs and\n55-21\n the transfer of control of goods or services to a customer. Therefore, an entity should exclude from an input\n method the effects of any inputs that, in accordance with the objective of measuring progress in\n paragraph 606-10-25-31, do not depict the entity's performance in transferring control of goods or services to\n the customer. For instance, when using a cost-based input method, an adjustment to the measure of progress\n may be required in the following circumstances:\n aWhen a cost incurred does not contribute to an entity's progress in satisfying the performance obligation.\n For example, an entity would not recognize revenue on the basis of costs incurred that are attributable to\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 40 of 123\n significant inefficiencies in the entity's performance that were not reflected in the price of the contract (for\n example, the costs of unexpected amounts of wasted materials, labor, or other resources that were\n incurred to satisfy the performance obligation).\n bWhen a cost incurred is not proportionate to the entity's progress in satisfying the performance\n obligation. In those circumstances, the best depiction of the entity's performance may be to adjust the\n input method to recognize revenue only to the extent of that cost incurred. For example, a faithful\n depiction of an entity's performance might be to recognize revenue at an amount equal to the cost of a\n good used to satisfy a performance obligation if the entity expects at contract inception that all of the\n following conditions would be met:\n\n 1The good is not distinct.\n\n 2The customer is expected to obtain control of the good significantly before receiving services related\n to the good.\n\n 3The cost of the transferred good is significant relative to the total expected costs to completely\n satisfy the performance obligation.\n\n 4The entity procures the good from a third party and is not significantly involved in designing and\n manufacturing the good (but the entity is acting as a principal in accordance with paragraphs 606-10-\n 55-36 through 55-40).\n\n\u00b7 > Sale with a Right of Return\n\n606-10- In some contracts, an entity transfers control of a product to a customer and also grants the customer the right\n55-22\n to return the product for various reasons (such as dissatisfaction with the product) and receive any\n combination of the following:\n aA full or partial refund of any consideration paid\n bA credit that can be applied against amounts owed, or that will be owed, to the entity\n cAnother product in exchange.\n\n\n606-10- To account for the transfer of products with a right of return (and for some services that are provided subject to\n55-23\n a refund), an entity should recognize all of the following:\n aRevenue for the transferred products in the amount of consideration to which the entity expects to be\n entitled (therefore, revenue would not be recognized for the products expected to be returned)\n bA refund liability\n cAn asset (and corresponding adjustment to cost of sales) for its right to recover products from customers\n on settling the refund liability.\n\n\n606-10- An entity's promise to stand ready to accept a returned product during the return period should not be\n55-24\n accounted for as a performance obligation in addition to the obligation to provide a refund.\n\n606-10- An entity should apply the guidance in paragraphs 606-10-32-2 through 32-27 (including the guidance on\n55-25\n constraining estimates of variable consideration in paragraphs 606-10-32-11 through 32-13) to determine the\n amount of consideration to which the entity expects to be entitled (that is, excluding the products expected to\n be returned). For any amounts received (or receivable) for which an entity does not expect to be entitled, the\n entity should not recognize revenue when it transfers products to customers but should recognize those\n amounts received (or receivable) as a refund liability. Subsequently, at the end of each reporting period, the\n entity should update its assessment of amounts for which it expects to be entitled in exchange for the\n transferred products and make a corresponding change to the transaction price and, therefore, in the amount\n of revenue recognized.\n\n606-10- An entity should update the measurement of the refund liability at the end of each reporting period for changes\n55-26\n in expectations about the amount of refunds. An entity should recognize corresponding adjustments as\n revenue (or reductions of revenue).\n\n606-10- An asset recognized for an entity's right to recover products from a customer on settling a refund liability\n55-27\n initially should be measured by reference to the former carrying amount of the product (for example, inventory)\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 41 of 123\n less any expected costs to recover those products (including potential decreases in the value to the entity of\n returned products). At the end of each reporting period, an entity should update the measurement of the asset\n arising from changes in expectations about products to be returned. An entity should present the asset\n separately from the refund liability.\n\n606-10- Exchanges by customers of one product for another of the same type, quality, condition, and price (for\n55-28\n example, one color or size for another) are not considered returns for the purposes of applying the guidance in\n this Topic.\n\n606-10- Contracts in which a customer may return a defective product in exchange for a functioning product should be\n55-29\n evaluated in accordance with the guidance on warranties in paragraphs 606-10-55-30 through 55-35.\n\n\u00b7 > Warranties\n\n606-10- It is common for an entity to provide (in accordance with the contract, the law, or the entity's customary\n55-30\n business practices) a warranty in connection with the sale of a product (whether a good or service). The nature\n of a warranty can vary significantly across industries and contracts. Some warranties provide a customer with\n assurance that the related product will function as the parties intended because it complies with agreed-upon\n specifications. Other warranties provide the customer with a service in addition to the assurance that the\n product complies with agreed-upon specifications.\n\n606-10- If a customer has the option to purchase a warranty separately (for example, because the warranty is priced or\n55-31\n negotiated separately), the warranty is a distinct service because the entity promises to provide the service to\n the customer in addition to the product that has the functionality described in the contract. In those\n circumstances, an entity should account for the promised warranty as a performance obligation in accordance\n with paragraphs 606-10-25-14 through 25-22 and allocate a portion of the transaction price to that\n performance obligation in accordance with paragraphs 606-10-32-28 through 32-41.\n\n606-10- If a customer does not have the option to purchase a warranty separately, an entity should account for the\n55-32\n warranty in accordance with the guidance on product warranties in Subtopic 460-10 on guarantees, unless the\n promised warranty, or a part of the promised warranty, provides the customer with a service in addition to the\n assurance that the product complies with agreed-upon specifications.\n\n606-10- In assessing whether a warranty provides a customer with a service in addition to the assurance that the\n55-33\n product complies with agreed-upon specifications, an entity should consider factors such as:\n aWhether the warranty is required by law\u2014If the entity is required by law to provide a warranty, the\n existence of that law indicates that the promised warranty is not a performance obligation because such\n requirements typically exist to protect customers from the risk of purchasing defective products.\n bThe length of the warranty coverage period\u2014The longer the coverage period, the more likely it is that\n the promised warranty is a performance obligation because it is more likely to provide a service in addition\n to the assurance that the product complies with agreed-upon specifications.\n cThe nature of the tasks that the entity promises to perform\u2014If it is necessary for an entity to perform\n specified tasks to provide the assurance that a product complies with agreed-upon specifications (for\n example, a return shipping service for a defective product), then those tasks likely do not give rise to a\n performance obligation.\n\n\n606-10- If a warranty, or a part of a warranty, provides a customer with a service in addition to the assurance that the\n55-34\n product complies with agreed-upon specifications, the promised service is a performance obligation.\n Therefore, an entity should allocate the transaction price to the product and the service. If an entity promises\n both an assurance-type warranty and a service-type warranty but cannot reasonably account for them\n separately, the entity should account for both of the warranties together as a single performance obligation.\n\n606-10- A law that requires an entity to pay compensation if its products cause harm or damage does not give rise to a\n55-35\n performance obligation. For example, a manufacturer might sell products in a jurisdiction in which the law\n holds the manufacturer liable for any damages (for example, to personal property) that might be caused by a\n consumer using a product for its intended purpose. Similarly, an entity's promise to indemnify the customer for\n liabilities and damages arising from claims of patent, copyright, trademark, or other infringement by the entity's\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 42 of 123\n products does not give rise to a performance obligation. The entity should account for such obligations in\n accordance with the guidance on loss contingencies in Subtopic 450-20 on contingencies.\n\n\u00b7 > Principal versus Agent Considerations\n606-10- When another party is involved in providing goods or services to a customer, the entity should determine\n55-36\n whether the nature of its promise is a performance obligation to provide the specified goods or services itself\n (that is, the entity is a principal) or to arrange for those goods or services to be provided by the other party\n (that is, the entity is an agent).An entity determines whether it is a principal or an agent for each specified\n good or service promised to the customer. A specified good or service is a distinct good or service (or a distinct\n bundle of goods or services) to be provided to the customer (see paragraphs 606-10-25-19 through 25-22). If\n a contract with a customer includes more than one specified good or service, an entity could be a principal for\n some specified goods or services and an agent for others.\n\n606-10- To determine the nature of its promise (as described in paragraph 606-10-55-36), the entity should:\n55-36A\n aIdentify the specified goods or services to be provided to the customer (which, for example, could be a\n right to a good or service to be provided by another party [see paragraph 606-10-25-18])\n bAssess whether it controls (as described in paragraph 606-10-25-25) each specified good or service\n before that good or service is transferred to the customer.\n\n606-10- An entity is a principal if it controls the specified good or service before that good or service is transferred to a\n55-37\n customer. However, an entity does not necessarily control a specified good if the entity obtains legal title to\n that good only momentarily before legal title is transferred to a customer. An entity that is a principal may\n satisfy its performance obligation to provide the specified good or service itself or it may engage another party\n (for example, a subcontractor) to satisfy some or all of the performance obligation on its behalf.\n\n606-10- When another party is involved in providing goods or services to a customer, an entity that is a principal\n55-37A\n obtains control of any one of the following:\n aA good or another asset from the other party that it then transfers to the customer.\n bA right to a service to be performed by the other party, which gives the entity the ability to direct that\n party to provide the service to the customer on the entity's behalf.\n cA good or service from the other party that it then combines with other goods or services in providing the\n specified good or service to the customer. For example, if an entity provides a significant service of\n integrating goods or services (see paragraph 606-10-25-21(a)) provided by another party into the\n specified good or service for which the customer has contracted, the entity controls the specified good or\n service before that good or service is transferred to the customer. This is because the entity first obtains\n control of the inputs to the specified good or service (which include goods or services from other parties)\n and directs their use to create the combined output that is the specified good or service.\n\n606-10- When (or as) an entity that is a principal satisfies a performance obligation, the entity recognizes revenue in\n55-37B\n the gross amount of consideration to which it expects to be entitled in exchange for the specified good or\n service transferred.\n\n606-10- An entity is an agent if the entity's performance obligation is to arrange for the provision of the specified good\n55-38\n or service by another party. An entity that is an agent does not control the specified good or service provided\n by another party before that good or service is transferred to the customer. When (or as) an entity that is an\n agent satisfies a performance obligation, the entity recognizes revenue in the amount of any fee or\n commission to which it expects to be entitled in exchange for arranging for the specified goods or services to\n be provided by the other party. An entity's fee or commission might be the net amount of consideration that the\n entity retains after paying the other party the consideration received in exchange for the goods or services to\n be provided by that party.\n\n606-10- Indicators that an entity controls the specified good or service before it is transferred to the customer (and is\n55-39\n therefore a principal [see paragraph 606-10-55-37]) include, but are not limited to, the following:\n aThe entity is primarily responsible for fulfilling the promise to provide the specified good or service. This\n typically includes responsibility for the acceptability of the specified good or service (for example, primary\n responsibility for the good or service meeting customer specifications). If the entity is primarily responsible\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 43 of 123\n for fulfilling the promise to provide the specified good or service, this may indicate that the other party\n involved in providing the specified good or service is acting on the entity's behalf.\n bThe entity has inventory risk before the specified good or service has been transferred to a customer or\n after transfer of control to the customer (for example, if the customer has a right of return). For example, if\n the entity obtains, or commits to obtain, the specified good or service before obtaining a contract with a\n customer, that may indicate that the entity has the ability to direct the use of, and obtain substantially all of\n the remaining benefits from, the good or service before it is transferred to the customer.\n cThe entity has discretion in establishing the price for the specified good or service. Establishing the price\n that the customer pays for the specified good or service may indicate that the entity has the ability to\n direct the use of that good or service and obtain substantially all of the remaining benefits. However, an\n agent can have discretion in establishing prices in some cases. For example, an agent may have some\n flexibility in setting prices in order to generate additional revenue from its service of arranging for goods or\n services to be provided by other parties to customers.\n dSubparagraph superseded by Accounting Standards Update No. 2016-08.\n eSubparagraph superseded by Accounting Standards Update No. 2016-08.\n\n606-10- The indicators in paragraph 606-10-55-39 may be more or less relevant to the assessment of control\n55-39A\n depending on the nature of the specified good or service and the terms and conditions of the contract. In\n addition, different indicators may provide more persuasive evidence in different contracts.\n\n606-10- If another entity assumes the entity's performance obligations and contractual rights in the contract so that the\n55-40\n entity is no longer obliged to satisfy the performance obligation to transfer the specified good or service to the\n customer (that is, the entity is no longer acting as the principal), the entity should not recognize revenue for\n that performance obligation. Instead, the entity should evaluate whether to recognize revenue for satisfying a\n performance obligation to obtain a contract for the other party (that is, whether the entity is acting as an\n agent).\n\n\u00b7 > Customer Options for Additional Goods or Services\n606-10- Customer options to acquire additional goods or services for free or at a discount come in many forms,\n55-41\n including sales incentives, customer award credits (or points), contract renewal options, or other discounts on\n future goods or services.\n\n606-10- If, in a contract, an entity grants a customer the option to acquire additional goods or services, that option\n55-42\n gives rise to a performance obligation in the contract only if the option provides a material right to the customer\n that it would not receive without entering into that contract (for example, a discount that is incremental to the\n range of discounts typically given for those goods or services to that class of customer in that geographical\n area or market). If the option provides a material right to the customer, the customer in effect pays the entity in\n advance for future goods or services, and the entity recognizes revenue when those future goods or services\n are transferred or when the option expires.\n\n606-10- If a customer has the option to acquire an additional good or service at a price that would reflect\n55-43\n the standalone selling price for that good or service, that option does not provide the customer with a material\n right even if the option can be exercised only by entering into a previous contract. In those cases, the entity\n has made a marketing offer that it should account for in accordance with the guidance in this Topic only when\n the customer exercises the option to purchase the additional goods or services.\n\n606-10- Paragraph 606-10-32-29 requires an entity to allocate the transaction price to performance obligations on a\n55-44\n relative standalone selling price basis. If the standalone selling price for a customer's option to acquire\n additional goods or services is not directly observable, an entity should estimate it. That estimate should reflect\n the discount that the customer would obtain when exercising the option, adjusted for both of the following:\n aAny discount that the customer could receive without exercising the option\n bThe likelihood that the option will be exercised.\n\n606-10- If a customer has a material right to acquire future goods or services and those goods or services are similar\n55-45\n to the original goods or services in the contract and are provided in accordance with the terms of the original\n contract, then an entity may, as a practical alternative to estimating the standalone selling price of the option,\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 44 of 123\n allocate the transaction price to the optional goods or services by reference to the goods or services expected\n to be provided and the corresponding expected consideration. Typically, those types of options are for contract\n renewals.\n\n\u00b7 > Customers' Unexercised Rights\n\n606-10- In accordance with paragraph 606-10-45-2, upon receipt of a prepayment from a customer, an entity should\n55-46\n recognize a contract liability in the amount of the prepayment for its performance obligation to transfer, or to\n stand ready to transfer, goods or services in the future. An entity should derecognize that contract liability (and\n recognize revenue) when it transfers those goods or services and, therefore, satisfies its performance\n obligation.\n\n606-10- A customer's nonrefundable prepayment to an entity gives the customer a right to receive a good or service in\n55-47\n the future (and obliges the entity to stand ready to transfer a good or service). However, customers may not\n exercise all of their contractual rights. Those unexercised rights are often referred to as breakage.\n\n606-10- If an entity expects to be entitled to a breakage amount in a contract liability, the entity should recognize the\n55-48\n expected breakage amount as revenue in proportion to the pattern of rights exercised by the customer. If an\n entity does not expect to be entitled to a breakage amount, the entity should recognize the expected breakage\n amount as revenue when the likelihood of the customer exercising its remaining rights becomes remote. To\n determine whether an entity expects to be entitled to a breakage amount, the entity should consider the\n guidance in paragraphs 606-10-32-11 through 32-13 on constraining estimates of variable consideration.\n\n606-10- An entity should recognize a liability (and not revenue) for any consideration received that is attributable to a\n55-49\n customer's unexercised rights for which the entity is required to remit to another party, for example, a\n government entity in accordance with applicable unclaimed property laws.\n\n\u00b7 > Nonrefundable Upfront Fees (and Some Related Costs)\n606-10- In some contracts, an entity charges a customer a nonrefundable upfront fee at or near contract inception.\n55-50\n Examples include joining fees in health club membership contracts, activation fees in telecommunication\n contracts, setup fees in some services contracts, and initial fees in some supply contracts.\n\n606-10- To identify performance obligations in such contracts, an entity should assess whether the fee relates to the\n55-51\n transfer of a promised good or service. In many cases, even though a nonrefundable upfront fee relates to an\n activity that the entity is required to undertake at or near contract inception to fulfill the contract, that activity\n does not result in the transfer of a promised good or service to the customer (see paragraph 606-10-25-17).\n Instead, the upfront fee is an advance payment for future goods or services and, therefore, would be\n recognized as revenue when those future goods or services are provided. The revenue recognition period\n would extend beyond the initial contractual period if the entity grants the customer the option to renew the\n contract and that option provides the customer with a material right as described in paragraph 606-10-55-42.\n\n606-10- If the nonrefundable upfront fee relates to a good or service, the entity should evaluate whether to account for\n55-52\n the good or service as a separate performance obligation in accordance with paragraphs 606-10-25-14\n through 25-22.\n\n606-10- An entity may charge a nonrefundable fee in part as compensation for costs incurred in setting up a contract\n55-53\n (or other administrative tasks as described in paragraph 606-10-25-17). If those setup activities do not satisfy\n a performance obligation, the entity should disregard those activities (and related costs) when measuring\n progress in accordance with paragraph 606-10-55-21. That is because the costs of setup activities do not\n depict the transfer of services to the customer. The entity should assess whether costs incurred in setting up a\n contract have resulted in an asset that should be recognized in accordance with paragraph 340-40-25-5.\n\n\u00b7 > Licensing\n\n606-10- A license establishes a customer's rights to the intellectual property of an entity. Licenses of intellectual\n55-54\n property may include, but are not limited to, licenses of any of the following:\n aSoftware (other than software subject to a hosting arrangement that does not meet the criteria in\n paragraph 985-20-15-5) and technology\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 45 of 123\n bMotion pictures, music, and other forms of media and entertainment\n cFranchises\n dPatents, trademarks, and copyrights.\n\n606-10- In addition to a promise to grant a license (or licenses) to a customer, an entity may also promise to transfer\n55-55\n other goods or services to the customer. Those promises may be explicitly stated in the contract or implied by\n an entity's customary business practices, published policies, or specific statements (see paragraph 606-10-25-\n 16). As with other types of contracts, when a contract with a customer includes a promise to grant a license (or\n licenses) in addition to other promised goods or services, an entity applies paragraphs 606-10-25-14 through\n 25-22 to identify each of the performance obligations in the contract.\n\n606-10- If the promise to grant a license is not distinct from other promised goods or services in the contract in\n55-56\n accordance with paragraphs 606-10-25-18 through 25-22, an entity should account for the promise to grant a\n license and those other promised goods or services together as a single performance obligation. Examples of\n licenses that are not distinct from other goods or services promised in the contract include the following:\n aA license that forms a component of a tangible good and that is integral to the functionality of the good\n bA license that the customer can benefit from only in conjunction with a related service (such as an online\n service provided by the entity that enables, by granting a license, the customer to access content).\n\n\n606-10- When a single performance obligation includes a license (or licenses) of intellectual property and one or more\n55-57\n other goods or services, the entity considers the nature of the combined good or service for which the\n customer has contracted (including whether the license that is part of the single performance obligation\n provides the customer with a right to use or a right to access intellectual property in accordance with\n paragraphs 606-10-55-59 through 55-60 and 606-10-55-62 through 55-64A) in determining whether that\n combined good or service is satisfied over time or at a point in time in accordance with paragraphs 606-10-25-\n 23 through 25-30 and, if over time, in selecting an appropriate method for measuring progress in accordance\n with paragraphs 606-10-25-31 through 25-37.\n\n606-10- In evaluating whether a license transfers to a customer at a point in time or over time, an entity should\n55-58\n consider whether the nature of the entity's promise in granting the license to a customer is to provide the\n customer with either:\n aA right to access the entity's intellectual property throughout the license period (or its remaining\n economic life, if shorter)\n bA right to use the entity's intellectual property as it exists at the point in time at which the license is\n granted.\n\n606-10- An entity should account for a promise to provide a customer with a right to access the entity's intellectual\n55-58A\n property as a performance obligation satisfied over time because the customer will simultaneously receive and\n consume the benefit from the entity's performance of providing access to its intellectual property as the\n performance occurs (see paragraph 606-10-25-27(a)). An entity should apply paragraphs 606-10-25-31\n through 25-37 to select an appropriate method to measure its progress toward complete satisfaction of that\n performance obligation to provide access to its intellectual property.\n\n606-10- An entity's promise to provide a customer with the right to use its intellectual property is satisfied at a point in\n55-58B\n time. The entity should apply paragraph 606-10-25-30 to determine the point in time at which the license\n transfers to the customer.\n\n606-10- Notwithstanding paragraphs 606-10-55-58A through 55-58B, revenue cannot be recognized from a license of\n55-58C\n intellectual property before both:\n aAn entity provides (or otherwise makes available) a copy of the intellectual property to the customer.\n bThe beginning of the period during which the customer is able to use and benefit from its right to access\n or its right to use the intellectual property. That is, an entity would not recognize revenue before the\n beginning of the license period even if the entity provides (or otherwise makes available) a copy of the\n intellectual property before the start of the license period or the customer has a copy of the intellectual\n property from another transaction. For example, an entity would recognize revenue from a license\n renewal no earlier than the beginning of the renewal period.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 46 of 123\n\n\u00b7 \u00b7 > Determining the Nature of the Entity's Promise\n\n606-10- To determine whether the entity's promise to provide a right to access its intellectual property or a right to use\n55-59\n its intellectual property, the entity should consider the nature of the intellectual property to which the customer\n will have rights. Intellectual property is either:\n aFunctional intellectual property. Intellectual property that has significant standalone functionality (for\n example, the ability to process a transaction, perform a function or task, or be played or aired). Functional\n intellectual property derives a substantial portion of its utility (that is, its ability to provide benefit or value)\n from its significant standalone functionality.\n bSymbolic intellectual property. Intellectual property that is not functional intellectual property (that is,\n intellectual property that does not have significant standalone functionality). Because symbolic intellectual\n property does not have significant standalone functionality, substantially all of the utility of symbolic\n intellectual property is derived from its association with the entity's past or ongoing activities, including its\n ordinary business activities.\n\n606-10- A customer's ability to derive benefit from a license to symbolic intellectual property depends on the entity\n55-60\n continuing to support or maintain the intellectual property. Therefore, a license to symbolic intellectual property\n grants the customer a right to access the entity's intellectual property, which is satisfied over time (see\n paragraphs 606-10-55-58A and 606-10-55-58C) as the entity fulfills its promise to both:\n aGrant the customer rights to use and benefit from the entity's intellectual property\n bSupport or maintain the intellectual property. An entity generally supports or maintains symbolic\n intellectual property by continuing to undertake those activities from which the utility of the intellectual\n property is derived and/or refraining from activities or other actions that would significantly degrade the\n utility of the intellectual property.\n cSubparagraph superseded by Accounting Standards Update No. 2016-10.\n\n\n606-10- Paragraph superseded by Accounting Standards Update No. 2016-10.\n55-61\n\n606-10- A license to functional intellectual property grants a right to use the entity's intellectual property as it exists at\n55-62\n the point in time at which the license is granted unless both of the following criteria are met:\n aThe functionality of the intellectual property to which the customer has rights is expected to substantively\n change during the license period as a result of activities of the entity that do not transfer a promised good\n or service to the customer (see paragraphs 606-10-25-16 through 25-18). Additional promised goods or\n services (for example, intellectual property upgrade rights or rights to use or access additional intellectual\n property) are not considered in assessing this criterion.\n bThe customer is contractually or practically required to use the updated intellectual property resulting\n from the activities in criterion (a).\n If both of those criteria are met, then the license grants a right to access the entity's intellectual property.\n\n606-10- Because functional intellectual property has significant standalone functionality, an entity's activities that do not\n55-63\n substantively change that functionality do not significantly affect the utility of the intellectual property to which\n the customer has rights. Therefore, the entity's promise to the customer in granting a license to functional\n intellectual property does not include supporting or maintaining the intellectual property. Consequently, if a\n license to functional intellectual property is a separate performance obligation (see paragraph 606-10-55-55)\n and does not meet the criteria in paragraph 606-10-55-62, it is satisfied at a point in time (see paragraphs 606-\n 10-55-58B through 55-58C).\n\n606-10- The following flowchart depicts the decision process for evaluating whether the nature of an entity's promise in\n55-63A\n granting a license is to provide the customer with a right to access the entity's intellectual property or a right to\n use the entity's intellectual property. The flowchart does not include all of the guidance on determining the\n nature of an entity's promise in granting a license of intellectual property in this Subtopic and is not intended as\n a substitute for the guidance in this Subtopic.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 47 of 123\n\n\n\n\n\u00b7 \u00b7 > Other Licensing Considerations\n\n606-10- Contractual provisions that explicitly or implicitly require an entity to transfer control of additional goods or\n55-64\n services to a customer (for example, by requiring the entity to transfer control of additional rights to use or\n rights to access intellectual property that the customer does not already control) should be distinguished from\n contractual provisions that explicitly or implicitly define the attributes of a single promised license (for example,\n restrictions of time, geographical region, or use). Attributes of a promised license define the scope of a\n customer's right to use or right to access the entity's intellectual property and, therefore, do not define whether\n the entity satisfies its performance obligation at a point in time or over time and do not create an obligation for\n the entity to transfer any additional rights to use or access its intellectual property.\n aSubparagraph superseded by Accounting Standards Update No. 2016-10.\n bSubparagraph superseded by Accounting Standards Update No. 2016-10.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 48 of 123\n606-10- Guarantees provided by the entity that it has a valid patent to intellectual property and that it will defend that\n55-64A\n patent from unauthorized use do not affect whether a license provides a right to access the entity's intellectual\n property or a right to use the entity's intellectual property. Similarly, a promise to defend a patent right is not a\n promised good or service because it provides assurance to the customer that the license transferred meets\n the specifications of the license promised in the contract.\n\n\u00b7 \u00b7 > Sales-Based or Usage-Based Royalties\n\n606-10- Notwithstanding the guidance in paragraphs 606-10-32-11 through 32-14, an entity should\n55-65\n recognize revenue for a sales-based or usage-based royalty promised in exchange for a license of intellectual\n property only when (or as) the later of the following events occurs:\n aThe subsequent sale or usage occurs.\n bThe performance obligation to which some or all of the sales-based or usage-based royalty has been\n allocated has been satisfied (or partially satisfied).\n\n606-10- The guidance for a sales-based or usage-based royalty in paragraph 606-10-55-65 applies when the royalty\n55-65A\n relates only to a license of intellectual property or when a license of intellectual property is the predominant\n item to which the royalty relates (for example, the license of intellectual property may be the predominant item\n to which the royalty relates when the entity has a reasonable expectation that the customer would ascribe\n significantly more value to the license than to the other goods or services to which the royalty relates).\n\n606-10- When the guidance in paragraph 606-10-55-65A is met, revenue from a sales-based or usage-based royalty\n55-65B\n should be recognized wholly in accordance with the guidance in paragraph 606-10-55-65. When the guidance\n in paragraph 606-10-55-65A is not met, the guidance on variable consideration in paragraphs 606-10-32-5\n through 32-14 applies to the sales-based or usage-based royalty.\n\n\u00b7 > Repurchase Agreements\n\n606-10- A repurchase agreement is a contract in which an entity sells an asset and also promises or has the option\n55-66\n (either in the same contract or in another contract) to repurchase the asset. The repurchased asset may be the\n asset that was originally sold to the customer, an asset that is substantially the same as that asset, or another\n asset of which the asset that was originally sold is a component.\n\n606-10- Repurchase agreements generally come in three forms:\n55-67\n aAn entity's obligation to repurchase the asset (a forward)\n bAn entity's right to repurchase the asset (a call option)\n cAn entity's obligation to repurchase the asset at the customer's request (a put option).\n\n\n\u00b7 \u00b7 > A Forward or a Call Option\n\n606-10- If an entity has an obligation or a right to repurchase the asset (a forward or a call option), a customer does\n55-68\n not obtain control of the asset because the customer is limited in its ability to direct the use of, and obtain\n substantially all of the remaining benefits from, the asset even though the customer may have physical\n possession of the asset. Consequently, the entity should account for the contract as either of the following:\n aA lease in accordance with Topic 842 on leases, if the entity can or must repurchase the asset for an\n amount that is less than the original selling price of the asset unless the contract is part of a sale and\n leaseback transaction. If the contract is part of a sale and leaseback transaction, the entity should account\n for the contract as a financing arrangement and not as a sale and leaseback transaction in accordance\n with Subtopic 842-40.\n bA financing arrangement in accordance with paragraph 606-10-55-70, if the entity can or must\n repurchase the asset for an amount that is equal to or more than the original selling price of the asset.\n\n606-10- When comparing the repurchase price with the selling price, an entity should consider the time value of\n55-69\n money.\n\n606-10- If the repurchase agreement is a financing arrangement, the entity should continue to recognize the asset and\n55-70\n also recognize a financial liability for any consideration received from the customer. The entity should\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 49 of 123\n recognize the difference between the amount of consideration received from the customer and the amount of\n consideration to be paid to the customer as interest and, if applicable, as processing or holding costs (for\n example, insurance).\n\n606-10- If the option lapses unexercised, an entity should derecognize the liability and recognize revenue.\n55-71\n\n\u00b7 \u00b7 > A Put Option\n\n606-10- If an entity has an obligation to repurchase the asset at the customer's request (a put option) at a price that is\n55-72\n lower than the original selling price of the asset, the entity should consider at contract inception whether the\n customer has a significant economic incentive to exercise that right. The customer's exercising of that right\n results in the customer effectively paying the entity consideration for the right to use a specified asset for a\n period of time. Therefore, if the customer has a significant economic incentive to exercise that right, the entity\n should account for the agreement as a lease in accordance with Topic 842 on leases unless the contract is\n part of a sale and leaseback transaction. If the contract is part of a sale and leaseback transaction, the entity\n should account for the contract as a financing arrangement and not as a sale and leaseback transaction in\n accordance with Subtopic 842-40.\n\n606-10- To determine whether a customer has a significant economic incentive to exercise its right, an entity should\n55-73\n consider various factors, including the relationship of the repurchase price to the expected market value of the\n asset at the date of the repurchase and the amount of time until the right expires. For example, if the\n repurchase price is expected to significantly exceed the market value of the asset, this may indicate that the\n customer has a significant economic incentive to exercise the put option.\n\n606-10- If the customer does not have a significant economic incentive to exercise its right at a price that is lower than\n55-74\n the original selling price of the asset, the entity should account for the agreement as if it were the sale of a\n product with a right of return as described in paragraphs 606-10-55-22 through 55-29.\n\n606-10- If the repurchase price of the asset is equal to or greater than the original selling price and is more than the\n55-75\n expected market value of the asset, the contract is in effect a financing arrangement and, therefore, should be\n accounted for as described in paragraph 606-10-55-70.\n\n606-10- If the repurchase price of the asset is equal to or greater than the original selling price and is less than or\n55-76\n equal to the expected market value of the asset, and the customer does not have a significant economic\n incentive to exercise its right, then the entity should account for the agreement as if it were the sale of a\n product with a right of return as described in paragraphs 606-10-55-22 through 55-29.\n\n606-10- When comparing the repurchase price with the selling price, an entity should consider the time value of\n55-77\n money.\n\n606-10- If the option lapses unexercised, an entity should derecognize the liability and recognize revenue.\n55-78\n\n\u00b7 > Consignment Arrangements\n\n606-10- When an entity delivers a product to another party (such as a dealer or a distributor) for sale to end customers,\n55-79\n the entity should evaluate whether that other party has obtained control of the product at that point in time. A\n product that has been delivered to another party may be held in a consignment arrangement if that other party\n has not obtained control of the product. Accordingly, an entity should not recognize revenue upon delivery of a\n product to another party if the delivered product is held on consignment.\n\n606-10- Indicators that an arrangement is a consignment arrangement include, but are not limited to, the following:\n55-80\n aThe product is controlled by the entity until a specified event occurs, such as the sale of the product to a\n customer of the dealer, or until a specified period expires.\n bThe entity is able to require the return of the product or transfer the product to a third party (such as\n another dealer).\n cThe dealer does not have an unconditional obligation to pay for the product (although it might be\n required to pay a deposit).\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 50 of 123\n\u00b7 > Bill-and-Hold Arrangements\n\n606-10- A bill-and-hold arrangement is a contract under which an entity bills a customer for a product but the entity\n55-81\n retains physical possession of the product until it is transferred to the customer at a point in time in the future.\n For example, a customer may request an entity to enter into such a contract because of the customer's lack of\n available space for the product or because of delays in the customer's production schedules.\n\n606-10- An entity should determine when it has satisfied its performance obligation to transfer a product by evaluating\n55-82\n when a customer obtains control of that product (see paragraph 606-10-25-30). For some contracts, control is\n transferred either when the product is delivered to the customer's site or when the product is shipped,\n depending on the terms of the contract (including delivery and shipping terms). However, for some contracts, a\n customer may obtain control of a product even though that product remains in an entity's physical possession.\n In that case, the customer has the ability to direct the use of, and obtain substantially all of the remaining\n benefits from, the product even though it has decided not to exercise its right to take physical possession of\n that product. Consequently, the entity does not control the product. Instead, the entity provides custodial\n services to the customer over the customer's asset.\n\n606-10- In addition to applying the guidance in paragraph 606-10-25-30, for a customer to have obtained control of a\n55-83\n product in a bill-and-hold arrangement, all of the following criteria must be met:\n aThe reason for the bill-and-hold arrangement must be substantive (for example, the customer has\n requested the arrangement).\n bThe product must be identified separately as belonging to the customer.\n cThe product currently must be ready for physical transfer to the customer.\n dThe entity cannot have the ability to use the product or to direct it to another customer.\n\n606-10- If an entity recognizes revenue for the sale of a product on a bill-and-hold basis, the entity should consider\n55-84\n whether it has remaining performance obligations (for example, for custodial services) in accordance with\n paragraphs 606-10-25-14 through 25-22 to which the entity should allocate a portion of the transaction price in\n accordance with paragraphs 606-10-32-28 through 32-41.\n\n\u00b7 > Customer Acceptance\n606-10- In accordance with paragraph 606-10-25-30(e), a customer's acceptance of an asset may indicate that the\n55-85\n customer has obtained control of the asset. Customer acceptance clauses allow a customer to cancel\n a contract or require an entity to take remedial action if a good or service does not meet agreed-upon\n specifications. An entity should consider such clauses when evaluating when a customer obtains control of a\n good or service.\n\n606-10- If an entity can objectively determine that control of a good or service has been transferred to the customer in\n55-86\n accordance with the agreed-upon specifications in the contract, then customer acceptance is a formality that\n would not affect the entity's determination of when the customer has obtained control of the good or service.\n For example, if the customer acceptance clause is based on meeting specified size and weight characteristics,\n an entity would be able to determine whether those criteria have been met before receiving confirmation of the\n customer's acceptance. The entity's experience with contracts for similar goods or services may provide\n evidence that a good or service provided to the customer is in accordance with the agreed-upon specifications\n in the contract. If revenue is recognized before customer acceptance, the entity still must consider whether\n there are any remaining performance obligations (for example, installation of equipment) and evaluate whether\n to account for them separately.\n\n606-10- However, if an entity cannot objectively determine that the good or service provided to the customer is in\n55-87\n accordance with the agreed-upon specifications in the contract, then the entity would not be able to conclude\n that the customer has obtained control until the entity receives the customer's acceptance. That is because, in\n that circumstance the entity cannot determine that the customer has the ability to direct the use of, and obtain\n substantially all of the remaining benefits from, the good or service.\n\n606-10- If an entity delivers products to a customer for trial or evaluation purposes and the customer is not committed\n55-88\n to pay any consideration until the trial period lapses, control of the product is not transferred to the customer\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 51 of 123\n until either the customer accepts the product or the trial period lapses.\n\n\u00b7 > Equity Instruments Granted as Consideration Payable to a Customer\n\n606-10- Paragraph 606-10-32-25A requires that equity instruments granted in conjunction with an entity selling goods\n55-88A\n or services be measured and classified under Topic 718 on stock compensation. If the number of equity\n instruments promised in a contract is variable due to a service condition or a performance condition that\n affects the vesting of an award, an entity should estimate the number of equity instruments that it will be\n obligated to issue to its customer and update the estimate of the number of equity instruments until the award\n ultimately vests in accordance with Topic 718. When measuring each instrument, the entity should include, in\n accordance with Topic 718, the effect of any market conditions and service or performance conditions that\n affect factors other than vesting. Examples of factors other than vesting are included in paragraph 718-10-30-\n 15. Changes in the grant-date fair value of an award due to revisions in the expected outcome of a service\n condition or a performance condition (both those that affect vesting and those that affect factors other than\n vesting) are not deemed to be changes due to the form of the consideration (as described in paragraph 606-\n 10-32-23) and, therefore, should be reflected in the transaction price.\n\n PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-2\n Editor's Note: The content of paragraph 606-10-55-88A will change upon transition, together with a\n change in the heading noted below.\n \u2022 > Share-Based Consideration Payable to a Customer\n Paragraph 606-10-32-25A requires that share-based consideration granted in conjunction with an entity\n selling goods or services be measured and classified under Topic 718 on stock compensation. If the\n number of awardspromised in a contract is variable due to a service condition or a performance\n condition that affects vesting, the grantor should estimate the number of awards that it will be obligated to\n issue to the grantee and reduce the transaction price by the grant-date fair value of the number of awards\n that are expected to vest (for awards with service conditions in accordance with paragraph 718-10-35-\n 1D(a)) or for which vesting is probable (for awards with performance conditions in accordance with\n paragraph 718-10-25-20). A grantor should update the estimate of the number of awards until\n the awards ultimately vest or are forfeited in accordance with Topic 718. When measuring each award, the\n grantor should include, in accordance with Topic 718, the effect of any market conditions and service or\n performance conditions that affect factors other than vesting. Examples of factors other than vesting are\n included in paragraph 718-10-30-15. Changes in the expected outcome of a service condition or a\n performance condition (both those that affect vesting and those that affect factors other than vesting) are\n not deemed to be changes due to the form of the consideration (as described in paragraph 606-10-32-23)\n and, therefore, should be reflected in the transaction price.\n\n\n606-10-\n55-88AA PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-2\n Examples of performance conditions in share-based consideration payable to a customer that can result\n in a reduction of the transaction price in accordance with this Topic include those with performance targets\n based on the grantee (or other parties that purchase the grantor\u2019s goods or services from the grantee)\n purchasing (or potentially purchasing) any of the following from the grantor (or the grantor\u2019s customers):\n aA specified volume of goods or services (including over a specified period of time). This includes\n performance targets achieved upon the first purchase from the grantor (or the grantor\u2019s customers).\n bA specified monetary amount of goods or services (including over a specified period of time).\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 52 of 123\n606-10-\n55-88AB PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-2\n If share-based consideration payable to a customer is a payment for a distinct good or service from the\n customer and the grantor accounts for any portion of the share-based consideration as a reduction of the\n transaction price in accordance with paragraph 606-10-32-26, the grantor should apply the definition of\n performance condition that is specific to share-based consideration payable to a customer that can result\n in a reduction of the transaction price in accordance with this Topic to the entire award (including the\n portion that is not accounted for as a reduction of the transaction price).\n\n\n606-10-\n55-88AC PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-2\n A grantor should not apply by analogy the aspects of the definition of performance condition that are\n specific to share-based consideration payable to a customer that can result in a reduction of the\n transaction price in accordance with this Topic to awards that are solely within the scope of Topic 718.\n\n\n606-10- Paragraph 606-10-32-25A requires that equity instruments granted by an entity in conjunction with selling\n55-88B\n goods or services be measured and classified under Topic 718 at the grant date of the instrument. When an\n estimate of the fair value of an equity instrument is required before the grant date in accordance with the\n guidance on variable consideration in paragraph 606-10-32-7, the estimate should be based on the fair value\n of the award at the reporting dates that occur before the grant date. An entity should change the transaction\n price for the cumulative effect of measuring the fair value at each reporting period after the initial estimate until\n the grant date occurs. In the period in which the grant date occurs, the entity should change the transaction\n price for the cumulative effect of measuring the fair value at the grant date rather than the fair value previously\n used at any prior reporting date.\n\n PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-2\n Paragraph 606-10-32-25A requires that share-based consideration granted by an entity in conjunction\n with selling goods or services be measured and classified under Topic 718 at the grant date of the\n instrument. When an estimate of the fair value of share-based consideration is required before the grant\n date in accordance with the guidance on variable consideration in paragraph 606-10-32-7, the estimate\n should be based on the fair value (measured in accordance with Topic 718) of the award at the reporting\n dates that occur before the grant date. The grantor should change the transaction price for the cumulative\n effect of measuring the fair value at each reporting period after the initial estimate until the grant date\n occurs. In the period in which the grant date occurs, the grantor should change the transaction price for\n the cumulative effect of measuring the fair value at the grant date rather than the fair value previously\n used at any prior reporting date.\n\n\n606-10-\n55-88C PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-2\n Regardless of whether an award\u2019s grant date has occurred, the guidance on constraining estimates of\n variable consideration in paragraphs 606-10-32-11 through 32-12 should not be applied to share-based\n consideration payable to a customer that is measured and classified under Topic 718.\n\n\n\u00b7 > Disclosure of Disaggregated Revenue\n\n606-10- Paragraph 606-10-50-5 requires an entity to disaggregate revenue from contracts with customers into\n55-89\n categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected\n by economic factors. Consequently, the extent to which an entity's revenue is disaggregated for the purposes\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 53 of 123\n of this disclosure depends on the facts and circumstances that pertain to the entity's contracts with customers.\n Some entities may need to use more than one type of category to meet the objective in paragraph 606-10-50-\n 5 for disaggregating revenue. Other entities may meet the objective by using only one type of category to\n disaggregate revenue.\n\n606-10- When selecting the type of category (or categories) to use to disaggregate revenue, an entity should consider\n55-90\n how information about the entity's revenue has been presented for other purposes, including all of the\n following:\n aDisclosures presented outside the financial statements (for example, in earnings releases, annual\n reports, or investor presentations)\n bInformation regularly reviewed by the chief operating decision maker for evaluating the financial\n performance of operating segments\n cOther information that is similar to the types of information identified in (a) and (b) and that is used by the\n entity or users of the entity's financial statements to evaluate the entity's financial performance or make\n resource allocation decisions.\n\n\n606-10- Examples of categories that might be appropriate include, but are not limited to, all of the following:\n55-91\n aType of good or service (for example, major product lines)\n bGeographical region (for example, country or region)\n cMarket or type of customer (for example, government and nongovernment customers)\n dType of contract (for example, fixed-price and time-and-materials contracts)\n eContract duration (for example, short-term and long-term contracts)\n fTiming of transfer of goods or services (for example, revenue from goods or services transferred to\n customers at a point in time and revenue from goods or services transferred over time)\n gSales channels (for example, goods sold directly to consumers and goods sold through intermediaries).\n\n\n> Illustrations\n606-10- These Examples portray hypothetical situations illustrating how an entity might apply some of the guidance in\n55-92\n this Topic to particular aspects of a contract with a customer on the basis of the limited facts presented. The\n analysis in each Example is not intended to represent the only manner in which the guidance could be applied,\n nor are the Examples intended to only apply to the specific industry illustrated. Although some aspects of the\n Examples may be present in actual fact patterns, all relevant facts and circumstances of a particular fact\n pattern would need to be evaluated when applying the guidance in this Topic.\n\n606-10- The Examples are organized as follows:\n55-93\n aIdentifying the Contract\n Example 1\u2014Collectibility of the Consideration\n Example 2\u2014Consideration Is Not the Stated Price\u2014Implicit Price Concession\n Example 3\u2014Implicit Price Concession\n Example 4\u2014Reassessing the Criteria for Identifying a Contract\n bContract Modifications\n Example 5\u2014Modification of a Contract for Goods\n Example 6\u2014Change in the Transaction Price after a Contract Modification\n Example 7\u2014Modification of a Services Contract\n Example 8\u2014Modification Resulting in a Cumulative Catch-Up Adjustment to Revenue\n Example 9\u2014Unapproved Change in Scope and Price\n cIdentifying Performance Obligations\n Example 10\u2014Goods and Services Are Not Distinct\n Example 11\u2014Determining Whether Goods or Services Are Distinct\n Example 12\u2014Explicit and Implicit Promises in a Contract\n\fCase 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 54 of 123\n Example 12A\u2014Series of Distinct Goods or Services\n dPerformance Obligations Satisfied Over Time\n Example 13\u2014Customer Simultaneously Receives and Consumes the Benefits\n Example 14\u2014Assessing Alternative Use and Right to Payment\n Example 15\u2014Asset Has No Alternative Use to the Entity\n Example 16\u2014Enforceable Right to Payment for Performance Completed to Date\n Example 17\u2014Assessing Whether a Performance Obligation Is Satisfied at a Point in Time or Over\n Time\n eMeasuring Progress toward Complete Satisfaction of a Performance Obligation\n Example 18\u2014Measuring Progress When Making Goods or Services Available\n Example 19\u2014Uninstalled Materials\n fVariable Consideration\n Example 20\u2014Penalty Gives Rise to Variable Consideration\n Example 21\u2014Estimating Variable Consideration\n gConstraining Estimates of Variable Consideration\n Example 22\u2014Right of Return\n Example 23\u2014Price Concessions\n Example 24\u2014Volume Discount Incentive\n Example 25\u2014Management Fees Subject to the Constraint\n hThe Existence of a Significant Financing Component in the Contract\n Example 26\u2014Significant Financing Component and Right of Return\n Example 27\u2014Withheld Payments on a Long-Term Contract\n Example 28\u2014Determining the Discount Rate\n Example 29\u2014Advance Payment and Assessment of the Discount Rate\n Example 30\u2014Advance Payment\n iNoncash Consideration\n Example 31\u2014Entitlement to Noncash Consideration\n jConsideration Payable to a Customer\n Example 32\u2014Consideration Payable to a Customer\n kAllocating the Transaction Price to Performance Obligations\n Example 33\u2014Allocation Methodology\n Example 34\u2014Allocating a Discount\n Example 35\u2014Allocation of Variable Consideration\n lContract Costs\n Example 36\u2014Incremental Costs of Obtaining a Contract\n Example 37\u2014Costs That Give Rise to an Asset\n mPresentation\n Example 38\u2014Contract Liability and Receivable\n Example 39\u2014Contract Asset Recognized for the Entity's Performance\n Example 40\u2014Receivable Recognized for the Entity's Performance\n nDisclosure\n Example 41\u2014Disaggregation of Revenue Quantitative Disclosure\n Example 42\u2014Disclosure of the Transaction Price Allocated to the Remaining Performance\n Obligations\n Example 43\u2014Disclosure of the Transaction Price Allocated to the Remaining Performance\n Obligations\u2014Qualitative\n\fCase 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 55 of 123\n oWarranties\n Example 44\u2014Warranties\n pPrincipal versus Agent Considerations\n Example 45\u2014Arranging for the Provision of Goods or Services (Entity Is an Agent)\n Example 46\u2014Promise to Provide Goods or Services (Entity Is a Principal)\n Example 46A\u2014Promise to Provide Goods or Services (Entity Is a Principal)\n Example 47\u2014Promise to Provide Goods or Services (Entity Is a Principal)\n Example 48\u2014Arranging for the Provision of Goods or Services (Entity Is an Agent)\n Example 48A\u2014Entity Is a Principal and an Agent in the Same Contract\n qCustomer Options for Additional Goods or Services\n Example 49\u2014Option That Provides the Customer with a Material Right (Discount Voucher)\n Example 50\u2014Option That Does Not Provide the Customer with a Material Right (Additional Goods or\n Services)\n Example 51\u2014Option That Provides the Customer with a Material Right (Renewal Option)\n Example 52\u2014Customer Loyalty Program\n rNonrefundable Upfront Fees\n Example 53\u2014Nonrefundable Upfront Fee\n sLicensing\n Example 54\u2014Right to Use Intellectual Property\n Example 55\u2014License of Intellectual Property\n Example 56\u2014Identifying a Distinct License\n Example 57\u2014Franchise Rights\n Example 58\u2014Access to Intellectual Property\n Example 59\u2014Right to Use Intellectual Property\n Example 60\u2014Sales-Based Royalty Promised in Exchange for a License of Intellectual Property and\n Other Goods and Services\n Example 61\u2014Access to Intellectual Property\n Example 61A\u2014Right to Use Intellectual Property\n Example 61B\u2014Distinguishing Multiple Licenses from Attributes of a Single License\n tRepurchase Agreements\n Example 62\u2014Repurchase Agreements\n uBill-and-Hold Arrangements\n Example 63\u2014Bill-and-Hold Arrangement\n\fCase 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 56 of 123\n PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-3\n The Examples are organized as follows:\n aIdentifying the Contract\n Example 1\u2014Collectibility of the Consideration\n Example 2\u2014Consideration Is Not the Stated Price\u2014Implicit Price Concession\n Example 3\u2014Implicit Price Concession\n Example 4\u2014Reassessing the Criteria for Identifying a Contract\n\n bContract Modifications\n Example 5\u2014Modification of a Contract for Goods\n Example 6\u2014Change in the Transaction Price after a Contract Modification\n Example 7\u2014Modification of a Services Contract\n Example 8\u2014Modification Resulting in a Cumulative Catch-Up Adjustment to Revenue\n Example 9\u2014Unapproved Change in Scope and Price\n\n cIdentifying Performance Obligations\n Example 10\u2014Goods and Services Are Not Distinct\n Example 11\u2014Determining Whether Goods or Services Are Distinct\n Example 12\u2014Explicit and Implicit Promises in a Contract\n Example 12A\u2014Series of Distinct Goods or Services\n\n dPerformance Obligations Satisfied Over Time\n Example 13\u2014Customer Simultaneously Receives and Consumes the Benefits\n Example 14\u2014Assessing Alternative Use and Right to Payment\n Example 15\u2014Asset Has No Alternative Use to the Entity\n Example 16\u2014Enforceable Right to Payment for Performance Completed to Date\n Example 17\u2014Assessing Whether a Performance Obligation Is Satisfied at a Point in Time or\n Over Time\n\n eMeasuring Progress toward Complete Satisfaction of a Performance Obligation\n Example 18\u2014Measuring Progress When Making Goods or Services Available\n Example 19\u2014Uninstalled Materials\n\n Example 20\u2014Penalty Gives Rise to Variable Consideration\n fVariable Consideration Example 21\u2014Estimating Variable Consideration\n\n gConstraining Estimates of Variable Consideration\n Example 22\u2014Right of Return\n Example 23\u2014Price Concessions\n Example 24\u2014Volume Discount Incentive\n Example 25\u2014Management Fees Subject to the Constraint\n\n hThe Existence of a Significant Financing Component in the Contract\n Example 26\u2014Significant Financing Component and Right of Return\n Example 27\u2014Withheld Payments on a Long-Term Contract\n Example 28\u2014Determining the Discount Rate\n Example 29\u2014Advance Payment and Assessment of the Discount Rate\n Example 30\u2014Advance Payment\n\n Example 31\u2014Entitlement to Noncash Consideration\n iNoncash Consideration Example 31A\u2014Share-Based Noncash Consideration\n\fCase 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 57 of 123\n iNoncash Consideration Example 31A Share Based Noncash Consideration\n\n jConsideration Payable to a Customer Example 32\u2014Consideration Payable to a Customer\n\n kAllocating the Transaction Price to Performance Obligations\n Example 33\u2014Allocation Methodology\n Example 34\u2014Allocating a Discount\n Example 35\u2014Allocation of Variable Consideration\n\n Example 36\u2014Incremental Costs of Obtaining a Contract\n lContract Costs Example 37\u2014Costs That Give Rise to an Asset\n\n Example 38\u2014Contract Liability and Receivable\n Example 39\u2014Contract Asset Recognized for the Entity's Performance\n mPresentation Example 40\u2014Receivable Recognized for the Entity's Performance\n\n nDisclosure\n Example 41\u2014Disaggregation of Revenue Quantitative Disclosure\n Example 42\u2014Disclosure of the Transaction Price Allocated to the Remaining Performance\n Obligations\n Example 43\u2014Disclosure of the Transaction Price Allocated to the Remaining Performance\n Obligations\u2014Qualitative\n\n oWarranties Example 44\u2014Warranties\n\n pPrincipal versus Agent Considerations\n Example 45\u2014Arranging for the Provision of Goods or Services (Entity Is an Agent)\n Example 46\u2014Promise to Provide Goods or Services (Entity Is a Principal)\n Example 46A\u2014Promise to Provide Goods or Services (Entity Is a Principal)\n Example 47\u2014Promise to Provide Goods or Services (Entity Is a Principal)\n Example 48\u2014Arranging for the Provision of Goods or Services (Entity Is an Agent)\n Example 48A\u2014Entity Is a Principal and an Agent in the Same Contract\n\n qCustomer Options for Additional Goods or Services\n Example 49\u2014Option That Provides the Customer with a Material Right (Discount Voucher)\n Example 50\u2014Option That Does Not Provide the Customer with a Material Right (Additional\n Goods or Services)\n Example 51\u2014Option That Provides the Customer with a Material Right (Renewal Option)\n Example 52\u2014Customer Loyalty Program\n\n rNonrefundable Upfront Fees Example 53\u2014Nonrefundable Upfront Fee\n\n sLicensing\n Example 54\u2014Right to Use Intellectual Property\n Example 55\u2014License of Intellectual Property\n Example 56\u2014Identifying a Distinct License\n Example 57\u2014Franchise Rights\n Example 58\u2014Access to Intellectual Property\n Example 59\u2014Right to Use Intellectual Property\n Example 60\u2014Sales-Based Royalty Promised in Exchange for a License of Intellectual Property\n and Other Goods and Services\n Example 61\u2014Access to Intellectual Property\n Example 61A\u2014Right to Use Intellectual Property\n Example 61B\u2014Distinguishing Multiple Licenses from Attributes of a Single License\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 58 of 123\n tRepurchase Agreements Example 62\u2014Repurchase Agreements\n\n uBill-and-Hold Arrangements Example 63\u2014Bill-and-Hold Arrangement\n\n\n\u00b7 > Identifying the Contract\n\n606-10- Examples 1-4 illustrate the guidance in paragraphs 606-10-25-1 through 25-8 on identifying the contract. In\n55-94\n addition, the following guidance is illustrated in these Examples:\n aParagraph 606-10-25-1(e) and paragraphs 606-10-55-3A through 55-3C on assessing collectibility\n (Example 1)\n bThe interaction of paragraph 606-10-25-1 with paragraphs 606-10-32-2 and 606-10-32-7 on estimating\n variable consideration (Examples 2 and 3)\n cParagraph 606-10-55-65 on consideration in the form of sales-based or usage-based royalties on\n licenses of intellectual property (Example 4).\n\n\n\u00b7 \u00b7 > Example 1\u2014Collectibility of the Consideration\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Collectibility Is Not Probable\n\n606-10- An entity, a real estate developer, enters into a contract with a customer for the sale of a building for $1 million.\n55-95\n The customer intends to open a restaurant in the building. The building is located in an area where new\n restaurants face high levels of competition, and the customer has little experience in the restaurant industry.\n\n606-10- The customer pays a nonrefundable deposit of $50,000 at inception of the contract and enters into a long-term\n55-96\n financing agreement with the entity for the remaining 95 percent of the promised consideration. The financing\n arrangement is provided on a nonrecourse basis, which means that if the customer defaults, the entity can\n repossess the building but cannot seek further compensation from the customer, even if the collateral does not\n cover the full value of the amount owed.\n\n606-10- The entity concludes that not all of the criteria in paragraph 606-10-25-1 are met. The entity concludes that the\n55-97\n criterion in paragraph 606-10-25-1(e) is not met because it is not probable that the entity will collect\n substantially all of the consideration to which it is entitled in exchange for the transfer of the building. In\n reaching this conclusion, the entity observes that the customer's ability and intention to pay may be in doubt\n because of the following factors:\n aThe customer intends to repay the loan (which has a significant balance) primarily from income derived\n from its restaurant business (which is a business facing significant risks because of high competition in\n the industry and the customer's limited experience).\n bThe customer lacks other income or assets that could be used to repay the loan.\n cThe customer's liability under the loan is limited because the loan is nonrecourse.\n\n\n606-10- The entity continues to assess the contract in accordance with paragraph 606-10-25-6 to determine whether\n55-98\n the criteria in paragraph 606-10-25-1 are subsequently met or whether the events in paragraph 606-10-25-\n 7 have occurred.\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014Credit Risk Is Mitigated\n\n606-10- An entity, a service provider, enters into a three-year service contract with a new customer of low credit quality\n55-98A\n at the beginning of a calendar month.\n\n606-10- The transaction price of the contract is $720, and $20 is due at the end of each month. The standalone selling\n55-98B\n price of the monthly service is $20. Both parties are subject to termination penalties if the contract is cancelled.\n\n606-10- The entity's history with this class of customer indicates that while the entity cannot conclude it is probable the\n55-98C\n customer will pay the transaction price of $720, the customer is expected to make the payments required\n under the contract for at least 9 months. If, during the contract term, the customer stops making the required\n payments, the entity's customary business practice is to limit its credit risk by not transferring further services\n to the customer and to pursue collection for the unpaid services.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 59 of 123\n606-10- In assessing whether the contract meets the criteria in paragraph 606-10-25-1, the entity assesses whether it\n55-98D\n is probable that the entity will collect substantially all of the consideration to which it will be entitled in\n exchange for the services that will be transferred to the customer. This includes assessing the entity's history\n with this class of customer in accordance with paragraph 606-10-55-3B and its business practice of stopping\n service in response to customer nonpayment in accordance with paragraph 606-10-55-3C. Consequently, as\n part of this analysis, the entity does not consider the likelihood of payment for services that would not be\n provided in the event of the customer's nonpayment because the entity is not exposed to credit risk for those\n services.\n\n606-10- It is not probable that the entity will collect the entire transaction price ($720) because of the customer's low\n55-98E\n credit rating. However, the entity's exposure to credit risk is mitigated because the entity has the ability and\n intention (as evidenced by its customary business practice) to stop providing services if the customer does not\n pay the promised consideration for services provided when it is due. Therefore, the entity concludes that the\n contract meets the criterion in paragraph 606-10-25-1(e) because it is probable that the customer will pay\n substantially all of the consideration to which the entity is entitled for the services the entity will transfer to the\n customer (that is, for the services the entity will provide for as long as the customer continues to pay for the\n services provided). Consequently, assuming the criteria in paragraph 606-10-25-1(a) through (d) are met, the\n entity would apply the remaining guidance in this Topic to recognize revenue and only reassess the criteria in\n paragraph 606-10-25-1 if there is an indication of a significant change in facts or circumstances such as the\n customer not making its required payments.\n\n\u00b7 \u00b7 \u00b7 > Case C\u2014Credit Risk Is Not Mitigated\n\n606-10- The same facts as in Case B apply to Case C, except that the entity's history with this class of customer\n55-98F\n indicates that there is a risk that the customer will not pay substantially all of the consideration for services\n received from the entity, including the risk that the entity will never receive any payment for any services\n provided.\n\n606-10- In assessing whether the contract with the customer meets the criteria in paragraph 606-10-25-1, the entity\n55-98G\n assesses whether it is probable that it will collect substantially all of the consideration to which it will be entitled\n in exchange for the goods or services that will be transferred to the customer. This includes assessing the\n entity's history with this class of customer and its business practice of stopping service in response to the\n customer's nonpayment in accordance with paragraph 606-10-55-3C.\n\n606-10- At contract inception, the entity concludes that the criterion in paragraph 606-10-25-1(e) is not met because it\n55-98H\n is not probable that the customer will pay substantially all of the consideration to which the entity will be\n entitled under the contract for the services that will be transferred to the customer. The entity concludes that\n not only is there a risk that the customer will not pay for services received from the entity, but also there is a\n risk that the entity will never receive any payment for any services provided. Subsequently, when the customer\n initially pays for one month of service, the entity accounts for the consideration received in accordance with\n paragraphs 606-10-25-7 through 25-8. The entity concludes that none of the events in paragraph 606-10-25-\n 7 have occurred because the contract has not been terminated, the entity has not received substantially all of\n the consideration promised in the contract, and the entity is continuing to provide services to the customer.\n\n606-10- Assume that the customer has made timely payments for several months. In accordance with paragraph 606-\n55-98I\n 10-25-6, the entity assesses the contract to determine whether the criteria in paragraph 606-10-25-1 are\n subsequently met. In making that evaluation, the entity considers, among other things, its experience with this\n specific customer. On the basis of the customer's performance under the contract, the entity concludes that\n the criteria in 606-10-25-1 have been met, including the collectibility criterion in paragraph 606-10-25-1(e).\n Once the criteria in paragraph 606-10-25-1 are met, the entity applies the remaining guidance in this Topic to\n recognize revenue.\n\n\u00b7 \u00b7 \u00b7 > Case D\u2014Advance Payment\n\n606-10- An entity, a health club, enters into a one-year membership with a customer of low credit quality. The\n55-98J\n transaction price of the contract is $120, and $10 is due at the beginning of each month. The standalone\n selling price of the monthly service is $10.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 60 of 123\n606-10- On the basis of the customer's credit history and in accordance with the entity's customary business practice,\n55-98K\n the customer is required to pay each month before the entity provides the customer with access to the health\n club. In response to nonpayment, the entity's customary business practice is to stop providing service to the\n customer upon nonpayment. The entity does not have exposure to credit risk because all payments are made\n in advance and the entity does not provide services unless the advance payment has been received.\n\n606-10- The contract meets the criterion in paragraph 606-10-25-1(e) because it is probable that the entity will collect\n55-98L\n the consideration to which it will be entitled in exchange for the services that will be transferred to the\n customer (that is, one month of payment in advance for each month of service).\n\n\u00b7 \u00b7 > Example 2\u2014Consideration is Not the Stated Price\u2014Implicit Price Concession\n\n606-10- An entity sells 1,000 units of a prescription drug to a customer for promised consideration of $1 million. This is\n55-99\n the entity's first sale to a customer in a new region, which is experiencing significant economic difficulty. Thus,\n the entity expects that it will not be able to collect from the customer the full amount of the promised\n consideration. Despite the possibility of not collecting the full amount, the entity expects the region's economy\n to recover over the next two to three years and determines that a relationship with the customer could help it\n to forge relationships with other potential customers in the region.\n\n606-10- When assessing whether the criterion in paragraph 606-10-25-1(e) is met, the entity also considers\n55-100\n paragraphs 606-10-32-2 and 606-10-32-7(b). Based on the assessment of the facts and circumstances, the\n entity determines that it expects to provide a price concession and accept a lower amount of consideration\n from the customer. Accordingly, the entity concludes that the transaction price is not $1 million and, therefore,\n the promised consideration is variable. The entity estimates the variable consideration and determines that it\n expects to be entitled to $400,000.\n\n606-10- The entity considers the customer's ability and intention to pay the consideration and concludes that even\n55-101\n though the region is experiencing economic difficulty it is probable that it will collect $400,000 from the\n customer. Consequently, the entity concludes that the criterion in paragraph 606-10-25-1(e) is met based on\n an estimate of variable consideration of $400,000. In addition, based on an evaluation of the contract terms\n and other facts and circumstances, the entity concludes that the other criteria in paragraph 606-10-25-1 are\n also met. Consequently, the entity accounts for the contract with the customer in accordance with the guidance\n in this Topic.\n\n\u00b7 \u00b7 > Example 3\u2014Implicit Price Concession\n\n606-10- An entity, a hospital, provides medical services to an uninsured patient in the emergency room. The entity has\n55-102\n not previously provided medical services to this patient but is required by law to provide medical services to all\n emergency room patients. Because of the patient's condition upon arrival at the hospital, the entity provides\n the services immediately and, therefore, before the entity can determine whether the patient is committed to\n perform its obligations under the contract in exchange for the medical services provided. Consequently, the\n contract does not meet the criteria in paragraph 606-10-25-1, and in accordance with paragraph 606-10-25-6,\n the entity will continue to assess its conclusion based on updated facts and circumstances.\n\n606-10- After providing services, the entity obtains additional information about the patient including a review of the\n55-103\n services provided, standard rates for such services, and the patient's ability and intention to pay the entity for\n the services provided. During the review, the entity notes its standard rate for the services provided in the\n emergency room is $10,000. The entity also reviews the patient's information and to be consistent with its\n policies designates the patient to a customer class based on the entity's assessment of the patient's ability and\n intention to pay. The entity determines that the services provided are not charity care based on the entity's\n internal policy and the patient's income level. In addition, the patient does not qualify for governmental\n subsidies.\n\n606-10- Before reassessing whether the criteria in paragraph 606-10-25-1 have been met, the entity considers\n55-104\n paragraphs 606-10-32-2 and 606-10-32-7(b). Although the standard rate for the services is $10,000 (which\n may be the amount invoiced to the patient), the entity expects to accept a lower amount of consideration in\n exchange for the services. Accordingly, the entity concludes that the transaction price is not $10,000 and,\n therefore, the promised consideration is variable. The entity reviews its historical cash collections from this\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 61 of 123\n customer class and other relevant information about the patient. The entity estimates the variable\n consideration and determines that it expects to be entitled to $1,000.\n\n606-10- In accordance with paragraph 606-10-25-1(e), the entity evaluates the patient's ability and intention to pay\n55-105\n (that is, the credit risk of the patient). On the basis of its collection history from patients in this customer class,\n the entity concludes it is probable that the entity will collect $1,000 (which is the estimate of variable\n consideration). In addition, on the basis of an assessment of the contract terms and other facts and\n circumstances, the entity concludes that the other criteria in paragraph 606-10-25-1 also are met.\n Consequently, the entity accounts for the contract with the patient in accordance with the guidance in this\n Topic.\n\n\u00b7 \u00b7 > Example 4\u2014Reassessing the Criteria for Identifying a Contract\n\n606-10- An entity licenses a patent to a customer in exchange for a usage-based royalty. At contract inception, the\n55-106\n contract meets all the criteria in paragraph 606-10-25-1, and the entity accounts for the contract with the\n customer in accordance with the guidance in this Topic. The entity recognizes revenue when the customer's\n subsequent usage occurs in accordance with paragraph 606-10-55-65.\n\n606-10- Throughout the first year of the contract, the customer provides quarterly reports of usage and pays within the\n55-107\n agreed-upon period.\n\n606-10- During the second year of the contract, the customer continues to use the entity's patent, but the customer's\n55-108\n financial condition declines. The customer's current access to credit and available cash on hand are limited.\n The entity continues to recognize revenue on the basis of the customer's usage throughout the second year.\n The customer pays the first quarter's royalties but makes nominal payments for the usage of the patent in\n quarters 2-4. The entity accounts for any credit losses on the existing receivable in accordance with\n Subtopic 326-20 on financial instruments measured at amortized cost.\n\n606-10- During the third year of the contract, the customer continues to use the entity's patent. However, the entity\n55-109\n learns that the customer has lost access to credit and its major customers and thus the customer's ability to\n pay significantly deteriorates. The entity therefore concludes that it is unlikely that the customer will be able to\n make any further royalty payments for ongoing usage of the entity's patent. As a result of this significant\n change in facts and circumstances, in accordance with paragraph 606-10-25-5, the entity reassesses the\n criteria in paragraph 606-10-25-1 and determines that they are not met because it is no longer probable that\n the entity will collect the consideration to which it will be entitled. Accordingly, the entity does not recognize any\n further revenue associated with the customer's future usage of its patent. The entity accounts for additional\n credit losses on the existing receivable in accordance with Subtopic 326-20.\n\n\u00b7 > Contract Modifications\n\n606-10- Examples 5-9 illustrate the guidance in paragraphs 606-10-25-10 through 25-13 on contract modifications. In\n55-110\n addition, the following guidance is illustrated in these Examples:\n aParagraphs 606-10-25-14 through 25-22 on identifying performance obligations (Examples 7 and 8)\n bParagraphs 606-10-32-11 through 32-13 on constraining estimates of variable consideration (Examples\n 6, 8, and 9)\n cParagraphs 606-10-32-42 through 32-45 on changes in the transaction price (Example 6).\n\n\n\u00b7 \u00b7 > Example 5\u2014Modification of a Contract for Goods\n\n606-10- An entity promises to sell 120 products to a customer for $12,000 ($100 per product). The products are\n55-111\n transferred to the customer over a six-month period. The entity transfers control of each product at a point in\n time. After the entity has transferred control of 60 products to the customer, the contract is modified to require\n the delivery of an additional 30 products (a total of 150 identical products) to the customer. The additional 30\n products were not included in the initial contract.\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Additional Products for a Price That Reflects the Standalone Selling Price\n\n606-10- When the contract is modified, the price of the contract modification for the additional 30 products is an\n55-112\n additional $2,850 or $95 per product. The pricing for the additional products reflects the standalone selling\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 62 of 123\n price of the products at the time of the contract modification, and the additional products are distinct (in\n accordance with paragraph 606-10-25-19) from the original products.\n\n606-10- In accordance with paragraph 606-10-25-12, the contract modification for the additional 30 products is, in\n55-113\n effect, a new and separate contract for future products that does not affect the accounting for the existing\n contract. The entity recognizes revenue of $100 per product for the 120 products in the original contract and\n $95 per product for the 30 products in the new contract.\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014Additional Products for a Price That Does Not Reflect the Standalone Selling Price\n\n606-10- During the process of negotiating the purchase of an additional 30 products, the parties initially agree on a\n55-114\n price of $80 per product. However, the customer discovers that the initial 60 products transferred to the\n customer contained minor defects that were unique to those delivered products. The entity promises a partial\n credit of $15 per product to compensate the customer for the poor quality of those products. The entity and the\n customer agree to incorporate the credit of $900 ($15 credit \u00d7 60 products) into the price that the entity\n charges for the additional 30 products. Consequently, the contract modification specifies that the price of the\n additional 30 products is $1,500 or $50 per product. That price comprises the agreed-upon price for the\n additional 30 products of $2,400, or $80 per product, less the credit of $900.\n\n606-10- At the time of modification, the entity recognizes the $900 as a reduction of the transaction price and,\n55-115\n therefore, as a reduction of revenue for the initial 60 products transferred. In accounting for the sale of the\n additional 30 products, the entity determines that the negotiated price of $80 per product does not reflect the\n standalone selling price of the additional products. Consequently, the contract modification does not meet the\n conditions in paragraph 606-10-25-12 to be accounted for as a separate contract. Because the remaining\n products to be delivered are distinct from those already transferred, the entity applies the guidance in\n paragraph 606-10-25-13(a) and accounts for the modification as a termination of the original contract and the\n creation of a new contract.\n\n606-10- Consequently, the amount recognized as revenue for each of the remaining products is a blended price of\n55-116\n $93.33 {[($100 \u00d7 60 products not yet transferred under the original contract) + ($80 \u00d7 30 products to be\n transferred under the contract modification)] \u00f7 90 remaining products}.\n\n\u00b7 \u00b7 > Example 6\u2014Change in the Transaction Price after a Contract Modification\n\n606-10- On July 1, 20X0, an entity promises to transfer two distinct products to a customer. Product X transfers to the\n55-117\n customer at contract inception and Product Y transfers on March 31, 20X1. The consideration promised by the\n customer includes fixed consideration of $1,000 and variable consideration that is estimated to be $200. The\n entity includes its estimate of variable consideration in the transaction price because it concludes that it is\n probable that a significant reversal in cumulative revenue recognized will not occur when the uncertainty is\n resolved.\n\n606-10- The transaction price of $1,200 is allocated equally to the performance obligation for Product X and the\n55-118\n performance obligation for Product Y. This is because both products have the same standalone selling prices\n and the variable consideration does not meet the criteria in paragraph 606-10-32-40 that requires allocation of\n the variable consideration to one but not both of the performance obligations.\n\n606-10- When Product X transfers to the customer at contract inception, the entity recognizes revenue of $600.\n55-119\n\n606-10- On November 30, 20X0, the scope of the contract is modified to include the promise to transfer Product Z (in\n55-120\n addition to the undelivered Product Y) to the customer on June 30, 20X1, and the price of the contract is\n increased by $300 (fixed consideration), which does not represent the standalone selling price of Product Z.\n The standalone selling price of Product Z is the same as the standalone selling prices of Products X and Y.\n\n606-10- The entity accounts for the modification as if it were the termination of the existing contract and the creation of\n55-121\n a new contract. This is because the remaining Products Y and Z are distinct from Product X, which had\n transferred to the customer before the modification, and the promised consideration for the additional Product\n Z does not represent its standalone selling price. Consequently, in accordance with paragraph 606-10-25-\n 13(a), the consideration to be allocated to the remaining performance obligations comprises the consideration\n that had been allocated to the performance obligation for Product Y (which is measured at an allocated\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 63 of 123\n transaction price amount of $600) and the consideration promised in the modification (fixed consideration of\n $300). The transaction price for the modified contract is $900, and that amount is allocated equally to the\n performance obligation for Product Y and the performance obligation for Product Z (that is, $450 is allocated to\n each performance obligation).\n\n606-10- After the modification but before the delivery of Products Y and Z, the entity revises its estimate of the amount\n55-122\n of variable consideration to which it expects to be entitled to $240 (rather than the previous estimate of $200).\n The entity concludes that the change in estimate of the variable consideration can be included in the\n transaction price because it is probable that a significant reversal in cumulative revenue recognized will not\n occur when the uncertainty is resolved. Even though the modification was accounted for as if it were the\n termination of the existing contract and the creation of a new contract in accordance with paragraph 606-10-\n 25-13(a), the increase in the transaction price of $40 is attributable to variable consideration promised before\n the modification. Therefore, in accordance with paragraph 606-10-32-45, the change in the transaction price is\n allocated to the performance obligations for Product X and Product Y on the same basis as at contract\n inception. Consequently, the entity recognizes revenue of $20 for Product X in the period in which the change\n in the transaction price occurs. Because Product Y had not transferred to the customer before the contract\n modification, the change in the transaction price that is attributable to Product Y is allocated to the remaining\n performance obligations at the time of the contract modification. This is consistent with the accounting that\n would have been required by paragraph 606-10-25-13(a) if that amount of variable consideration had been\n estimated and included in the transaction price at the time of the contract modification.\n\n606-10- The entity also allocates the $20 increase in the transaction price for the modified contract equally to the\n55-123\n performance obligations for Product Y and Product Z. This is because the products have the same standalone\n selling prices and the variable consideration does not meet the criteria in paragraph 606-10-32-40 that require\n allocation of the variable consideration to one but not both of the performance obligations. Consequently, the\n amount of the transaction price allocated to the performance obligations for Product Y and Product Z\n increases by $10 to $460 each.\n\n606-10- On March 31, 20X1, Product Y is transferred to the customer, and the entity recognizes revenue of $460. On\n55-124\n June 30, 20X1, Product Z is transferred to the customer, and the entity recognizes revenue of $460.\n\n\u00b7 \u00b7 > Example 7\u2014Modification of a Services Contract\n\n606-10- An entity enters into a three-year contract to clean a customer's offices on a weekly basis. The customer\n55-125\n promises to pay $100,000 per year. The standalone selling price of the services at contract inception is\n $100,000 per year. The entity recognizes revenue of $100,000 per year during the first 2 years of providing\n services. At the end of the second year, the contract is modified and the fee for the third year is reduced to\n $80,000. In addition, the customer agrees to extend the contract for 3 additional years for consideration of\n $200,000 payable in 3 equal annual installments of $66,667 at the beginning of years 4, 5, and 6. The\n standalone selling price of the services for years 4 through 6 at the beginning of the third year is $80,000 per\n year. The entity's standalone selling price at the beginning of the third year, multiplied by the additional 3 years\n of services, is $240,000, which is deemed to be an appropriate estimate of the standalone selling price of the\n multiyear contract.\n\n606-10- At contract inception, the entity assesses that each week of cleaning service is distinct in accordance with\n55-126\n paragraph 606-10-25-19. Notwithstanding that each week of cleaning service is distinct, the entity accounts for\n the cleaning contract as a single performance obligation in accordance with paragraph 606-10-25-14(b). This\n is because the weekly cleaning services are a series of distinct services that are substantially the same and\n have the same pattern of transfer to the customer (the services transfer to the customer over time and use the\n same method to measure progress\u2014that is, a time-based measure of progress).\n\n606-10- At the date of the modification, the entity assesses the additional services to be provided and concludes that\n55-127\n they are distinct. However, the price change does not reflect the standalone selling price.\n\n606-10- Consequently, the entity accounts for the modification in accordance with paragraph 606-10-25-13(a) as if it\n55-128\n were a termination of the original contract and the creation of a new contract with consideration of $280,000\n for 4 years of cleaning service. The entity recognizes revenue of $70,000 per year ($280,000 \u00f7 4 years) as the\n services are provided over the remaining 4 years.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 64 of 123\n\u00b7 \u00b7 > Example 8\u2014Modification Resulting in a Cumulative Catch-Up Adjustment to Revenue\n\n606-10- An entity, a construction company, enters into a contract to construct a commercial building for a customer on\n55-129\n customer-owned land for promised consideration of $1 million and a bonus of $200,000 if the building is\n completed within 24 months. The entity accounts for the promised bundle of goods and services as a single\n performance obligation satisfied over time in accordance with paragraph 606-10-25-27(b) because the\n customer controls the building during construction. At the inception of the contract, the entity expects the\n following:\n\n\n\n\n606-10- At contract inception, the entity excludes the $200,000 bonus from the transaction price because it cannot\n55-130\n conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not\n occur. Completion of the building is highly susceptible to factors outside the entity's influence, including\n weather and regulatory approvals. In addition, the entity has limited experience with similar types of contracts.\n\n606-10- The entity determines that the input measure, on the basis of costs incurred, provides an appropriate measure\n55-131\n of progress toward complete satisfaction of the performance obligation. By the end of the first year, the entity\n has satisfied 60 percent of its performance obligation on the basis of costs incurred to date ($420,000) relative\n to total expected costs ($700,000). The entity reassesses the variable consideration and concludes that the\n amount is still constrained in accordance with paragraphs 606-10-32-11 through 32-13. Consequently, the\n cumulative revenue and costs recognized for the first year are as follows:\n\n\n\n\n606-10- In the first quarter of the second year, the parties to the contract agree to modify the contract by changing the\n55-132\n floor plan of the building. As a result, the fixed consideration and expected costs increase by $150,000 and\n $120,000, respectively. Total potential consideration after the modification is $1,350,000 ($1,150,000 fixed\n consideration + $200,000 completion bonus). In addition, the allowable time for achieving the $200,000 bonus\n is extended by 6 months to 30 months from the original contract inception date. At the date of the modification,\n on the basis of its experience and the remaining work to be performed, which is primarily inside the building\n and not subject to weather conditions, the entity concludes that it is probable that including the bonus in the\n transaction price will not result in a significant reversal in the amount of cumulative revenue recognized in\n accordance with paragraph 606-10-32-11 and includes the $200,000 in the transaction price. In assessing the\n contract modification, the entity evaluates paragraph 606-10-25-19(b) and concludes (on the basis of the\n factors in paragraph 606-10-25-21) that the remaining goods and services to be provided using the modified\n contract are not distinct from the goods and services transferred on or before the date of contract modification;\n that is, the contract remains a single performance obligation.\n\n606-10- Consequently, the entity accounts for the contract modification as if it were part of the original contract (in\n55-133\n accordance with paragraph 606-10-25-13(b)). The entity updates its measure of progress and estimates that it\n has satisfied 51.2 percent of its performance obligation ($420,000 actual costs incurred \u00f7 $820,000 total\n expected costs). The entity recognizes additional revenue of $91,200 [(51.2 percent complete \u00d7 $1,350,000\n modified transaction price) - $600,000 revenue recognized to date] at the date of the modification as a\n cumulative catch-up adjustment.\n\n\u00b7 \u00b7 > Example 9\u2014Unapproved Change in Scope and Price\n\n606-10- An entity enters into a contract with a customer to construct a building on customer-owned land. The contract\n55-134\n states that the customer will provide the entity with access to the land within 30 days of contract inception.\n However, the entity was not provided access until 120 days after contract inception because of storm damage\n to the site that occurred after contract inception. The contract specifically identifies any delay (including force\n majeure) in the entity's access to customer-owned land as an event that entitles the entity to compensation\n that is equal to actual costs incurred as a direct result of the delay. The entity is able to demonstrate that the\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 65 of 123\n specific direct costs were incurred as a result of the delay in accordance with the terms of the contract and\n prepares a claim. The customer initially disagreed with the entity's claim.\n\n606-10- The entity assesses the legal basis of the claim and determines, on the basis of the underlying contractual\n55-135\n terms, that it has enforceable rights. Consequently, it accounts for the claim as a contract modification in\n accordance with paragraphs 606-10-25-10 through 25-13. The modification does not result in any additional\n goods and services being provided to the customer. In addition, all of the remaining goods and services after\n the modification are not distinct and form part of a single performance obligation. Consequently, the entity\n accounts for the modification in accordance with paragraph 606-10-25-13(b) by updating the transaction price\n and the measure of progress toward complete satisfaction of the performance obligation. The entity considers\n the constraint on estimates of variable consideration in paragraphs 606-10-32-11 through 32-13 when\n estimating the transaction price.\n\n\u00b7 > Identifying Performance Obligations\n\n606-10- Examples 10-12A illustrate the guidance in paragraphs 606-10-25-14 through 25-22 on identifying\n55-136\n performance obligations.\n\n\u00b7 \u00b7 > Example 10\u2014Goods and Services Are Not Distinct\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Significant Integration Service\n\n606-10- An entity, a contractor, enters into a contract to build a hospital for a customer. The entity is responsible for the\n55-137\n overall management of the project and identifies various promised goods and services, including engineering,\n site clearance, foundation, procurement, construction of the structure, piping and wiring, installation of\n equipment, and finishing.\n\n606-10- The promised goods and services are capable of being distinct in accordance with paragraph 606-10-25-\n55-138\n 19(a). That is, the customer can benefit from the goods and services either on their own or together with other\n readily available resources. This is evidenced by the fact that the entity, or competitors of the entity, regularly\n sells many of these goods and services separately to other customers. In addition, the customer could\n generate economic benefit from the individual goods and services by using, consuming, selling, or holding\n those goods or services.\n\n606-10- However, the promises to transfer the goods and services are not separately identifiable in accordance with\n55-139\n paragraph 606-10-25-19(b) (on the basis of the factors in paragraph 606-10-25-21). This is evidenced by the\n fact that the entity provides a significant service of integrating the goods and services (the inputs) into the\n hospital (the combined output) for which the customer has contracted.\n\n606-10- Because both criteria in paragraph 606-10-25-19 are not met, the goods and services are not distinct. The\n55-140\n entity accounts for all of the goods and services in the contract as a single performance obligation.\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014Significant Integration Service\n\n606-10- An entity enters into a contract with a customer that will result in the delivery of multiple units of a highly\n55-140A\n complex, specialized device. The terms of the contract require the entity to establish a manufacturing process\n in order to produce the contracted units. The specifications are unique to the customer based on a custom\n design that is owned by the customer and that were developed under the terms of a separate contract that is\n not part of the current negotiated exchange. The entity is responsible for the overall management of the\n contract, which requires the performance and integration of various activities including procurement of\n materials; identifying and managing subcontractors; and performing manufacturing, assembly, and testing.\n\n606-10- The entity assesses the promises in the contract and determines that each of the promised devices is capable\n55-140B\n of being distinct in accordance with paragraph 606-10-25-19(a) because the customer can benefit from each\n device on its own. This is because each unit can function independently of the other units.\n\n606-10- The entity observes that the nature of its promise is to establish and provide a service of producing the full\n55-140C\n complement of devices for which the customer has contracted in accordance with the customer's\n specifications. The entity considers that it is responsible for overall management of the contract and for\n providing a significant service of integrating various goods and services (the inputs) into its overall service and\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 66 of 123\n the resulting devices (the combined output) and, therefore, the devices and the various promised goods and\n services inherent in producing those devices are not separately identifiable in accordance with\n paragraphs 606-10-25-19(b) and 606-10-25-21. In this Case, the manufacturing process provided by the entity\n is specific to its contract with the customer. In addition, the nature of the entity's performance and, in particular,\n the significant integration service of the various activities mean that a change in one of the entity's activities to\n produce the devices has a significant effect on the other activities required to produce the highly complex\n specialized devices such that the entity's activities are highly interdependent and highly interrelated. Because\n the criterion in paragraph 606-10-25-19(b) is not met, the goods and services that will be provided by the entity\n are not separately identifiable, and, therefore, are not distinct. The entity accounts for all of the goods and\n services promised in the contract as a single performance obligation.\n\n\u00b7 \u00b7 \u00b7 > Case C\u2014Combined Item\n\n606-10- An entity grants a customer a three-year term license to anti-virus software and promises to provide the\n55-140D\n customer with when-and-if available updates to that software during the license period. The entity frequently\n provides updates that are critical to the continued utility of the software. Without the updates, the customer's\n ability to benefit from the software would decline significantly during the three-year arrangement.\n\n606-10- The entity concludes that the software and the updates are each promised goods or services in the contract\n55-140E\n and are each capable of being distinct in accordance with paragraph 606-10-25-19(a). The software and the\n updates are capable of being distinct because the customer can derive economic benefit from the software on\n its own throughout the license period (that is, without the updates the software would still provide its original\n functionality to the customer), while the customer can benefit from the updates together with the software\n license transferred at the outset of the contract.\n\n606-10- The entity concludes that its promises to transfer the software license and to provide the updates, when-and-if\n55-140F\n available, are not separately identifiable (in accordance with paragraph 606-10-25-19(b)) because the license\n and the updates are, in effect, inputs to a combined item (anti-virus protection) in the contract. The updates\n significantly modify the functionality of the software (that is, they permit the software to protect the customer\n from a significant number of additional viruses that the software did not protect against previously) and are\n integral to maintaining the utility of the software license to the customer. Consequently, the license and\n updates fulfill a single promise to the customer in the contract (a promise to provide protection from computer\n viruses for three years). Therefore, in this Example, the entity accounts for the software license and the when-\n and-if available updates as a single performance obligation. In accordance with paragraph 606-10-25-33, the\n entity concludes that the nature of the combined good or service it promised to transfer to the customer in this\n Example is computer virus protection for three years. The entity considers the nature of the combined good or\n service (that is, to provide anti-virus protection for three years) in determining whether the performance\n obligation is satisfied over time or at a point in time in accordance with paragraphs 606-10-25-23 through 25-\n 30 and in determining the appropriate method for measuring progress toward complete satisfaction of the\n performance obligation in accordance with paragraphs 606-10-25-31 through 25-37.\n\n\u00b7 \u00b7 > Example 11\u2014Determining Whether Goods or Services Are Distinct\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Distinct Goods or Services\n\n606-10- An entity, a software developer, enters into a contract with a customer to transfer a software license, perform\n55-141\n an installation service, and provide unspecified software updates and technical support (online and telephone)\n for a two-year period. The entity sells the license, installation service, and technical support separately. The\n installation service includes changing the web screen for each type of user (for example, marketing, inventory\n management, and information technology). The installation service is routinely performed by other entities and\n does not significantly modify the software. The software remains functional without the updates and the\n technical support.\n\n606-10- The entity assesses the goods and services promised to the customer to determine which goods and services\n55-142\n are distinct in accordance with paragraph 606-10-25-19. The entity observes that the software is delivered\n before the other goods and services and remains functional without the updates and the technical\n support. The customer can benefit from the updates together with the software license transferred at the\n outset of the contract. Thus, the entity concludes that the customer can benefit from each of the goods and\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 67 of 123\n services either on their own or together with the other goods and services that are readily available and the\n criterion in paragraph 606-10-25-19(a) is met.\n\n606-10- The entity also considers the principle and the factors in paragraph 606-10-25-21 and determines that the\n55-143\n promise to transfer each good and service to the customer is separately identifiable from each of the other\n promises (thus, the criterion in paragraph 606-10-25-19(b) is met). In reaching this determination the entity\n considers that although it integrates the software into the customer's system, the installation services do not\n significantly affect the customer's ability to use and benefit from the software license because the installation\n services are routine and can be obtained from alternate providers. The software updates do not significantly\n affect the customer's ability to use and benefit from the software license because, in contrast with Example 10\n (Case C), the software updates in this contract are not necessary to ensure that the software maintains a high\n level of utility to the customer during the license period. The entity further observes that none of the promised\n goods or services significantly modify or customize one another and the entity is not providing a significant\n service of integrating the software and the services into a combined output. Lastly, the entity concludes that\n the software and the services do not significantly affect each other and, therefore, are not highly\n interdependent or highly interrelated because the entity would be able to fulfill its promise to transfer the initial\n software license independent from its promise to subsequently provide the installation service, software\n updates, or technical support.\n\n606-10- On the basis of this assessment, the entity identifies four performance obligations in the contract for the\n55-144\n following goods or services:\n aThe software license\n bAn installation service\n cSoftware updates\n dTechnical support.\n\n606-10- The entity applies paragraphs 606-10-25-23 through 25-30 to determine whether each of the performance\n55-145\n obligations for the installation service, software updates, and technical support are satisfied at a point in time\n or over time. The entity also assesses the nature of the entity's promise to transfer the software license in\n accordance with paragraphs 606-10-55-59 through 55-60 and 606-10-55-62 through 55-64A (see Example 54\n in paragraphs 606-10-55-362 through 55-363B).\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014Significant Customization\n\n606-10- The promised goods and services are the same as in Case A, except that the contract specifies that, as part of\n55-146\n the installation service, the software is to be substantially customized to add significant new functionality to\n enable the software to interface with other customized software applications used by the customer. The\n customized installation service can be provided by other entities.\n\n606-10- The entity assesses the goods and services promised to the customer to determine which goods and services\n55-147\n are distinct in accordance with paragraph 606-10-25-19. The entity first assesses whether the criterion in\n paragraph 606-10-25-19(a) has been met. For the same reasons as in Case A, the entity determines that the\n software license, installation, software updates, and technical support each meet that criterion. The entity next\n assesses whether the criterion in paragraph 606-10-25-19(b) has been met by evaluating the principle and the\n factors in paragraph 606-10-25-21.The entity observes that the terms of the contract result in a promise to\n provide a significant service of integrating the licensed software into the existing software system by\n performing a customized installation service as specified in the contract. In other words, the entity is using the\n license and the customized installation service as inputs to produce the combined output (that is, a functional\n and integrated software system) specified in the contract (see paragraph 606-10-25-21(a)). The software is\n significantly modified and customized by the service (see paragraph 606-10-25-21(b)). Consequently, the\n entity determines that the promise to transfer the license is not separately identifiable from the customized\n installation service and, therefore, the criterion in paragraph 606-10-25-19(b) is not met. Thus, the software\n license and the customized installation service are not distinct.\n\n606-10- On the basis of the same analysis as in Case A, the entity concludes that the software updates and technical\n55-148\n support are distinct from the other promises in the contract.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 68 of 123\n606-10- On the basis of this assessment, the entity identifies three performance obligations in the contract for the\n55-149\n following goods or services:\n aSoftware customization which is comprised of the license to the software and the customized installation\n service\n bSoftware updates\n cTechnical support.\n\n\n606-10- The entity applies paragraphs 606-10-25-23 through 25-30 to determine whether each performance obligation\n55-150\n is satisfied at a point in time or over time and paragraphs 606-10-25-31 through 25-37 to measure progress\n toward complete satisfaction of those performance obligations determined to be satisfied over time. In\n applying those paragraphs to the software customization, the entity considers that the customized software to\n which the customer will have rights is functional intellectual property and that the functionality of that software\n will not change during the license period as a result of activities that do not transfer a good or service to the\n customer. Therefore, the entity is providing a right to use the customized software. Consequently, the software\n customization performance obligation is completely satisfied upon completion of the customized installation\n service. The entity considers the other specific facts and circumstances of the contract in the context of the\n guidance in paragraphs 606-10-25-23 through 25-30 in determining whether it should recognize revenue\n related to the single software customization performance obligation as it performs the customized installation\n service or at the point in time the customized software is transferred to the customer.\n\n\u00b7 \u00b7 \u00b7 > Case C\u2014Promises Are Separately Identifiable (Installation)\n\n606-10- An entity contracts with a customer to sell a piece of equipment and installation services. The equipment is\n55-150A\n operational without any customization or modification. The installation required is not complex and is capable\n of being performed by several alternative service providers.\n\n606-10- The entity identifies two promised goods and services in the contract: (a) equipment and (b) installation. The\n55-150B\n entity assesses the criteria in paragraph 606-10-25-19 to determine whether each promised good or service is\n distinct. The entity determines that the equipment and the installation each meet the criterion in\n paragraph 606-10-25-19(a). The customer can benefit from the equipment on its own, by using it or reselling it\n for an amount greater than scrap value, or together with other readily available resources (for example,\n installation services available from alternative providers). The customer also can benefit from the installation\n services together with other resources that the customer will already have obtained from the entity (that is, the\n equipment).\n\n606-10- The entity further determines that its promises to transfer the equipment and to provide the installation\n55-150C\n services are each separately identifiable (in accordance with paragraph 606-10-25-19(b)). The entity considers\n the principle and the factors in paragraph 606-10-25-21 in determining that the equipment and the installation\n services are not inputs to a combined item in this contract. In this Case, each of the factors in paragraph 606-\n 10-25-21 contributes to, but is not individually determinative of, the conclusion that the equipment and the\n installation services are separately identifiable as follows:\n aThe entity is not providing a significant integration service. That is, the entity has promised to deliver the\n equipment and then install it; the entity would be able to fulfill its promise to transfer the equipment\n separately from its promise to subsequently install it. The entity has not promised to combine the\n equipment and the installation services in a way that would transform them into a combined output.\n bThe entity's installation services will not significantly customize or significantly modify the equipment.\n cAlthough the customer can benefit from the installation services only after it has obtained control of the\n equipment, the installation services do not significantly affect the equipment because the entity would be\n able to fulfill its promise to transfer the equipment independently of its promise to provide the installation\n services. Because the equipment and the installation services do not each significantly affect the other,\n they are not highly interdependent or highly interrelated.\n On the basis of this assessment, the entity identifies two performance obligations (the equipment and\n installation services) in the contract.\n\n606-10- The entity applies paragraphs 606-10-25-23 through 25-30 to determine whether each performance obligation\n55-150D\n is satisfied at a point in time or over time.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 69 of 123\n\u00b7 \u00b7 \u00b7 > Case D\u2014Promises Are Separately Identifiable (Contractual Restrictions)\n\n606-10- Assume the same facts as in Case C, except that the customer is contractually required to use the entity's\n55-150E\n installation services.\n\n606-10- The contractual requirement to use the entity's installation services does not change the evaluation of whether\n55-150F\n the promised goods and services are distinct in this Case. This is because the contractual requirement to use\n the entity's installation services does not change the characteristics of the goods or services themselves, nor\n does it change the entity's promises to the customer. Although the customer is required to use the entity's\n installation services, the equipment and the installation services are capable of being distinct (that is, they\n each meet the criterion in paragraph 606-10-25-19(a)), and the entity's promises to provide the equipment and\n to provide the installation services are each separately identifiable (that is, they each meet the criterion in\n paragraph 606-10-25-19(b)). The entity's analysis in this regard is consistent with Case C.\n\n\u00b7 \u00b7 \u00b7 > Case E\u2014Promises Are Separately Identifiable (Consumables)\n\n606-10- An entity enters into a contract with a customer to provide a piece of off-the-shelf equipment (that is, it is\n55-150G\n operational without any significant customization or modification) and to provide specialized consumables for\n use in the equipment at predetermined intervals over the next three years. The consumables are produced\n only by the entity, but are sold separately by the entity.\n\n606-10- The entity determines that the customer can benefit from the equipment together with the readily available\n55-150H\n consumables. The consumables are readily available in accordance with paragraph 606-10-25-20 because\n they are regularly sold separately by the entity (that is, through refill orders to customers that previously\n purchased the equipment). The customer can benefit from the consumables that will be delivered under the\n contract together with the delivered equipment that is transferred to the customer initially under the contract.\n Therefore, the equipment and the consumables are each capable of being distinct in accordance with\n paragraph 606-10-25-19(a).\n\n606-10- The entity determines that its promises to transfer the equipment and to provide consumables over a three-\n55-150I\n year period are each separately identifiable in accordance with paragraph 606-10-25-19(b). In determining that\n the equipment and the consumables are not inputs to a combined item in this contract, the entity considers\n that it is not providing a significant integration service that transforms the equipment and consumables into a\n combined output. Additionally, neither the equipment nor the consumables are significantly customized or\n modified by the other. Lastly, the entity concludes that the equipment and the consumables are not highly\n interdependent or highly interrelated because they do not significantly affect each other. Although the\n customer can benefit from the consumables in this contract only after it has obtained control of the equipment\n (that is, the consumables would have no use without the equipment) and the consumables are required for the\n equipment to function, the equipment and the consumables do not each significantly affect the other. This is\n because the entity would be able to fulfill each of its promises in the contract independently of the other. That\n is, the entity would be able to fulfill its promise to transfer the equipment even if the customer did not purchase\n any consumables and would be able to fulfill its promise to provide the consumables even if the customer\n acquired the equipment separately.\n\n606-10- On the basis of this assessment, the entity identifies two performance obligations in the contract for the\n55-150J\n following goods or services:\n aThe equipment\n bThe consumables.\n\n\n606-10- The entity applies paragraphs 606-10-25-23 through 25-30 to determine whether each performance obligation\n55-150K\n is satisfied at a point in time or over time.\n\n\u00b7 \u00b7 > Example 12\u2014Explicit and Implicit Promises in a Contract\n\n606-10- An entity, a manufacturer, sells a product to a distributor (that is, its customer), who will then resell it to an end\n55-151\n customer.\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Explicit Promise of Service\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 70 of 123\n606-10- In the contract with the distributor, the entity promises to provide maintenance services for no additional\n55-152\n consideration (that is, \u201cfree\u201d) to any party (that is, the end customer) that purchases the product from the\n distributor. The entity outsources the performance of the maintenance services to the distributor and pays the\n distributor an agreed-upon amount for providing those services on the entity's behalf. If the end customer does\n not use the maintenance services, the entity is not obliged to pay the distributor.\n\n606-10- The contract with the customer includes two promised goods or services\u2014(a) the product and (b) the\n55-153\n maintenance services (because the promise of maintenance services is a promise to transfer goods or\n services in the future and is part of the negotiated exchange between the entity and the distributor). The entity\n assesses whether each good or service is distinct in accordance with paragraph 606-10-25-19. The entity\n determines that both the product and the maintenance services meet the criterion in paragraph 606-10-25-\n 19(a). The entity regularly sells the product on a standalone basis, which indicates that the customer can\n benefit from the product on its own. The customer can benefit from the maintenance services together with a\n resource the customer already has obtained from the entity (that is, the product).\n\n606-10- The entity further determines that its promises to transfer the product and to provide the maintenance services\n55-153A\n are separately identifiable (in accordance with paragraph 606-10-25-19(b)) on the basis of the principle and\n the factors in paragraph 606-10-25-21. The product and the maintenance services are not inputs to a\n combined item in this contract. The entity is not providing a significant integration service because the\n presence of the product and the services together in this contract do not result in any additional or combined\n functionality. In addition, neither the product nor the services modify or customize the other. Lastly, the product\n and the maintenance services are not highly interdependent or highly interrelated because the entity would be\n able to satisfy each of the promises in the contract independent of its efforts to satisfy the other (that is, the\n entity would be able to transfer the product even if the customer declined maintenance services and would be\n able to provide maintenance services in relation to products sold previously through other distributors). The\n entity also observes, in applying the principle in paragraph 606-10-25-21, that the entity's promise to provide\n maintenance is not necessary for the product to continue to provide significant benefit to the customer.\n Consequently, the entity allocates a portion of the transaction price to each of the two performance obligations\n (that is, the product and the maintenance services) in the contract.\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014Implicit Promise of Service\n\n606-10- The entity has historically provided maintenance services for no additional consideration (that is, \u201cfree\u201d) to end\n55-154\n customers that purchase the entity's product from the distributor. The entity does not explicitly promise\n maintenance services during negotiations with the distributor, and the final contract between the entity and the\n distributor does not specify terms or conditions for those services.\n\n606-10- However, on the basis of its customary business practice, the entity determines at contract inception that it has\n55-155\n made an implicit promise to provide maintenance services as part of the negotiated exchange with the\n distributor. That is, the entity's past practices of providing these services create reasonable expectations of the\n entity's customers (that is, the distributor and end customers) in accordance with paragraph 606-10-25-16.\n Consequently, the entity assesses whether the promise of maintenance services is a performance\n obligation. For the same reasons as in Case A, the entity determines that the product and maintenance\n services are separate performance obligations.\n\n\u00b7 \u00b7 \u00b7 > Case C\u2014Services Are Not a Promised Service\n\n606-10- In the contract with the distributor, the entity does not promise to provide any maintenance services. In\n55-156\n addition, the entity typically does not provide maintenance services, and, therefore, the entity's customary\n business practices, published policies, and specific statements at the time of entering into the contract have\n not created an implicit promise to provide goods or services to its customers. The entity transfers control of the\n product to the distributor and, therefore, the contract is completed. However, before the sale to the end\n customer, the entity makes an offer to provide maintenance services to any party that purchases the product\n from the distributor for no additional promised consideration.\n\n606-10- The promise of maintenance is not included in the contract between the entity and the distributor at contract\n55-157\n inception. That is, in accordance with paragraph 606-10-25-16, the entity does not explicitly or implicitly\n promise to provide maintenance services to the distributor or the end customers. Consequently, the entity\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 71 of 123\n does not identify the promise to provide maintenance services as a performance obligation. Instead, the\n obligation to provide maintenance services is accounted for in accordance with Topic 450 on contingencies.\n\n606-10- Although the maintenance services are not a promised service in the current contract, in future contracts with\n55-157A\n customers the entity would assess whether it has created a business practice resulting in an implied promise\n to provide maintenance services.\n\n\u00b7 \u00b7 > Example 12A\u2014Series of Distinct Goods or Services\n\n606-10- An entity, a hotel manager, enters into a contract with a customer to manage a customer-owned property for\n55-157B\n 20 years. The entity receives consideration monthly that is equal to 1 percent of the revenue from the\n customer-owned property.\n\n606-10- The entity evaluates the nature of its promise to the customer in this contract and determines that its promise\n55-157C\n is to provide a hotel management service. The service comprises various activities that may vary each day (for\n example, cleaning services, reservation services, and property maintenance). However, those tasks are\n activities to fulfill the hotel management service and are not separate promises in the contract. The entity\n determines that each increment of the promised service (for example, each day of the management service) is\n distinct in accordance with paragraph 606-10-25-19. This is because the customer can benefit from each\n increment of service on its own (that is, it is capable of being distinct) and each increment of service is\n separately identifiable because no day of service significantly modifies or customizes another and no day of\n service significantly affects either the entity's ability to fulfill another day of service or the benefit to the\n customer of another day of service.\n\n606-10- The entity also evaluates whether it is providing a series of distinct goods or services in accordance with\n55-157D\n paragraphs 606-10-25-14 through 25-15. First, the entity determines that the services provided each day are\n substantially the same. This is because the nature of the entity's promise is the same each day and the entity\n is providing the same overall management service each day (although the underlying tasks or activities the\n entity performs to provide that service may vary from day to day). The entity then determines that the services\n have the same pattern of transfer to the customer because both criteria in paragraph 606-10-25-15 are met.\n The entity determines that the criterion in paragraph 606-10-25-15(a) is met because each distinct service\n meets the criteria in paragraph 606-10-25-27 to be a performance obligation satisfied over time. The customer\n simultaneously receives and consumes the benefits provided by the entity as it performs. The entity\n determines that the criterion in paragraph 606-10-25-15(b) also is met because the same measure of progress\n (in this case, a time-based output method) would be used to measure the entity's progress toward satisfying its\n promise to provide the hotel management service each day.\n\n606-10- After determining that the entity is providing a series of distinct daily hotel management services over the 20-\n55-157E\n year management period, the entity next determines the transaction price. The entity determines that the\n entire amount of the consideration is variable consideration. The entity considers whether the variable\n consideration may be allocated to one or more, but not all, of the distinct days of service in the series in\n accordance with paragraph 606-10-32-39(b). The entity evaluates the criteria in paragraph 606-10-32-40 and\n determines that the terms of the variable consideration relate specifically to the entity's efforts to transfer each\n distinct daily service and that allocation of the variable consideration earned based on the activities performed\n by the entity each day to the distinct day in which those activities are performed is consistent with the overall\n allocation objective. Therefore, as each distinct daily service is completed, the variable consideration allocated\n to that period may be recognized, subject to the constraint on variable consideration.\n\n\u00b7 > Performance Obligations Satisfied Over Time\n\n606-10- Examples 13-17 illustrate the guidance in paragraphs 606-10-25-27 through 25-29 and 606-10-55-4 through\n55-158\n 55-15 on performance obligations satisfied over time. In addition, the following guidance is illustrated in these\n Examples:\n aParagraphs 606-10-25-27(a) and 606-10-55-5 through 55-6 on when a customer simultaneously\n receives and consumes the benefits provided by the entity's performance as the entity performs\n (Examples 13 and 14)\n bParagraphs 606-10-25-27(c) and 606-10-25-28 through 25-29 and 606-10-55-8 through 55-15 on an\n entity's performance that does not create an asset with an alternative use and an entity's enforceable right\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 72 of 123\n to payment for performance completed to date (Examples 14-17)\n cParagraph 606-10-25-30 on performance obligations satisfied at a point in time (Example 17).\n\n\u00b7 \u00b7 > Example 13\u2014Customer Simultaneously Receives and Consumes the Benefits\n\n606-10- An entity enters into a contract to provide monthly payroll processing services to a customer for one year.\n55-159\n\n606-10- The promised payroll processing services are accounted for as a single performance obligation in accordance\n55-160\n with paragraph 606-10-25-14(b). The performance obligation is satisfied over time in accordance with\n paragraph 606-10-25-27(a) because the customer simultaneously receives and consumes the benefits of the\n entity's performance in processing each payroll transaction as and when each transaction is processed. The\n fact that another entity would not need to reperform payroll processing services for the service that the entity\n has provided to date also demonstrates that the customer simultaneously receives and consumes the benefits\n of the entity's performance as the entity performs. (The entity disregards any practical limitations on\n transferring the remaining performance obligation, including setup activities that would need to be undertaken\n by another entity.) The entity recognizes revenue over time by measuring its progress toward complete\n satisfaction of that performance obligation in accordance with paragraphs 606-10-25-31 through 25-\n 37 and 606-10-55-16 through 55-21.\n\n\u00b7 \u00b7 > Example 14\u2014Assessing Alternative Use and Right to Payment\n\n606-10- An entity enters into a contract with a customer to provide a consulting service that results in the entity\n55-161\n providing a professional opinion to the customer. The professional opinion relates to facts and circumstances\n that are specific to the customer. If the customer were to terminate the consulting contract for reasons other\n than the entity's failure to perform as promised, the contract requires the customer to compensate the entity for\n its costs incurred plus a 15 percent margin. The 15 percent margin approximates the profit margin that the\n entity earns from similar contracts.\n\n606-10- The entity considers the criterion in paragraph 606-10-25-27(a) and the guidance in paragraphs 606-10-55-5\n55-162\n through 55-6 to determine whether the customer simultaneously receives and consumes the benefits of the\n entity's performance. If the entity were to be unable to satisfy its obligation and the customer hired another\n consulting firm to provide the opinion, the other consulting firm would need to substantially reperform the work\n that the entity had completed to date because the other consulting firm would not have the benefit of any work\n in progress performed by the entity. The nature of the professional opinion is such that the customer will\n receive the benefits of the entity's performance only when the customer receives the professional opinion.\n Consequently, the entity concludes that the criterion in paragraph 606-10-25-27(a) is not met.\n\n606-10- However, the entity's performance obligation meets the criterion in paragraph 606-10-25-27(c) and is a\n55-163\n performance obligation satisfied over time because of both of the following factors:\n aIn accordance with paragraphs 606-10-25-28 and 606-10-55-8 through 55-10, the development of the\n professional opinion does not create an asset with alternative use to the entity because the professional\n opinion relates to facts and circumstances that are specific to the customer. Therefore, there is a practical\n limitation on the entity's ability to readily direct the asset to another customer.\n bIn accordance with paragraphs 606-10-25-29 and 606-10-55-11 through 55-15, the entity has an\n enforceable right to payment for its performance completed to date for its costs plus a reasonable margin,\n which approximates the profit margin in other contracts.\n\n\n606-10- Consequently, the entity recognizes revenue over time by measuring the progress toward complete\n55-164\n satisfaction of the performance obligation in accordance with paragraphs 606-10-25-31 through 25-\n 37 and 606-10-55-16 through 55-21.\n\n\u00b7 \u00b7 > Example 15\u2014Asset Has No Alternative Use to the Entity\n\n606-10- An entity enters into a contract with a customer, a government agency, to build a specialized satellite. The\n55-165\n entity builds satellites for various customers, such as governments and commercial entities. The design and\n construction of each satellite differ substantially, on the basis of each customer's needs and the type of\n technology that is incorporated into the satellite.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 73 of 123\n606-10- At contract inception, the entity assesses whether its performance obligation to build the satellite is a\n55-166\n performance obligation satisfied over time in accordance with paragraph 606-10-25-27.\n\n606-10- As part of that assessment, the entity considers whether the satellite in its completed state will have an\n55-167\n alternative use to the entity. Although the contract does not preclude the entity from directing the completed\n satellite to another customer, the entity would incur significant costs to rework the design and function of the\n satellite to direct that asset to another customer. Consequently, the asset has no alternative use to the entity\n (see paragraphs 606-10-25-27(c), 606-10-25-28, and 606-10-55-8 through 55-10) because the customer-\n specific design of the satellite limits the entity's practical ability to readily direct the satellite to another\n customer.\n\n606-10- For the entity's performance obligation to be satisfied over time when building the satellite, paragraph 606-10-\n55-168\n 25-27(c) also requires the entity to have an enforceable right to payment for performance completed to date.\n This condition is not illustrated in this Example.\n\n\u00b7 \u00b7 > Example 16\u2014Enforceable Right to Payment for Performance Completed to Date\n\n606-10- An entity enters into a contract with a customer to build an item of equipment. The payment schedule in the\n55-169\n contract specifies that the customer must make an advance payment at contract inception of 10 percent of the\n contract price, regular payments throughout the construction period (amounting to 50 percent of the contract\n price), and a final payment of 40 percent of the contract price after construction is completed and the\n equipment has passed the prescribed performance tests. The payments are nonrefundable unless the entity\n fails to perform as promised. If the customer terminates the contract, the entity is entitled only to retain any\n progress payments received from the customer. The entity has no further rights to compensation from the\n customer.\n\n606-10- At contract inception, the entity assesses whether its performance obligation to build the equipment is a\n55-170\n performance obligation satisfied over time in accordance with paragraph 606-10-25-27.\n\n606-10- As part of that assessment, the entity considers whether it has an enforceable right to payment for\n55-171\n performance completed to date in accordance with paragraphs 606-10-25-27(c), 606-10-25-29, and 606-10-\n 55-11 through 55-15 if the customer were to terminate the contract for reasons other than the entity's failure to\n perform as promised. Even though the payments made by the customer are nonrefundable, the cumulative\n amount of those payments is not expected, at all times throughout the contract, to at least correspond to the\n amount that would be necessary to compensate the entity for performance completed to date. This is because\n at various times during construction the cumulative amount of consideration paid by the customer might be\n less than the selling price of the partially completed item of equipment at that time. Consequently, the entity\n does not have a right to payment for performance completed to date.\n\n606-10- Because the entity does not have a right to payment for performance completed to date, the entity's\n55-172\n performance obligation is not satisfied over time in accordance with paragraph 606-10-25-27(c). Accordingly,\n the entity does not need to assess whether the equipment would have an alternative use to the entity. The\n entity also concludes that it does not meet the criteria in paragraph 606-10-25-27(a) or (b), and, thus, the\n entity accounts for the construction of the equipment as a performance obligation satisfied at a point in time in\n accordance with paragraph 606-10-25-30.\n\n\u00b7 \u00b7 > Example 17\u2014Assessing Whether a Performance Obligation Is Satisfied at a Point in Time or Over Time\n\n606-10- An entity is developing a multi-unit residential complex. A customer enters into a binding sales contract with\n55-173\n the entity for a specified unit that is under construction. Each unit has a similar floor plan and is of a similar\n size, but other attributes of the units are different (for example, the location of the unit within the complex).\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Entity Does Not Have an Enforceable Right to Payment for Performance Completed to Date\n\n606-10- The customer pays a deposit upon entering into the contract, and the deposit is refundable only if the entity\n55-174\n fails to complete construction of the unit in accordance with the contract. The remainder of the contract price is\n payable on completion of the contract when the customer obtains physical possession of the unit. If the\n customer defaults on the contract before completion of the unit, the entity only has the right to retain the\n deposit.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 74 of 123\n606-10- At contract inception, the entity applies paragraph 606-10-25-27(c) to determine whether its promise to\n55-175\n construct and transfer the unit to the customer is a performance obligation satisfied over time. The entity\n determines that it does not have an enforceable right to payment for performance completed to date because\n until construction of the unit is complete, the entity only has a right to the deposit paid by the customer.\n Because the entity does not have a right to payment for work completed to date, the entity's performance\n obligation is not a performance obligation satisfied over time in accordance with paragraph 606-10-25-27(c).\n Instead, the entity accounts for the sale of the unit as a performance obligation satisfied at a point in time in\n accordance with paragraph 606-10-25-30.\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014Entity Has an Enforceable Right to Payment for Performance Completed to Date\n\n606-10- The customer pays a nonrefundable deposit upon entering into the contract and will make progress payments\n55-176\n during construction of the unit. The contract has substantive terms that preclude the entity from being able to\n direct the unit to another customer. In addition, the customer does not have the right to terminate the contract\n unless the entity fails to perform as promised. If the customer defaults on its obligations by failing to make the\n promised progress payments as and when they are due, the entity would have a right to all of the\n consideration promised in the contract if it completes the construction of the unit. The courts have previously\n upheld similar rights that entitle developers to require the customer to perform, subject to the entity meeting its\n obligations under the contract.\n\n606-10- At contract inception, the entity applies paragraph 606-10-25-27(c) to determine whether its promise to\n55-177\n construct and transfer the unit to the customer is a performance obligation satisfied over time. The entity\n determines that the asset (unit) created by the entity's performance does not have an alternative use to the\n entity because the contract precludes the entity from transferring the specified unit to another customer. The\n entity does not consider the possibility of a contract termination in assessing whether the entity is able to direct\n the asset to another customer.\n\n606-10- The entity also has a right to payment for performance completed to date in accordance with paragraphs 606-\n55-178\n 10-25-29 and 606-10-55-11 through 55-15. This is because if the customer were to default on its obligations,\n the entity would have an enforceable right to all of the consideration promised under the contract if it continues\n to perform as promised.\n\n606-10- Therefore, the terms of the contract and the practices in the legal jurisdiction indicate that there is a right to\n55-179\n payment for performance completed to date. Consequently, the criteria in paragraph 606-10-25-27(c) are met,\n and the entity has a performance obligation that it satisfies over time. To recognize revenue for that\n performance obligation satisfied over time, the entity measures its progress toward complete satisfaction of its\n performance obligation in accordance with paragraphs 606-10-25-31 through 25-37 and 606-10-55-16 through\n 55-21.\n\n606-10- In the construction of a multi-unit residential complex, the entity may have many contracts with individual\n55-180\n customers for the construction of individual units within the complex. The entity would account for each\n contract separately. However, depending on the nature of the construction, the entity's performance in\n undertaking the initial construction works (that is, the foundation and the basic structure), as well as the\n construction of common areas, may need to be reflected when measuring its progress toward complete\n satisfaction of its performance obligations in each contract.\n\n\u00b7 \u00b7 \u00b7 > Case C\u2014Entity Has an Enforceable Right to Payment for Performance Completed to Date\n\n606-10- The same facts as in Case B apply to Case C, except that in the event of a default by the customer, either the\n55-181\n entity can require the customer to perform as required under the contract or the entity can cancel the contract\n in exchange for the asset under construction and an entitlement to a penalty of a proportion of the contract\n price.\n\n606-10- Notwithstanding that the entity could cancel the contract (in which case the customer's obligation to the entity\n55-182\n would be limited to transferring control of the partially completed asset to the entity and paying the penalty\n prescribed), the entity has a right to payment for performance completed to date because the entity also could\n choose to enforce its rights to full payment under the contract. The fact that the entity may choose to cancel\n the contract in the event the customer defaults on its obligations would not affect that assessment (see\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 75 of 123\n paragraph 606-10-55-13), provided that the entity's rights to require the customer to continue to perform as\n required under the contract (that is, pay the promised consideration) are enforceable.\n\n\u00b7 > Measuring Progress toward Complete Satisfaction of a Performance Obligation\n\n606-10- Examples 18 and 19 illustrate the guidance in paragraphs 606-10-25-31 through 25-37 on measuring progress\n55-183\n toward complete satisfaction of a performance obligation satisfied over time. Example 19 also illustrates the\n guidance in paragraph 606-10-55-21 on uninstalled materials when costs incurred are not proportionate to the\n entity's progress in satisfying a performance obligation.\n\n\u00b7 \u00b7 > Example 18\u2014Measuring Progress When Making Goods or Services Available\n\n606-10- An entity, an owner and manager of health clubs, enters into a contract with a customer for one year of access\n55-184\n to any of its health clubs. The customer has unlimited use of the health clubs and promises to pay $100 per\n month.\n\n606-10- The entity determines that its promise to the customer is to provide a service of making the health clubs\n55-185\n available for the customer to use as and when the customer wishes. This is because the extent to which the\n customer uses the health clubs does not affect the amount of the remaining goods and services to which the\n customer is entitled. The entity concludes that the customer simultaneously receives and consumes the\n benefits of the entity's performance as it performs by making the health clubs available. Consequently, the\n entity's performance obligation is satisfied over time in accordance with paragraph 606-10-25-27(a).\n\n606-10- The entity also determines that the customer benefits from the entity's service of making the health clubs\n55-186\n available evenly throughout the year. (That is, the customer benefits from having the health clubs available,\n regardless of whether the customer uses it or not.) Consequently, the entity concludes that the best measure\n of progress toward complete satisfaction of the performance obligation over time is a time-based measure,\n and it recognizes revenue on a straight-line basis throughout the year at $100 per month.\n\n\u00b7 \u00b7 > Example 19\u2014Uninstalled Materials\n\n606-10- In November 20X2, an entity contracts with a customer to refurbish a 3-story building and install new elevators\n55-187\n for total consideration of $5 million. The promised refurbishment service, including the installation of elevators,\n is a single performance obligation satisfied over time. Total expected costs are $4 million, including $1.5 million\n for the elevators. The entity determines that it acts as a principal in accordance with paragraphs 606-10-55-36\n through 55-40 because it obtains control of the elevators before they are transferred to the customer.\n\n606-10- A summary of the transaction price and expected costs is as follows:\n55-188\n\n\n\n\n606-10- The entity uses an input method based on costs incurred to measure its progress toward complete satisfaction\n55-189\n of the performance obligation. The entity assesses whether the costs incurred to procure the elevators are\n proportionate to the entity's progress in satisfying the performance obligation in accordance with\n paragraph 606-10-55-21. The customer obtains control of the elevators when they are delivered to the site in\n December 20X2, although the elevators will not be installed until June 20X3. The costs to procure the\n elevators ($1.5 million) are significant relative to the total expected costs to completely satisfy the performance\n obligation ($4 million). The entity is not involved in designing or manufacturing the elevators.\n\n606-10- The entity concludes that including the costs to procure the elevators in the measure of progress would\n55-190\n overstate the extent of the entity's performance. Consequently, in accordance with paragraph 606-10-55-21,\n the entity adjusts its measure of progress to exclude the costs to procure the elevators from the measure of\n costs incurred and from the transaction price. The entity recognizes revenue for the transfer of the elevators in\n an amount equal to the costs to procure the elevators (that is, at a zero margin).\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 76 of 123\n606-10- As of December 31, 20X2, the entity observes that:\n55-191\n aOther costs incurred (excluding elevators) are$500,000.\n bPerformance is 20% complete (that is, $500,000 \u00f7 $2,500,000).\n\n\n606-10- Consequently, at December 31, 20X2, the entity recognizes the following:\n55-192\n\n\n\n\n\u00b7 > Variable Consideration\n\n606-10- Examples 20 and 21 illustrate the guidance in paragraphs 606-10-32-5 through 32-9 on identifying variable\n55-193\n consideration.\n\n\u00b7 \u00b7 > Example 20\u2014Penalty Gives Rise to Variable Consideration\n\n606-10- An entity enters into a contract with a customer to build an asset for $1 million. In addition, the terms of the\n55-194\n contract include a penalty of $100,000 if the construction is not completed within 3 months of a date specified\n in the contract.\n\n606-10- The entity concludes that the consideration promised in the contract includes a fixed amount of $900,000 and\n55-195\n a variable amount of $100,000 (arising from the penalty).\n\n606-10- The entity estimates the variable consideration in accordance with paragraphs 606-10-32-5 through 32-9 and\n55-196\n considers the guidance in paragraphs 606-10-32-11 through 32-13 on constraining estimates of variable\n consideration.\n\n\u00b7 \u00b7 > Example 21\u2014Estimating Variable Consideration\n\n606-10- An entity enters into a contract with a customer to build a customized asset. The promise to transfer the asset\n55-197\n is a performance obligation that is satisfied over time. The promised consideration is $2.5 million, but that\n amount will be reduced or increased depending on the timing of completion of the asset. Specifically, for each\n day after March 31, 20X7 that the asset is incomplete, the promised consideration is reduced by $10,000. For\n each day before March 31, 20X7 that the asset is complete, the promised consideration increases by $10,000.\n\n606-10- In addition, upon completion of the asset, a third party will inspect the asset and assign a rating based on\n55-198\n metrics that are defined in the contract. If the asset receives a specified rating, the entity will be entitled to an\n incentive bonus of $150,000.\n\n606-10- In determining the transaction price, the entity prepares a separate estimate for each element of variable\n55-199\n consideration to which the entity will be entitled using the estimation methods described in paragraph 606-10-\n 32-8:\n aThe entity decides to use the expected value method to estimate the variable consideration associated\n with the daily penalty or incentive (that is, $2.5 million, plus or minus $10,000 per day). This is because it\n is the method that the entity expects to better predict the amount of consideration to which it will be\n entitled.\n bThe entity decides to use the most likely amount to estimate the variable consideration associated with\n the incentive bonus. This is because there are only 2 possible outcomes ($150,000 or $0) and it is the\n method that the entity expects to better predict the amount of consideration to which it will be entitled.\n\n\n606-10- The entity considers the guidance in paragraphs 606-10-32-11 through 32-13 on constraining estimates of\n55-200\n variable consideration to determine whether the entity should include some or all of its estimate of variable\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 77 of 123\n consideration in the transaction price.\n\n\u00b7 > Constraining Estimates of Variable Consideration\n\n606-10- Examples 22-25 illustrate the guidance in paragraphs 606-10-32-11 through 32-13 on constraining estimates\n55-201\n of variable consideration. In addition, the following guidance is illustrated in these Examples:\n aParagraph 606-10-32-10 on refund liabilities (Example 22)\n bParagraphs 606-10-55-22 through 55-29 on sales with a right of return (Example 22)\n cParagraphs 606-10-32-39 through 32-41 on allocating variable consideration to performance obligations\n (Example 25).\n\n\n\u00b7 \u00b7 > Example 22\u2014Right of Return\n\n606-10- An entity enters into 100 contracts with customers. Each contract includes the sale of 1 product for $100 (100\n55-202\n total products \u00d7 $100 = $10,000 total consideration). Cash is received when control of a product transfers. The\n entity's customary business practice is to allow a customer to return any unused product within 30 days and\n receive a full refund. The entity's cost of each product is $60.\n\n606-10- The entity applies the guidance in this Topic to the portfolio of 100 contracts because it reasonably expects\n55-203\n that, in accordance with paragraph 606-10-10-4, the effects on the financial statements from applying this\n guidance to the portfolio would not differ materially from applying the guidance to the individual contracts\n within the portfolio.\n\n606-10- Because the contract allows a customer to return the products, the consideration received from the customer\n55-204\n is variable. To estimate the variable consideration to which the entity will be entitled, the entity decides to use\n the expected value method (see paragraph 606-10-32-8(a)) because it is the method that the entity expects to\n better predict the amount of consideration to which it will be entitled. Using the expected value method, the\n entity estimates that 97 products will not be returned.\n\n606-10- The entity also considers the guidance in paragraphs 606-10-32-11 through 32-13 on constraining estimates\n55-205\n of variable consideration to determine whether the estimated amount of variable consideration of $9,700 ($100\n \u00d7 97 products not expected to be returned) can be included in the transaction price. The entity considers the\n factors in paragraph 606-10-32-12 and determines that although the returns are outside the entity's influence,\n it has significant experience in estimating returns for this product and customer class. In addition, the\n uncertainty will be resolved within a short time frame (that is, the 30-day return period). Thus, the entity\n concludes that it is probable that a significant reversal in the cumulative amount of revenue recognized (that is,\n $9,700) will not occur as the uncertainty is resolved (that is, over the return period).\n\n606-10- The entity estimates that the costs of recovering the products will be immaterial and expects that the returned\n55-206\n products can be resold at a profit.\n\n606-10- Upon transfer of control of the 100 products, the entity does not recognize revenue for the 3 products that it\n55-207\n expects to be returned. Consequently, in accordance with paragraphs 606-10-32-10 and 606-10-55-23, the\n entity recognizes the following:\n\n\n\n\n\u00b7 \u00b7 > Example 23\u2014Price Concessions\n\n606-10- An entity enters into a contract with a customer, a distributor, on December 1, 20X7. The entity transfers 1,000\n55-208\n products at contract inception for a price stated in the contract of $100 per product (total consideration is\n $100,000). Payment from the customer is due when the customer sells the products to the end customers.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 78 of 123\n The entity's customer generally sells the products within 90 days of obtaining them. Control of the products\n transfers to the customer on December 1, 20X7.\n\n606-10- On the basis of its past practices and to maintain its relationship with the customer, the entity anticipates\n55-209\n granting a price concession to its customer because this will enable the customer to discount the product and\n thereby move the product through the distribution chain. Consequently, the consideration in the contract is\n variable.\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Estimate of Variable Consideration Is Not Constrained\n\n606-10- The entity has significant experience selling this and similar products. The observable data indicate that\n55-210\n historically the entity grants a price concession of approximately 20 percent of the sales price for these\n products. Current market information suggests that a 20 percent reduction in price will be sufficient to move\n the products through the distribution chain. The entity has not granted a price concession significantly greater\n than 20 percent in many years.\n\n606-10- To estimate the variable consideration to which the entity will be entitled, the entity decides to use the\n55-211\n expected value method (see paragraph 606-10-32-8(a)) because it is the method that the entity expects to\n better predict the amount of consideration to which it will be entitled. Using the expected value method, the\n entity estimates the transaction price to be $80,000 ($80 \u00d7 1,000 products).\n\n606-10- The entity also considers the guidance in paragraphs 606-10-32-11 through 32-13 on constraining estimates\n55-212\n of variable consideration to determine whether the estimated amount of variable consideration of $80,000 can\n be included in the transaction price. The entity considers the factors in paragraph 606-10-32-12 and\n determines that it has significant previous experience with this product and current market information that\n supports its estimate. In addition, despite some uncertainty resulting from factors outside its influence, based\n on its current market estimates, the entity expects the price to be resolved within a short time frame. Thus, the\n entity concludes that it is probable that a significant reversal in the cumulative amount of revenue recognized\n (that is, $80,000) will not occur when the uncertainty is resolved (that is, when the total amount of price\n concessions is determined). Consequently, the entity recognizes $80,000 as revenue when the products are\n transferred on December 1, 20X7.\n\n\u00b7 \u00b7 \u00b7 > Case B-Estimate of Variable Consideration Is Constrained\n\n606-10- The entity has experience selling similar products. However, the entity's products have a high risk of\n55-213\n obsolescence, and the entity is experiencing high volatility in the pricing of its products. The observable data\n indicate that historically the entity grants a broad range of price concessions ranging from 20 to 60 percent of\n the sales price for similar products. Current market information also suggests that a 15 to 50 percent reduction\n in price may be necessary to move the products through the distribution chain.\n\n606-10- To estimate the variable consideration to which the entity will be entitled, the entity decides to use the\n55-214\n expected value method (see paragraph 606-10-32-8(a)) because it is the method that the entity expects to\n better predict the amount of consideration to which it will be entitled. Using the expected value method, the\n entity estimates that a discount of 40 percent will be provided and, therefore, the estimate of the variable\n consideration is $60,000 ($60 \u00d7 1,000 products).\n\n606-10- The entity also considers the guidance in paragraphs 606-10-32-11 through 32-13 on constraining estimates\n55-215\n of variable consideration to determine whether some or all of the estimated amount of variable consideration\n of $60,000 can be included in the transaction price. The entity considers the factors in paragraph 606-10-32-\n 12 and observes that the amount of consideration is highly susceptible to factors outside the entity's influence\n (that is, risk of obsolescence) and it is likely that the entity may be required to provide a broad range of price\n concessions to move the products through the distribution chain. Consequently, the entity cannot include its\n estimate of $60,000 (that is, a discount of 40 percent) in the transaction price because it cannot conclude that\n it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.\n Although the entity's historical price concessions have ranged from 20 to 60 percent, market information\n currently suggests that a price concession of 15 to 50 percent will be necessary. The entity's actual results\n have been consistent with then-current market information in previous, similar transactions. Consequently, the\n entity concludes that it is probable that a significant reversal in the cumulative amount of revenue recognized\n will not occur if the entity includes $50,000 in the transaction price ($100 sales price and a 50 percent price\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 79 of 123\n concession) and, therefore, recognizes revenue at that amount. Therefore, the entity recognizes revenue of\n $50,000 when the products are transferred and reassesses the estimates of the transaction price at each\n reporting date until the uncertainty is resolved in accordance with paragraph 606-10-32-14.\n\n\u00b7 \u00b7 > Example 24\u2014Volume Discount Incentive\n\n606-10- An entity enters into a contract with a customer on January 1, 20X8, to sell Product A for $100 per unit. If the\n55-216\n customer purchases more than 1,000 units of Product A in a calendar year, the contract specifies that the price\n per unit is retrospectively reduced to $90 per unit. Consequently, the consideration in the contract is variable.\n\n606-10- For the first quarter ended March 31, 20X8, the entity sells 75 units of Product A to the customer. The entity\n55-217\n estimates that the customer's purchases will not exceed the 1,000-unit threshold required for the volume\n discount in the calendar year.\n\n606-10- The entity considers the guidance in paragraphs 606-10-32-11 through 32-13 on constraining estimates of\n55-218\n variable consideration, including the factors in paragraph 606-10-32-12. The entity determines that it has\n significant experience with this product and with the purchasing pattern of the entity. Thus, the entity concludes\n that it is probable that a significant reversal in the cumulative amount of revenue recognized (that is, $100 per\n unit) will not occur when the uncertainty is resolved (that is, when the total amount of purchases is known).\n Consequently, the entity recognizes revenue of $7,500 (75 units \u00d7 $100 per unit) for the quarter ended March\n 31, 20X8.\n\n606-10- In May 20X8, the entity's customer acquires another company and in the second quarter ended June 30,\n55-219\n 20X8, the entity sells an additional 500 units of Product A to the customer. In light of the new fact, the entity\n estimates that the customer's purchases will exceed the 1,000-unit threshold for the calendar year and,\n therefore, it will be required to retrospectively reduce the price per unit to $90.\n\n606-10- Consequently, the entity recognizes revenue of $44,250 for the quarter ended June 30, 20X8. That amount is\n55-220\n calculated from $45,000 for the sale of 500 units (500 units \u00d7 $90 per unit) less the change in transaction price\n of $750 (75 units \u00d7 $10 price reduction) for the reduction of revenue relating to units sold for the quarter ended\n March 31, 20X8 (see paragraphs 606-10-32-42 through 32-43).\n\n\u00b7 \u00b7 > Example 25\u2014Management Fees Subject to the Constraint\n\n606-10- On January 1, 20X8, an entity enters into a contract with a client to provide asset management services for\n55-221\n five years. The entity receives a 2 percent quarterly management fee based on the client's assets under\n management at the end of each quarter. In addition, the entity receives a performance-based incentive fee of\n 20 percent of the fund's return in excess of the return of an observable market index over the 5-year period.\n Consequently, both the management fee and the performance fee in the contract are variable consideration.\n\n606-10- The entity accounts for the services as a single performance obligation in accordance with paragraph 606-10-\n55-222\n 25-14(b), because it is providing a series of distinct services that are substantially the same and have the\n same pattern of transfer (the services transfer to the customer over time and use the same method to\n measure progress\u2014that is, a time-based measure of progress).\n\n606-10- At contract inception, the entity considers the guidance in paragraphs 606-10-32-5 through 32-9 on estimating\n55-223\n variable consideration and the guidance in paragraphs 606-10-32-11 through 32-13 on constraining estimates\n of variable consideration, including the factors in paragraph 606-10-32-12. The entity observes that the\n promised consideration is dependent on the market and, thus, is highly susceptible to factors outside the\n entity's influence. In addition, the incentive fee has a large number and a broad range of possible\n consideration amounts. The entity also observes that although it has experience with similar contracts, that\n experience is of little predictive value in determining the future performance of the market. Therefore, at\n contract inception, the entity cannot conclude that it is probable that a significant reversal in the cumulative\n amount of revenue recognized would not occur if the entity included its estimate of the management fee or the\n incentive fee in the transaction price.\n\n606-10- At each reporting date, the entity updates its estimate of the transaction price. Consequently, at the end of\n55-224\n each quarter, the entity concludes that it can include in the transaction price the actual amount of the quarterly\n management fee because the uncertainty is resolved. However, the entity concludes that it cannot include its\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 80 of 123\n estimate of the incentive fee in the transaction price at those dates. This is because there has not been a\n change in its assessment from contract inception\u2014the variability of the fee based on the market index\n indicates that the entity cannot conclude that it is probable that a significant reversal in the cumulative amount\n of revenue recognized would not occur if the entity included its estimate of the incentive fee in the transaction\n price. At March 31, 20X8, the client's assets under management are $100 million. Therefore, the resulting\n quarterly management fee and the transaction price is $2 million.\n\n606-10- At the end of each quarter, the entity allocates the quarterly management fee to the distinct services provided\n55-225\n during the quarter in accordance with paragraphs 606-10-32-39(b) and 606-10-32-40. This is because the fee\n relates specifically to the entity's efforts to transfer the services for that quarter, which are distinct from the\n services provided in other quarters, and the resulting allocation will be consistent with the allocation objective\n in paragraph 606-10-32-28. Consequently, the entity recognizes $2 million as revenue for the quarter ended\n March 31, 20X8.\n\n\u00b7 > The Existence of a Significant Financing Component in the Contract\n606-10- Examples 26-30 illustrate the guidance in paragraphs 606-10-32-15 through 32-20 on the existence of a\n55-226\n significant financing component in the contract. In addition, the following guidance is illustrated in Example 26:\n aParagraphs 606-10-32-11 through 32-13 on constraining estimates of variable consideration\n bParagraphs 606-10-55-22 through 55-29 on sales with a right of return.\n\n\n\u00b7 \u00b7 > Example 26\u2014Significant Financing Component and Right of Return\n\n606-10- An entity sells a product to a customer for $121 that is payable 24 months after delivery. The customer obtains\n55-227\n control of the product at contract inception. The contract permits the customer to return the product within 90\n days. The product is new, and the entity has no relevant historical evidence of product returns or other\n available market evidence.\n\n606-10- The cash selling price of the product is $100, which represents the amount that the customer would pay upon\n55-228\n delivery for the same product sold under otherwise identical terms and conditions as at contract inception. The\n entity's cost of the product is $80.\n\n606-10- The entity does not recognize revenue when control of the product transfers to the customer. This is because\n55-229\n the existence of the right of return and the lack of relevant historical evidence means that the entity cannot\n conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not\n occur in accordance with paragraphs 606-10-32-11 through 32-13. Consequently, revenue is recognized after\n three months when the right of return lapses.\n\n606-10- The contract includes a significant financing component, in accordance with paragraphs 606-10-32-15 through\n55-230\n 32-17. This is evident from the difference between the amount of promised consideration of $121 and the cash\n selling price of $100 at the date that the goods are transferred to the customer.\n\n606-10- The contract includes an implicit interest rate of 10 percent (that is, the interest rate that over 24 months\n55-231\n discounts the promised consideration of $121 to the cash selling price of $100). The entity evaluates the rate\n and concludes that it is commensurate with the rate that would be reflected in a separate financing transaction\n between the entity and its customer at contract inception. The following journal entries illustrate how the entity\n accounts for this contract in accordance with paragraphs 606-10-55-22 through 55-29:\n aWhen the product is transferred to the customer, in accordance with paragraph 606-10-55-23.\n\n\n\n\n bDuring the three-month right of return period, no interest is recognized in accordance with\n paragraph 606-10-32-20 because no contract asset or receivable has been recognized.\n cWhen the right of return lapses (the product is not returned).\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 81 of 123\n\n\n\n\n606-10- Until the entity receives the cash payment from the customer, interest income would be recognized\n55-232\n consistently with the subsequent measurement guidance in Subtopic 835-30 on imputation of interest. The\n entity would accrete the receivable up to $121 from the time the right of return lapses until customer payment.\n\n\u00b7 \u00b7 > Example 27\u2014Withheld Payments on a Long-Term Contract\n\n606-10- An entity enters into a contract for the construction of a building that includes scheduled milestone payments\n55-233\n for the performance by the entity throughout the contract term of three years. The performance obligation will\n be satisfied over time, and the milestone payments are scheduled to coincide with the entity's expected\n performance. The contract provides that a specified percentage of each milestone payment is to be withheld\n (that is, retained) by the customer throughout the arrangement and paid to the entity only when the building is\n complete.\n\n606-10- The entity concludes that the contract does not include a significant financing component. The milestone\n55-234\n payments coincide with the entity's performance, and the contract requires amounts to be retained for reasons\n other than the provision of finance in accordance with paragraph 606-10-32-17(c). The withholding of a\n specified percentage of each milestone payment is intended to protect the customer from the contractor failing\n to adequately complete its obligations under the contract.\n\n\u00b7 \u00b7 > Example 28\u2014Determining the Discount Rate\n\n606-10- An entity enters into a contract with a customer to sell equipment. Control of the equipment transfers to the\n55-235\n customer when the contract is signed. The price stated in the contract is $1 million plus a 5 percent contractual\n rate of interest, payable in 60 monthly installments of $18,871.\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Contractual Discount Rate Reflects the Rate in a Separate Financing Transaction\n\n606-10- In evaluating the discount rate in the contract that contains a significant financing component, the entity\n55-236\n observes that the 5 percent contractual rate of interest reflects the rate that would be used in a separate\n financing transaction between the entity and its customer at contract inception (that is, the contractual rate of\n interest of 5 percent reflects the credit characteristics of the customer).\n\n606-10- The market terms of the financing mean that the cash selling price of the equipment is $1 million. This amount\n55-237\n is recognized as revenue and as a loan receivable when control of the equipment transfers to the customer.\n The entity accounts for the receivable in accordance with Topic 310 on receivables, Subtopic 326-20 on\n financial instruments measured at amortized cost, and Subtopic 835-30 on the imputation of interest.\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014Contractual Discount Rate Does Not Reflect the Rate in a Separate Financing Transaction\n\n606-10- In evaluating the discount rate in the contract that contains a significant financing component, the entity\n55-238\n observes that the 5 percent contractual rate of interest is significantly lower than the 12 percent interest rate\n that would be used in a separate financing transaction between the entity and its customer at contract\n inception (that is, the contractual rate of interest of 5 percent does not reflect the credit characteristics of the\n customer). This suggests that the cash selling price is less than $1 million.\n\n606-10- In accordance with paragraph 606-10-32-19, the entity determines the transaction price by adjusting the\n55-239\n promised amount of consideration to reflect the contractual payments using the 12 percent interest rate that\n reflects the credit characteristics of the customer. Consequently, the entity determines that the transaction\n price is $848,357 (60 monthly payments of $18,871 discounted at 12 percent). The entity recognizes revenue\n and a loan receivable for that amount. The entity accounts for the loan receivable in accordance with\n Subtopic 310-10 on receivables, Subtopic 326-20 on financial instruments measured at amortized cost, and\n Subtopic 835-30 on the imputation of interest.\n\n\u00b7 \u00b7 > Example 29\u2014Advance Payment and Assessment of Discount Rate\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 82 of 123\n606-10- An entity enters into a contract with a customer to sell an asset. Control of the asset will transfer to the\n55-240\n customer in two years (that is, the performance obligation will be satisfied at a point in time). The contract\n includes 2 alternative payment options: payment of $5,000 in 2 years when the customer obtains control of the\n asset or payment of $4,000 when the contract is signed. The customer elects to pay $4,000 when the contract\n is signed.\n\n606-10- The entity concludes that the contract contains a significant financing component because of the length of time\n55-241\n between when the customer pays for the asset and when the entity transfers the asset to the customer, as well\n as the prevailing interest rates in the market.\n\n606-10- The interest rate implicit in the transaction is 11.8 percent, which is the interest rate necessary to make the 2\n55-242\n alternative payment options economically equivalent. However, the entity determines that, in accordance with\n paragraph 606-10-32-19, the rate that should be used in adjusting the promised consideration is 6 percent,\n which is the entity's incremental borrowing rate.\n\n606-10- The following journal entries illustrate how the entity would account for the significant financing component.\n55-243\n aRecognize a contract liability for the $4,000 payment received at contract inception.\n\n\n\n bDuring the 2 years from contract inception until the transfer of the asset, the entity adjusts the promised\n amount of consideration (in accordance with paragraph 606-10-32-20) and accretes the contract liability\n by recognizing interest on $4,000 at 6 percent for 2 years.\n\n\n\n\n cRecognize revenue for the transfer of the asset.\n\n\n\n\n\u00b7 \u00b7 > Example 30\u2014Advance Payment\n\n606-10- An entity, a technology product manufacturer, enters into a contract with a customer to provide global\n55-244\n telephone technology support and repair coverage for three years along with its technology product. The\n customer purchases this support service at the time of buying the product. Consideration for the service is an\n additional $300. Customers electing to buy this service must pay for it upfront (that is, a monthly payment\n option is not available).\n\n606-10- To determine whether there is a significant financing component in the contract, the entity considers the nature\n55-245\n of the service being offered and the purpose of the payment terms. The entity charges a single upfront\n amount, not with the primary purpose of obtaining financing from the customer but, instead, to maximize\n profitability, taking into consideration the risks associated with providing the service. Specifically, if customers\n could pay monthly, they would be less likely to renew, and the population of customers that continue to use the\n support service in the later years may become smaller and less diverse over time (that is, customers that\n choose to renew historically are those that make greater use of the service, thereby increasing the entity's\n costs). In addition, customers tend to use services more if they pay monthly rather than making an upfront\n payment. Finally, the entity would incur higher administration costs such as the costs related to administering\n renewals and collection of monthly payments.\n\n606-10- In assessing the guidance in paragraph 606-10-32-17(c), the entity determines that the payment terms were\n55-246\n structured primarily for reasons other than the provision of finance to the entity. The entity charges a single\n upfront amount for the services because other payment terms (such as a monthly payment plan) would affect\n the nature of the risks assumed by the entity to provide the service and may make it uneconomical to provide\n the service. As a result of its analysis, the entity concludes that there is not a significant financing component.\n\n\u00b7 > Noncash Consideration\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 83 of 123\n\u00b7 \u00b7 > Example 31\u2014Entitlement to Noncash Consideration\n\n606-10- Example 31 illustrates the guidance in paragraphs 606-10-32-21 through 32-24 on noncash consideration. In\n55-247\n addition, the following guidance is illustrated in this Example:\n aParagraph 606-10-25-14 on identifying performance obligations\n bParagraphs 606-10-32-11 through 32-13 on constraining estimates of variable consideration.\n\n PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-3\n Example 31 illustrates the guidance in paragraph 606-10-15-3A on share-based noncash consideration\n from a customer for the transfer of goods or services and the guidance in paragraphs 606-10-32-21\n through 32-24 on noncash consideration. In addition, the following guidance is illustrated in this Example:\n aParagraph 606-10-25-14 on identifying performance obligations\n bParagraphs 606-10-32-11 through 32-13 on constraining estimates of variable consideration.\n\n\n606-10- An entity enters into a contract with a customer to provide a weekly service for one year. The contract is\n55-248\n signed on January 1, 20X1, and work begins immediately. The entity concludes that the service is a single\n performance obligation in accordance with paragraph 606-10-25-14(b). This is because the entity is providing\n a series of distinct services that are substantially the same and have the same pattern of transfer (the services\n transfer to the customer over time and use the same method to measure progress\u2014that is, a time-based\n measure of progress).\n\n606-10- In exchange for the service, the customer promises 100 shares of its common stock per week of service (a\n55-249\n total of 5,200 shares for the contract). The terms in the contract require that the shares must be paid upon the\n successful completion of each week of service.\n\n606-10- To determine the transaction price (and the amount of revenue to be recognized), the entity measures the\n55-250\n estimated fair value of 5,200 shares at contract inception (that is, on January 1, 20X1). The entity measures its\n progress toward complete satisfaction of the performance obligation and recognizes revenue as each week of\n service is complete. The entity does not reflect any changes in the fair value of the 5,200 shares after contract\n inception in the transaction price. However, the entity assesses any related contract asset or receivable for\n impairment. Upon receipt of the noncash consideration, the entity would apply the guidance related to the form\n of the noncash consideration to determine whether and how any changes in fair value that occurred after\n contract inception should be recognized.\n\n\u00b7 \u00b7 > Example 31A\u2014Share-Based Noncash Consideration\n\n606-10-\n55-250A PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-3\n Example 31A illustrates the guidance in paragraph 606-10-15-3A on share-based noncash consideration\n from a customer for the transfer of goods or services and the guidance in paragraphs 606-10-32-21\n through 32-24 on noncash consideration. In addition, the following guidance is illustrated in this Example:\n aParagraph 606-10-25-14 on identifying performance obligations\n bParagraph 606-10-32-4 on determining transaction price\n cParagraphs 606-10-32-5 through 32-14 on variable consideration\n dParagraphs 606-10-32-28 through 32-41 on allocating transaction price to the performance\n obligations in the contract\n eParagraph 606-10-45-4 on an unconditional right to consideration.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 84 of 123\n606-10-\n55-250B PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-3\n On January 1, 20X7, an entity enters into a contract with a customer to sell 5,000 units of Product A. The\n customer will pay $100 for each unit upon delivery. If the entity delivers all 5,000 units within 2 years from\n contract inception, the customer promises a performance bonus of 100 warrants for the customer\u2019s\n common stock. The estimated fair value of the 100 warrants at contract inception is $100,000. At contract\n inception, the entity concludes that each unit is a performance obligation that is satisfied at a point in time.\n Based on its experience, the entity expects that all 5,000 units will be delivered to the customer before the\n end of 20X8. Accordingly, it concludes that the variable consideration related to the 100 warrants is not\n constrained and the transaction price is $600,000 ([5,000 units \u00d7 $100] + $100,000 estimated fair value of\n 100 warrants at contract inception). Accordingly, the transaction price allocated to each unit is $120\n ($600,000/5,000 units).\n\n\n606-10-\n55-250C PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-3\n During 20X7, the entity delivers 3,000 units to the customer. At the end of 20X7, the entity continues to\n expect that the remaining 2,000 units will be delivered to the customer before the end of 20X8. Therefore,\n the transaction price determined at contract inception is unchanged. For 20X7, the entity recognizes\n revenue of $360,000 (3,000 units \u00d7 $120), cash of $300,000, and a contract asset of $60,000 ($100,000\n estimated fair value of 100 warrants at contract inception \u00d7 [3,000 delivered units/5,000 units]). The entity\n does not reflect any changes in the fair value of the 100 warrants in the transaction price. However, the\n entity assesses the related contract asset for impairment.\n\n\n606-10-\n55-250D PENDING CONTENT\n\n\n Transition Date: December 16, 2026; December 16, 2026 Transition Guidance: 606-10-65-3\n During 20X8, the entity delivers the remaining 2,000 units to the customer. For 20X8, the entity\n recognizes revenue of $240,000 (2,000 units \u00d7 $120), cash of $200,000, and a contract asset of $40,000\n ($100,000 estimated fair value of 100 warrants at contract inception \u00d7 [2,000 delivered units/5,000 units]).\n The entity does not reflect any changes in the fair value of the 100 warrants in the transaction price.\n However, the entity assesses the related contract asset for impairment. When all 5,000 units have been\n delivered, the entity concludes that its right to receive or retain the 100 warrants is unconditional under\n this Topic. At that point, the entity derecognizes the contract asset and applies the guidance in other\n Topics to account for the 100 warrants.\n\n\n\u00b7 > Consideration Payable to a Customer\n\n606-10- Example 32 illustrates the guidance in paragraphs 606-10-32-25 through 32-27 on consideration payable to a\n55-251\n customer.\n\n\u00b7 \u00b7 > Example 32\u2014Consideration Payable to a Customer\n\n606-10- An entity that manufactures consumer goods enters into a one-year contract to sell goods to a customer that is\n55-252\n a large global chain of retail stores. The customer commits to buy at least $15 million of products during the\n year. The contract also requires the entity to make a nonrefundable payment of $1.5 million to the customer at\n the inception of the contract. The $1.5 million payment will compensate the customer for the changes it needs\n to make to its shelving to accommodate the entity's products.\n\n606-10- The entity considers the guidance in paragraphs 606-10-32-25 through 32-27 and concludes that the payment\n55-253\n to the customer is not in exchange for a distinct good or service that transfers to the entity. This is because the\n entity does not obtain control of any rights to the customer's shelves. Consequently, the entity determines that,\n in accordance with paragraph 606-10-32-25, the $1.5 million payment is a reduction of the transaction price.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 85 of 123\n606-10- The entity applies the guidance in paragraph 606-10-32-27 and concludes that the consideration payable is\n55-254\n accounted for as a reduction in the transaction price when the entity recognizes revenue for the transfer of the\n goods. Consequently, as the entity transfers goods to the customer, the entity reduces the transaction price for\n each good by 10 percent ($1.5 million \u00f7 $15 million). Therefore, in the first month in which the entity transfers\n goods to the customer, the entity recognizes revenue of $1.8 million ($2.0 million invoiced amount - $0.2\n million of consideration payable to the customer).\n\n\u00b7 > Allocating the Transaction Price to Performance Obligations\n\n606-10- Examples 33-35 illustrate the guidance in paragraphs 606-10-32-28 through 32-41 on allocating the\n55-255\n transaction price to performance obligations. In addition, the following guidance is illustrated in Example 35:\n aParagraph 606-10-32-8 on variable consideration\n bParagraph 606-10-55-65 on consideration in the form of sales-based or usage-based royalties on\n licenses of intellectual property.\n\n\n\u00b7 \u00b7 > Example 33\u2014Allocation Methodology\n\n606-10- An entity enters into a contract with a customer to sell Products A, B, and C in exchange for $100. The entity\n55-256\n will satisfy the performance obligations for each of the products at different points in time. The entity regularly\n sells Product A separately, and, therefore the standalone selling price is directly observable. The standalone\n selling prices of Products B and C are not directly observable.\n\n606-10- Because the standalone selling prices for Products B and C are not directly observable, the entity must\n55-257\n estimate them. To estimate the standalone selling prices, the entity uses the adjusted market assessment\n approach for Product B and the expected cost plus a margin approach for Product C. In making those\n estimates, the entity maximizes the use of observable inputs (in accordance with paragraph 606-10-32-33).\n The entity estimates the standalone selling prices as follows:\n\n\n\n\n606-10- The customer receives a discount for purchasing the bundle of goods because the sum of the standalone\n55-258\n selling prices ($150) exceeds the promised consideration ($100). The entity considers whether it has\n observable evidence about the performance obligation to which the entire discount belongs (in accordance\n with paragraph 606-10-32-37) and concludes that it does not. Consequently, in accordance with\n paragraphs 606-10-32-31 and 606-10-32-36, the discount is allocated proportionately across Products A, B,\n and C. The discount, and therefore the transaction price, is allocated as follows:\n\n\n\n\n\u00b7 \u00b7 > Example 34\u2014Allocating a Discount\n\n606-10- An entity regularly sells Products A, B, and C individually, thereby establishing the following standalone selling\n55-259\n prices:\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 86 of 123\n\n\n\n606-10- In addition, the entity regularly sells Products B and C together for $60.\n55-260\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Allocating a Discount to One or More Performance Obligations\n\n606-10- The entity enters into a contract with a customer to sell Products A, B, and C in exchange for $100. The entity\n55-261\n will satisfy the performance obligations for each of the products at different points in time.\n\n606-10- The contract includes a discount of $40 on the overall transaction, which would be allocated proportionately to\n55-262\n all 3 performance obligations when allocating the transaction price using the relative standalone selling price\n method (in accordance with paragraph 606-10-32-36). However, because the entity regularly sells Products B\n and C together for $60 and Product A for $40, it has evidence that the entire discount should be allocated to\n the promises to transfer Products B and C in accordance with paragraph 606-10-32-37.\n\n606-10- If the entity transfers control of Products B and C at the same point in time, then the entity could, as a practical\n55-263\n matter, account for the transfer of those products as a single performance obligation. That is, the entity could\n allocate $60 of the transaction price to the single performance obligation and recognize revenue of $60 when\n Products B and C simultaneously transfer to the customer.\n\n606-10- If the contract requires the entity to transfer control of Products B and C at different points in time, then the\n55-264\n allocated amount of $60 is individually allocated to the promises to transfer Product B (standalone selling price\n of $55) and Product C (standalone selling price of $45) as follows:\n\n\n\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014Residual Approach Is Appropriate\n\n606-10- The entity enters into a contract with a customer to sell Products A, B, and C as described in Case A. The\n55-265\n contract also includes a promise to transfer Product D. Total consideration in the contract is $130. The\n standalone selling price for Product D is highly variable (see paragraph 606-10-32-34(c)(1)) because the entity\n sells Product D to different customers for a broad range of amounts ($15 - $45). Consequently, the entity\n decides to estimate the standalone selling price of Product D using the residual approach.\n\n606-10- Before estimating the standalone selling price of Product D using the residual approach, the entity determines\n55-266\n whether any discount should be allocated to the other performance obligations in the contract in accordance\n with paragraphs 606-10-32-37 through 32-38.\n\n606-10- As in Case A, because the entity regularly sells Products B and C together for $60 and Product A for $40, it\n55-267\n has observable evidence that $100 should be allocated to those 3 products and a $40 discount should be\n allocated to the promises to transfer Products B and C in accordance with paragraph 606-10-32-37. Using the\n residual approach, the entity estimates the standalone selling price of Product D to be $30 as follows:\n\n\n\n\n606-10- The entity observes that the resulting $30 allocated to Product D is within the range of its observable selling\n55-268\n prices ($15 - $45). Therefore, the resulting allocation (see above table) is consistent with the allocation\n objective in paragraph 606-10-32-28 and the guidance in paragraph 606-10-32-33.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 87 of 123\n\u00b7 \u00b7 \u00b7 > Case C\u2014Residual Approach Is Inappropriate\n\n606-10- The same facts as in Case B apply to Case C except the transaction price is $105 instead of $130.\n55-269\n Consequently, the application of the residual approach would result in a standalone selling price of $5 for\n Product D ($105 transaction price less $100 allocated to Products A, B, and C). The entity concludes that $5\n would not faithfully depict the amount of consideration to which the entity expects to be entitled in exchange\n for satisfying its performance obligation to transfer Product D because $5 does not approximate the\n standalone selling price of Product D, which ranges from $15 - $45. Consequently, the entity reviews its\n observable data, including sales and margin reports, to estimate the standalone selling price of Product D\n using another suitable method. The entity allocates the transaction price of $105 to Products A, B, C, and D\n using the relative standalone selling prices of those products in accordance with paragraphs 606-10-32-28\n through 32-35.\n\n\u00b7 \u00b7 > Example 35\u2014Allocation of Variable Consideration\n\n606-10- An entity enters into a contract with a customer for two intellectual property licenses (Licenses X and Y), which\n55-270\n the entity determines to represent two performance obligations each satisfied at a point in time. The\n standalone selling prices of Licenses X and Y are $800 and $1,000, respectively.\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Variable Consideration Allocated Entirely to One Performance Obligation\n\n606-10- The price stated in the contract for License X is a fixed amount of $800, and for License Y the consideration is\n55-271\n 3 percent of the customer's future sales of products that use License Y. For purposes of allocation, the entity\n estimates its sales-based royalties (that is, the variable consideration) to be $1,000, in accordance with\n paragraph 606-10-32-8.\n\n606-10- To allocate the transaction price, the entity considers the criteria in paragraph 606-10-32-40 and concludes\n55-272\n that the variable consideration (that is, the sales-based royalties) should be allocated entirely to License Y. The\n entity concludes that the criteria in paragraph 606-10-32-40 are met for the following reasons:\n aThe variable payment relates specifically to an outcome from the performance obligation to transfer\n License Y (that is, the customer's subsequent sales of products that use License Y).\n bAllocating the expected royalty amounts of $1,000 entirely to License Y is consistent with the allocation\n objective in paragraph 606-10-32-28. This is because the entity's estimate of the amount of sales-based\n royalties ($1,000) approximates the standalone selling price of License Y and the fixed amount of $800\n approximates the standalone selling price of License X. The entity allocates $800 to License X in\n accordance with paragraph 606-10-32-41. This is because, based on an assessment of the facts and\n circumstances relating to both licenses, allocating to License Y some of the fixed consideration in addition\n to all of the variable consideration would not meet the allocation objective in paragraph 606-10-32-28.\n\n606-10- The entity transfers License Y at inception of the contract and transfers License X one month later. Upon the\n55-273\n transfer of License Y, the entity does not recognize revenue because the consideration allocated to License Y\n is in the form of a sales-based royalty. Therefore, in accordance with paragraph 606-10-55-65, the entity\n recognizes revenue for the sales-based royalty when those subsequent sales occur.\n\n606-10- When License X is transferred, the entity recognizes as revenue the $800 allocated to License X.\n55-274\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014Variable Consideration Allocated on the Basis of Standalone Selling Prices\n\n606-10- The price stated in the contract for License X is a fixed amount of $300, and for License Y the consideration is\n55-275\n 5 percent of the customer's future sales of products that use License Y. The entity's estimate of the sales-\n based royalties (that is, the variable consideration) is $1,500 in accordance with paragraph 606-10-32-8.\n\n606-10- To allocate the transaction price, the entity applies the criteria in paragraph 606-10-32-40 to determine\n55-276\n whether to allocate the variable consideration (that is, the sales-based royalties) entirely to License Y. In\n applying the criteria, the entity concludes that even though the variable payments relate specifically to an\n outcome from the performance obligation to transfer License Y (that is, the customer's subsequent sales of\n products that use License Y), allocating the variable consideration entirely to License Y would be inconsistent\n with the principle for allocating the transaction price. Allocating $300 to License X and $1,500 to License Y\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 88 of 123\n does not reflect a reasonable allocation of the transaction price on the basis of the standalone selling prices of\n Licenses X and Y of $800 and $1,000, respectively. Consequently, the entity applies the general allocation\n requirements in paragraphs 606-10-32-31 through 32-35.\n\n606-10- The entity allocates the transaction price of $300 to Licenses X and Y on the basis of relative standalone\n55-277\n selling prices of $800 and $1,000, respectively. The entity also allocates the consideration related to the sales-\n based royalty on a relative standalone selling price basis. However, in accordance with paragraph 606-10-55-\n 65, when an entity licenses intellectual property in which the consideration is in the form of a sales-based\n royalty, the entity cannot recognize revenue until the later of the following events: the subsequent sales occur\n or the performance obligation is satisfied (or partially satisfied).\n\n606-10- License Y is transferred to the customer at the inception of the contract, and License X is transferred three\n55-278\n months later. When License Y is transferred, the entity recognizes as revenue the $167 ($1,000 \u00f7 $1,800 \u00d7\n $300) allocated to License Y. When License X is transferred, the entity recognizes as revenue the $133 ($800\n \u00f7 $1,800 \u00d7 $300) allocated to License X.\n\n606-10- In the first month, the royalty due from the customer's first month of sales is $200. Consequently, in\n55-279\n accordance with paragraph 606-10-55-65, the entity recognizes as revenue the $111 ($1,000 \u00f7 $1,800 \u00d7 $200)\n allocated to License Y (which has been transferred to the customer and is therefore a satisfied performance\n obligation). The entity recognizes a contract liability for the $89 ($800 \u00f7 $1,800 \u00d7 $200) allocated to License X.\n This is because although the subsequent sale by the entity's customer has occurred, the performance\n obligation to which the royalty has been allocated has not been satisfied.\n\n\u00b7 > Contract Costs\n\n606-10- Examples 36 and 37 illustrate the guidance in paragraphs 340-40-25-1 through 25-4 on incremental costs of\n55-280\n obtaining a contract, paragraphs 340-40-25-5 through 25-8 on costs to fulfill a contract, and paragraphs 340-\n 40-35-1 through 35-6 on amortization and impairment of contract costs.\n\n\u00b7 \u00b7 > Example 36\u2014Incremental Costs of Obtaining a Contract\n\n606-10- For an illustration of the incremental costs of obtaining a contract, see Example 1 in Subtopic 340-40 on other\n55-281\n assets and deferred costs\u2014costs related to a contract with a customer (paragraphs 340-40-55-2 through 55-\n 4).\n\n\u00b7 \u00b7 > Example 37\u2014Costs That Give Rise to an Asset\n\n606-10- For an illustration of costs that give rise to an asset, see Example 2 in Subtopic 340-40 on other assets and\n55-282\n deferred costs\u2014costs related to a contract with a customer (paragraphs 340-40-55-5 through 55-9).\n\n\u00b7 > Presentation\n\n606-10- Examples 38-40 illustrate the guidance in paragraphs 606-10-45-1 through 45-5 on the presentation of\n55-283\n contract balances.\n\n\u00b7 \u00b7 > Example 38\u2014Contract Liability and Receivable\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Cancellable Contract\n\n606-10- On January 1, 20X9, an entity enters into a cancellable contract to transfer a product to a customer on March\n55-284\n 31, 20X9. The contract requires the customer to pay consideration of $1,000 in advance on January 31, 20X9.\n The customer pays the consideration on March 1, 20X9. The entity transfers the product on March 31, 20X9.\n The following journal entries illustrate how the entity accounts for the contract:\n aThe entity receives cash of $1,000 on March 1, 20X9 (cash is received in advance of performance).\n\n\n\n\n bThe entity satisfies the performance obligation on March 31, 20X9.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 89 of 123\n\u00b7 \u00b7 \u00b7 > Case B\u2014Noncancellable Contract\n\n606-10- The same facts as in Case A apply to Case B except that the contract becomes noncancellable on January 31,\n55-285\n 20X9. The following journal entries illustrate how the entity accounts for the contract:\n aJanuary 31, 20X9 is the date at which the entity recognizes a receivable because it has an unconditional\n right to consideration.\n\n\n\n bThe entity receives the cash on March 1, 20X9.\n\n\n\n\n cThe entity satisfies the performance obligation on March 31, 20X9.\n\n\n\n\n606-10- If the entity issued the invoice before January 31, 20X9, the entity would not recognize the receivable and the\n55-286\n contract liability in the statement of financial position because the entity does not yet have a right to\n consideration that is unconditional (the contract is cancellable before January 31, 20X9).\n\n\u00b7 \u00b7 > Example 39\u2014Contract Asset Recognized for the Entity's Performance\n\n606-10- On January 1, 20X8, an entity enters into a contract to transfer Products A and B to a customer in exchange\n55-287\n for $1,000. The contract requires Product A to be delivered first and states that payment for the delivery of\n Product A is conditional on the delivery of Product B. In other words, the consideration of $1,000 is due only\n after the entity has transferred both Products A and B to the customer. Consequently, the entity does not have\n a right to consideration that is unconditional (a receivable) until both Products A and B are transferred to the\n customer.\n\n606-10- The entity identifies the promises to transfer Products A and B as performance obligations and allocates $400\n55-288\n to the performance obligation to transfer Product A and $600 to the performance obligation to transfer Product\n B on the basis of their relative standalone selling prices. The entity recognizes revenue for each respective\n performance obligation when control of the product transfers to the customer.\n\n606-10- The entity satisfies the performance obligation to transfer Product A.\n55-289\n\n\n\n\n606-10- The entity satisfies the performance obligation to transfer Product B and to recognize the unconditional right to\n55-290\n consideration.\n\n\n\n\n\u00b7 \u00b7 > Example 40\u2014Receivable Recognized for the Entity's Performance\n\n606-10- An entity enters into a contract with a customer on January 1, 20X9, to transfer products to the customer for\n55-291\n $150 per product. If the customer purchases more than 1 million products in a calendar year, the contract\n indicates that the price per unit is retrospectively reduced to $125 per product.\n\n606-10- Consideration is due when control of the products transfer to the customer. Therefore, the entity has an\n55-292\n unconditional right to consideration (that is, a receivable) for $150 per product until the retrospective price\n reduction applies (that is, after 1 million products are shipped).\n\n606-10- In determining the transaction price, the entity concludes at contract inception that the customer will meet the\n55-293\n 1 million products threshold and therefore estimates that the transaction price is $125 per product.\n Consequently, upon the first shipment to the customer of 100 products the entity recognizes the following.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 90 of 123\n\n\n\n\n606-10- The refund liability (see paragraph 606-10-32-10) represents a refund of $25 per product, which is expected to\n55-294\n be provided to the customer for the volume-based rebate (that is, the difference between the $150 price stated\n in the contract that the entity has an unconditional right to receive and the $125 estimated transaction price).\n\n\u00b7 > Disclosure\n\n606-10- Example 41 illustrates the guidance in paragraphs 606-10-50-5 through 50-6 and 606-10-55-89 through 55-\n55-295\n 91 on the disaggregation of revenue disclosure. Examples 42 and 43 illustrate the guidance in\n paragraphs 606-10-50-13 through 50-15 on the disclosure of the transaction price allocated to the remaining\n performance obligations. In addition, the following guidance is illustrated in Example 42:\n aParagraph 606-10-32-12 on constraining estimates of variable consideration\n bParagraph 606-10-55-18 on methods for measuring progress toward complete satisfaction of a\n performance obligation.\n\n\n\u00b7 \u00b7 > Example 41\u2014Disaggregation of Revenue\u2014Quantitative Disclosure\n\n606-10- An entity reports the following segments: consumer products, transportation, and energy, in accordance with\n55-296\n Topic 280 on segment reporting. When the entity prepares its investor presentations, it disaggregates revenue\n into primary geographical markets, major product lines, and timing of revenue recognition (that is, goods\n transferred at a point in time or services transferred over time).\n\n606-10- The entity determines that the categories used in the investor presentations can be used to meet the objective\n55-297\n of the disaggregation disclosure requirement in paragraph 606-10-50-5, which is to disaggregate revenue from\n contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of\n revenue and cash flows are affected by economic factors. The following table illustrates the disaggregation\n disclosure by primary geographical market, major product line, and timing of revenue recognition, including a\n reconciliation of how the disaggregated revenue ties in with the consumer products, transportation, and energy\n segments in accordance with paragraphs 606-10-50-6.\n\n\n\n\n\u00b7 \u00b7 > Example 42\u2014Disclosure of the Transaction Price Allocated to the Remaining Performance Obligations\n\n606-10- On June 30, 20X7, an entity enters into three contracts (Contracts A, B, and C) with separate customers to\n55-298\n provide services. Each contract has a two-year noncancellable term. The entity considers the guidance in\n paragraphs 606-10-50-13 through 50-15 in determining the information in each contract to be included in the\n disclosure of the transaction price allocated to the remaining performance obligations at December 31, 20X7.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 91 of 123\n\u00b7 \u00b7 \u00b7 > Contract A\n\n606-10- Cleaning services are to be provided over the next two years typically at least once per month. For services\n55-299\n provided, the customer pays an hourly rate of $25.\n\n606-10- Because the entity bills a fixed amount for each hour of service provided, the entity has a right to invoice the\n55-300\n customer in the amount that corresponds directly with the value of the entity's performance completed to date\n in accordance with paragraph 606-10-55-18. Consequently, the entity could elect to apply the optional\n exemption in paragraph 606-10-50-14(b). If the entity elects not to disclose the transaction price allocated to\n remaining performance obligations for Contract A, the entity would disclose that it has applied the optional\n exemption in paragraph 606-10-50-14(b). The entity also would disclose the nature of the performance\n obligation, the remaining duration, and a description of the variable consideration that has been excluded from\n the disclosure of remaining performance obligations in accordance with paragraph 606-10-50-15.\n\n\u00b7 \u00b7 \u00b7 > Contract B\n\n606-10- Cleaning services and lawn maintenance services are to be provided as and when needed with a maximum of\n55-301\n four visits per month over the next two years. The customer pays a fixed price of $400 per month for both\n services. The entity measures its progress toward complete satisfaction of the performance obligation using a\n time-based measure.\n\n606-10- The entity discloses the amount of the transaction price that has not yet been recognized as revenue in a table\n55-302\n with quantitative time bands that illustrates when the entity expects to recognize the amount as revenue. The\n information for Contract B included in the overall disclosure is as follows.\n\n\n\n\n\u00b7 \u00b7 \u00b7 > Contract C\n\n606-10- Cleaning services are to be provided as and when needed over the next two years. The customer pays fixed\n55-303\n consideration of $100 per month plus a one-time variable consideration payment ranging from $0 - $1,000\n corresponding to a one-time regulatory review and certification of the customer's facility (that is, a performance\n bonus). The entity estimates that it will be entitled to $750 of the variable consideration. On the basis of the\n entity's assessment of the factors in paragraph 606-10-32-12, the entity includes its estimate of $750 of\n variable consideration in the transaction price because it is probable that a significant reversal in the amount of\n cumulative revenue recognized will not occur. The entity measures its progress toward complete satisfaction of\n the performance obligation using a time-based measure.\n\n606-10- The entity discloses the amount of the transaction price that has not yet been recognized as revenue in a table\n55-304\n with quantitative time bands that illustrates when the entity expects to recognize the amount as revenue. The\n entity also includes a qualitative discussion about any significant variable consideration that is not included in\n the disclosure. The information for Contract C included in the overall disclosure is as follows.\n\n\n\n\n606-10- In addition, in accordance with paragraph 606-10-50-15, the entity discloses qualitatively that part of the\n55-305\n performance bonus has been excluded from the disclosure because it was not included in the transaction\n price. That part of the performance bonus was excluded from the transaction price in accordance with the\n guidance on constraining estimates of variable consideration.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 92 of 123\n606-10- The entity does not meet the criteria to apply the optional exemption in paragraph 606-10-50-14A because the\n55-305A\n monthly consideration is fixed and the variable consideration does not meet the condition in paragraph 606-\n 10-50-14A(b).\n\n\u00b7 \u00b7 > Example 43\u2014Disclosure of the Transaction Price Allocated to the Remaining Performance Obligations\u2014Qualitative\nDisclosure\n\n606-10- On January 1, 20X2, an entity enters into a contract with a customer to construct a commercial building for\n55-306\n fixed consideration of $10 million. The construction of the building is a single performance obligation that the\n entity satisfies over time. As of December 31, 20X2, the entity has recognized $3.2 million of revenue. The\n entity estimates that construction will be completed in 20X3 but it is possible that the project will be completed\n in the first half of 20X4.\n\n606-10- At December 31, 20X2, the entity discloses the amount of the transaction price that has not yet been\n55-307\n recognized as revenue in its disclosure of the transaction price allocated to the remaining performance\n obligations. The entity also discloses an explanation of when the entity expects to recognize that amount as\n revenue. The explanation can be disclosed either on a quantitative basis using time bands that are most\n appropriate for the duration of the remaining performance obligation or by providing a qualitative explanation.\n Because the entity is uncertain about the timing of revenue recognition, the entity discloses this information\n qualitatively as follows:\n As of December 31, 20X2, the aggregate amount of the transaction price allocated to the remaining\n performance obligation is $6.8 million, and the entity will recognize this revenue as the building is\n completed, which is expected to occur over the next 12-18 months.\n\n\n\u00b7 > Warranties\n\n606-10- Example 44 illustrates the guidance in paragraphs 606-10-55-30 through 55-35 on warranties. In addition,\n55-308\n Example 44 illustrates the guidance in paragraphs 606-10-25-19 through 25-21 on identifying performance\n obligations.\n\n\u00b7 \u00b7 > Example 44\u2014Warranties\n\n606-10- An entity, a manufacturer, provides its customer with a warranty with the purchase of a product. The warranty\n55-309\n provides assurance that the product complies with agreed-upon specifications and will operate as promised for\n one year from the date of purchase. The contract also provides the customer with the right to receive up to 20\n hours of training services on how to operate the product at no additional cost. The training services will help\n the customer optimize its use of the product in a short time frame. Therefore, although the training services are\n only for 20 hours and are not essential to the customer's ability to use the product, the entity determines that\n the training services are material in the context of the contract on the basis of the facts and circumstances of\n the arrangement.\n\n606-10- The entity assesses the goods and services in the contract to determine whether they are distinct and\n55-310\n therefore give rise to separate performance obligations.\n\n606-10- The product and training services are each capable of being distinct in accordance with paragraphs 606-10-\n55-311\n 25-19(a) and 606-10-25-20 because the customer can benefit from the product on its own without the training\n services and can benefit from the training services together with the product that already has been transferred\n by the entity. The entity regularly sells the product separately without the training services.\n\n606-10- The entity next assesses whether its promises to transfer the product and to provide the training services are\n55-312\n separately identifiable in accordance with paragraphs 606-10-25-19(b) and 606-10-25-21. The entity does not\n provide a significant service of integrating the training services with the product (see paragraph 606-10-25-\n 21(a)). The training services and product do not significantly modify or customize each other (see\n paragraph 606-10-25-21(b)). The product and the training services are not highly interdependent or highly\n interrelated as described in paragraph 606-10-25-21(c).The entity would be able to fulfill its promise to transfer\n the product independent of its efforts to subsequently provide the training services and would be able to\n provide training services to any customer that previously acquired its product. Consequently, the entity\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 93 of 123\n concludes that its promise to transfer the product and its promise to provide training services are not inputs to\n a combined item and, therefore, are each separately identifiable.\n\n606-10- The product and training services are each distinct in accordance with paragraph 606-10-25-19 and therefore\n55-313\n give rise to two separate performance obligations.\n\n606-10- Finally, the entity assesses the promise to provide a warranty and observes that the warranty provides the\n55-314\n customer with the assurance that the product will function as intended for one year. The entity concludes, in\n accordance with paragraphs 606-10-55-30 through 55-35, that the warranty does not provide the customer\n with a good or service in addition to that assurance and, therefore, the entity does not account for it as a\n performance obligation. The entity accounts for the assurance-type warranty in accordance with the\n requirements on product warranties in Subtopic 460-10.\n\n606-10- As a result, the entity allocates the transaction price to the two performance obligations (the product and the\n55-315\n training services) and recognizes revenue when (or as) those performance obligations are satisfied.\n\n\u00b7 > Principal Versus Agent Considerations\n606-10- Examples 45-48A illustrate the guidance in paragraphs 606-10-55-36 through 55-40 on principal versus agent\n55-316\n considerations.\n\n\u00b7 \u00b7 > Example 45\u2014Arranging for the Provision of Goods or Services (Entity Is an Agent)\n\n606-10- An entity operates a website that enables customers to purchase goods from a range of suppliers who deliver\n55-317\n the goods directly to the customers. Under the terms of the entity's contracts with suppliers, when a good is\n purchased via the website, the entity is entitled to a commission that is equal to 10 percent of the sales price.\n The entity's website facilitates payment between the supplier and the customer at prices that are set by the\n supplier. The entity requires payment from customers before orders are processed, and all orders are\n nonrefundable. The entity has no further obligations to the customer after arranging for the products to be\n provided to the customer.\n\n606-10- To determine whether the entity's performance obligation is to provide the specified goods itself (that is, the\n55-318\n entity is a principal) or to arrange for those goods to be provided by the supplier (that is, the entity is an agent),\n the entity identifies the specified good or service to be provided to the customer and assesses whether it\n controls that good or service before the good or service is transferred to the customer.\n aSubparagraph superseded by Accounting Standards Update No. 2016-08.\n bSubparagraph superseded by Accounting Standards Update No. 2016-08.\n cSubparagraph superseded by Accounting Standards Update No. 2016-08.\n dSubparagraph superseded by Accounting Standards Update No. 2016-08.\n eSubparagraph superseded by Accounting Standards Update No. 2016-08.\n\n\n606-10- The website operated by the entity is a marketplace in which suppliers offer their goods and customers\n55-318A\n purchase the goods that are offered by the suppliers. Accordingly, the entity observes that the specified goods\n to be provided to customers that use the website are the goods provided by the suppliers, and no other goods\n or services are promised to customers by the entity.\n\n606-10- The entity concludes that it does not control the specified goods before they are transferred to customers that\n55-318B\n order goods using the website. The entity does not at any time have the ability to direct the use of the goods\n transferred to customers. For example, it cannot direct the goods to parties other than the customer or prevent\n the supplier from transferring those goods to the customer. The entity does not control the suppliers' inventory\n of goods used to fulfill the orders placed by customers using the website.\n\n606-10- As part of reaching that conclusion, the entity considers the following indicators in paragraph 606-10-55-\n55-318C\n 39. The entity concludes that these indicators provide further evidence that it does not control the specified\n goods before they are transferred to the customers.\n aThe supplier is primarily responsible for fulfilling the promise to provide the goods to the customer. The\n entity is neither obliged to provide the goods if the supplier fails to transfer the goods to the customer nor\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 94 of 123\n responsible for the acceptability of the goods.\n bThe entity does not take inventory risk at any time before or after the goods are transferred to the\n customer. The entity does not commit to obtain the goods from the supplier before the goods are\n purchased by the customer and does not accept responsibility for any damaged or returned goods.\n cThe entity does not have discretion in establishing prices for the supplier's goods. The sales price is set\n by the supplier.\n\n606-10- Consequently, the entity concludes that it is an agent and its performance obligation is to arrange for the\n55-319\n provision of goods by the supplier. When the entity satisfies its promise to arrange for the goods to be\n provided by the supplier to the customer (which, in this example, is when goods are purchased by the\n customer), the entity recognizes revenue in the amount of the commission to which it is entitled.\n\n\u00b7 \u00b7 > Example 46\u2014Promise to Provide Goods or Services (Entity Is a Principal)\n\n606-10- An entity enters into a contract with a customer for equipment with unique specifications. The entity and the\n55-320\n customer develop the specifications for the equipment, which the entity communicates to a supplier that the\n entity contracts with to manufacture the equipment. The entity also arranges to have the supplier deliver the\n equipment directly to the customer. Upon delivery of the equipment to the customer, the terms of the contract\n require the entity to pay the supplier the price agreed to by the entity and the supplier for manufacturing the\n equipment.\n\n606-10- The entity and the customer negotiate the selling price, and the entity invoices the customer for the agreed-\n55-321\n upon price with 30-day payment terms. The entity's profit is based on the difference between the sales price\n negotiated with the customer and the price charged by the supplier.\n\n606-10- The contract between the entity and the customer requires the customer to seek remedies for defects in the\n55-322\n equipment from the supplier under the supplier's warranty. However, the entity is responsible for any\n corrections to the equipment required resulting from errors in specifications.\n\n606-10- To determine whether the entity's performance obligation is to provide the specified goods or services itself\n55-323\n (that is, the entity is a principal) or to arrange for those goods or services to be provided by another party (that\n is, the entity is an agent), the entity identifies the specified good or service to be provided to the customer and\n assesses whether it controls that good or service before the good or service is transferred to the customer.\n aSubparagraph superseded by Accounting Standards Update No. 2016-08.\n bSubparagraph superseded by Accounting Standards Update No. 2016-08.\n cSubparagraph superseded by Accounting Standards Update No. 2016-08.\n dSubparagraph superseded by Accounting Standards Update No. 2016-08.\n eSubparagraph superseded by Accounting Standards Update No. 2016-08.\n\n\n606-10- The entity concludes that it has promised to provide the customer with specialized equipment designed by the\n55-323A\n entity. Although the entity has subcontracted the manufacturing of the equipment to the supplier, the entity\n concludes that the design and manufacturing of the equipment are not distinct because they are not\n separately identifiable (that is, there is a single performance obligation). The entity is responsible for the\n overall management of the contract (for example, by ensuring that the manufacturing service conforms to the\n specifications) and thus provides a significant service of integrating those items into the combined output\u2014the\n specialized equipment\u2014for which the customer has contracted. In addition, those activities are highly\n interrelated. If necessary modifications to the specifications are identified as the equipment is manufactured,\n the entity is responsible for developing and communicating revisions to the supplier and for ensuring that any\n associated rework required conforms with the revised specifications. Accordingly, the entity identifies the\n specified good to be provided to the customer as the specialized equipment.\n\n606-10- The entity concludes that it controls the specialized equipment before that equipment is transferred to the\n55-323B\n customer (see paragraph 606-10-55-37A(c)). The entity provides the significant integration service necessary\n to produce the specialized equipment and, therefore, controls the specialized equipment before it is\n transferred to the customer. The entity directs the use of the supplier's manufacturing service as an input in\n creating the combined output that is the specialized equipment. In reaching the conclusion that it controls the\n specialized equipment before that equipment is transferred to the customer, the entity also observes that even\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 95 of 123\n though the supplier delivers the specialized equipment to the customer, the supplier has no ability to direct its\n use (that is, the terms of the contract between the entity and the supplier preclude the supplier from using the\n specialized equipment for another purpose or directing that equipment to another customer). The entity also\n obtains the remaining benefits from the specialized equipment by being entitled to the consideration in the\n contract from the customer.\n\n606-10- Thus, the entity concludes that it is a principal in the transaction. The entity does not consider the indicators in\n55-324\n paragraph 606-10-55-39 because the evaluation above is conclusive without consideration of the\n indicators. The entity recognizes revenue in the gross amount of consideration to which it is entitled from the\n customer in exchange for the specialized equipment.\n\n\u00b7 \u00b7 > Example 46A\u2014Promise to Provide Goods or Services (Entity is a Principal)\n\n606-10- An entity enters into a contract with a customer to provide office maintenance services. The entity and the\n55-324A\n customer define and agree on the scope of the services and negotiate the price. The entity is responsible for\n ensuring that the services are performed in accordance with the terms and conditions in the contract. The\n entity invoices the customer for the agreed-upon price on a monthly basis with 10-day payment terms.\n\n606-10- The entity regularly engages third-party service providers to provide office maintenance services to its\n55-324B\n customers. When the entity obtains a contract from a customer, the entity enters into a contract with one of\n those service providers, directing the service provider to perform office maintenance services for the customer.\n The payment terms in the contracts with the service providers generally are aligned with the payment terms in\n the entity's contracts with customers. However, the entity is obliged to pay the service provider even if the\n customer fails to pay.\n\n606-10- To determine whether the entity is a principal or an agent, the entity identifies the specified good or service to\n55-324C\n be provided to the customer and assesses whether it controls that good or service before the good or service\n is transferred to the customer.\n\n606-10- The entity observes that the specified services to be provided to the customer are the office maintenance\n55-324D\n services for which the customer contracted and that no other goods or services are promised to the customer.\n While the entity obtains a right to office maintenance services from the service provider after entering into the\n contract with the customer, that right is not transferred to the customer. That is, the entity retains the ability to\n direct the use of, and obtain substantially all the remaining benefits from, that right. For example, the entity can\n decide whether to direct the service provider to provide the office maintenance services for that customer, or\n for another customer, or at its own facilities. The customer does not have a right to direct the service provider\n to perform services that the entity has not agreed to provide. Therefore, the right to office maintenance\n services obtained by the entity from the service provider is not the specified good or service in its contract with\n the customer.\n\n606-10- The entity concludes that it controls the specified services before they are provided to the customer. The entity\n55-324E\n obtains control of a right to office maintenance services after entering into the contract with the customer but\n before those services are provided to the customer. The terms of the entity's contract with the service provider\n give the entity the ability to direct the service provider to provide the specified services on the entity's behalf\n (see paragraph 606-10-55-37A(b)). In addition, the entity concludes that the following indicators in\n paragraph 606-10-55-39 provide further evidence that the entity controls the office maintenance services\n before they are provided to the customer:\n aThe entity is primarily responsible for fulfilling the promise to provide office maintenance services.\n Although the entity has hired a service provider to perform the services promised to the customer, it is the\n entity itself that is responsible for ensuring that the services are performed and are acceptable to the\n customer (that is, the entity is responsible for fulfilment of the promise in the contract, regardless of\n whether the entity performs the services itself or engages a third-party service provider to perform the\n services).\n bThe entity has discretion in setting the price for the services to the customer.\n\n\n606-10- The entity observes that it does not commit itself to obtain the services from the service provider before\n55-324F\n obtaining the contract with the customer. Thus, the entity has mitigated its inventory risk with respect to the\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 96 of 123\n office maintenance services. Nonetheless, the entity concludes that it controls the office maintenance services\n before they are provided to the customer on the basis of the evidence in paragraph 606-10-55-324E.\n\n606-10- Thus, the entity is a principal in the transaction and recognizes revenue in the amount of consideration to\n55-324G\n which it is entitled from the customer in exchange for the office maintenance services.\n\n\u00b7 \u00b7 > Example 47\u2014Promise to Provide Goods or Services (Entity Is a Principal)\n\n606-10- An entity negotiates with major airlines to purchase tickets at reduced rates compared with the price of tickets\n55-325\n sold directly by the airlines to the public. The entity agrees to buy a specific number of tickets and must pay for\n those tickets regardless of whether it is able to resell them. The reduced rate paid by the entity for each ticket\n purchased is negotiated and agreed in advance.\n\n606-10- The entity determines the prices at which the airline tickets will be sold to its customers. The entity sells the\n55-326\n tickets and collects the consideration from customers when the tickets are purchased.\n\n606-10- The entity also assists the customers in resolving complaints with the service provided by the airlines.\n55-327\n However, each airline is responsible for fulfilling obligations associated with the ticket, including remedies to a\n customer for dissatisfaction with the service.\n\n606-10- To determine whether the entity's performance obligation is to provide the specified goods or services itself\n55-328\n (that is, the entity is a principal) or to arrange for those goods or services to be provided by another party (that\n is, the entity is an agent), the entity identifies the specified good or service to be provided to the customer and\n assesses whether it controls that good or service before the good or service is transferred to the customer.\n aSubparagraph superseded by Accounting Standards Update No. 2016-08.\n bSubparagraph superseded by Accounting Standards Update No. 2016-08.\n cSubparagraph superseded by Accounting Standards Update No. 2016-08.\n dSubparagraph superseded by Accounting Standards Update No. 2016-08.\n\n\n606-10- The entity concludes that with each ticket that it commits itself to purchase from the airline, it obtains control of\n55-328A\n a right to fly on a specified flight (in the form of a ticket) that the entity then transfers to one of its customers\n (see paragraph 606-10-55-37A(a)). Consequently, the entity determines that the specified good or service to\n be provided to its customer is that right (to a seat on a specific flight) that the entity controls. The entity\n observes that no other goods or services are promised to the customer.\n\n606-10- The entity controls the right to each flight before it transfers that specified right to one of its customers because\n55-328B\n the entity has the ability to direct the use of that right by deciding whether to use the ticket to fulfill a contract\n with a customer and, if so, which contract it will fulfill. The entity also has the ability to obtain the remaining\n benefits from that right by either reselling the ticket and obtaining all of the proceeds from the sale or,\n alternatively, using the ticket itself.\n\n606-10- The indicators in paragraph 606-10-55-39(b) through (c) also provide relevant evidence that the entity controls\n55-328C\n each specified right (ticket) before it is transferred to the customer. The entity has inventory risk with respect to\n the ticket because the entity committed itself to obtain the ticket from the airline before obtaining a contract\n with a customer to purchase the ticket. This is because the entity is obliged to pay the airline for that right\n regardless of whether it is able to obtain a customer to resell the ticket to or whether it can obtain a favorable\n price for the ticket. The entity also establishes the price that the customer will pay for the specified ticket.\n\n606-10- Thus, the entity concludes that it is a principal in the transactions with customers. The entity recognizes\n55-329\n revenue in the gross amount of consideration to which it is entitled in exchange for the tickets transferred to\n the customers.\n\n\u00b7 \u00b7 > Example 48\u2014Arranging for the Provision of Goods or Services (Entity Is an Agent)\n\n606-10- An entity sells vouchers that entitle customers to future meals at specified restaurants, and the sales price of\n55-330\n the voucher provides the customer with a significant discount when compared with the normal selling prices of\n the meals (for example, a customer pays $100 for a voucher that entitles the customer to a meal at a\n restaurant that would otherwise cost $200). The entity does not purchase or commit itself to purchase\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 97 of 123\n vouchers in advance of the sale of a voucher to a customer; instead, it purchases vouchers only as they are\n requested by the customers. The entity sells the vouchers through its website, and the vouchers are\n nonrefundable.\n\n606-10- The entity and the restaurants jointly determine the prices at which the vouchers will be sold to customers.\n55-331\n Under the terms of its contracts with the restaurants, the entity is entitled to 30 percent of the voucher price\n when it sells the voucher.\n\n606-10- The entity also assists the customers in resolving complaints about the meals and has a buyer satisfaction\n55-332\n program. However, the restaurant is responsible for fulfilling obligations associated with the voucher, including\n remedies to a customer for dissatisfaction with the service.\n\n606-10- To determine whether the entity is a principal or an agent, the entity identifies the specified good or service to\n55-333\n be provided to the customer and assesses whether it controls the specified good or service before that good\n or service is transferred to the customer.\n aSubparagraph superseded by Accounting Standards Update No. 2016-08.\n bSubparagraph superseded by Accounting Standards Update No. 2016-08.\n cSubparagraph superseded by Accounting Standards Update No. 2016-08.\n dSubparagraph superseded by Accounting Standards Update No. 2016-08.\n\n\n606-10- A customer obtains a voucher for the restaurant that it selects. The entity does not engage the restaurants to\n55-333A\n provide meals to customers on the entity's behalf as described in the indicator in paragraph 606-10-55-39(a).\n Therefore, the entity observes that the specified good or service to be provided to the customer is the right to a\n meal (in the form of a voucher) at a specified restaurant or restaurants, which the customer purchases and\n then can use itself or transfer to another person. The entity also observes that no other goods or services\n (other than the vouchers) are promised to the customers.\n\n606-10- The entity concludes that it does not control the voucher (right to a meal) at any time. In reaching this\n55-333B\n conclusion, the entity principally considers the following:\n aThe vouchers are created only at the time that they are transferred to the customers and, thus, do not\n exist before that transfer. Therefore, the entity does not at any time have the ability to direct the use of the\n vouchers or obtain substantially all of the remaining benefits from the vouchers before they are\n transferred to customers.\n bThe entity neither purchases nor commits itself to purchase vouchers before they are sold to customers.\n The entity also has no responsibility to accept any returned vouchers. Therefore, the entity does not have\n inventory risk with respect to the vouchers as described in the indicator in paragraph 606-10-55-39(b).\n\n\n606-10- Thus, the entity concludes that it is an agent in the arrangement with respect to the vouchers. The entity\n55-334\n recognizes revenue in the net amount of consideration to which the entity will be entitled in exchange for\n arranging for the restaurants to provide vouchers to customers for the restaurants' meals, which is the 30\n percent commission it is entitled to upon the sale of each voucher.\n\n\u00b7 \u00b7 > Example 48A\u2014Entity Is a Principal and an Agent in the Same Contract\n\n606-10- An entity sells services to assist its customers in more effectively targeting potential recruits for open job\n55-334A\n positions. The entity performs several services itself, such as interviewing candidates and performing\n background checks. As part of the contract with a customer, the customer agrees to obtain a license to access\n a third party's database of information on potential recruits. The entity arranges for this license with the third\n party, but the customer contracts directly with the database provider for the license. The entity collects\n payment on behalf of the third-party database provider as part of its overall invoicing to the customer. The\n database provider sets the price charged to the customer for the license and is responsible for providing\n technical support and credits to which the customer may be entitled for service down-time or other technical\n issues.\n\n606-10- To determine whether the entity is a principal or an agent, the entity identifies the specified goods or services\n55-334B\n to be provided to the customer and assesses whether it controls those goods or services before they are\n transferred to the customer.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 98 of 123\n606-10- For the purpose of this Example, it is assumed that the entity concludes that its recruitment services and the\n55-334C\n database access license are each distinct on the basis of its assessment of the guidance in paragraphs 606-\n 10-25-19 through 25-22. Accordingly, there are two specified goods or services to be provided to the customer\n \u2014access to the third-party's database and recruitment services.\n\n606-10- The entity concludes that it does not control the access to the database before it is provided to the customer.\n55-334D\n The entity does not at any time have the ability to direct the use of the license because the customer contracts\n for the license directly with the database provider. The entity does not control access to the provider's\n database\u2014it cannot, for example, grant access to the database to a party other than the customer or prevent\n the database provider from providing access to the customer.\n\n606-10- As part of reaching that conclusion, the entity also considers the indicators in paragraph 606-10-55-39. The\n55-334E\n entity concludes that these indicators provide further evidence that it does not control access to the database\n before that access is provided to the customer.\n aThe entity is not responsible for fulfilling the promise to provide the database access service. The\n customer contracts for the license directly with the third-party database provider, and the database\n provider is responsible for the acceptability of the database access (for example, by providing technical\n support or service credits).\n bThe entity does not have inventory risk because it does not purchase or commit to purchase the\n database access before the customer contracts for database access directly with the database provider.\n cThe entity does not have discretion in setting the price for the database access with the customer\n because the database provider sets that price.\n\n\n606-10- Thus, the entity concludes that it is an agent in relation to the third-party's database service. In contrast, the\n55-334F\n entity concludes that it is the principal in relation to the recruitment services because the entity performs those\n services itself and no other party is involved in providing those services to the customer.\n\n\u00b7 > Customer Options for Additional Goods or Services\n606-10- Examples 49-52 illustrate the guidance in paragraphs 606-10-55-41 through 55-45 on customer options for\n55-335\n additional goods or services. Example 50 illustrates the guidance in paragraphs 606-10-25-19 through 25-\n 21 on identifying performance obligations. Example 52 illustrates a customer loyalty program. That Example\n may not apply to all customer loyalty arrangements because the terms and conditions may differ. In particular,\n when there are more than two parties to the arrangement, an entity should consider all facts and\n circumstances to determine the customer in the transaction that gives rise to the award credits.\n\n\u00b7 \u00b7 > Example 49\u2014Option That Provides the Customer with a Material Right (Discount Voucher)\n\n606-10- An entity enters into a contract for the sale of Product A for $100. As part of the contract, the entity gives the\n55-336\n customer a 40 percent discount voucher for any future purchases up to $100 in the next 30 days. The entity\n intends to offer a 10 percent discount on all sales during the next 30 days as part of a seasonal promotion.\n The 10 percent discount cannot be used in addition to the 40 percent discount voucher.\n\n606-10- Because all customers will receive a 10 percent discount on purchases during the next 30 days, the only\n55-337\n discount that provides the customer with a material right is the discount that is incremental to that 10 percent\n (that is, the additional 30 percent discount). The entity accounts for the promise to provide the incremental\n discount as a performance obligation in the contract for the sale of Product A.\n\n606-10- To estimate the standalone selling price of the discount voucher in accordance with paragraph 606-10-55-44,\n55-338\n the entity estimates an 80 percent likelihood that a customer will redeem the voucher and that a customer will,\n on average, purchase $50 of additional products. Consequently, the entity's estimated standalone selling price\n of the discount voucher is $12 ($50 average purchase price of additional products \u00d7 30 percent incremental\n discount \u00d7 80 percent likelihood of exercising the option). The standalone selling prices of Product A and the\n discount voucher and the resulting allocation of the $100 transaction price are as follows:\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 99 of 123\n\n\n\n\n606-10- The entity allocates $89 to Product A and recognizes revenue for Product A when control transfers. The entity\n55-339\n allocates $11 to the discount voucher and recognizes revenue for the voucher when the customer redeems it\n for goods or services or when it expires.\n\n\u00b7 \u00b7 > Example 50\u2014Option That Does Not Provide the Customer with a Material Right (Additional Goods or Services)\n\n606-10- An entity in the telecommunications industry enters into a contract with a customer to provide a handset and\n55-340\n monthly network service for two years. The network service includes up to 1,000 call minutes and 1,500 text\n messages each month for a fixed monthly fee. The contract specifies the price for any additional call minutes\n or texts that the customer may choose to purchase in any month. The prices for those services are equal to\n their standalone selling prices.\n\n606-10- The entity determines that the promises to provide the handset and network service are each separate\n55-341\n performance obligations. This is because the customer can benefit from the handset and network service\n either on their own or together with other resources that are readily available to the customer in accordance\n with the criterion in paragraph 606-10-25-19(a). In addition, the handset and network service are separately\n identifiable in accordance with the criterion in paragraph 606-10-25-19(b) (on the basis of the factors in\n paragraph 606-10-25-21).\n\n606-10- The entity determines that the option to purchase the additional call minutes and texts does not provide a\n55-342\n material right that the customer would not receive without entering into the contract (see paragraph 606-10-55-\n 43). This is because the prices of the additional call minutes and texts reflect the standalone selling prices for\n those services. Because the option for additional call minutes and texts does not grant the customer a material\n right, the entity concludes it is not a performance obligation in the contract. Consequently, the entity does not\n allocate any of the transaction price to the option for additional call minutes or texts. The entity will recognize\n revenue for the additional call minutes or texts if and when the entity provides those services.\n\n\u00b7 \u00b7 > Example 51\u2014Option That Provides the Customer with a Material Right (Renewal Option)\n\n606-10- An entity enters into 100 separate contracts with customers to provide 1 year of maintenance services for\n55-343\n $1,000 per contract. The terms of the contracts specify that at the end of the year, each customer has the\n option to renew the maintenance contract for a second year by paying an additional $1,000. Customers who\n renew for a second year also are granted the option to renew for a third year for $1,000. The entity charges\n significantly higher prices for maintenance services to customers that do not sign up for the maintenance\n services initially (that is, when the products are new). That is, the entity charges $3,000 in Year 2 and $5,000\n in Year 3 for annual maintenance services if a customer does not initially purchase the service or allows the\n service to lapse.\n\n606-10- The entity concludes that the renewal option provides a material right to the customer that it would not receive\n55-344\n without entering into the contract because the price for maintenance services are significantly higher if the\n customer elects to purchase the services only in Year 2 or 3. Part of each customer's payment of $1,000 in the\n first year is, in effect, a nonrefundable prepayment of the services to be provided in a subsequent year.\n Consequently, the entity concludes that the promise to provide the option is a performance obligation.\n\n606-10- The renewal option is for a continuation of maintenance services, and those services are provided in\n55-345\n accordance with the terms of the existing contract. Instead of determining the standalone selling prices for the\n renewal options directly, the entity allocates the transaction price by determining the consideration that it\n expects to receive in exchange for all the services that it expects to provide in accordance with paragraph 606-\n 10-55-45.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 100 of 123\n606-10- The entity expects 90 customers to renew at the end of Year 1 (90 percent of contracts sold) and 81\n55-346\n customers to renew at the end of Year 2 (90 percent of the 90 customers that renewed at the end of Year 1 will\n also renew at the end of Year 2, that is 81 percent of contracts sold).\n\n606-10- At contract inception, the entity determines the expected consideration for each contract is $2,710 [$1,000 +\n55-347\n (90 percent \u00d7 $1,000) + (81 percent \u00d7 $1,000)]. The entity also determines that recognizing revenue on the\n basis of costs incurred relative to the total expected costs depicts the transfer of services to the customer.\n Estimated costs for a three-year contract are as follows:\n\n\n\n\n606-10- Accordingly, the pattern of revenue recognition expected at contract inception for each contract is as follows:\n55-348\n\n\n\n\n606-10- Consequently, at contract inception, the entity allocates to the option to renew at the end of Year 1 $22,000 of\n55-349\n the consideration received to date [cash of $100,000 - revenue to be recognized in Year 1 of $78,000 ($780 \u00d7\n 100)].\n\n606-10- Assuming there is no change in the entity's expectations and the 90 customers renew as expected, at the end\n55-350\n of the first year, the entity has collected cash of $190,000 [(100 \u00d7 $1,000) + (90 \u00d7 $1,000)], has recognized\n revenue of $78,000 ($780 \u00d7 100), and has recognized a contract liability of $112,000.\n\n606-10- Consequently, upon renewal at the end of the first year, the entity allocates $24,300 to the option to renew at\n55-351\n the end of Year 2 [cumulative cash of $190,000 - cumulative revenue recognized in Year 1 and to be\n recognized in Year 2 of $165,700 ($78,000 + $877 \u00d7 100)].\n\n606-10- If the actual number of contract renewals was different than what the entity expected, the entity would update\n55-352\n the transaction price and the revenue recognized accordingly.\n\n\u00b7 \u00b7 > Example 52\u2014Customer Loyalty Program\n\n606-10- An entity has a customer loyalty program that rewards a customer with 1 customer loyalty point for every $10\n55-353\n of purchases. Each point is redeemable for a $1 discount on any future purchases of the entity's products.\n During a reporting period, customers purchase products for $100,000 and earn 10,000 points that are\n redeemable for future purchases. The consideration is fixed, and the standalone selling price of the purchased\n products is $100,000. The entity expects 9,500 points to be redeemed. The entity estimates a standalone\n selling price of $0.95 per point (totalling $9,500) on the basis of the likelihood of redemption in accordance\n with paragraph 606-10-55-44.\n\n606-10- The points provide a material right to customers that they would not receive without entering into a contract.\n55-354\n Consequently, the entity concludes that the promise to provide points to the customer is a performance\n obligation. The entity allocates the transaction price ($100,000) to the product and the points on a relative\n standalone selling price basis as follows:\n\n\n\n\n606-10- At the end of the first reporting period, 4,500 points have been redeemed, and the entity continues to expect\n55-355\n 9,500 points to be redeemed in total. The entity recognizes revenue for the loyalty points of $4,110 [(4,500\n points \u00f7 9,500 points) \u00d7 $8,676] and recognizes a contract liability of $4,566 ($8,676 - $ 4,110) for the\n unredeemed points at the end of the first reporting period.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 101 of 123\n606-10- At the end of the second reporting period, 8,500 points have been redeemed cumulatively. The entity updates\n55-356\n its estimate of the points that will be redeemed and now expects that 9,700 points will be redeemed. The entity\n recognizes revenue for the loyalty points of $3,493 {[(8,500 total points redeemed \u00f7 9,700 total points\n expected to be redeemed) \u00d7 $8,676 initial allocation] - $4,110 recognized in the first reporting period}. The\n contract liability balance is $1,073 ($8,676 initial allocation - $7,603 of cumulative revenue recognized).\n\n\u00b7 > Nonrefundable Upfront Fees\n606-10- Example 53 illustrates the guidance in paragraphs 606-10-55-50 through 55-53 on nonrefundable upfront fees.\n55-357\n\n\u00b7 \u00b7 > Example 53\u2014Nonrefundable Upfront Fee\n\n606-10- An entity enters into a contract with a customer for one year of transaction processing services. The entity's\n55-358\n contracts have standard terms that are the same for all customers. The contract requires the customer to pay\n an upfront fee to set up the customer on the entity's systems and processes. The fee is a nominal amount and\n is nonrefundable. The customer can renew the contract each year without paying an additional fee.\n\n606-10- The entity's setup activities do not transfer a good or service to the customer and, therefore, do not give rise to\n55-359\n a performance obligation.\n\n606-10- The entity concludes that the renewal option does not provide a material right to the customer that it would not\n55-360\n receive without entering into that contract (see paragraph 606-10-55-42). The upfront fee is, in effect, an\n advance payment for the future transaction processing services. Consequently, the entity determines the\n transaction price, which includes the nonrefundable upfront fee, and recognizes revenue for the transaction\n processing services as those services are provided in accordance with paragraph 606-10-55-51.\n\n\u00b7 > Licensing\n606-10- Examples 54-61B illustrate the guidance in paragraphs 606-10-25-14 through 25-22 on identifying\n55-361\n performance obligations and paragraphs 606-10-55-54 through 55-60 and 606-10-55-62 through 55-65B on\n licensing. These Examples also illustrate other guidance as follows:\n aParagraphs 606-10-25-31 through 25-37 on measuring progress toward complete satisfaction of a\n performance obligation (Examples 57 and 58)\n bParagraphs 606-10-32-39 through 32-41 on allocating variable consideration to performance obligations\n (Example 57)\n cParagraphs 606-10-55-65 through 55-65B on consideration in the form of sales-based or usage-based\n royalties on licenses of intellectual property (Examples 57 and 61).\n\n\n\u00b7 \u00b7 > Example 54\u2014Right to Use Intellectual Property\n\n606-10- Using the same facts as in Case A in Example 11 (see paragraphs 606-10-55-141 through 55-145), the entity\n55-362\n identifies four performance obligations in a contract:\n aThe software license\n bInstallation services\n cSoftware updates\n dTechnical support.\n\n\n606-10- The entity assesses the nature of its promise to transfer the software license. The entity first concludes that\n55-363\n the software to which the customer obtains rights as a result of the license is functional intellectual property.\n This is because the software has significant standalone functionality from which the customer can derive\n substantial benefit regardless of the entity's ongoing business activities.\n\n606-10- The entity further concludes that while the functionality of the underlying software is expected to change during\n55-363A\n the license period as a result of the entity's continued development efforts, the functionality of the software to\n which the customer has rights (that is, the customer's instance of the software) will change only as a result of\n the entity's promise to provide when-and-if available software updates. Because the entity's promise to provide\n software updates represents an additional promised service in the contract, the entity's activities to fulfill that\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 102 of 123\n promised service are not considered in evaluating the criteria in paragraph 606-10-55-62. The entity further\n notes that the customer has the right to install, or not install, software updates when they are provided such\n that the criterion in 606-10-55-62(b) would not be met even if the entity's activities to develop and provide\n software updates had met the criterion in paragraph 606-10-55-62(a).\n\n606-10- Therefore, the entity concludes that it has provided the customer with a right to use its software as it exists at\n55-363B\n the point in time the license is granted and the entity accounts for the software license performance obligation\n as a performance obligation satisfied at a point in time. The entity recognizes revenue on the software license\n performance obligation in accordance with paragraphs 606-10-55-58B through 55-58C.\n\n\u00b7 \u00b7 > Example 55\u2014License of Intellectual Property\n\n606-10- An entity enters into a contract with a customer to license (for a period of three years) intellectual property\n55-364\n related to the design and production processes for a good. The contract also specifies that the customer will\n obtain any updates to that intellectual property for new designs or production processes that may be\n developed by the entity. The updates are integral to the customer's ability to derive benefit from the license\n during the license period because the intellectual property is used in an industry in which technologies change\n rapidly.\n\n606-10- The entity assesses the goods and services promised to the customer to determine which goods and services\n55-365\n are distinct in accordance with paragraph 606-10-25-19. The entity determines that the customer can benefit\n from (a) the license on its own without the updates and (b) the updates together with the initial license.\n Although the benefit the customer can derive from the license on its own (that is, without the updates) is\n limited because the updates are integral to the customer's ability to continue to use the intellectual property in\n an industry in which technologies change rapidly, the license can be used in a way that generates some\n economic benefits. Therefore, the criterion in paragraph 606-10-25-19(a) is met for the license and the\n updates.\n\n606-10- The fact that the benefit the customer can derive from the license on its own (that is, without the updates) is\n55-365A\n limited (because the updates are integral to the customer's ability to continue to use the license in the rapidly\n changing technological environment) also is considered in assessing whether the criterion in paragraph 606-\n 10-25-19(b) is met. Because the benefit that the customer could obtain from the license over the three-year\n term without the updates would be significantly limited, the entity's promises to grant the license and to provide\n the expected updates are, in effect, inputs that, together fulfill a single promise to deliver a combined item to\n the customer. That is, the nature of the entity's promise in the contract is to provide ongoing access to the\n entity's intellectual property related to the design and production processes for a good for the three-year term\n of the contract. The promises within that combined item (that is, to grant the license and to provide when-and-if\n available updates) are therefore not separately identifiable in accordance with the criterion in paragraph 606-\n 10-25-19(b).\n\n606-10- The nature of the combined good or service that the entity promised to transfer to the customer is ongoing\n55-366\n access to the entity's intellectual property related to the design and production processes for a good for the\n three-year term of the contract. Based on this conclusion, the entity applies paragraphs 606-10-25-23 through\n 25-30 to determine whether the single performance obligation is satisfied at a point in time or over time and\n paragraphs 606-10-25-31 through 25-37 to determine the appropriate method for measuring progress toward\n complete satisfaction of the performance obligation. The entity concludes that because the customer\n simultaneously receives and consumes the benefits of the entity's performance as it occurs, the performance\n obligation is satisfied over time in accordance with paragraph 606-10-25-27(a)and that a time-based input\n measure of progress is appropriate because the entity expects, on the basis of its relevant history with similar\n contracts, to expend efforts to develop and transfer updates to the customer on a generally even basis\n throughout the three-year term.\n\n\u00b7 \u00b7 > Example 56\u2014Identifying a Distinct License\n\n606-10- An entity, a pharmaceutical company, licenses to a customer its patent rights to an approved drug compound\n55-367\n for 10 years and also promises to manufacture the drug for the customer for 5 years, while the customer\n develops its own manufacturing capability. The drug is a mature product; therefore, there is no expectation that\n the entity will undertake activities to change the drug (for example, to alter its chemical composition). There\n are no other promised goods or services in the contract.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 103 of 123\n\u00b7 \u00b7 \u00b7 > Case A\u2014License Is Not Distinct\n\n606-10- In this case, no other entity can manufacture this drug while the customer learns the manufacturing process\n55-368\n and builds its own manufacturing capability because of the highly specialized nature of the manufacturing\n process. As a result, the license cannot be purchased separately from the manufacturing service.\n\n606-10- The entity assesses the goods and services promised to the customer to determine which goods and services\n55-369\n are distinct in accordance with paragraph 606-10-25-19. The entity determines that the customer cannot\n benefit from the license without the manufacturing service; therefore, the criterion in paragraph 606-10-25-\n 19(a) is not met. Consequently, the license and the manufacturing service are not distinct, and the entity\n accounts for the license and the manufacturing service as a single performance obligation.\n\n606-10- The nature of the combined good or service for which the customer contracted is a sole sourced supply of the\n55-370\n drug for the first five years; the customer benefits from the license only as a result of having access to a supply\n of the drug. After the first five years, the customer retains solely the right to use the entity's functional\n intellectual property (see Case B, paragraph 606-10-55-373), and no further performance is required of the\n entity during Years 6-10. The entity applies paragraphs 606-10-25-23 through 25-30 to determine whether the\n single performance obligation (that is, the bundle of the license and the manufacturing service) is a\n performance obligation satisfied at a point in time or over time. Regardless of the determination reached in\n accordance with paragraphs 606-10-25-23 through 25-30, the entity's performance under the contract will be\n complete at the end of Year 5.\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014License Is Distinct\n\n606-10- In this case, the manufacturing process used to produce the drug is not unique or specialized, and several\n55-371\n other entities also can manufacture the drug for the customer.\n\n606-10- The entity assesses the goods and services promised to the customer to determine which goods and services\n55-372\n are distinct, and it concludes that the criteria in paragraph 606-10-25-19 are met for each of the license and\n the manufacturing service. The entity concludes that the criterion in paragraph 606-10-25-19(a) is met\n because the customer can benefit from the license together with readily available resources other than the\n entity's manufacturing service (that is, because there are other entities that can provide the manufacturing\n service) and can benefit from the manufacturing service together with the license transferred to the customer\n at the start of the contract.\n\n606-10- The entity also concludes that its promises to grant the license and to provide the manufacturing service are\n55-372A\n separately identifiable (that is, the criterion in paragraph 606-10-25-19(b) is met). The entity concludes that the\n license and the manufacturing service are not inputs to a combined item in this contract on the basis of the\n principle and the factors in paragraph 606-10-25-21. In reaching this conclusion, the entity considers that the\n customer could separately purchase the license without significantly affecting its ability to benefit from the\n license. Neither the license nor the manufacturing service is significantly modified or customized by the other,\n and the entity is not providing a significant service of integrating those items into a combined output. The entity\n further considers that the license and the manufacturing service are not highly interdependent or highly\n interrelated because the entity would be able to fulfill its promise to transfer the license independent of fulfilling\n its promise to subsequently manufacture the drug for the customer. Similarly, the entity would be able to\n manufacture the drug for the customer even if the customer had previously obtained the license and initially\n utilized a different manufacturer. Thus, although the manufacturing service necessarily depends on the license\n in this contract (that is, the entity would not contract for the manufacturing service without the customer having\n obtained the license), the license and the manufacturing service do not significantly affect each other.\n Consequently, the entity concludes that its promises to grant the license and to provide the manufacturing\n service are distinct and that there are two performance obligations:\n aLicense of patent rights\n bManufacturing service.\n\n\n606-10- The entity assesses the nature of its promise to grant the license. The entity concludes that the patented drug\n55-373\n formula is functional intellectual property (that is, it has significant standalone functionality in the form of its\n ability to treat a disease or condition). There is no expectation that the entity will undertake activities to change\n the functionality of the drug formula during the license period. Because the intellectual property has significant\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 104 of 123\n standalone functionality, any other activities the entity might undertake (for example, promotional activities like\n advertising or activities to develop other drug products) would not significantly affect the utility of the licensed\n intellectual property. Consequently, the nature of the entity's promise in transferring the license is to provide a\n right to use the entity's functional intellectual property, and it accounts for the license as a performance\n obligation satisfied at a point in time. The entity recognizes revenue for the license performance obligation in\n accordance with paragraphs 606-10-55-58B through 55-58C.\n\n606-10- In its assessment of the nature of the license, the entity does not consider the manufacturing service because\n55-374\n it is an additional promised service in the contract. The entity applies paragraphs 606-10-25-23 through 25-\n 30 to determine whether the manufacturing service is a performance obligation satisfied at a point in time or\n over time.\n\n\u00b7 \u00b7 > Example 57\u2014Franchise Rights\n\n606-10- An entity enters into a contract with a customer and promises to grant a franchise license that provides the\n55-375\n customer with the right to use the entity's trade name and sell the entity's products for 10 years. In addition to\n the license, the entity also promises to provide the equipment necessary to operate a franchise store. In\n exchange for granting the license, the entity receives a fixed fee of $1 million, as well as a sales-based royalty\n of 5 percent of the customer's sales for the term of the license. The fixed consideration for the equipment is\n $150,000 payable when the equipment is delivered.\n\n\u00b7 \u00b7 \u00b7 > Identifying Performance Obligations\n\n606-10- The entity assesses the goods and services promised to the customer to determine which goods and services\n55-376\n are distinct in accordance with paragraph 606-10-25-19. The entity observes that the entity, as a franchisor,\n has developed a customary business practice to undertake activities such as analyzing the consumers'\n changing preferences and implementing product improvements, pricing strategies, marketing campaigns, and\n operational efficiencies to support the franchise name. However, the entity concludes that these activities do\n not directly transfer goods or services to the customer.\n\n606-10- The entity determines that it has two promises to transfer goods or services: a promise to grant a license and\n55-377\n a promise to transfer equipment. In addition, the entity concludes that the promise to grant the license and the\n promise to transfer the equipment are each distinct. This is because the customer can benefit from each good\n or service (that is, the license and the equipment) on its own or together with other resources that are readily\n available (see paragraph 606-10-25-19(a)). The customer can benefit from the license together with the\n equipment that is delivered before the opening of the franchise, and the equipment can be used in the\n franchise or sold for an amount other than scrap value. The entity also determines that the promises to grant\n the franchise license and to transfer the equipment are separately identifiable in accordance with the criterion\n in paragraph 606-10-25-19(b). The entity concludes that the license and the equipment are not inputs to a\n combined item (that is, they are not fulfilling what is, in effect, a single promise to the customer). In reaching\n this conclusion, the entity considers that it is not providing a significant service of integrating the license and\n the equipment into a combined item (that is, the licensed intellectual property is not a component of, and does\n not significantly modify, the equipment). Additionally, the license and the equipment are not highly\n interdependent or highly interrelated because the entity would be able to fulfill each promise (that is, to license\n the franchise or to transfer the equipment) independently of the other. Consequently, the entity has two\n performance obligations:\n aThe franchise license\n bThe equipment.\n\n\n\u00b7 \u00b7 \u00b7 > Allocating the Transaction Price\n\n606-10- The entity determines that the transaction price includes fixed consideration of $1,150,000 and variable\n55-378\n consideration (5 percent of the customer's sales from the franchise store). The standalone selling price of the\n equipment is $150,000 and the entity regularly licenses franchises in exchange for 5 percent of customer\n sales and a similar upfront fee.\n\n606-10- The entity applies paragraph 606-10-32-40 to determine whether the variable consideration should be\n55-379\n allocated entirely to the performance obligation to transfer the franchise license. The entity concludes that the\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 105 of 123\n variable consideration (that is, the sales-based royalty) should be allocated entirely to the franchise license\n because the variable consideration relates entirely to the entity's promise to grant the franchise license. In\n addition, the entity observes that allocating $150,000 to the equipment and allocating the sales-based royalty\n (as well as the additional $1 million in fixed consideration) to the franchise license would be consistent with an\n allocation based on the entity's relative standalone selling prices in similar contracts. Consequently, the entity\n concludes that the variable consideration (that is, the sales-based royalty) should be allocated entirely to the\n performance obligation to grant the franchise license.\n\n\u00b7 \u00b7 \u00b7 > Licensing\n\n606-10- The entity assesses the nature of the entity's promise to grant the franchise license. The entity concludes\n55-380\n that the nature of its promise is to provide a right to access the entity's symbolic intellectual property. The trade\n name and logo have limited standalone functionality; the utility of the products developed by the entity is\n derived largely from the products' association with the franchise brand. Substantially all of the utility inherent in\n the trade name, logo, and product rights granted under the license stems from the entity's past and ongoing\n activities of establishing, building, and maintaining the franchise brand. The utility of the license is its\n association with the franchise brand and the related demand for its products.\n aSubparagraph superseded by Accounting Standards Update No. 2016-10.\n bSubparagraph superseded by Accounting Standards Update No. 2016-10.\n cSubparagraph superseded by Accounting Standards Update No. 2016-10.\n\n\n606-10- The entity is granting a license to symbolic intellectual property. Consequently, the license provides the\n55-381\n customer with a right to access the entity's intellectual property and the entity's performance obligation to\n transfer the license is satisfied over time in accordance with paragraph 606-10-55-58A. The entity recognizes\n the fixed consideration allocable to the license performance obligation in accordance with paragraph 606-10-\n 55-58A and paragraph 606-10-55-58C. This includes applying paragraphs 606-10-25-31 through 25-37 to\n identify the method that best depicts the entity's performance in satisfying the license (see paragraph 606-10-\n 55-382).\n\n606-10- Because the consideration that is in the form of a sales-based royalty relates specifically to the franchise\n55-382\n license (see paragraph 606-10-55-379), the entity applies paragraph 606-10-55-65in recognizing that\n consideration as revenue. Consequently, the entity recognizes revenue from the sales-based royalty as and\n when the sales occur. The entity concludes that recognizing revenue resulting from the sales-based royalty\n when the customer's subsequent sales occur is consistent with the guidance in paragraph 606-10-55-65(b).\n That is, the entity concludes that ratable recognition of the fixed $1 million franchise fee plus recognition of the\n periodic royalty fees as the customer's subsequent sales occur reasonably depict the entity's performance\n toward complete satisfaction of the franchise license performance obligation to which the sales-based royalty\n has been allocated.\n\n\u00b7 \u00b7 > Example 58\u2014Access to Intellectual Property\n\n606-10- An entity, a creator of comic strips, licenses the use of the images and names of its comic strip characters in\n55-383\n three of its comic strips to a customer for a four-year term. There are main characters involved in each of the\n comic strips. However, newly created characters appear and disappear regularly and the images of the\n characters evolve over time. The customer, an operator of cruise ships, can use the entity's characters in\n various ways, such as in shows or parades, within reasonable guidelines.\n\n606-10- In exchange for granting the license, the entity receives a fixed payment of $1 million in each year of the 4-\n55-384\n year term.\n\n606-10- The entity concludes that it has made no other promises to the customer other than the promise to grant a\n55-385\n license. That is, the additional activities associated with the license do not directly transfer a good or service to\n the customer. Therefore, the entity concludes that its only performance obligation is to transfer the license.\n\n606-10- The entity assesses the nature of its promise to transfer the license and concludes that the nature of its\n55-386\n promise is to grant the customer the right to access the entity's symbolic intellectual property. The entity\n determines that the licensed intellectual property (that is, the character names and images) is symbolic\n because it has no standalone functionality (the names and images cannot process a transaction, perform a\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 106 of 123\n function or task, or be played or aired separate from significant additional production that would, for example,\n use the images to create a movie or a show) and the utility of those names and images is derived from the\n entity's past and ongoing activities such as producing the weekly comic strip that includes the characters.\n aSubparagraph superseded by Accounting Standards Update No. 2016-10.\n bSubparagraph superseded by Accounting Standards Update No. 2016-10.\n cSubparagraph superseded by Accounting Standards Update No. 2016-10.\n\n606-10- Because the nature of the entity's promise in granting the license is to provide the customer with a right to\n55-387\n access the entity's intellectual property, in accordance with paragraph 606-10-55-58A, the entity accounts for\n the promised license as a performance obligation satisfied over time.\n\n606-10- The entity recognizes the fixed consideration allocable to the license performance obligation in accordance\n55-388\n with paragraphs 606-10-55-58A and 606-10-55-58C. The entity considers paragraphs 606-10-25-31 through\n 25-37 in identifying the method that best depicts its performance in the license. Because the contract provides\n the customer with unlimited use of the licensed characters for a fixed term, the entity determines that a time-\n based method would be the most appropriate measure of progress toward complete satisfaction of the\n performance obligation.\n\n\u00b7 \u00b7 > Example 59\u2014Right to Use Intellectual Property\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Initial License\n\n606-10- An entity, a music record label, licenses to a customer a recording of a classical symphony by a noted\n55-389\n orchestra. The customer, a consumer products company, has the right to use the recorded symphony in all\n commercials, including television, radio, and online advertisements for two years in Country A starting on\n January 1, 20X1. In exchange for providing the license, the entity receives fixed consideration of $10,000 per\n month. The contract does not include any other goods or services to be provided by the entity. The contract is\n noncancellable.\n\n606-10- The entity assesses the goods and services promised to the customer to determine which goods and services\n55-390\n are distinct in accordance with paragraph 606-10-25-19. The entity concludes that its only performance\n obligation is to grant the license. The term of the license (two years), the geographical scope of the license\n (that is, the customer's right to use the symphony only in Country A), and the defined permitted uses for the\n recording (that is, use in commercials) are all attributes of the promised license in this contract.\n\n606-10- In determining that the promised license provides the customer with a right to use its intellectual property as it\n55-391\n exists at the point in time at which the license is granted, the entity considers the following:\n aThe classical symphony recording has significant standalone functionality because the recording can be\n played in its present, completed form without the entity's further involvement. The customer can derive\n substantial benefit from that functionality regardless of the entity's further activities or actions. Therefore,\n the nature of the licensed intellectual property is functional.\n bThe contract does not require, and the customer does not reasonably expect, that the entity will\n undertake activities to change the licensed recording.\n Therefore, the criteria in paragraph 606-10-55-62 are not met.\n\n606-10- In accordance with paragraph 606-10-55-58B, the promised license, which provides the customer with a right\n55-392\n to use the entity's intellectual property, is a performance obligation satisfied at a point in time. The entity\n recognizes revenue from the satisfaction of that performance obligation in accordance with paragraphs 606-\n 10-55-58B through 55-58C. Additionally, because of the length of time between the entity's performance (at\n the beginning of the period) and the customer's monthly payments over two years (which are noncancellable),\n the entity considers the guidance in paragraphs 606-10-32-15 through 32-20 to determine whether a\n significant financing component exists.\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014Renewal of the License\n\n606-10- At the end of the first year of the license period, on December 31, 20X1, the entity and the customer agree to\n55-392A\n renew the license to the recorded symphony for two additional years, subject to the same terms and\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 107 of 123\n conditions as the original license. The entity will continue to receive fixed consideration of $10,000 per month\n during the 2-year renewal period.\n\n606-10- The entity considers the contract combination guidance in paragraph 606-10-25-9 and assesses that the\n55-392B\n renewal was not entered into at or near the same time as the original license and, therefore, is not combined\n with the initial contract. The entity evaluates whether the renewal should be treated as a new license or the\n modification of an existing license. Assume that in this scenario, the renewal is distinct. If the price for the\n renewal reflects its standalone selling price, the entity will, in accordance with paragraph 606-10-25-12,\n account for the renewal as a separate contract with the customer. Alternatively, if the price for the renewal\n does not reflect the standalone selling price of the renewal, the entity will account for the renewal as a\n modification of the original license contract.\n\n606-10- In determining when to recognize revenue attributable to the license renewal, the entity considers the\n55-392C\n guidance in paragraph 606-10-55-58C and determines that the customer cannot use and benefit from the\n license before the beginning of the two-year renewal period on January 1, 20X3. Therefore, revenue for the\n renewal cannot be recognized before that date.\n\n606-10- Consistent with Case A, because the customer's additional monthly payments for the modification to the\n55-392D\n license will be made over two years from the date the customer obtains control of the second license, the\n entity considers the guidance in paragraphs 606-10-32-15 through 32-20 to determine whether a significant\n financing component exists.\n\n\u00b7 \u00b7 > Example 60\u2014Sales-Based Royalty Promised in Exchange for a License of Intellectual Property and Other Goods and\nServices\n\n606-10- An entity, a movie distribution company, licenses Movie XYZ to a customer. The customer, an operator of\n55-393\n cinemas, has the right to show the movie in its cinemas for six weeks. Additionally, the entity has agreed to\n provide memorabilia from the filming to the customer for display at the customer's cinemas before the\n beginning of the six-week airing period and to sponsor radio advertisements for Movie XYZ on popular radio\n stations in the customer's geographical area throughout the six-week airing period. In exchange for providing\n the license and the additional promotional goods and services, the entity will receive a portion of the operator's\n ticket sales for Movie XYZ (that is, variable consideration in the form of a sales-based royalty).\n\n606-10- The entity concludes that the license to show Movie XYZ is the predominant item to which the sales-based\n55-394\n royalty relates because the entity has a reasonable expectation that the customer would ascribe significantly\n more value to the license than to the related promotional goods or services. The entity will recognize revenue\n from the sales-based royalty, the only fees to which the entity is entitled under the contract, wholly in\n accordance with paragraph 606-10-55-65. If the license, the memorabilia, and the advertising activities were\n separate performance obligations, the entity would allocate the sales-based royalties to each performance\n obligation.\n\n\u00b7 \u00b7 > Example 61\u2014Access to Intellectual Property\n\n606-10- An entity, a well-known sports team, licenses the use of its name and logo to a customer. The customer, an\n55-395\n apparel designer, has the right to use the sports team's name and logo on items including t-shirts, caps, mugs,\n and towels for one year. In exchange for providing the license, the entity will receive fixed consideration of $2\n million and a royalty of 5 percent of the sales price of any items using the team name or logo. The customer\n expects that the entity will continue to play games and provide a competitive team.\n\n606-10- The entity assesses the goods and services promised to the customer to determine which goods and services\n55-396\n are distinct in accordance with paragraph 606-10-25-19. The entity concludes that the only good or service\n promised to the customer in the contract is the license. The additional activities associated with the license\n (that is, continuing to play games and provide a competitive team) do not directly transfer a good or service to\n the customer. Therefore, there is one performance obligation in the contract.\n\n606-10- To determine whether the entity's promise in granting the license provides the customer with a right to access\n55-397\n the entity's intellectual property or a right to use the entity's intellectual property, the entity assesses the nature\n of the intellectual property to which the customer obtains rights. The entity concludes that the intellectual\n property to which the customer obtains rights is symbolic intellectual property. The utility of the team name and\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 108 of 123\n logo to the customer is derived from the entity's past and ongoing activities of playing games and providing a\n competitive team (that is, those activities effectively give value to the intellectual property). Absent those\n activities, the team name and logo would have little or no utility to the customer because they have no\n standalone functionality (that is, no ability to perform or fulfill a task separate from their role as symbols of the\n entity's past and ongoing activities).\n aSubparagraph superseded by Accounting Standards Update No. 2016-10.\n bSubparagraph superseded by Accounting Standards Update No. 2016-10.\n cSubparagraph superseded by Accounting Standards Update No. 2016-10.\n\n606-10- Consequently, the entity's promise in granting the license provides the customer with the right to access the\n55-398\n entity's intellectual property throughout the license period and, in accordance with paragraph 606-10-55-58A,\n the entity accounts for the promised license as a performance obligation satisfied over time.\n\n606-10- The entity recognizes the fixed consideration allocable to the license performance obligation in accordance\n55-399\n with paragraphs 606-10-55-58A and 606-10-55-58C. This includes applying paragraphs 606-10-25-31 through\n 25-37 to identify the method that best depicts the entity's performance in satisfying the license. For the\n consideration that is in the form of a sales-based royalty, paragraph 606-10-55-65applies because the sales-\n based royalty relates solely to the license that is the only performance obligation in the contract. The entity\n concludes that recognizing revenue from the sales-based royalty when the customer's subsequent sales of\n items using the team name or logo occur is consistent with the guidance in paragraph 606-10-55-65(b). That\n is, the entity concludes that ratable recognition of the fixed consideration of $2 million plus recognition of the\n royalty fees as the customer's subsequent sales occur reasonably depict the entity's progress toward\n complete satisfaction of the license performance obligation.\n\n\u00b7 \u00b7 > Example 61A\u2014Right to Use Intellectual Property\n\n606-10- An entity, a television production company, licenses all of the existing episodes of a television show (which\n55-399A\n consists of the first four seasons) to a customer. The show is presently in its fifth season, and the television\n production company is producing episodes for that fifth season at the time the contract is entered into, as well\n as promoting the show to attract further viewership. The Season 5 episodes in production are still subject to\n change before airing.\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014License Is the Only Promise in the Contract\n\n606-10- The customer obtains the right to broadcast the existing episodes, in sequential order, for a period of two\n55-399B\n years. The show has been successful through the first four seasons, and the customer is both aware that\n Season 5 already is in production and aware of the entity's continued promotion of the show. The customer will\n make fixed monthly payments of an equal amount throughout the two-year license period.\n\n606-10- The entity assesses the goods and services promised to the customer. The entity's activities to produce\n55-399C\n Season 5 and its continued promotion of the show do not transfer a promised good or service to the customer.\n Therefore, the entity concludes that there are no other promised goods or services in the contract other than\n the license to broadcast the existing episodes in the television series. The contractual requirement to\n broadcast the episodes in sequential order is an attribute of the license (that is, a restriction on how the\n customer may use the license); therefore, the only performance obligation in this contract is the single license\n to the completed Seasons 1-4.\n\n606-10- To determine whether the promised license provides the customer with a right to use its intellectual property or\n55-399D\n a right to access its intellectual property, the entity evaluates the intellectual property that is the subject of the\n license. The existing episodes have substantial standalone functionality at the point in time they are\n transferred to the customer because the episodes can be aired, in the form transferred, without any further\n participation by the entity. Therefore, the customer can derive substantial benefit from the completed episodes,\n which have significant utility to the customer without any further activities of the entity. The entity further\n observes that the existing episodes are complete and not subject to change. Thus, there is no expectation that\n the functionality of the intellectual property to which the customer has rights will change (that is, the criteria in\n paragraph 606-10-55-62 are not met). Therefore, the entity concludes that the license provides the customer\n with a right to use its functional intellectual property.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 109 of 123\n606-10- Consequently, in accordance with paragraph 606-10-55-58B, the license is a performance obligation satisfied\n55-399E\n at a point in time. In accordance with paragraphs 606-10-55-58B through 55-58C, the entity recognizes\n revenue for the license on the date that the customer is first permitted to air the licensed content, assuming\n the content is made available to the customer on or before that date. The date the customer is first permitted\n to air the licensed content is the beginning of the period during which the customer is able to use and benefit\n from its right to use the intellectual property. Because of the length of time between the entity's performance\n (at the beginning of the period) and the customer's annual payments over two years (which are\n noncancellable), the entity considers the guidance in paragraphs 606-10-32-15 through 32-20 to determine\n whether a significant financing component exists.\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014Contract Includes Two Promises\n\n606-10- Consistent with Case A, the contract provides the customer with the right to broadcast the existing episodes, in\n55-399F\n sequential order, over a period of two years. The contract also grants the customer the right to broadcast the\n episodes being produced for Season 5 once all of those episodes are completed.\n\n606-10- The entity assesses the goods and services promised to the customer. The entity concludes that there are two\n55-399G\n promised goods or services in the contract:\n aThe license to the existing episodes (see paragraph 606-10-55-399C)\n bThe license to the episodes comprising Season 5, when all of those episodes are completed.\n\n\n606-10- The entity then evaluates whether the license to the existing content is distinct from the license to the Season\n55-399H\n 5 episodes when they are completed. The entity concludes that the two licenses are distinct from each other\n and, therefore, separate performance obligations. This conclusion is based on the following analysis:\n aEach license is capable of being distinct because the customer can benefit from its right to air the\n existing completed episodes on their own and can benefit from the right to air the episodes comprising\n Season 5, when they are all completed, on their own and together with the right to air the existing\n completed content.\n bEach of the two promises to transfer a license in the contract also is separately identifiable; they do not,\n together, constitute a single overall promise to the customer. The existing episodes do not modify or\n customize the Season 5 episodes in production, and the existing episodes do not, together with the\n pending Season 5 episodes, result in a combined functionality or changed content. The right to air the\n existing content and the right to air the Season 5 content, when available, are not highly interdependent or\n highly interrelated because the entity's ability to fulfill its promise to transfer either license is unaffected by\n its promise to transfer the other. In addition, whether the customer or another licensee had rights to air the\n future episodes would not be expected to significantly affect the customer's license to air the existing,\n completed episodes (for example, viewers' desire to watch existing episodes from Seasons 1-4 on the\n customer's network generally would not be significantly affected by whether the customer, or another\n network, had the right to broadcast the episodes that will comprise Season 5).\n\n606-10- The entity assesses the nature of the two separate performance obligations (that is, the license to the existing,\n55-399I\n completed episodes of the series and the license to episodes that will comprise Season 5 when completed).\n To determine whether the licenses provide the customer with rights to use the entity's intellectual property or\n rights to access the entity's intellectual property, the entity considers the following:\n aThe licensed intellectual property (that is, the completed episodes in Seasons 1-4 and the episodes in\n Season 5, when completed) has significant standalone functionality separate from the entity's ongoing\n business activities, such as in producing additional intellectual property (for example, future seasons) or in\n promoting the show, and completed episodes can be aired without the entity's further involvement.\n bThere is no expectation that the entity will substantively change any of the content once it is made\n available to the customer for broadcast (that is, the criteria in paragraph 606-10-55-62 are not met).\n cThe activities expected to be undertaken by the entity to produce Season 5 and transfer the right to air\n those episodes constitute an additional promised good (license) in the contract and, therefore, do not\n affect the nature of the entity's promise in granting the license to Seasons 1-4.\n\n606-10- Therefore, the entity concludes that both the license to the existing episodes in the series and the license to\n55-399J\n the episodes that will comprise Season 5 provide the customer with the right to use its functional intellectual\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 110 of 123\n property as it exists at the point in time the license is granted. As a result, the entity recognizes the portion of\n the transaction price allocated to each license at a point in time in accordance with paragraphs 606-10-55-58B\n through 55-58C. That is, the entity recognizes the revenue attributable to each license on the date that the\n customer is first permitted to first air the content included in each performance obligation. That date is the\n beginning of the period during which the customer is able to use and benefit from its right to use the licensed\n intellectual property.\n\n\u00b7 \u00b7 > Example 61B\u2014Distinguishing Multiple Licenses from Attributes of a Single License\n\n606-10- On December 15, 20X0, an entity enters into a contract with a customer that permits the customer to embed\n55-399K\n the entity's functional intellectual property in two classes of the customer's consumer products (Class 1 and\n Class 2) for five years beginning on January 1, 20X1. During the first year of the license period, the customer\n is permitted to embed the entity's intellectual property only in Class 1. Beginning in Year 2 (that is, beginning\n on January 1, 20X2), the customer is permitted to embed the entity's intellectual property in Class 2. There is\n no expectation that the entity will undertake activities to change the functionality of the intellectual property\n during the license period. There are no other promised goods or services in the contract. The entity provides\n (or otherwise makes available\u2014for example, makes available for download) a copy of the intellectual property\n to the customer on December 20, 20X0.\n\n606-10- In identifying the goods and services promised to the customer in the contract (in accordance with guidance in\n55-399L\n paragraphs 606-10-25-14 through 25-18), the entity considers whether the contract grants the customer a\n single promise, for which an attribute of the promised license is that during Year 1 of the contract the customer\n is restricted from embedding the intellectual property in the Class 2 consumer products), or two promises (that\n is, a license for a right to embed the entity's intellectual property in Class 1 for a five-year period beginning on\n January 1, 20X1, and a right to embed the entity's intellectual property in Class 2 for a four-year period\n beginning on January 1, 20X2).\n\n606-10- In making this assessment, the entity determines that the provision in the contract stipulating that the right for\n55-399M\n the customer to embed the entity's intellectual property in Class 2 only commences one year after the right for\n the customer to embed the entity's intellectual property in Class 1 means that after the customer can begin to\n use and benefit from its right to embed the entity's intellectual property in Class 1 on January 1, 20X1, the\n entity must still fulfill a second promise to transfer an additional right to use the licensed intellectual property\n (that is, the entity must still fulfill its promise to grant the customer the right to embed the entity's intellectual\n property in Class 2). The entity does not transfer control of the right to embed the entity's intellectual property\n in Class 2 before the customer can begin to use and benefit from that right on January 1, 20X2.\n\n606-10- The entity then concludes that the first promise (the right to embed the entity's intellectual property in Class 1)\n55-399N\n and the second promise (the right to embed the entity's intellectual property in Class 2) are distinct from each\n other. The customer can benefit from each right on its own and independently of the other. Therefore, each\n right is capable of being distinct in accordance with paragraph 606-10-25-19(a)). In addition, the entity\n concludes that the promise to transfer each license is separately identifiable (that is, each right meets the\n criterion in paragraph 606-10-25-19(b)) on the basis of an evaluation of the principle and the factors in\n paragraph 606-10-25-21. The entity concludes that it is not providing any integration service with respect to\n the two rights (that is, the two rights are not inputs to a combined output with functionality that is different from\n the functionality provided by the licenses independently), neither right significantly modifies or customizes the\n other, and the entity can fulfill its promise to transfer each right to the customer independently of the other (that\n is, the entity could transfer either right to the customer without transferring the other). In addition, neither the\n Class 1 license nor the Class 2 license is integral to the customer's ability to use or benefit from the other.\n\n606-10- Because each right is distinct, they constitute separate performance obligations. On the basis of the nature of\n55-399O\n the licensed intellectual property and the fact that there is no expectation that the entity will undertake activities\n to change the functionality of the intellectual property during the license period, each promise to transfer one\n of the two licenses in this contract provides the customer with a right to use the entity's intellectual property\n and the entity's promise to transfer each license is, therefore, satisfied at a point in time. The entity determines\n at what point in time to recognize the revenue allocable to each performance obligation in accordance with\n paragraphs 606-10-55-58B through 55-58C. Because a customer does not control a license until it can begin\n to use and benefit from the rights conveyed, the entity recognizes revenue allocated to the Class 1 license no\n earlier than January 1, 20X1, and the revenue on the Class 2 license no earlier than January 1, 20X2.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 111 of 123\n\u00b7 > Repurchase Agreements\n\n606-10- Example 62 illustrates the guidance in paragraphs 606-10-55-66 through 55-78 on repurchase agreements.\n55-400\n\n\u00b7 \u00b7 > Example 62\u2014Repurchase Agreements\n\n606-10- An entity enters into a contract with a customer for the sale of a tangible asset on January 1, 20X7, for $1\n55-401\n million.\n\n\u00b7 \u00b7 \u00b7 > Case A\u2014Call Option: Financing\n\n606-10- The contract includes a call option that gives the entity the right to repurchase the asset for $1.1 million on or\n55-402\n before December 31, 20X7.\n\n606-10- Control of the asset does not transfer to the customer on January 1, 20X7, because the entity has a right to\n55-403\n repurchase the asset and therefore the customer is limited in its ability to direct the use of, and obtain\n substantially all of the remaining benefits from, the asset. Consequently, in accordance with paragraph 606-10-\n 55-68(b), the entity accounts for the transaction as a financing arrangement because the exercise price is\n more than the original selling price. In accordance with paragraph 606-10-55-70, the entity does not\n derecognize the asset and instead recognizes the cash received as a financial liability. The entity also\n recognizes interest expense for the difference between the exercise price ($1.1 million) and the cash received\n ($1 million), which increases the liability.\n\n606-10- On January 1, 20X7, the option lapses unexercised; therefore, the entity derecognizes the liability and\n55-404\n recognizes revenue of $1.1 million.\n\n\u00b7 \u00b7 \u00b7 > Case B\u2014Put Option: Lease\n\n606-10- Instead of having a call option, the contract includes a put option that obliges the entity to repurchase the\n55-405\n asset at the customer's request for $900,000 on or before December 31, 20X7. The market value is expected\n to be $750,000 on December 31, 20X7.\n\n606-10- At the inception of the contract, the entity assesses whether the customer has a significant economic incentive\n55-406\n to exercise the put option, to determine the accounting for the transfer of the asset (see paragraphs 606-10-\n 55-72 through 55-78). The entity concludes that the customer has a significant economic incentive to exercise\n the put option because the repurchase price significantly exceeds the expected market value of the asset at\n the date of repurchase. The entity determines there are no other relevant factors to consider when assessing\n whether the customer has a significant economic incentive to exercise the put option. Consequently, the entity\n concludes that control of the asset does not transfer to the customer because the customer is limited in its\n ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.\n\n606-10- In accordance with paragraphs 606-10-55-72 through 55-73, the entity accounts for the transaction as a lease\n55-407\n in accordance with Topic 842 on leases.\n\n\u00b7 > Bill-and-Hold Arrangements\n606-10- Example 63 illustrates the guidance in paragraphs 606-10-55-81 through 55-84 on bill-and-hold arrangements.\n55-408\n\n\u00b7 \u00b7 > Example 63\u2014Bill-and-Hold Arrangement\n\n606-10- An entity enters into a contract with a customer on January 1, 20X8, for the sale of a machine and spare parts.\n55-409\n The manufacturing lead time for the machine and spare parts is two years.\n\n606-10- Upon completion of manufacturing, the entity demonstrates that the machine and spare parts meet the\n55-410\n agreed-upon specifications in the contract. The promises to transfer the machine and spare parts are distinct\n and result in two performance obligations that each will be satisfied at a point in time. On December 31, 20X9,\n the customer pays for the machine and spare parts but only takes physical possession of the machine.\n Although the customer inspects and accepts the spare parts, the customer requests that the spare parts be\n stored at the entity's warehouse because of its close proximity to the customer's factory. The customer has\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 112 of 123\n legal title to the spare parts, and the parts can be identified as belonging to the customer. Furthermore, the\n entity stores the spare parts in a separate section of its warehouse, and the parts are ready for immediate\n shipment at the customer's request. The entity expects to hold the spare parts for two to four years, and the\n entity does not have the ability to use the spare parts or direct them to another customer.\n\n 606-10- The entity identifies the promise to provide custodial services as a performance obligation because it is a\n 55-411\n service provided to the customer and it is distinct from the machine and spare parts. Consequently, the entity\n accounts for three performance obligations in the contract (the promises to provide the machine, the spare\n parts, and the custodial services). The transaction price is allocated to the three performance obligations and\n revenue is recognized when (or as) control transfers to the customer.\n\n 606-10- Control of the machine transfers to the customer on December 31, 20X9, when the customer takes physical\n 55-412\n possession. The entity assesses the indicators in paragraph 606-10-25-30 to determine the point in time at\n which control of the spare parts transfers to the customer, noting that the entity has received payment, the\n customer has legal title to the spare parts, and the customer has inspected and accepted the spare parts. In\n addition, the entity concludes that all of the criteria in paragraph 606-10-55-83 are met, which is necessary for\n the entity to recognize revenue in a bill-and-hold arrangement. The entity recognizes revenue for the spare\n parts on December 31, 20X9, when control transfers to the customer.\n\n 606-10- The performance obligation to provide custodial services is satisfied over time as the services are provided.\n 55-413\n The entity considers whether the payment terms include a significant financing component in accordance with\n paragraphs 606-10-32-15 through 32-20.\n\n\n\n\n60 Relationships\n\n\n General Note:The Relationships Section contains links to guidance that may be helpful to, but not\n required by, a user of the Subtopic. This Section may not be all-inclusive. The relationship items are\n organized according to the Topic structure in the Codification.\n\n\n\n\n General\n > Costs Related to a Contract with a Customer\n \u00b7 > Other Assets and Deferred Costs\u2014Costs Related to a Contract with a Customer\n 606-10- For guidance on the costs related to a contract with a customer that is within the scope of this Topic, see\n 60-1\n Subtopic 340-40.\n\n\n > Revenue Recognition\n \u00b7 > Agriculture\u2014Revenue Recognition\n 606-10- For guidance on recognizing revenue from contracts that are not within scope of this Topic by entities in the\n 60-2\n agriculture industry, see Subtopic 905-605.\n\n \u00b7 > Financial Services\u2014Insurance\u2014Revenue Recognition\n 606-10- For guidance on recognizing revenue from contracts that are not within scope of this Topic by insurance\n 60-3\n entities, see Subtopic 944-605.\n\n \u00b7 > Health Care Entities\u2014Revenue Recognition\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 113 of 123\n606-10- For guidance on recognizing revenue from contracts that are not within scope of this Topic by health care\n60-4\n entities, see Subtopic 954-605.\n\n\u00b7 > Not-for-Profit-Entities\u2014Revenue Recognition\n606-10- For guidance on recognizing revenue from contracts that are not within scope of this Topic by not-for-profit\n60-5\n entities, see Subtopic 958-605.\n\n\u00b7 > Regulated Operations\u2014Revenue Recognition\n606-10- For guidance on recognizing revenue and disclosure requirements for contracts that are not within scope of\n60-6\n this Topic by entities with regulated operations, see Subtopic 980-605.\n\n\n> Provision for Losses\n\u00b7 > Software\u2014Revenue Recognition\u2014Provision for Losses\n606-10- For guidance on determining the need for a provision for losses on certain software arrangements, see\n60-7\n Subtopic 985-605.\n\n606-10- For guidance on determining the need for a provision for losses on certain reinsurance contracts, See\n60-8\n Subtopic 944-605.\n\n\u00b7 > Revenue Recognition\u2014Provision for Losses on Construction-Type and Production-Type Contracts\n606-10- For guidance on determining the need for a provision for losses for construction-type and production-type\n60-9\n contracts, see Subtopic 605-35.\n\n\u00b7 > Revenue Recognition\u2014Provision for Losses on Separately Priced Extended Warranty and Product\nMaintenance Contracts\n606-10- For guidance on recognizing a loss on separately priced extended warranty and product maintenance\n60-10\n contracts, see Subtopic 605-20.\n\n\u00b7 > Health Care Entities\u2014Commitments\n606-10- For guidance on determining whether a liability should be recognized for a continuing care retirement\n60-11\n community for its obligation to provide future services and the use of facilities to current residents, see\n Sections 954-440-25 and 954-440-35.\n\n\u00b7 > Health Care Entities\u2014Contingencies\n606-10- For guidance on determining when to recognize a loss under prepaid health care services contracts, see\n60-12\n paragraph 954-450-30-4.\n\n\u00b7 > Regulated Operations\u2014Intangibles\u2014Goodwill and Other\n606-10- For guidance on recognizing a loss on long-term power sales contracts, see paragraph 980-350-35-3.\n60-13\n\n\u00b7 > Contractors\u2014Federal Government\u2014Contract Costs\n606-10- For guidance on the presentation of a loss on a termination of a contract for default, see paragraph 912-20-25-\n60-14\n 4.\n\n\n> Interest\u2014Imputation of Interest\n606-10- For guidance on imputation of interest on contracts that are not within scope of Topic 606, see Subtopic 835-\n60-15\n 30.\n\n\n> Nonmonetary Transactions\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 114 of 123\n \u00b7 > Nonmonetary Transactions\u2014Transactions including Noncash Consideration\n\n 606-10- For guidance on nonmonetary transactions (that is, transactions including noncash consideration) in contracts\n 60-16\n that are not within scope of this Topic, see Subtopic 845-10.\n\n\n\n\n65 Transition and Open Effective Date Information\n\n\n General Note:The Transition Section contains a description of the required transition provisions and a\n list of the related paragraphs that have been modified. This Section will retain the transition content\n during the transition period. After the transition period, the transition content will be removed yet will be\n available in archived versions of the Section.\n\n\n\n\n General Related Proposed ASUs\n\n\n 606-10- Paragraph superseded on 12/14/2022 after the end of the transition period stated in Accounting Standards\n 65-1\n Updates No. 2014-09, Revenue from Contracts with Customers (Topic 606), No. 2016-08, Revenue from\n Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross\n versus Net), No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance\n Obligations and Licensing, No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope\n Improvements and Practical Expedients, No. 2016-20, Technical Corrections and Improvements to Topic 606,\n Revenue from Contracts with Customers, No. 2017-05, Other Income\u2014Gains and Losses from the\n Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance\n and Accounting for Partial Sales of Nonfinancial Assets, and No. 2020-05, Revenue from Contracts with\n Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities.\n\n\n > Transition Related to Accounting Standards Update No. 2025-\n 04, Compensation\u2014Stock Compensation (Topic 718) and Revenue from\n Contracts with Customers (Topic 606): Clarifications to Share-Based\n Consideration Payable to a Customer\n 606-10- The following represents the transition and effective date information related to Accounting Standards Update\n 65-2\n No. 2025-04, Compensation\u2014Stock Compensation (Topic 718) and Revenue from Contracts with Customers\n (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer:\n Effective date and early adoption\n aAll entities shall apply the pending content that links to this paragraph for annual reporting periods\n beginning after December 15, 2026, and interim reporting periods within those annual reporting periods.\n bEarly adoption of the pending content that links to this paragraph is permitted in an interim or annual\n reporting period in which financial statements have not yet been issued (or made available for issuance).\n If an entity adopts the pending content that links to this paragraph in an interim reporting period, it shall\n adopt the pending content as of the beginning of the annual reporting period that includes that interim\n reporting period.\n Transition method\n cAn entity shall apply the pending content that links to this paragraph using one of the following transition\n methods:\n\n 1On a modified retrospective basis through a cumulative-effect adjustment to the opening balance of\n retained earnings (or other appropriate components of equity or net assets in the statement of\n financial position) as of the beginning of the annual reporting period in which the pending content that\n links to this paragraph is adopted.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 115 of 123\n 2On a retrospective basis through a cumulative-effect adjustment to the opening balance of retained\n earnings (or other appropriate components of equity or net assets in the statement of financial\n position) as of the beginning of the first period presented in accordance with the guidance on\n accounting changes in paragraphs 250-10-45-5 and 250-10-45-8. If retrospective transition is\n applied, an entity shall use the actual outcome, if known, of a performance condition or service\n condition as of the beginning of the annual reporting period in which the pending content that links to\n this paragraph is adopted for all prior-period estimates. If the actual outcome is unknown, an entity\n shall use its estimate of the probability of achieving a service condition or performance condition as of\n the beginning of the annual reporting period of adoption for all prior-period estimates.\n Transition disclosures\n dAn entity applying the pending content that links to this paragraph in accordance with (c)(1) shall provide\n the following transition disclosures in the financial statements of both the interim reporting period (if\n applicable) and the annual reporting period of the change:\n\n 1The nature of the change in accounting principle, including an explanation of the newly adopted\n accounting principle\n\n 2The method of applying the change\n\n 3The cumulative effect of the change on retained earnings or other components of equity in the\n statement of financial position as of the annual reporting period in which the pending content that\n links to this paragraph is adopted.\n eAn entity applying the pending content that links to this paragraph in accordance with (c)(2) shall provide\n the following transition disclosures in the financial statements of both the interim reporting period (if\n applicable) and the annual reporting period of the change:\n\n 1The nature of the change in accounting principle, including an explanation of the newly adopted\n accounting principle\n\n 2The method of applying the change\n\n 3The cumulative effect of the change on retained earnings or other components of equity in the\n statement of financial position as of the beginning of the earliest period presented\n\n 4The effect of the change on income from continuing operations, net income (or other appropriate\n captions of changes in the applicable net assets or performance indicator), any other affected\n financial statement line item, and any affected per-share amounts for any prior periods retrospectively\n adjusted.\n\n\n> Transition Related to Accounting Standards Update No. 2025-\n07, Derivatives and Hedging (Topic 815) and Revenue from Contracts\nwith Customers (Topic 606): Derivatives Scope Refinements and Scope\nClarification for Share-Based Noncash Consideration from a Customer in\na Revenue Contract\n606-10- The following represents the transition and effective date information related to Accounting Standards Update\n65-3\n No. 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606):\n Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a\n Customer in a Revenue Contract:\n Effective date and early adoption\n aAll entities shall apply the pending content that links to this paragraph for annual reporting periods\n beginning after December 15, 2026, and interim reporting periods within those annual reporting periods.\n bEarly adoption of the pending content that links to this paragraph is permitted in both interim and annual\n reporting periods for which financial statements have not yet been issued or made available for issuance.\n If an entity early adopts the pending content that links to this paragraph in an interim reporting period, it\n shall apply the pending content as of the beginning of the annual reporting period that includes that\n interim reporting period. If an entity early adopts the pending content that links to this paragraph, it also\n shall early adopt the pending content that links to paragraph 815-10-65-8 simultaneously.\n Transition method\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 116 of 123\n cAn entity shall apply the pending content that links to this paragraph using one of the following transition\n methods:\n\n 1Prospectively to new contracts entered into on or after the date of adoption, including modified\n contracts accounted for as separate contracts in accordance with paragraph 606-10-25-12\n\n 2On a modified retrospective basis through a cumulative-effect adjustment to the opening balance of\n retained earnings (or other appropriate components of equity or net assets in the statement of\n financial position) as of the beginning of the annual reporting period of adoption for contracts existing\n as of the beginning of the annual reporting period of adoption.\n Transition disclosures\n dAn entity that applies the transition method in (c)(1) shall disclose the nature of and reason for the\n change in accounting principle in both the interim reporting period and the annual reporting period in\n which the entity adopts the pending content that links to this paragraph.\n eAn entity that applies the transition method in (c)(2) shall disclose the following in both the interim\n reporting period and the annual reporting period in which the entity adopts the pending content that links\n to this paragraph:\n\n 1The nature of and reason for the change in accounting principle\n\n 2The cumulative effect of the change on retained earnings or other components of equity or net\n assets in the statement of financial position as of the beginning of the annual reporting period of\n adoption.\n\n\n\n\nS00 Status\n\n\n General Note:The Status Section identifies changes to this Subtopic resulting from Accounting\n Standards Updates. The Section provides references to the affected Codification content and links to\n the related Accounting Standards Updates. Nonsubstantive changes for items such as editorial, link\n and similar corrections are included separately in Maintenance Updates.\n\n\n\n\n General\n 606-10- The following table identifies the changes made to this Subtopic.\n S00-1\n Paragraph Action Accounting Standards Update Date\n\n 606-10-S25-1 Added Accounting Standards Update No. 2017-14 11/22/2017\n 606-10-S65-1 Added Accounting Standards Update No. 2017-13 09/29/2017\n\n\n\n\nS20 Glossary\n\n\n General Note:The Master Glossary contains all terms identified as glossary terms throughout the\n Codification. Clicking on any term in the Master Glossary will display where the term is used. The\n Master Glossary may contain identical terms with different definitions, some of which may not be\n appropriate for a particular Subtopic. For any particular Subtopic, users should only use the glossary\n terms included in the particular Subtopic Glossary Section (Section 20).\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 117 of 123\n Not-for-Profit Entity\n\n An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business\n entity:\n aContributions of significant amounts of resources from resource providers who do not expect\n commensurate or proportionate pecuniary return\n bOperating purposes other than to provide goods or services at a profit\n cAbsence of ownership interests like those of business entities.\n Entities that clearly fall outside this definition include the following:\n aAll investor-owned entities\n bEntities that provide dividends, lower costs, or other economic benefits directly and proportionately to\n their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural\n electric cooperatives, and employee benefit plans.\n\n\n Public Business Entity\n\n A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit\n entity nor an employee benefit plan is a business entity.\n aIt is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial\n statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including\n other entities whose financial statements or financial information are required to be or are included in a\n filing).\n bIt is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations\n promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the\n SEC.\n cIt is required to file or furnish financial statements with a foreign or domestic regulatory agency in\n preparation for the sale of or for purposes of issuing securities that are not subject to contractual\n restrictions on transfer.\n dIt has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange\n or an over-the-counter market.\n eIt has one or more securities that are not subject to contractual restrictions on transfer, and it is required\n by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make\n them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet\n both of these conditions to meet this criterion.\n An entity may meet the definition of a public business entity solely because its financial statements or financial\n information is included in another entity's filing with the SEC. In that case, the entity is only a public business\n entity for purposes of financial statements that are filed or furnished with the SEC.\n\n Security\n\n A share, participation, or other interest in property or in an entity of the issuer or an obligation of the issuer that\n has all of the following characteristics:\n aIt is either represented by an instrument issued in bearer or registered form or, if not represented by an\n instrument, is registered in books maintained to record transfers by or on behalf of the issuer.\n bIt is of a type commonly dealt in on securities exchanges or markets or, when represented by an\n instrument, is commonly recognized in any area in which it is issued or dealt in as a medium for\n investment.\n cIt either is one of a class or series or by its terms is divisible into a class or series of shares,\n participations, interests, or obligations.\n\n\n\n\nS25 Recognition\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 118 of 123\n\n General Note:The Recognition Section provides guidance on the required criteria, timing, and location\n (within the financial statements) for recording a particular item in the financial statements. Disclosure is\n not recognition.\n\n\n\n\nGeneral\n606-10- The following is the text of Interpretive Release No. 33-10403: Updates to Commission Guidance Regarding\nS25-1\n Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement\n into the Pediatric Vaccine Stockpile or the Strategic National Stockpile.\n AGENCY: Securities and Exchange Commission.\n ACTION: Interpretation.\n SUMMARY: The Securities and Exchange Commission is publishing this interpretive release to update\n previously issued guidance with respect to accounting for sales of vaccines and bioterror\n countermeasures to the Federal Government for placement into stockpiles related to the Vaccines for\n Children Program or the Strategic National Stockpile. This update is being provided to bring existing\n guidance into conformity with Financial Accounting Standards Board's Accounting Standards Codification\n Topic 606, Revenue from Contracts with Customers. This guidance is applicable upon a registrant's\n adoption of Accounting Standards Codification Topic 606 and is applicable to all arrangements for which\n revenue is recognized in accordance with Accounting Standards Codification Topic 606.\n EFFECTIVE DATE: August 29, 2017.\n FOR FURTHER INFORMATION CONTACT: Kevin L. Vaughn, Senior Associate Chief Accountant, or\n Joseph R. Epstein, Professional Accounting Fellow, Office of the Chief Accountant, at (202) 551-5300,\n U.S. Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-6561. Inquiries\n about this interpretive release also can be directed to oca@sec.gov.\n SUPPLEMENTARY INFORMATION:\n I. Introduction\n The Securities and Exchange Commission (\u201cCommission\u201d) continues to be committed, as stated in\n previously-issued guidance (the \u201c2005 Release\u201d), FN1 to addressing any unintended consequences of\n accounting requirements that could impair the nation's ability to create and maintain sufficient supplies of\n various vaccines and bioterror countermeasures (\u201cenumerated vaccines\u201d). The Commission issued the\n 2005 Release to address questions about the timing of revenue recognition for vaccines placed into the\n Vaccines for Children Program and the Strategic National Stockpile. At the time of the 2005 Release,\n some expressed concerns that the application of generally accepted accounting principles may require\n revenue recognition to be delayed beyond the period in which the vaccine is placed in the stockpile, and\n may have an unintended consequence of causing some vaccine manufacturers to decline to participate in\n these critical stockpile programs. The Commission published the guidance in the 2005 Release to resolve\n the accounting questions. With the Financial Accounting Standards Board's (\u201cFASB\u201d) issuance of\n Accounting Standards Codification (\u201cASC\u201d) Topic 606, Revenues from Contracts with Customers (\u201cASC\n Topic 606\u201d), FN2 we are providing this updated guidance.\n\n FN1 See Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror\n Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or\n the Strategic National Stockpile, Release No. 33-8642 (Dec. 5, 2005).\n\n FN2 The International Accounting Standards Board (IASB) has also issued IFRS 15, Revenue from\n Contracts with Customers (IFRS 15). The issuance of ASC Topic 606 and IFRS 15 completes the\n joint effort by the FASB and IASB that was undertaken with the intent of improving financial reporting\n by creating converged comprehensive revenue recognition guidance for U.S. GAAP and IFRS.\n Government vaccine stockpile programs are unique in many respects. For example, the primary objective\n of purchasing the vaccines is not to take delivery for ultimate use but rather to be able to require\n immediate delivery on notice. An additional characteristic of vaccine stockpiles is the limited shelf life of\n\fCase 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 119 of 123\n the vaccines. For these and other reasons, the Commission continues to limit this guidance to the\n vaccines enumerated below.\n II. The Application of Generally Accepted Accounting Principles for Revenue Recognition to\n Vaccine Stockpiles\n The Commission historically has recognized pronouncements of the FASB as authoritative in the absence\n of any contrary determination by the Commission. FN3 In Financial Reporting Release No. 70, FN4 the\n Commission stated its determination that the FASB and its parent organization, the Financial Accounting\n Foundation, satisfied the criteria in Section 19(b) of the Securities Act of 1933 FN5 and, accordingly,\n FASB's financial accounting and reporting standards are recognized as \u201cgenerally accepted\u201d for purposes\n of the federal securities laws. As a result, registrants are required to comply with those standards in\n preparing financial statements filed with the Commission, unless the Commission provides otherwise. FN6\n\n FN3 Rule 4-01(a)(1) of Regulation S-X, 17 CFR 210.4-01(a)(1). See Accounting Series Release\n (\u201cASR\u201d) No. 150 (Dec. 20, 1973) and ASR No. 4 (Apr. 25, 1938).\n\n FN4 Policy Statement: Reaffirming the Status of the FASB as a Designated Private-Sector Standard\n Setter, Release Nos. 33-8221; 34-47743; IC-26028; FR-70 (Apr. 25, 2003) (\u201cFR-70\u201d); 68 FR 23333\n (May 1, 2003).\n\n FN5 15 U.S.C 77s(b).\n\n FN6 See FR-70; Rule 4-01(a)(1) of Regulation S-X, 17 CFR 210.4-01(a)(1).\n Although no specific guidance has been published by the FASB related to revenue recognition for vaccine\n stockpiles, the FASB has issued comprehensive revenue recognition guidance in ASC Topic 606, which\n supersedes most previous revenue recognition guidance issued by the FASB.\n In response to the new, comprehensive revenue recognition model in ASC Topic 606, simultaneous with\n publication of this release, the Commission has issued an interpretation stating FN7 that upon the\n registrant's adoption of ASC Topic 606, such registrant should no longer rely on the guidance in Securities\n Exchange Act Release No. 23507 and Accounting and Auditing Enforcement Release No. 108, In the\n Matter of Stewart Parness (\u201cAAER 108\u201d), FN8 which set forth criteria to be met in order to recognize\n revenue when delivery has not occurred. The Commission staff had previously reiterated the guidance in\n AAER 108 in Staff Accounting Bulletin (\u201cSAB\u201d) Topic 13, Revenue Recognition, which the staff is\n modifying as a result of the FASB's issuance of ASC Topic 606.\n\n FN7 Commission Guidance Regarding Revenue Recognition for Bill-and-Hold Arrangements,\n Release No. 33-10402 (Aug. 18, 2017).\n\n FN8 See In the Matter of Stewart Parness, AAER 108 (Aug. 5, 1986).\n Under ASC Topic 606, the general criteria for revenue recognition includes identifying the contract(s) with\n a customer, identifying the performance obligations in the contract, determining the transaction price,\n allocating the transaction price to the performance obligations in the contract, and recognizing revenue\n when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a\n customer. FN9 A good or service is transferred when (or as) the customer obtains control of that good or\n service and ASC Topic 606 sets forth indicators of when control has been transferred. FN10\n\n FN9 See ASC paragraph 606-10-05-4.\n\n FN10 See ASC paragraphs 606-10-25-23 through 25-30.\n ASC Topic 606 also provides specific guidance on contracts under which an entity bills a customer for a\n product but the entity retains physical possession of the product until it is transferred to the customer at a\n point in time in the future (i.e., a bill-and-hold arrangement). FN11 Topic 606 acknowledges that, for some\n contracts, a customer may obtain control of a product even though that product remains in an entity's\n physical possession. FN12 In order to recognize revenue in a bill-and-hold arrangement, Topic 606 requires\n consideration of the indicators of when control has been transferred and sets forth additional criteria to be\n met. FN13\n\n FN11 See ASC paragraphs 606-10-55-81 through 55-84.\n\n FN12 See ASC paragraph 606-10-55-82.\n\n FN13 See ASC paragraph 606-10-55-83.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 120 of 123\n III. Updated Commission Guidance\n The Commission believes vaccine manufacturers should recognize revenue and provide the disclosures\n required under ASC Topic 606 when vaccines are placed into Federal Governmental stockpile programs\n because control of the enumerated vaccines will have been transferred to the customer and the criteria to\n recognize revenue in a bill-and-hold arrangement under ASC Topic 606 will have been met.\n The following are the enumerated vaccines subject to this release:\n\n \u2022 Childhood disease vaccines;\n\n \u2022 Influenza vaccines; and\n\n \u2022 Other vaccines and countermeasures sold to the Federal Government for placement in the Strategic\n National Stockpile.\n Due to the uniqueness of the vaccine stockpile programs as discussed above, this interpretative guidance\n is not applicable to transactions other than the sales of enumerated vaccines by vaccine manufacturers.\n Prior to a registrant's adoption of ASC Topic 606, the guidance contained in the 2005 Release is still\n applicable to all arrangements for which revenue is recognized.\n List of Subjects\n 17 CFR Parts 231, 241, and 271\n Securities.\n Amendments to the Code of Federal Regulations\n For the reasons set out in the preamble, the Commission is amending Title 17, chapter II of the Code of\n Federal Regulations as set forth below:\n PART 231 - INTERPRETATIVE RELEASES RELATING TO THE SECURITIES ACT OF 1933 AND\n GENERAL RULES AND REGULATIONS THEREUNDER\n Part 231 is amended by adding Release No. 33-10403 and the release date of August 18, 2017 to the list\n of interpretive releases.\n PART 241 - INTERPRETATIVE RELEASES RELATING TO THE SECURITIES EXCHANGE ACT OF\n 1934 AND GENERAL RULES AND REGULATIONS THEREUNDER\n Part 241 is amended by adding Release No. 34-81429 and the release date of August 18, 2017 to the list\n of interpretive releases.\n PART 271 - INTERPRETATIVE RELEASES RELATING TO THE INVESTMENT COMPANY ACT OF\n 1940 AND GENERAL RULES AND REGULATIONS THEREUNDER\n Part 271 is amended by adding Release No. IC-32785 and the release date of August 18, 2017 to the list\n of interpretive releases.\n By the Commission.\n Dated: August 18, 2017\n Jill M. Peterson\n Assistant Secretary\n\n\n\n\nS65 Transition and Open Effective Date Information\n\n\n General Note:The Transition Section contains a description of the required transition provisions and a\n list of the related paragraphs that have been modified. This Section will retain the transition content\n during the transition period. After the transition period, the transition content will be removed yet will be\n available in archived versions of the Section.\n\n\n\n\n General\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 121 of 123\n> SEC Staff Guidance\n\u00b7 > SEC Staff Announcement: Transition Related to Accounting Standards Updates No. 2014-09 and 2016-\n02\n\n606-10- The following is the text of SEC Staff Announcement: Transition Related to Accounting Standards Updates No.\nS65-1\n 2014-09 and 2016-02.\n FASB Accounting Standards Updates No. 2014-09, Revenue from Contracts with Customers (Topic 606),\n issued in May 2014 and codified in ASC Topic 606, Revenue from Contracts with Customers, and No.\n 2016-02, Leases (Topic 842), issued in February 2016 and codified in ASC Topic 842, Leases, provide\n effective dates that differ for (1) public business entities and certain other specified entities and (2) all\n other entities. The SEC staff has received inquiries from stakeholders regarding the application of the\n effective dates of ASC Topic 606 and ASC Topic 842 for a public business entityFN1 that otherwise would\n not meet the definition of a public business entity except for a requirement to include or the inclusion of its\n financial statements or financial information in another entity's filing with the SEC.\n The transition provisions in ASC Topic 606 require that a public business entity and certain other specified\n entities adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2017, including\n interim reporting periods within that reporting period. FN2 All other entities are required to adopt ASC Topic\n 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within\n annual reporting periods beginning after December 15, 2019.\n The transition provisions in ASC Topic 842 require that a public business entity and certain other specified\n entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods\n within those fiscal years. FN3 All other entities are required to adopt ASC Topic 842 for fiscal years\n beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15,\n 2020.\n In response to the stakeholder inquiries outlined above, the SEC staff would not object to a public\n business entity that otherwise would not meet the definition of a public business entity except for a\n requirement to include or the inclusion of its financial statements or financial information in another entity's\n filing with the SEC adopting (1) ASC Topic 606 for annual reporting periods beginning after December 15,\n 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019,\n and (2) ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within\n fiscal years beginning after December 15, 2020.\n A public business entity that otherwise would not meet the definition of a public business entity except for\n a requirement to include or the inclusion of its financial statements or financial information in another\n entity's filing with the SEC may still elect to adopt ASC Topic 606 and ASC Topic 842 according to the\n public business entity effective dates outlined above.\n This announcement is applicable only to public business entities that otherwise would not meet the\n definition of a public business entity except for a requirement to include or the inclusion of its financial\n statements or financial information in another entity's filing with the SEC. This announcement is not\n applicable to other public business entities.\n FN 1 The definition of Public Business Entity in the FASB's ASC Master Glossary states, in part, the\n following:\n\n A public business entity is a business entity meeting any one of the criteria below . . .\n aIt is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial\n statements, or does file or furnish financial statements (including voluntary filers), with the SEC\n (including other entities whose financial statements or financial information are required to be or\n are included in a filing) . . .\n\n An entity may meet the definition of a public business entity solely because its financial statements or\n financial information is included in another entity's filing with the SEC. In that case, the entity is only a\n public business entity for purposes of financial statements that are filed or furnished with the SEC.\n FN 2 Early adoption of ASC Topic 606 is permitted for public business entities and certain other specified\n entities only as of annual reporting periods beginning after December 15, 2016, including interim reporting\n periods within that reporting period.\n\fCase 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 122 of 123\n FN 3 Early adoption of ASC Topic 842 is permitted for public business entities and certain other specified\n entities, as well as for all other entities.\n\f Case 1:25-cv-00541-JAV Document 70-13 Filed 11/20/25 Page 123 of 123\n\n\nCopyright\nCopyright \u00a9 2025 by Financial Accounting Foundation. All rights reserved. Certain portions may\ninclude material copyrighted by American Institute of Certified Public Accountants. Content\ncopyrighted by Financial Accounting Foundation, or any third parties who have not provided specific\npermission, may not be reproduced, stored in a retrieval system, or transmitted, in any form or by any\nmeans, electronic, mechanical, photocopying, recording, or otherwise, without the prior written\npermission of Financial Accounting Foundation or such applicable third party. Financial Accounting\nFoundation claims no copyright in any portion hereof that constitutes a work of the United States\nGovernment.\n\f","ocr_status":1,"date_upload":"2026-05-12T04:15:46.805602-07:00","document_number":"70","attachment_number":13,"pacer_doc_id":"127038602957","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit M - FASB ASC Topic 606","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874414/","id":478874414,"tags":[],"absolute_url":"/docket/69558488/70/14/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.557260-07:00","date_modified":"2026-05-14T07:11:46.104005-07:00","sha1":"b2c8084cae167880e33d84e901ef5b38c61077ca","page_count":13,"file_size":279482,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.14.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.14.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 1 of 13\n\n\n\n\n Exhibit N\n\f Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 2 of 13\n\n\n November 27, 2024\n\nVIA EDGAR\n\nBlaise Rhodes and Rufus Decker\nDivision of Corporation Finance\nOffice of Trade & Services\nU.S. Securities and Exchange Commission\n100 F Street, NE\nWashington, DC 20549-4631\n\nRe: FTAI Aviation Ltd.\n Form 10-K for Fiscal Year Ended December 31, 2023\n Item 2.02 Form 8-K filed July 24, 2024\n File No. 001-37386\n\nDear Messrs. Rhodes and Decker,\n\n On behalf of FTAI Aviation Ltd. (the \u201cCompany\u201d or \u201cFTAI\u201d), the undersigned submits this letter in response to a comment\nfrom the staff (the \u201cStaff\u201d) of the U.S. Securities and Exchange Commission (the \u201cCommission\u201d) received by letter, dated\nNovember 5, 2024 (the \u201cComment Letter\u201d), relating to the Company\u2019s Annual Report on Form 10-K for the fiscal year ended\nDecember 31, 2023 (the \u201c10-K\u201d) and Item 2.02 of Form 8-K filed July 24, 2024 (the \u201c8-K\u201d). To facilitate your review, the\nundersigned has reproduced the text of the Staff\u2019s comment in italics below, and the heading and comment number in this letter\ncorrespond to the heading and comment number in the Comment Letter. In addition, capitalized terms used but not defined herein\nshall have the meanings assigned to such terms in the 10-K and 8-K, as applicable.\n\nForm 10-K for Fiscal Year Ended December 31, 2023\n\nManagement\u2019s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations, page\n32\n\n 1. Please substantially revise both your consolidated and segment results of operations discussions to disclose in greater detail the\n underlying business reasons for material changes between periods in each line item. In circumstances where there are more than one\n underlying business reason for the change, quantify the incremental impact of each individual reason discussed on the overall change\n in the line item. Refer to Item 303 of Regulation S-K.\n\n Response\n\n The Company respectfully acknowledges the Staff\u2019s comment. In future quarterly and annual reports, for all periods\n presented, the Company confirms that it will disclose in greater detail the underlying business reasons for material changes\n between periods in each line item and, in circumstances where there are two or more underlying business reasons for such\n material changes, will quantify the incremental impact of each factor. The Company has included additional qualitative and\n quantitative disclosure in its Form 10-Q for the quarter ended September 30, 2024, filed on November 12, 2024. See\n Item 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations on pages 37-50.\n\nConsolidated Balance Sheets, page 53\n\n 2. Please disclose total current assets and total current liabilities for all periods presented. Refer to Rules 5-02.9 and .21 of Regulation S-\n X.\n\f Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 3 of 13\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nNovember 27, 2024\nPage 2\n\n Response\n\n The Company respectfully acknowledges the Staff\u2019s comment and will disclose total current assets and total current\n liabilities for all periods presented in the Consolidated Balance Sheets beginning with its Form 10-K filing for the year\n ended December 31, 2024.\n\nConsolidated Statements of Operations, page 54\n\n 3. Please present cost of tangible goods sold, expenses applicable to rental income, cost of services and expenses applicable to other\n revenues separately. Refer to Rule 5-03.2 of Regulation S-X.\n\n\n Response\n\n The Company respectfully acknowledges the Staff\u2019s comment. Cost of sales is primarily comprised of the net book values\n of leasing equipment sold and cost of inventory sold. The expenses applicable to rental income are immaterial for separate\n disclosure for the years ended December 31, 2023, 2022 and 2021. We had no cost of services in the periods presented.\n The significant cost associated with lease income is the depreciation of leasing equipment. This cost is included in\n depreciation and amortization, which is separately shown on the Statements of Operations. In future filings, the Company\n will indicate that cost of sales excludes depreciation and amortization.\n\n The Company will continue to monitor the materiality of expenses applicable to rental income and the cost of services and,\n if material, update the Statements of Operations in accordance with Rule 5-03.2 of Regulation S-X.\n\n 4. Please include gain on sale of assets, net in the same area of the statements of operations as your operating items. Also, include interest\n expense in the same area of the statements of operations as your non-operating items. Refer to Rules 5-03.3 through .9 of Regulation S-X\n and ASC 360-10-45-5.\n\n Response\n\n The Company respectfully acknowledges the Staff\u2019s comment and will update the presentation of the Statements of\n Operations in all future filings, beginning with its Form 10-K filing for the year ended December 31, 2024, to show gain on\n sale of assets, net in the same area as its other operating items within the Total expenses line. Additionally, the Company\n updated the presentation of the Statements of Operations in its Form 10-Q filing for the quarter ended September 30,\n 2024 that was filed on November 12, 2024, to show interest expense in the same area as its other income (expense) line\n items and will continue to do so in all future filings.\n\nConsolidated Statements of Cash Flows, page 58\n\n 5. Please disclose in greater detail the nature of each non-cash activity shown in the supplemental disclosures. The revised disclosures\n should clearly discuss both sides of the non-cash transactions, so that it is transparent why the transactions are non-cash. For the\n transfers from leasing equipment, please also disclose the asset category to which the transfers were made and the circumstances\n surrounding the transfers. Also, tell us whether these assets were still under lease at the time of transfer and quantify the amounts for\n each period presented. Next, tell us and disclose whether the later cash inflows from the sale/disposition of leasing equipment\n transferred to inventory are included in investing activities or operating activities. If these later cash inflows are not included in\n investing activities, explain in detail how your inconsistent classification for the cash outflows and cash inflows complies with GAAP.\n For all cash inflows included in operating activities related to leasing equipment transferred to inventory, tell us the amounts for each\n period presented, including 2024 interim periods. If there have been transfers from inventory to leasing equipment or other long-lived\n assets, provide revised disclosures presenting this non-cash activity separately and include a similar GAAP analysis with quantification\n of cash inflows included in investing activities related the sale/disposition of inventory transferred to leasing equipment or other long-\n lived assets. Finally, disclose in a footnote your accounting policy for cash inflows and cash outflows related to each category of\n transferred assets (before transfer and after transfer). Refer to ASCs 230-10-45-22 and 45-22A.\n\f Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 4 of 13\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nNovember 27, 2024\nPage 3\n\n Response: The Company respectfully acknowledges the Staff\u2019s comment. For purposes of responding to the different\n components of the comment, the Company has separated its response into five sections:\n\n a) Non-cash activity in the supplemental disclosures\n b) Background and accounting policy for transfers of engines from leasing equipment to inventory\n c) Background and accounting policy for transfers of modules and parts from inventory to leasing equipment\n d) Quantification of the requested amounts by reporting period\n e) Financial statement disclosures\n\n (a) Non-cash activity in the supplemental disclosures\n\n Included below is an excerpt from the Company\u2019s Form 10-K for the year ended December 31, 2023 (\u201c2023 Form 10-\n K\u201d) specific to supplemental disclosures of non-cash investing and financing. The material components are explained in\n greater detail below. Please see (e) below for clarifying disclosures the Company plans to provide in future filings.\n\n Supplemental disclosure of non-cash investing Note Year ended Year ended Year ended\n and financing activities as disclosed in the 2023 December December December\n Form 10-K: (in thousands) 31, 2021 31, 2022 31, 2023\n Acquisition of leasing equipment A $ (44,552) $ (74,706) $ (105,313)\n Acquisition of property, plant and equipment Immaterial* (581) - (699)\n Transfers from leasing equipment B 91,266 121,855 224,218\n Security deposits, maintenance deposits, other assets and other\n liabilities settled in the sale of leasing equipment C 400 18,385 24,116\n Settled and assumed security deposits D (4,041) (6,774) 823\n Billed, assumed and settled maintenance deposits E (21,710) (47,933) (18,907)\n Non-cash change in equity method investment F (129,907) (182,963) -\n Conversion of interests in unconsolidated entities G - (21,302) -\n Issuance of ordinary shares Immaterial* 455 399 924\n* The Company intends to remove these immaterial amounts in its disclosures in the 2024 Form 10-K\n\n (A) Acquisition of leasing equipment includes the following material activities (Note 1):\n - Receipt of leasing equipment, unrelated to the Company\u2019s leasing equipment under lease, in lieu of cash payment to settle\n outstanding receivables due from lessees\n - Acquisition of leasing equipment in accrued liabilities\n - Purchase deposits reclassified to leasing equipment from other assets upon acquisition\n\n (B) Transfers from leasing equipment includes the following material activities:\n - Transfers from leasing equipment to inventory for the teardown of engines (with the intent to manufacture new assets for sale as\n further discussed below), offset by transfers from inventory to leasing equipment for modules and parts used to rebuild full\n engines. Refer to sections (b) and (c) of our response below for further detail and explanation of our accounting policies and\n section (e) of our response below for further detail on revised disclosures, including presentation of this activity on a gross basis in\n future filings\n\f Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 5 of 13\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nNovember 27, 2024\nPage 4\n - Engine exchanges provided to aircraft lessees in lieu of cash reimbursements of maintenance deposits\n - Receipt of notes receivable from customers in connection with the sale of leasing equipment. Cash received under the notes\n receivable is recorded as an inflow within net cash used in investing activities\n\n (C) Security deposits, maintenance deposits, other assets and other liabilities settled in the sale of leasing equipment with customers (Note\n 1)\n\n (D) Settled and assumed security deposits includes the following activities (Note 1):\n - Decrease in security deposit liabilities when used to settle outstanding receivables due from lessees\n\n (E) Billed, assumed and settled maintenance deposits includes the following activities (Note 1):\n - Decrease in maintenance deposits resulting from engine exchanges provided to lessees in lieu of cash reimbursements\n - Decrease in maintenance deposit liabilities when used to settle outstanding receivables due from lessees\n - Decrease in maintenance deposits related to non-recurring events associated with Russia and Ukraine, as disclosed in Footnote 4\n of the 2022 Form 10-K\n\n (F) Non-cash change in equity method investment includes:\n - Changes in equity method investment related to the change in the fair value of non-hedge derivatives held by the equity method\n investment (included in discontinued operations)\n\n (G) Conversion of interests in unconsolidated entities includes:\n - Conversion of equity and credit agreements into new equity interests of unconsolidated entities (included in discontinued\n operations)\n\nNote 1 (amounts in thousands) - Within the 2023 Form 10-K, these non-cash line items also included certain activity\nassociated with the acquisition and disposal of leasing equipment. The Company removed this activity, primarily related\nto maintenance and security deposit liabilities, from the change in the relevant financial statement line items and included\nthe activity on the line items above in its cash flow presentation. The cash paid for acquisitions is included in \u201cAcquisition\nof leasing equipment\u201d and the cash received for the sale of assets is included in \u201cProceeds from sale of leasing\nequipment\u201d. For acquisitions, maintenance and security deposit liabilities assumed were $24,506, $49,545 and $40,530\nfor the years ended December 31, 2021, 2022 and 2023, respectively. For disposals, maintenance and security deposit\nliabilities derecognized were $(218), $(25,540) and $(10,282) for the years ended December 31, 2021, 2022 and 2023,\nrespectively. In all future filings, beginning with the 2024 Form 10-K, the Company intends to disclose this activity within\nits leasing equipment footnote (FN5 in 2023 Form 10-K).\n\n (b) Transfers of engines from leasing equipment to inventory\n\n Transfers of engines from leasing equipment to inventory are only made when the engines are not on lease. The Company\u2019s\n aerospace products business focuses on the manufacturing and sale of new assets through the use of inventory purchased\n from third parties and salvaged modules and parts from generally unserviceable engines. The Company invests significant\n costs, often over multiple reporting periods, through the purchase of inventory and capitalizable labor (e.g., engineering)\n accounted for under ASC 330 to manufacture these modules and parts into a salable condition as new assets. These costs\n are reflected in net cash (used in) provided by operating activities as components of the changes in inventory.\n\f Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 6 of 13\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nNovember 27, 2024\nPage 5\n\n\n In assessing the appropriate classification of cash inflow from the sale of modules and parts from engines originally\n classified as leasing equipment that were transferred to inventory, the Company assessed the guidance in ASC 230-10-45-\n 22 and ASC 230-10-45-22A. The Company acknowledges that ASC 230 indicates that when an asset is purchased as\n an investing outflow, the sale of the asset should follow this classification as an investing inflow. This guidance applies\n directly to the Company\u2019s engine sales, as explained further in section (c) of this response, but the Company believes that\n the guidance in ASC 230 is not specific to its fact pattern for module and part sales. Given the significant effort made and\n costs incurred to manufacture the modules and parts, from both a qualitative and quantitative perspective, the Company\n believes new assets are created when they are substantially different from the original assets (the engines). As such, the\n Company believes that the cash inflow related to the sales of modules and parts, when certain conditions are met\n (discussed below), should be reported as an operating cash inflow to match the cash outflows used to manufacture the\n new assets.\n\n The Company has outlined the key considerations and assumptions in its analysis in applying the provisions of ASC 230:\n\n - Specific guidance: Given the substantial amount of costs incurred to manufacture new assets, the Company believes that there is no\n specific guidance in ASC 230 or other applicable GAAP accounting standards on the classification of cash receipts of this nature.\n - Multiple classes of cash outflows: The cash receipts are related to more than one class of cash outflow and cannot be separated into\n distinct, identifiable sources of cash. This requires the Company to classify the inflows based on judgment on the predominant use of\n cash to generate the asset that is sold.\n - Applicability of ASC 230 predominance assessment: A determination was made that a new asset is created based on the extent of\n effort and costs incurred to manufacture new assets in the aerospace products business. Predominance is assessed based on the\n extent of costs incurred to create the new assets in combination with qualitative factors.\n - Unit of account for assessment: The assessment of predominance of cash outflows is performed at the original engine level, which\n aligns with the unit of account for the original outflow.\n - Predominance assessment calculation: When the costs to manufacture the new assets are quantitatively greater than (i.e.,\n predominant to) the estimated value transferred from leasing equipment into inventory, the related cash receipt is recorded as a cash\n inflow in operating activities. If the costs to manufacture the new assets is not greater than the estimated value transferred from\n leasing equipment, the related cash receipt is recorded as a cash inflow in investing activities.\n\n To provide further background on the aerospace business processes that supports the view that new assets are created,\n the following key qualitative factors were considered in the Company\u2019s judgment and approach:\n\n The Company began its aerospace products business in 2021 to create new assets through the combination of\n new parts and materials, engineering labor, and modules and parts sourced from engines used in its aviation leasing\n business. Specifically, engines were transferred to inventory when determined to be unserviceable for leasing\n purposes with the intent to tear down the asset into salvageable components that would be manufactured into new\n modules and parts and sold. The new assets sold are fundamentally different from the original engine, noting the\n following key qualitative factors:\n\n (1) The strategic sourcing of modules and parts and the disassembly process creates new assets.\n a. The Company strategically acquires modules and parts for future applications, which are recorded as inventory. The\n purchased modules and parts are utilized to enhance, transform, and reconfigure modules and parts from engines\n sourced from leasing equipment into new assets based on market demand. This strategy formed the basis of the\n Company\u2019s aerospace products business / operating segment.\n\f Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 7 of 13\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nNovember 27, 2024\nPage 6\n b. Inventory consumed in the creation of new assets includes purchased modules and parts from third parties and modules\n and parts from previously leased engines, as well as labor and overhead capitalized in connection with the\n manufacturing of the new assets.\n c. Once an engine is disassembled, the individual components are refurbished and typically require significant effort and\n costs to create the new asset.\n\n (2) Extensive processes to reconfigure and manufacture new recertified assets are followed using a variety of components and\n labor.\n a. When an engine is disassembled into modules and parts, the assets are unusable until they are manufactured,\n inspected, and certified as a standalone asset by certified inspectors and adhering to strict quality guidelines. The\n recertified assets are comprised of parts from numerous other engines as well as parts sourced from third parties and\n labor costs incurred throughout the process.\n b. This intricate extensive process accomplishes a proprietary suite of modifications enabling the asset to be used across\n multiple engine models, effectively altering the utility of these modules and parts when compared to the original engine.\n (3) The Company expends significant costs when creating the new assets, which are cash outflows for operating activities to\n build inventory.\n a. During the processes outlined in item (2), substantial costs are incurred for purchases of new parts and raw materials\n (sourced from third parties), and related repair costs and labor to manufacture the new asset for resale.\n b. During the processes, highly trained and licensed engineers are utilized, and significant material is needed, resulting in\n significant new costs. These costs arise from the following procedures: (i) machining/metal additions/manipulation, (ii)\n welding (metal additions and joining) and (iii) surface engineering and layer production, among others.\n c. These procedures are required to recertify and allow the asset into service. Given the potential harsh operating\n conditions of these assets, engineers must manufacture critical sections of the assets with new parts and raw materials\n to ensure their proper functioning (these efforts are not just a simple effort of putting a basic item back together). The\n most critical parts of the asset are essential in ensuring the asset\u2019s airworthiness for future use.\n d. The incremental costs and efforts discussed above are substantial and are recorded as operating cash outflows to\n manufacture the new asset inventory.\n\n\n The Company continues to invest in its aerospace business, as it has recently closed on the acquisition of two\n manufacturing facilities - QuickTurn Engine Center in December 2023 and Lockheed Martin Commercial Engine Solution\n in September 2024. The Company expects this business to increase as the demand for these new assets is growing.\n\n Additionally, the Company considered the applicable topics in the AICPA Airline Guide, which describe activities that\n extend the useful life of an aircraft and are capitalizable and activities that represent maintenance that are expensed as\n incurred. In consideration of this guidance, the Company believes the activities undertaken to refurbish/rebuild parts and\n modules for resale most closely align to those noted to extend the useful life of those assets and therefore result in new\n assets (i.e., substantially different from those components sourced from equipment previously on lease).\n\f Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 8 of 13\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nNovember 27, 2024\nPage 7\n (c) The transfer of modules and parts from inventory to leasing equipment\n\n\n Transfers of modules and parts from inventory to leasing equipment typically occur when modules or parts are used in the\n rebuild process for a full engine. For any engine sales, the related cash receipt is recorded as an inflow in net cash (used in)\n provided by investing activities on the basis that a new asset is not created in this fact pattern.\n\n Therefore, the cash inflow upon the sale of an engine is consistent with the original cash outflow activity, as that was the\n predominant source of the related cash flows.\n\n (d) Quantification of amounts noted in (b) and (c) above\n\n Cash received for sale of assets sourced from leasing equipment with inflows included in cash (used in) provided by\n operating activities were as follows (in thousands):\n\n Year ended Year ended Year ended 3 months 6 months 9 months\n December December December ended March ended June ended Sept\n 31, 2021 31, 2022 31, 2023 31, 2024 30, 2024 30, 2024\nCash received for sale of assets sourced\n from leasing equipment - inflow\n included in cash (used in) provided\n by operating activities $ 13,364 $ 43,859 $ 94,222 $ 20,050 $ 38,461 $ 56,670\n\n\n Non-cash transfers from leasing equipment to inventory were as follows (in thousands).\n\n Year ended Year ended Year ended 3 months 6 months 9 months\n December December December ended March ended June ended Sept\n 31, 2021 31, 2022 31, 2023 31, 2024 30, 2024 30, 2024\nNon-cash transfers from leasing\n equipment to inventory $ 49,298 $ 127,349 $ 178,740 $ 32,429 $ 70,897 $ 143,678\n\n\n As outlined above, the sale of leasing equipment is classified as investing inflows, consistent with the original classification\n of the asset purchase. Cash received from sales of leasing equipment that includes components (e.g., parts) purchased\n from third parties and initially recorded as inventory as an operating outflow, was as follows (in thousands):\n\n Year ended Year ended Year ended 3 months 6 months 9 months\n December December December ended March ended June ended Sept\n 31, 2021 31, 2022 31, 2023 31, 2024 30, 2024 30, 2024\nCash received for sale of leasing\n equipment that includes components\n sourced from inventory - inflow\n included in cash used in investing\n activities $ 7,190 $ 118,735 $ 79,474 $ 39,649 $ 114,455 $ 225,692\nNote that these cash inflows are included in the Proceeds from sale of leasing equipment within the investing activities\nsection of the Consolidated Statements of Cash Flows in the 2023 Form 10-K and are comprised of the sales of aircraft as\nwell as engines.\n\n (e) Additional financial statement disclosures the Company intends to include in the 2024 Form 10-K\n\n\n As noted earlier in the response, the Company plans to include revised disclosures in the upcoming 2024 Form 10-K.\n Relative to the 2023 Form 10-K, the substantive updates planned can be summarized as follows:\n\f Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 9 of 13\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nNovember 27, 2024\nPage 8\n - Non-cash activity: Clarifying disclosure of non-cash activity, as noted in section (a) of the response and expanded on further below.\n This includes enhancements to the nomenclature of line-item descriptions that are expected to provide clearer disclosure of material\n non-cash activity to the readers of the financial statements.\n - Accounting policies: Qualitative disclosure of the Company\u2019s GAAP accounting policies for cash flow classification, as outlined in\n detail in sections (b) and (c) of the response\n - Other quantitative disclosures: Quantitative disclosure of non-cash and cash activity, including but not limited to the information\n included in section (d) of the response\n\n Supplemental non-cash investing and financing disclosures:\n In the Form 10-Q for the quarter ended September 30, 2024, the Company enhanced its supplemental disclosure of non-\n cash investing and financing activities on both the face of the Consolidated Statements of Cash Flows and Footnote 2 -\n Summary of Significant Accounting Policies. In an effort to make clearer disclosures of material non-cash activities, the\n Company intends to include the following captions in the non-cash supplemental section on the face of the Consolidated\n Statements of Cash Flows in the 2024 Form 10-K and future filings. The notes provided below are for the Staff\u2019s\n reference to connect the line to the non-cash items in 2023 Form 10-K explained above.\n\n Year ended Year ended Year ended\n December December December\n (in thousands) Note 31, 2022 31, 2023 31, 2024\n Receipt of notes receivable in connection with the sale of aircraft and engines A $ 16,463 $ 46,654 []\n Acquisition of leasing equipment in accrued liabilities B (15,570) (8,962) []\n Receipt of leasing equipment in settlement of accounts receivable B - (14,250) []\n Purchase deposits reclassified to leasing equipment from other assets upon\n acquisition B (13,658) (6,371) []\n Decrease in leasing equipment for engines provided to aircraft lessees in lieu of\n cash reimbursements of maintenance deposits C 6,108 10,970 []\n Accounts receivable settled with security deposits D (13,461) (6,050) []\n Accounts receivable settled with maintenance deposits E (9,358) (1,856)\n Non-cash change in equity method investment F (182,963) - []\n Conversion of interests in unconsolidated entities F (21,302) - []\n\n (A) Previously included as a component of \u201cTransfers from leasing equipment\u201d line item in the 2023 Form 10-K\n (B) Previously included as a component of \u201cAcquisition of leasing equipment\u201d line item in the 2023 Form 10-K\n\f Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 10 of 13\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nNovember 27, 2024\nPage 9\n (C) Previously included as a component of \u201cTransfers from leasing equipment\u201d and \u201cBilled, assumed and settled maintenance deposits\u201d\n in the 2023 Form 10-K\n (D) Previously included as a component of \u201cSettled and assumed security deposits\u201d in the 2023 Form 10-K\n (E) Previously included as a component of \u201cBilled, assumed and settled maintenance deposits\u201d in the 2023 Form 10-K\n (F) No changes to presentation in 2023 Form 10-K\n\n\n Accounting policies\n\n In the Form 10-Q for the quarter ended September 30, 2024, the Company enhanced its accounting policy disclosures in\n footnote 2, Summary of Significant Accounting Policies - Cash Flow Presentation, to include the policies for the cash\n inflows and cash outflows associated with the sale of engine modules and parts that were on engines originally purchased\n and reported as leasing equipment. The Company will include this disclosure in its 2024 Form 10-K and future filings.\n\n The Company believes that this expanded disclosure below will comply with the guidance in ASC 230-10-45-22 and 45-\n 22A and provide useful information to the readers of the financial statements.\n\n Other quantitative disclosures to be added\n\n In the Form 10-Q for the quarter ended September 30, 2024, the Company also enhanced its quantitative disclosures of\n cash inflows and cash outflows associated with the sale of engine modules and parts that were on engines originally\n purchased and reported as leasing equipment. The Company will include this disclosure in its 2024 Form 10-K and future\n filings. In addition, the Company intends to expand its disclosures to include the cash received for sale of leasing equipment\n that include components sourced from inventory - inflow included in cash used in investing activities, which is included in\n the last line of the table below.\n\n Year ended Year ended Year ended\n December 31, December 31, December 31,\n (in thousands) 2022 2023 2024\n Cost of modules and parts sold sourced from engines originally within leasing equipment $ 36,946 $ 41,167 $ []\n Transfers of engines from leasing equipment to inventory for manufacturing and sale 127,349 178,740 []\n Transfers of inventory to leasing equipment for rebuilding and sale of engines (89,041) (78,788) []\n Total outflows related to manufacturing modules and parts - included in net cash (used in)\n provided by operating activities (101,249) (138,045) []\n Cash received for assets sold sourced from leasing equipment - inflow included in cash\n (used in) provided by operating activities 43,859 94,222 []\n Cash received for sales of leasing equipment that include components sourced from\n inventory - inflow included in cash used in investing activities 118,735 79,474\n\n\nNote 11. Income Taxes, page 76\n\n 6. Please disclose for each period presented the amounts of domestic and foreign pre-tax income. Refer to Rule 4-08(h)(1) of Regulation S-\n X.\n\f Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 11 of 13\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nNovember 27, 2024\nPage 10\n\n Response\n\n The Company respectfully acknowledges the Staff\u2019s comment. The Company will include the disclosure required by Rule\n 4-08(h)(1) of Regulation S-X in future filings, beginning with its Form 10-K filing for the year ended December 31, 2024,\n similar to the table below for the years ended December 31, 2023, 2022 and 2021.\n\n The components of (loss) income before income taxes are as follows (in thousands):\n\n Years ended December 31,\n 2021 2022 2023\n Cayman Islands $ (236) $ (247) $ (282)\n Foreign (39,499) (105,064) 184,299\n (Loss) income before income taxes $ (39,735) $ (105,311) $ 184,017\n\n\nNote 13. Segment Information, page 80\n\n 7. Please disclose the amounts of revenues and long-lived assets for each individual country that is material. Refer to ASC 280-10-50-41.\n\n\n Response\n\n The Company respectfully acknowledges the Staff\u2019s comment. The United States represented 47% and 44% of total\n revenues for the years ended December 31, 2023 and 2022, respectively, based on the location of its customers and\n lessees. The United States, United Arab Emirates, and Ireland represented 18%, 13%, and 11% of total revenues,\n respectively, for the year ended December 31, 2021 based on the location of its customers and lessees. No other country\n represented more than 10% of total revenues for these years.\n\n The United States and Italy each represented 17% of long-lived assets as of December 31, 2023, and represented 20%\n and 18% of long-lived assets, respectively, as of December 31, 2022, based on the location of the customer for assets on-\n lease or the location of assets off-lease.\n\n The Company will disclose in all future filings, beginning with its Form 10-Q filing for the quarter ended September 30,\n 2024, that was filed on November 12, 2024, any individual country that is material per ASC 280-10-50-41.\n\nItem 2.02 Form 8-K filed July 24, 2024\n\nExhibit 99.1\nBusiness Highlights, page 1\n\n 8. Please present net income (loss) attributable to shareholders for your aerospace products segment, when adjusted EBITDA for your\n aerospace products segment is presented. Also, provide a reconciliation between the amounts.\n\n Response\n\n The Company respectfully acknowledges the Staff\u2019s comment. In consideration of the Staff\u2019s comment, the Company\n confirms that, in future filings, it will present the net income (loss) attributable to shareholders for the Company\u2019s aerospace\n products segment when the related adjusted EBITDA is presented and include a reconciliation between the two amounts.\n The reconciliation between the two amounts will be substantially similar to the information set forth in the tables below,\n which are presented in the Company\u2019s Form 10-Q for the quarterly period ended September 30, 2024, filed November\n 12, 2024.\n\f Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 12 of 13\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nNovember 27, 2024\nPage 11\n Three Months Ended Nine Months Ended\n September 30, September 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nNet income attributable to shareholders $ 93,788 $ 41,330 $ 52,458 $ 245,096 $ 99,616 $ 145,480\nAdd: Provision for income taxes 4,408 1,131 3,277 11,865 2,631 9,234\nAdd: Equity-based compensation\n expense 156 70 86 154 155 (1)\nAdd: Acquisition and transaction\n expenses 2,100 110 1,990 2,871 1,137 1,734\nAdd: Losses on the modification or\n extinguishment of debt and capital\n lease obligations - - - - - -\nAdd: Changes in fair value of non-hedge\n derivative instruments - - - - - -\nAdd: Asset impairment charges - - - - - -\nAdd: Incentive allocations - - - - - -\nAdd: Depreciation and amortization\n expense 1,306 115 1,191 3,177 298 2,879\nAdd: Interest expense and dividends on\n preferred shares - - - - - -\nAdd: Internalization fee to affiliate - - - - - -\nAdd: Pro-rata share of Adjusted EBITDA\n from unconsolidated entities (1) (382) 687 (1,069) (1,424) 149 (1,573)\nLess: Equity in losses (earnings) of\n unconsolidated entities 438 (154) 592 1,592 1,427 165\nLess: Non-controlling share of Adjusted\n EBITDA - - - - - -\nAdjusted EBITDA (non-GAAP) $ 101,814 $ 43,289 $ 58,525 $ 263,331 $ 105,413 $ 157,918\n\n\n\n (1) Includes the following items for the three months ended September 30, 2024 and 2023: (i) net (loss) income of $(438) and $154, (ii)\n depreciation and amortization expense of $56 and $304, and (iii) acquisition and transaction expenses of $0 and $229, respectively. Includes\n the following items for the nine months ended September 30, 2024 and 2023: (i) net loss of $1,592 and $1,427, (ii) depreciation and\n amortization expense of $168 and $1,013, and (iii) acquisition and transaction expenses of $0 and $563, respectively.\n\n ***\n\f Case 1:25-cv-00541-JAV Document 70-14 Filed 11/20/25 Page 13 of 13\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nNovember 27, 2024\nPage 12\n\n Please contact the undersigned at (332) 239-7600 should you require further information or have any questions.\n\n Very truly yours,\n\n /s/ Eun (Angela) Nam\n Eun (Angela) Nam\n Chief Financial Officer & Chief Accounting Officer\n\f","ocr_status":1,"date_upload":"2026-05-12T04:15:50.095855-07:00","document_number":"70","attachment_number":14,"pacer_doc_id":"127038602958","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit N - 11/27/24 SEC Comment Letter","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874415/","id":478874415,"tags":[],"absolute_url":"/docket/69558488/70/15/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.568014-07:00","date_modified":"2026-05-14T07:12:05.204293-07:00","sha1":"f8eee9fdcc3e5c103ab92cc122dd200f4545ebf0","page_count":11,"file_size":262868,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.15.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.15.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-15 Filed 11/20/25 Page 1 of 11\n\n\n\n\n Exhibit O\n\f Case 1:25-cv-00541-JAV Document 70-15 Filed 11/20/25 Page 2 of 11\n\n\n January 3, 2025\n\nVIA EDGAR\n\nBlaise Rhodes and Rufus Decker\nDivision of Corporation Finance\nOffice of Trade & Services\nU.S. Securities and Exchange Commission\n100 F Street, NE\nWashington, DC 20549-4631\n\nRe: FTAI Aviation Ltd.\n Form 10-K for Fiscal Year Ended December 31, 2023\n Response dated November 27, 2024\n File No. 001-37386\n\n\nDear Messrs. Rhodes and Decker,\n\n On behalf of FTAI Aviation Ltd. (the \u201cCompany\u201d or \u201cFTAI\u201d), the undersigned submits this letter in response to a comment\nfrom the staff (the \u201cStaff\u201d) of the U.S. Securities and Exchange Commission (the \u201cCommission\u201d) received by letter, dated\nDecember 13, 2024 (the \u201cComment Letter\u201d), relating to the Company\u2019s Annual Report on Form 10-K for the fiscal year ended\nDecember 31, 2023 (the \u201c10-K\u201d) and the Company's response letter dated November 27, 2024 (the \u201cFirst Response Letter\u201d).\nTo facilitate your review, the undersigned has reproduced the text of the Staff\u2019s comment in italics below, and the heading and\ncomment number in this letter correspond to the heading and comment number in the Comment Letter. In addition, capitalized\nterms used but not defined herein shall have the meanings assigned to such terms in the 10-K and the First Response Letter, as\napplicable.\n\nForm 10-K for Fiscal Year Ended December 31, 2023\n\nConsolidated Financial Statements of FTAI Aviation Ltd.\n\nConsolidated Balance Sheets, page 53\n\n1. We read your response to prior comment 2. Please show us how your presentation will be revised.\n\nResponse\n\nIn response to the Staff\u2019s comment, the Company will update its Consolidated Balance Sheets to disclose total current assets and\ntotal current liabilities for all periods presented in the Consolidated Balance Sheets beginning with its Form 10-K filing for the year\nended December 31, 2024. Below is the table previously included in the 10-K, updated to illustrate how the presentation will be\nrevised in future filings.\n\f Case 1:25-cv-00541-JAV Document 70-15 Filed 11/20/25 Page 3 of 11\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nJanuary 3, 2025\nPage 2\n\nFTAI AVIATION LTD.\nCONSOLIDATED BALANCE SHEETS\n(Dollars in thousands, except share and per share data)\n\n December 31,\n Notes 2024 2023\nAssets\n Current assets\n Cash and cash equivalents 2 $ $ 90,756\n Restricted cash 2 150\n Accounts receivable, net 115,156\n Inventory, net 2 316,637\n Other current assets 2 148,735\n Total current assets 671,434\n Leasing equipment, net 5 2,032,413\n Property, plant, and equipment, net 45,175\n Investments 6 22,722\n Intangible assets, net 7 50,590\n Goodwill 4. 4,630\n Other non-current assets 2 137,721\nTotal assets $ $ 2,964,685\n\nLiabilities\n Current liabilities\n Accounts payable and accrued liabilities $ $ 112,907\n Current maintenance deposits 2 39,455\n Current security deposits 2 17,735\n Other current liabilities 11,746\n Total current liabilities 181,843\n Long-term debt, net 8 2,517,343\n Non-current maintenance deposits 2 25,932\n Non-current security deposits 2 23,330\n Other non-current liabilities 40,354\nTotal liabilities $ $ 2,788,802\n\nCommitments and contingencies 15\n\nEquity\nOrdinary shares ($0.01 par value per share\u037e 2,000,000,000 shares authorized\u037e [x] and 100,245,905\n shares issued and outstanding as of December 31, 2024 and 2023, respectively) $ $ 1,002\nPreferred shares ($0.01 par value per share\u037e 200,000,000 shares authorized\u037e [x] and 15,920,000\n shares issued and outstanding as of December 31, 2024 and 2023, respectively) 159\nAdditional paid in capital 255,973\nAccumulated deficit (81,785)\nShareholders' equity 175,349\nNon-controlling interest in equity of consolidated subsidiaries 534\nTotal equity $ $ 175,883\nTotal liabilities and equity $ $ 2,964,685\n\f Case 1:25-cv-00541-JAV Document 70-15 Filed 11/20/25 Page 4 of 11\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nJanuary 3, 2025\nPage 3\n\nConsolidated Statements of Operations, page 54\n\n2. Please tell us in greater detail why no sales transactions of aircraft or engines after the third quarter of 2022 appear to have been\n accounted for under ASC 610-20, as discussed on page 62. In doing so, focus your response on your sales of previously leased long-lived\n assets (classified as leasing equipment) that have not been turned into inventory. Explain in detail how these previously leased long-lived\n assets are an \u201coutput\u201d of your ordinary activities, when they were classified as leasing equipment and not inventory at the time of sale. Also,\n explain why sales of long-lived assets would be in the scope of ASC 606, rather than ASC 610-20. Discuss aircraft and engines separately.\n Use in any examples the aircraft and engine that was in the worst condition when sold.\n\nResponse\n\nThe Company respectfully acknowledges the Staff\u2019s comment. For purposes of responding to the different components of the\ncomment, the Company has separated its response into two sections:\n\n a. Background of changes in the business\n b. Determination of ordinary activities and application of ASC 606\n\n (a) Background of changes in the business:\n\n\nOn August 1, 2022, the Company completed the spin-off of FTAI Infrastructure Inc. (\u201cFIP\u201d) into an independent publicly traded\ncompany, marking a pivotal shift in the Company's business strategy. Before the spin-off of FIP, the Company was organized into\nfour reportable segments: (i) Aviation Leasing, (ii) Jefferson Terminal, (iii) Ports and Terminals, and (iv) Transtar. As disclosed in\nthe Q3 2022 Form 10-Q, as a result of the spin-off of FIP, which included three of the four reportable segments, the Company re-\nevaluated its operating segments. Management considered key factors related to the organization and alignment of internal\noperations and the nature of the products and services, and two reportable segments were identified: (i) Aviation Leasing and (ii)\nAerospace Products. In conjunction with the spin-off resulting in the Company focusing on operating principally in the aviation\nbusiness, the Company also evaluated its current and expected growth opportunities and determined that the sale of aircraft and\nengines in the Aviation Leasing segment was a component of the Company\u2019s ordinary activities.\n\nPrior to Q3 2022, the sale of assets within the historical Aviation Leasing segment were not viewed as outputs of the Company\u2019s\nordinary activities as they were typically opportunistic based on market demand and specific requests from counterparties, and not\nviewed as sales to customers as defined in ASC 606. The transactions were accounted for under ASC 610-20 and the resulting\ngain or loss from sale was recognized within Other Income (Expense) in the Company\u2019s Consolidated Statements of Operations\nfor all periods through Q2 2022.\n\nAs noted in the Staff\u2019s comment, the focus of this response is on the sale of previously leased long-lived assets that have not been\nturned into inventory. Therefore, the response below focuses on sales within the Aviation Leasing segment. Asset sales within the\nAviation Leasing segment are sales that relate to assets held in the leasing equipment balance sheet line item and are reflected in the\nAsset sales revenue line item with the corresponding cost as a component of Cost of sales.\n\f Case 1:25-cv-00541-JAV Document 70-15 Filed 11/20/25 Page 5 of 11\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nJanuary 3, 2025\nPage 4\n (b) Determination of ordinary activities and application of ASC 606\n\n\nIn evaluating the sales of long-lived assets as outputs of the Company\u2019s ordinary activities in the scope of ASC 606 rather than\nASC 610-20, the Company considered the following guidance in ASC 606 and the Basis of Conclusion to ASC 2014-09,\nnotably paragraphs BC52 and BC53.\n\n 606-10-15-3 - An entity shall apply the guidance in this Topic to a contract (other than a contract listed in\n paragraph 606-10-15-2) only if the counterparty to the contract is a customer. A customer is a party that has\n contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in\n exchange for consideration.\n\n Definition of a Customer (Paragraph 606-10-15-3 and Master Glossary)\n\n BC52. The Boards decided to define the term customer to enable an entity to distinguish contracts that should be\n accounted for under Topic 606 (that is, contracts with customers) from contracts that should be accounted for\n under other guidance.\n\n BC53. The definition of customer in Topic 606 refers to an entity\u2019s ordinary activities. Some respondents asked the\n Boards to clarify the meaning of ordinary activities\u037e however, the Boards decided not to provide additional\n guidance because the notion of ordinary activities is derived from the definitions of revenue in the Boards\u2019\n respective conceptual frameworks. In particular, the IASB\u2019s Conceptual Framework description of revenue refers\n specifically to the \u201cordinary activities of an entity\u201d and the definition of revenue in FASB Concepts Statement 6\n refers to the notion of an entity\u2019s \u201congoing major or central operations.\u201d As noted in paragraph BC29, the Boards\n did not reconsider those definitions as part of the revenue recognition project.\n\nDuring Q3 2022, the Company shifted its strategic focus within the Aviation Leasing segment to prioritize both leasing\nopportunities as well as opportunities to sell assets that had originally been purchased to support the Company\u2019s leasing business.\nA new Aviation business leadership team was appointed to support this initiative, and the Company built out a dedicated sales\nteam under the new leadership\u2019s direction to begin actively identifying and executing on a pipeline of sales opportunities to sell\naircraft and engines that had previously been purchased to support the leasing business. This change in structure drove a change in\nthe ordinary activities of the Company, which, per the guidance above, changed the buyers to be viewed as customers.\n\nAs part of the new leadership team\u2019s strategy, the Company began evaluating different potential revenue generating activities for\nleasing equipment that is serviceable (e.g., an aircraft and engines with remaining greentime - time the engine has remaining to fly).\nHistorically, management focused on re-leasing with the existing lessee or finding new opportunities to lease the aircraft and engines\nthat were returned off lease from the lessee to the Company and did not proactively pursue opportunities to sell aircraft or engines\nthat were on lease. However, beginning in Q3 2022, especially in light of industry supply chain issues and an overall shortage in the\navailability of aviation assets, there was a shift towards evaluating both leasing and sales opportunities with customers tailored to\ncustomer-specific needs. Each aircraft and engine was, and continues to be, regularly evaluated by the Company to determine the\nbest course of action to improve the Company\u2019s key metrics. With a dedicated sales team of five professionals located\ndomestically and internationally, a pipeline of opportunities has been consistently identified, tracked and reported to management\non a weekly basis. This pipeline included assets in all conditions including assets on lease, assets near the end of the current lease,\nassets off lease, or assets being put on lease in the near future to sell. Given the dynamic nature of the Company\u2019s operations in\noffering customers the ability to buy or lease assets, aircraft and serviceable engines are a component of Leasing equipment, net. It\nis common for customers to consider both alternatives based on their specific requirements as part of deal negotiations, which\ntypically span 1-2 months. Aircraft and engine assets were not specifically managed separately between assets for lease and assets\nfor sale (which is changing as explained herein). In addition, it is common for sales to occur while an asset is on lease as the\ncustomer is interested in obtaining lease revenue for the remaining term on the assumed lease.\n\f Case 1:25-cv-00541-JAV Document 70-15 Filed 11/20/25 Page 6 of 11\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nJanuary 3, 2025\nPage 5\n\nAs an example, to reflect the Company\u2019s change in approach to asset sales, this recurring revenue stream was incorporated into\nthe discussion of growth drivers, and the target EBITDA expected on sales of this nature was communicated to investors during\nthe Q3 2022 earnings call. The CEO noted on this call that the Company expected to earn $100M in EBITDA in 2023 from these\nsales (or 17% of total target EBITDA), or approximately $25M per quarter. This quarterly target EBITDA continues to be\ncommunicated to investors to this day.\n\nThe Company\u2019s customer base continued to expand into leasing companies and operators as it identified new types of customers\nthat were interested in owning assets as lessors. In addition, the Company\u2019s customer base has expanded into financial buyers\n(e.g., financial institutions) who were interested in purchasing assets with long-term leases, generating consistent rental income, with\na turn-key type offering involving ongoing services through a service newly offered to customers starting in Q3 2022 that was\ninitiated by the new Aviation leadership team. The Company\u2019s new strategy is based on its unique position in the market where it\nalso has the capabilities to provide engine maintenance services to these customers. This created an opportunity to sell on-lease\naircraft while still providing engine maintenance services throughout the lease term, allowing the Company to also offer customers\nattractive engine maintenance service offerings. These post-sale service opportunities are a key factor that management considers\nwhen evaluating the best course of action for each aircraft or engine. The first such sale involving this service occurred in Q3 2022\nwith a financial institution customer and has been regularly sold to customers in conjunction with asset sales through the current\nperiod.\n\nWith respect to the Staff\u2019s request to use the aircraft and engine that was in the worst condition when sold, the Company notes that\nall such assets were serviceable when sold in that (a) all aircraft have a remaining useful life (ranging from 29 months to over 120\nmonths) and are ready to fly and (b) all engines have at least multiple months of remaining greentime (ranging from approximately 4\nmonths to a newly overhauled engine that has greentime of over 48 months). The assets sold often had existing leases attached as\ncustomers desire the ongoing revenue stream that is purchased with longer-term leases. The Company generally does not sell\nassets that are worn out as its customers lack the in-house facilities to rebuild the engines and would be dependent on securing\nslots in maintenance facilities, which results in months with inoperable assets on the ground and would also require significant\ninvestment immediately after purchase. Typical customers for these assets are primarily interested in securing greentime (e.g. assets\nthat are able to fly immediately).\n\f Case 1:25-cv-00541-JAV Document 70-15 Filed 11/20/25 Page 7 of 11\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nJanuary 3, 2025\nPage 6\n\nA summary of sales of aircraft and engines within the Aviation Leasing segment over the course of the quarters of 2022 and 2023\nis outlined in the following table (in thousands):\n\n Q1 Q2 Q3 Q4 FY 2022 Q1 Q2 Q3 Q4 FY 2023\n 2022* 2022* 2022 2022 2023 2023 2023 2023\nTotal Asset Sales $ 19,483 $ 136,670 $ 85,488 $ 98,047 $339,688 $108,691 $ 76,836 $ 61,400 $ 56,214 $303,141\n*Gain is presented net in Gain on sale of assets, net. Within the Q2 2022 sales, there were $116 million of opportunistic\nsales of cargo-related aircraft and engines that were non-recurring and were sold in response to the significant demand for\nthis type of asset based on COVID-19 driven cargo market conditions at the time.\n\nAs outlined above, excluding the cargo-related aircraft sales, the sale of aircraft and engines increased in Q3 2022 and has been\nrelatively consistent and recurring each quarter in 2022 and 2023. While the volume of transactions varies by quarter based on the\nCompany\u2019s fleet of assets and market demand, this sustained, consistently material level of sales reflects the efforts of the\ndedicated internal resources focused on supporting this revenue stream. While the table includes only sales information, almost all\nsales transactions resulted in positive margins as the team pursues sales opportunities that are accretive to EBITDA.\n\nIn summary, the Company considered these strategic shifts in priorities and growth opportunities, which corresponded with the\nrealigned organizational structure, to support the view that the sales are within the scope of ASC 606 starting in Q3 2022. As\ndisclosed, these sales have been a part of the Company\u2019s ordinary activities per ASC 606-10-15-3 and reflect the Company\u2019s\nongoing operations based on management\u2019s approach in regularly evaluating the strategic alternatives for each leasing equipment\nasset.\n\nConsolidated Statements of Cash Flows, page 58\n\n3. We read your response to prior comment 5. You record the acquisition of leasing equipment as an investing cash outflow, the rental proceeds\n from these assets as an operating cash inflow and the sale of these assets as either an operating or investing cash inflow based upon the\n circumstances stated in your response. The primary focus of this comment is understanding why the acquisition of the leased assets are\n included as investing cash outflows. You say on page 62 that, due to a change in corporate strategy in 2022, the sale of aircraft and engines\n is now an output of your recurring, ordinary activities. Please provide us with the analysis you performed in concluding the expected\n predominant source of cash inflows from the acquired leasing equipment would be from leasing activities, rather than the later sale of these\n assets. In doing so, provide the analysis separately for (a) aircraft and (b) engines. Also, explain how the increased value upon the sale of\n acquired leasing equipment turned into new assets was factored into your assumptions related to the expected predominant source of cash\n inflows from the acquired leasing equipment. Refer to ASCs 230-10-45-22 and 45-22A.\n\n\nResponse\n\nThe Company respectfully acknowledges the Staff\u2019s comment. For purposes of responding to the different components of the\ncomment, the Company has separated its response into three sections:\n a. Overview of Company\u2019s history and process for assessing the intent of aircraft and engine acquisitions\n b. Predominance assessment\n c. Additional financial statement disclosures the Company intends to include in the 2024 Form 10-K\n\f Case 1:25-cv-00541-JAV Document 70-15 Filed 11/20/25 Page 8 of 11\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nJanuary 3, 2025\nPage 7\n a. Overview of Company\u2019s history and process for assessing the intent of aircraft and engine acquisitions\n\n\nHistorically, the Company (excluding FIP) was exclusively a leasing company and has expanded its service offerings since 2022 in\nresponse to new growth opportunities. From a macroeconomic perspective, the aviation leasing market has and continues to\nexperience significant leasing demand for aircraft and engines. This was particularly the case in 2022 and 2023 given supply chain\nshortages in all aspects across the aviation industry. To provide some context on the growth in the leasing business, total new leases\nfor the Company increased each year from 70 in 2020 to 142 in 2023. Aircraft on lease often require engines to be swapped as\nmaintenance events rise, and it is important that the Company has a sufficient portfolio of leasing equipment engines to fulfill engine\nswap events throughout the lease term to fulfill its contractual obligations in the lease.\n\nAs outlined in the comment and our prior response, the acquisition of leasing equipment has historically been recorded as an\ninvesting cash outflow. The overall basis was that the leasing equipment, which includes both aircraft and engines, was acquired\nwith the intent to lease and included in the portfolio of assets available to the Company\u2019s aviation leasing business team, as leasing\nwas almost the entire business of the Company at the time (e.g., approximately 95% of Adjusted EBITDA for QTD and YTD Q2\n2022). Specifically, through Q2 2022, the Company\u2019s new offerings, discussed herein and our previous response, did not exist or\nwere in early maturity and, as such, the purchases of assets were for its leasing business. The assets purchased were generally on-\nlease with a third-party at the time of the acquisition and contain serviceable components. During 2022 and 2023, the sale of\nassets within the Company\u2019s businesses was predominantly the sale of assets purchased before Q2 2022.\n\nThe acquisition of each leasing equipment asset is a significant decision for which the aviation leasing business team has a robust\ninternal review process for each investment opportunity related to aircraft and engines, including the expected price and return on\ninvestment. This process became particularly important beginning in Q3 2022 when the new businesses began to further develop,\nwith new leadership. The return on investment analysis considers the estimated lease cash inflows for the remaining greentime on\nthe assets and estimated potential other cash flows (refer to the \u201cPredominance assessment calculation\u201d discussion below). Each\ninvestment was carefully assessed as described above and below. Through December 31, 2023, at the time of purchase there\nwere no specific sales opportunities identified for the assets purchased (i.e., purchased with the intent to sell). However, the\nCompany understood that future sales opportunities could materialize, as the Company brought in new senior employees,\nexpanded its sales team and grew its Aerospace Products business in parallel with the increase in asset purchases. While the\nCompany did have other businesses, its priority business model was a leasing company and the quantitative and qualitative\nconsiderations were consistently focused on the leasing related opportunities. As discussed further below, the Company\u2019s business\ncontinues to evolve, and it expects more purchases to be related to operating activities versus investing activities in the future.\n\nA summary of key attributes of the internal review process is as follows:\n \u2022 A return on investment analysis is performed by the aviation leasing business team for each aircraft and engine investment opportunity.\n This analysis is included in an Investment Committee memo, which also includes deal terms, and is approved by the CEO and other\n internal stakeholders prior to the execution of each transaction\n \u2022 Expected leasing cash inflows from each aircraft and engine are outlined to support the deal rationale, including the rate of return based on\n key assumptions, including lease terms for any on-lease assets, the remaining greentime of the assets, and high-level assumptions on\n potential additional cash proceeds that may be generated once the asset is no longer serviceable.\n\n\nAs discussed in our earlier response, the Company continues to invest in its Aerospace products business, as it has closed on the\nacquisition of two manufacturing facilities recently - QuickTurn Engine Center in December 2023 and Lockheed Martin\nCommercial Engine Solutions in September 2024. As such and in connection with its strategy, the Company expects to purchase\nengines directly into inventory with a specific plan to tear down the engines into modules and/or parts for sale, especially as the\nacquisition of Lockheed Martin Commercial Engine Solutions included both supply chain management and asset management\nfunctions. It is also possible the Company will purchase aircraft for sale rather than leasing. While no such purchases have occurred\nthrough September 30, 2024, any such purchases will be recorded as inventory purchases and included as an outflow within cash\nflow provided by (used in) operating activities. Additionally, in accordance with its existing policy, the aviation leasing business\nteam and the Investment Committee will continue to assess predominance of all aircraft and engine acquisitions for purposes of\ndetermining the appropriate class flow presentation of the related cash outflows.\n\f Case 1:25-cv-00541-JAV Document 70-15 Filed 11/20/25 Page 9 of 11\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nJanuary 3, 2025\nPage 8\n b. Predominance assessment\n\nThrough September 30, 2024, almost all aircraft and engine purchases were made with the intent to lease and the expected\npredominant source of cash inflows from the acquired leasing equipment was from leasing activities.\n\nSimilar to the response provided in the prior comment letter, the Company has outlined the key considerations and assumptions in\nits analysis in applying the provisions of ASC 230 and specifically the guidance in ASC 230-10-45-22 and ASC 230-10-45-22A:\n\n \u2022 Specific guidance: Given the multiple potential streams of cash inflows that may be generated from an aircraft or engine (e.g., lease (initial\n and re-lease), sale, teardown and rebuild as a component of a new asset), the Company believes that there is judgment in the application of\n ASC 230-10-45-22 and ASC 230-10-45-22A that requires additional considerations as outlined below.\n \u2022 Multiple classes of cash inflows: The cash outflows may eventually be related to more than one class of cash inflows that cannot be\n separated into distinct, identifiable sources of cash. This requires the Company to classify the outflows based on judgment on the\n predominant use of cash inflows expected through use of the asset at the time of purchase.\n \u2022 Applicability of ASC 230 predominance assessment: The Company believes that the ASC 230 predominance guidance applies in its\n specific facts and circumstances.\n \u2022 Unit of account for assessment: The assessment of predominance of cash inflows is performed at asset level, either aircraft or engine.\n \u2022 Predominance assessment calculation: When the expected cash receipts are predominately related to lease revenue, both the initial lease\n cash flows from the remaining greentime as well as estimated additional lease cash flows if the asset is overhauled, are quantitatively\n greater than (i.e., predominant to) the estimated cash receipts from sales transactions, the related cash payment is recorded as a cash\n outflow in investing activities. The estimated cash receipts from sales transactions in the predominance calculation contemplates\n assumptions of the increased value of any newly created inventory assets.\n\nThe Company acknowledges that the Staff specifically requested the analysis separately for (a) aircraft and (b) engines. Other than\nthe specific considerations around engine teardowns, the approach outline above applies to both types as the upfront analysis and\naviation leasing team and Investment Committee process is the same.\n\n(c) Additional financial statement disclosures the Company intends to include in the 2024 Form 10-K\n\nProspectively (e.g., 2025 or later), the Company expects that it will have two types of asset purchases:\n (1) Aircraft and engines purchased to support the leasing business, which could be sold while on lease based on\n the Company\u2019s proactive selling initiative discussed above (acquisitions and subsequent disposals presented as\n investing inflows and outflows based on predominance assessment), or specific to engines when no longer\n serviceable, transferred to the Aerospace Products business for creation of a new asset. Refer to the Company\u2019s\n earlier response for further explanation of the process for creation of a new asset and the Company\u2019s application\n of ASC 230 to cash inflows generated from the sale of the newly created asset.\n (2) Aircraft and engines purchased directly into inventory with the intent of either (a) selling in their current\n condition or (b) for engines, tearing down into modules and parts (purchases and subsequent sales presented as\n operating outflows).\n\nThe Company intends to include additional disclosure to its Form 10-K for the year ended December 31, 2024 (\u201c2024 Form 10-\nK\u201d) to specifically address the accounting policy related to the Company\u2019s cash flow predominance assessment for asset\npurchases.\n\f Case 1:25-cv-00541-JAV Document 70-15 Filed 11/20/25 Page 10 of 11\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nJanuary 3, 2025\nPage 9\n\nWhile not expected to be relevant to fiscal year 2024, the Company intends to include additional disclosure, including a significant\naccounting policy disclosure, in its future filings for cash paid for engine and aircraft inventory, once applicable. This additional\ndisclosure will be quantitative and included with the other cash flow quantitative information as outlined in our prior response and\nincluded below. The Company has included in the intended disclosure below for purposes of illustrating the expected disclosure in\nfuture filings:\n\n Year ended\n December 31,\n(in thousands)\n 2022 2023 2024\nCost of modules and parts sold sourced from engines originally within leasing equipment $ 36,946 $ 41,167 $ []\nTransfers of engines from leasing equipment to inventory for manufacturing and sale 127,349 178,740 []\nTransfers of inventory to leasing equipment for rebuilding and sale of engines (89,041) (78,788) []\nTotal outflows related to manufacturing modules and parts - included in net cash (used in)\nprovided by operating\nactivities (101,249) (138,045) []\nCash received for assets sold sourced from leasing equipment - inflow included in cash (used\nin) provided by\noperating activities 43,859 94,222 []\nCash received for sales of leasing equipment that include components sourced from\ninventory - inflow included in\ncash used in investing activities 118,735 79,474 []\nIllustrative example for future filings -->\nCash paid for engine and aircraft inventory - outflow included in cash provided by (used\nin) operating activities N/A N/A []\n\n\n ***\n\f Case 1:25-cv-00541-JAV Document 70-15 Filed 11/20/25 Page 11 of 11\n\nMessrs. Blaise Rhodes and Rufus Decker\nU.S. Securities and Exchange Commission\nJanuary 3, 2025\nPage 10\n\n Please contact the undersigned at (332) 239-7600 should you require further information or have any questions.\n\n Very truly yours,\n\n /s/ Eun (Angela) Nam\n Eun (Angela) Nam\n Chief Financial Officer & Chief Accounting Officer\n\f","ocr_status":1,"date_upload":"2026-05-12T04:15:51.378178-07:00","document_number":"70","attachment_number":15,"pacer_doc_id":"127038602959","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit O - 1/3/25 SEC Comment Letter","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874416/","id":478874416,"tags":[],"absolute_url":"/docket/69558488/70/16/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.577819-07:00","date_modified":"2026-05-14T07:11:09.969287-07:00","sha1":"42fb8fd5bf65b4782cf9323d6c7c8cc968ef229c","page_count":16,"file_size":440314,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.16.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.16.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 1 of 16\n\n\n\n\n Exhibit P\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 2 of 16\n\n\n\n\nFortress Transportation and Infrastructure\nInvestors LLC NasdaqGS:FTAI\nFQ2 2022 Earnings Call Transcripts\nThursday, July 28, 2022 12:00 PM GMT\nS&P Global Market Intelligence Estimates\n -FQ2 2022- -FQ3 2022- -FY 2022- -FY 2023-\n\n CONSENSUS ACTUAL SURPRISE CONSENSUS CONSENSUS CONSENSUS\n\n EPS (GAAP) 0.15 0.11 (26.67 %) 0.34 (2.27) 1.61\n\n Revenue (mm) 172.93 177.93 2.89 194.02 698.00 918.34\nCurrency: USD\nConsensus as of Jul-27-2022 10:15 PM GMT\n\n\n\n\n - EPS (GAAP) -\n\n CONSENSUS ACTUAL SURPRISE\n\n FQ3 2021 (0.08) (0.44) NM\n\n FQ4 2021 0.03 (0.19) NM\n\n FQ1 2022 (0.11) (2.30) NM\n\n FQ2 2022 0.15 0.11 (26.67 %)\n\n\n\n\nCOPYRIGHT \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved 1\nspglobal.com/marketintelligence\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 3 of 16\nContents\n\n\n\n\nTable of Contents\n\nCall Participants .................................................................................. 3\nPresentation .................................................................................. 4\nQuestion and Answer .................................................................................. 8\n\n\n\n\nCOPYRIGHT \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved 2\nspglobal.com/marketintelligence\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 4 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\n\n\nCall Participants\nEXECUTIVES\n\nAlan John Andreini\nInvestor Relations\n\nJoseph P. Adams\nChairman & CEO\n\nKenneth Nicholson;CEO, FTAI\nInfrastructure\n\nANALYSTS\n\nEli Winski\nCitigroup Inc., Research Division\n\nFrank Galanti\nStifel, Nicolaus & Company,\nIncorporated, Research Division\n\nGiuliano Jude Anderes Bologna\nCompass Point Research &\nTrading, LLC, Research Division\n\nJoshua Ward Sullivan\nThe Benchmark Company, LLC,\nResearch Division\n\nJustin Trennon Long\nStephens Inc., Research Division\n\n\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 3\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 5 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\n\nPresentation\nOperator\nGood day, and welcome to the Second Quarter 2022 Fortress Transportation and Infrastructure Investors\nEarnings Call. Today's call is being recorded.\n\nAnd I would now like to turn today's conference over to Alan Andreini. Please go ahead, sir.\nAlan John Andreini\nInvestor Relations\nThank you, Lisa. I would like to welcome all of you to the Fortress Transportation and Infrastructure\nSecond Quarter 2022 Earnings Call. Joining me here today are Joe Adams, the CEO of FTAI; Ken\nNicholson, the CEO FTAI Infrastructure; Scott Christopher, the CFO of FTAI Infrastructure; and Angela\nNam, the soon to be CFO of FTAI Aviation.\n\nWe have posted an investor presentation and our press release on our website, which we encourage you\nto download if you have not already done so. [Operator Instructions]\n\nIn addition, we will be discussing some non-GAAP financial measures during the call today, including FAD.\nThe reconciliations of those measures to the most directly comparable GAAP measures can be found in the\nearnings supplement.\n\nBefore I turn the call over to Joe and Ken, I would like to point out that certain statements made today\nwill be forward-looking statements, including regarding future earnings. These statements by their nature\nare uncertain and may differ materially from actual results. We encourage you to review the disclaimers in\nour press release and investor presentation regarding non-GAAP financial measures and forward-looking\nstatements and to review the risk factors contained in our quarterly report filed with the SEC.\n\nNow I would like to turn the call over to Joe.\nJoseph P. Adams\nChairman & CEO\nThanks, Alan. Welcome to the FTAI second quarter earnings call. Today, we have presented and will be\ndiscussing the financials as of June 30 on a consolidated basis. But we're very excited that everything\nis in place for the spin-off of FTAI Infrastructure to be completed next Monday. So we will also provide\nsome pro forma information about the 2 separate companies, which will be trading next Tuesday under the\nsymbols FTAI and FIP.\n\nTo start, I'm pleased to announce our 29th dividend as a public company and our 44th consecutive\ndividend since inception. The dividend of $0.33 per share will be paid on August 29 based on a\nshareholder record date of August 15.\n\nLet's now turn to the consolidated numbers. The key metrics for us are adjusted EBITDA and FAD or Funds\nAvailable for Distribution. Adjusted EBITDA was $165.3 million, up 220% compared to $51.6 million in Q1\n2022 and up 143% compared to $68.0 million in Q2 2021.\n\nFAD was $109.4 million, up 53% compared to $71.4 million in Q1 2022 and up 60% compared to $68.3\nmillion in Q2 2021. During the second quarter, the $109.4 million FAD number was comprised of $161.6\nmillion from our aviation leasing portfolio, $9.9 million from our infrastructure business and negative $62.1\nmillion from Corporate and Other.\n\nStarting now with Aviation. Aviation had a really good quarter, posting approximately $160 million of\nEBITDA and $105 million of net income. We're benefiting from strong demand globally, driven by the\nrecovery in travel demand, which in turn is fueling growth in engine aftermarket services.\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 4\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 6 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\nLease rates have returned to at or above pre-COVID levels and improving asset utilization is pushing\nmaintenance reserve collection up while inflation is driving higher per hour and cycle rates. Asset prices\nare also up. We took advantage by selling about $100 million book value of assets for a gain of $55\nmillion. And we have more asset sales coming in Q3 and Q4, both to recycle capital invested in some of\nour 2021 larger acquisitions and continue capitalizing on the robust freighter market.\n\nAerospace Products had an excellent quarter with $17 million in EBITDA and a significant increase in\norder backlog. We're in the process of completing 2 separate asset sales, where FTAI will retain engine\nmaintenance service contracts for the next 8 years covering 22 engines. We believe this marks a unique\nway to scale the number of engines we manage while recycling capital for new investments.\nIn addition, we've been awarded a major engine exchange program covering between 10 and 20 engines\nfor a large Southeast Asian airline. All told today, we now have 5 airlines, 3 leasing companies and 5\nmaintenance repair organizations, or MROs, signed up to use The Module Factory for a significant portion\nof their CFM56 fleet. And every user we've had so far has been a repeat customer.\n\nUsed serviceable material, USM, sales experienced more activity in Q2 and shop visits increased. Demand\nfor used CFM56 material is high and growing and sufficient to easily support 20 to 30 engine teardowns\nper year, which continue to generate approximately $1 million in profit per engine for us.\n\nOur PMA initiative made significant progress in Q2 on the next 4 parts development. Although the process\nis slower than expected, we're very happy with the parts being produced and are promptly supplying\nall data requested. At this point, we expect all 4 new products to be submitted for final approval by\nthis time next year. We currently expect to complete an additional $200 million in asset sales in Q3 and\nhave concurrently signed up $300 million in attractive new acquisitions to replace these. The new deals\nare expected to be accretive by adding more EBITDA than the assets removed. Although from a timing\nperspective, Q3 likely will experience a slight decrease in leasing EBITDA until those new investments have\nfully closed.\n\nTurning to the insurance claims. We're making good progress by supplying all information requested by\nthe insurers regarding our $290 million in claims for assets lost in Russia/Ukraine. With 3 different buckets\nof claims, we think it is possible to realize a partial recovery by year-end 2022 this year with the balance\ncollected in 2023 and 2024.\n\nAs a reminder, any recoveries will be 100% income since all related assets were written off fully in Q1.\nTo pull it all together, we expect Aviation without any insurance recoveries will produce per quarter $90\nmillion to $100 million in EBITDA from leasing, $20 million to $30 million in asset sale gains, which we\nthink will be recurring each quarter, and $20 million to $30 million in EBITDA from aerospace products\ntotaling $550 million to $600 million in per annum EBITDA from Aviation.\n\nWith this level of EBITDA, we expect FTAI Aviation to pay a dividend going forward of $1.20 per annum,\nwhile FTAI Infrastructure expects to pay $0.12 per annum for the total of $1.32 for the 2 stocks post spin.\n\nLet me now turn the call over to Ken to discuss Infrastructure.\nKenneth Nicholson;CEO, FTAI Infrastructure\nThank you, Joe, and good morning, everyone. As Joe mentioned, our Infrastructure business will be a\nstandalone company commencing next Tuesday. We're extremely excited about the prospects of our\ninfrastructure platform and believe we're well positioned to drive substantial growth at each of our 4\nexisting businesses.\n\nIt's a dynamic time in the industrial and energy markets with inflation and focus on energy security as\nprominent as ever and our assets are extremely well positioned to capitalize on several opportunities.\n\nQuickly to the second quarter results. In total, our Infrastructure business posted $26.7 million of EBITDA\nin the second quarter, up 34.8% sequentially from $19.8 million in the first quarter of 2022. Importantly,\neach of our 4 core companies reported sequential growth in revenue and EBITDA.\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 5\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 7 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\nAs we head into the second half of the year, we're seeing good momentum across the portfolio and expect\nto continue to generate meaningful sequential growth as our businesses continue to ramp up operations\nfollowing recently completed developments and as new contracts kick in.\n\nIn the aggregate, we're targeting achieving annual adjusted EBITDA in excess of $200 million in the next\n12 to 24 months with no additional investment required to meet that target.\n\nI'll briefly review each of our infrastructure companies, starting with Transtar. Transtar had an excellent\nquarter, posting growth across all aspects of the business, including volumes, pricing, revenue and\nEBITDA. EBITDA increased from $14.8 million in Q1 to $18.8 million for Q2, a 29% quarter-over-quarter\ngain. More importantly, cash flow was $20 million for the quarter as sales from noncore assets continued\nto exceed capital expenditures.\n\nVolumes at Transtar increased from 54,000 to 57,000 carloads from Q1 to Q2, while pricing or average\nrate per car grew from $562 to $599 per carload. We're insulated from inflation and higher fuel costs at\nTranstar with the ability to pass through higher operating costs under our contract with U.S. Steel and\nancillary services also grew at Transtar with car repair efforts, bringing in new revenue for the quarter.\n\nWhile the third quarter is typically seasonally a little softer than other quarters during the year, we expect\nresults to remain steady as we look ahead, driven by continued progress on a number of initiatives to gain\nnew customers and grow revenue from other sources, including car repair and real estate income.\n\nNext, on to Jefferson. Q2 EBITDA at Jefferson was $4.2 million, up 11% compared to $3.8 million in Q1\nof 2022. We saw increases in volumes of both refined products and crude oil as utilization of our terminal\ncapacity continued to steadily ramp up during the quarter. We're very bullish about the second half of the\nyear at Jefferson and expect revenue and EBITDA to grow materially in the third and fourth quarters.\n\nWe're seeing a substantial pickup in volumes of refined products shipped to Mexico and yellow wax crude\ntrains are now running at 9 to 10 trains per month. More importantly, at ExxonMobil's request, we now\nexpect to complete construction of new storage tanks and commence terminal operations under our 10-\nyear contract during the fourth quarter of this year, ahead of our original schedule of January 2023. We\nexpect this contract to generate approximately $20 million of incremental EBITDA annually, bringing\nsubstantial committed throughput volume for the terminal and provide a springboard for increased growth\nin volumes.\n\nWe are also in active discussions with Exxon about activating an additional connecting pipeline, which will\nbring incremental crude volume from Jefferson to the expanded Exxon Beaumont refinery. Additionally,\nwe will look to complement this expansion by providing bidirectional service on the Southern Star crude\noil pipeline between Jefferson and Motiva, allowing for increased blending capabilities and higher crude oil\nthroughput at the terminal. In short, the much anticipated ramp at Jefferson is now upon us.\n\nMoving on to Long Ridge. Long Ridge generated $7.5 million in EBITDA in Q2 versus $6.1 million in Q1.\nAs we have communicated in the past, we target quarterly EBITDA for our 50% share of Long Ridge to\nbe in the range of $12 million to $15 million per quarter. Our results for 2Q included the impact of gas\npurchases during the quarter that were required from external suppliers as we transitioned our internal\ngas production to new wells later than planned. This combination of constrained labor availability and\nlimited supply of drilling equipment, mainly took approximately 3 weeks longer than expected to bring\nnew gas production online, necessitating the purchase for our power plant from third parties at historically\nhigh prices. Fortunately, it was an isolated event and not something we expect to repeat.\n\nBy the month of June, we were running on our own gas and generated EBITDA for the month within our\ntargets. And going forward, we expect to continue steady EBITDA from the power plant, in line with our\ntargets.\n\nDevelopment at Long Ridge continues to be robust. In July, we entered into agreements with Newlight\nTechnologies for the construction of a new $300 million facility to be built on Long Ridge property, which\nwill produce carbon negative and biodegradable plastic products from natural gas. Long Ridge will sell\npower and natural gas to Newlight as well as provide land under a long-term lease. In addition, we expect\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 6\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 8 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\nto be an investor in the project if certain conditions are met. We expect the facility to be operational in\n2024.\n\nFinally, to close out with Repauno. At Repauno, our key focus is on commencing development of our Phase\nII LPG Transloading System. This system is expected to triple our throughput capacity and quadruple our\noperating margins when it comes online in a couple of years. We have demand from multiple international\nofftakers, and our goal is to enter into a long-term agreement with one or more parties during the third\nquarter. We have completed engineering for the new storage tank and associating piping and systems and\nnegotiated construction contracts. We plan to finance all construction costs with tax exempt debt.\n\nIn the meantime, in the second quarter, we expanded our existing capabilities by loading fully refrigerated\nLPG to large gas carrier marine vessels. With this important step, we moved closer to our goal of loading\nVLGCs or Very Large Gas Carriers, across our dock facility. In addition, the newly expanded LPG truck\nracks continues to see higher utilization, providing both propane and butane to local heating and blending\nmarkets, meeting additional customer needs in the area.\n\nFinally, we continue to see increased interest in the renewable energy space with 250 acres planned for\ndevelopment. We have announced a coordinated effort to develop a unique marine cable manufacturing\nfacility with Rise Light, which will provide a critical American-made infrastructure link to bring renewable\nelectricity from offshore wind generation to local consumers. Also, our Clean Planet joint venture continues\nto progress through the permitting process for the first plastics recycling plant at Repauno. We're\nexpecting to complete construction of the Clean Planet facility in 2024.\n\nWith that, I'll turn it back to Joe.\nJoseph P. Adams\nChairman & CEO\nThanks, Ken. Next week is a big week for FTAI shareholders with the consummation of the spin. FIP will\neliminate K-1s for shareholders upon the spin and FTAI will begin a 6 to 8-week re-domiciling, which,\nwhen complete, will eliminate K-1s for all shareholders as well.\n\nIndex funds, ETFs and a broader investor universe will be able to own both stocks. And importantly, both\ncompanies will focus, refine, and articulate their uniqueness and value add in the respective markets\nserved.\n\nFor Aviation, FTAI is capitalizing on global travel recovery and growth in aftermarket engine services to\nbe the leading low-cost commercial engine power provider for narrow-body aircraft globally. The unique\ncombination of engine, leasing and maintenance management provides airlines cost savings and capital\npreservation through proprietary products and practices while focusing on the largest and most liquid\nengine market in the world.\nKenneth Nicholson;CEO, FTAI Infrastructure\nAnd I would just say for infrastructure, we very much look forward to updating investors on a standalone\nbasis starting next quarter. We do expect to post meaningful growth in the near term across each of our\n4 key business units. It's a very attractive time to own long-term assets well insulated from inflation and\nwith high scarcity value in the country's largest industrial and energy markets.\n\nWe view the growth of Transtar this quarter as a good indication of things to come. And following years of\ndevelopment, we're accelerating the pace of ramp-up at Jefferson and Repauno terminals, while at Long\nRidge with the power plant complete, we're now beginning to drive incremental cash flow and value.\n\nAnd I'll turn it back to Alan.\nAlan John Andreini\nInvestor Relations\nThank you, Ken. Lisa, you may now open the call to Q&A.\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 7\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 9 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\n\nQuestion and Answer\nOperator\n[Operator Instructions] We'll take our first question from Giuliano Bologna from Compass Point.\nGiuliano Jude Anderes Bologna\nCompass Point Research & Trading, LLC, Research Division\nStarting off on the aviation side. I'm curious about a couple of different things and how they kind of\ninteract together. You obviously mapped out a handful of asset sales from some of the, call it, the 4 of\nthe 9 assets you got back from Russian carriers last quarter that you expected to generate, [ over $30\nmillion ] gain on sale. And then you had a handful of other 737NGs that you got back that were potentially\ngoing to go on lease. I'm curious, when we look at the asset sale numbers as they came in a bit higher\nthan what I had expected, I'm curious what the composition of those asset sales looks like or -- and if you\nsold more of the Russian assets? And you mentioned some cargo assets as well during the call.\n\nAnd then looking on the other side, I'm curious what kind of assets you're looking at on the LOI side\nbecause you obviously have a pretty strong LOI pipeline and you mentioned, call it, $300 million of\npotential acquisitions. So I'm curious, what types of assets you're selling, what types of assets you're\nacquiring? And how should we think about the EBITDA contribution coming out on the sales and then back\nin on the acquisitions?\nJoseph P. Adams\nChairman & CEO\nYes. So the composition is a little -- as I mentioned, its 2 different groupings. One is cargo and the other is\nrecycling capital from mainly the Avianca deal, but also some others with long-term leases that we did last\nyear. The cargo assets, we also sold in addition to selling some of the assets, the 757s and 767s we took\nback from Russia and Ukraine. We've also sold some 747s in this quarter. So that's why the gain is higher\nthan we had originally projected.\n\nThat market, as I mentioned, we don't know when the cargo market will slowdown, but we don't want\nto miss it. So we decided that it was sort of a good time to -- we'd rather be early than late. And that\nmarket, we had bought those assets at a very attractive time several years ago when no one was paying\nattention or thinking about cargo. So there were quite good returns for us. But we decided it was time to\nsort of lighten up on the cargo side.\nAnd then in the third quarter, I think I alluded to the deals that we're selling with long-term leases\nattached. So there's still a lot of capital that's been raised by new leasing companies, like -- that wants to\nbuy deals. And we structured those so that we can retain the engine maintenance service contract and do\nthat for the lessor, which is great for us because we could use lessors -- other lessors' capital and retain\nthe best part of the deal.\n\nSo those are the deals we're targeting to close mostly in Q3 and we'll add a lot of -- we had backlog\nto our aerospace products business that way. And we think we can continue to grow it. And we're very\npleased that the lessor acceptance of that has been -- not by 1 lessor but by 2 lessors. So we see that\nas something that's very, very significant for us to continue to grow the service business and highlight\nour ability to create value out of portfolio deals, which is why I referenced, and I think this gain on sale is\nsomething that we think is -- should be recurring for us each quarter. I think we can do that. We can buy\npackages of assets and then find the parts that are most attractive to other people and take advantage of\nthat. And in this case, we're able to even keep the engine maintenance service as part of that.\n\nOn the buy side, we're focused on all CFM56 engines or mostly. That's been the focus all along. We\nacquired 25 engines in Q2. They were all off lease. So that's where you get the best prices when you have\nan asset that's some -- you have to put revenue, you have to attach revenue to it. That's a market that\nvery few people compete with us on that. So that was a great on the buy side.\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 8\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 10 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\nAnd then, additionally, we've got some deals with big airlines that we have existing relationships with\n-- that we've established a good relationship with. There are also CFM56 engines. And they would\nadd to very similar to the transactions we did last year with Avianca and ITA. So we think it's a great\ncombination. We pick up EBITDA by doing that. So it's both recognizing a gain and increasing EBITDA\nseems like a very good win.\nGiuliano Jude Anderes Bologna\nCompass Point Research & Trading, LLC, Research Division\nThat's great. And then, switching topics over to Infrastructure. I'd like to focus a little more on Jefferson.\nI'm curious, obviously, there's a lot of commentary on the call about Jefferson. And there's an outlook\nroadmap or a roadmap to get into roughly around $80 million of EBITDA. I'm curious, what gives you a lot\nmore confidence that you'll be able to get there and thinking about the different components? Obviously,\nthere's Exxon deal coming on, obviously the yellow wax train car volumes, the capacity increase that\nstarted to increase during 2Q. I'm curious what the different components are and how do you think about\ncontribution from some of the different initiatives that are going on at Jefferson?\nKenneth Nicholson;CEO, FTAI Infrastructure\nYes, yes. Look, we're pretty bullish on the second half of the year at Jefferson. Look, all the assets are\nin place. We're finishing up the new assets for the ExxonMobil contract and we're really happy that we're\ngoing to be able to start operations under that contract now in the fourth quarter. That's obviously a big\npiece of the bridge to $80 million, but a bigger piece is just continued increases in utilization. All of our\nassets in place today are being utilized at less than 50%. And it's been a process for, frankly, a few years\nof building out those assets and cultivating the relationships with the ExxonMobil, Motiva, and others in\nthe Beaumont refinery complex. That's been a lengthy process, but we're now finally there.\n\nAs I mentioned, we're opening up another crude pipe between Jefferson and Exxon, where we're kind\nof making a small change to the Southern Star pipeline between Exxon and Motiva to allow it to be\nbidirectional. All of these things play into more demand and more requests for throughput from our 2\nlargest customers. Yes, we're thrilled that yellow wax trains continue to accelerate. The second quarter\nwas a good quarter. I think the third quarter will be an even better quarter. Refined products in the\nMexico are strong and getting stronger. New terminals are being opened in Mexico. And so we're seeing\nindications and seeing business in this month of July that make us very comfortable with our outlook for\n$80 million of EBITDA in the next 12 to 24 months.\nOperator\nWe'll take our next question from Josh Sullivan from The Benchmark Company.\nJoshua Ward Sullivan\nThe Benchmark Company, LLC, Research Division\nJust a question on the overall leasing market. We've had both Airbus and Boeing come out here, lowering\ndelivery assumptions due to supply chain issues, mainly within the engine availability market vertical. So\nfirst off, is that lack of OEM engine supply supporting the module business in USM? And then, secondly,\non the aircraft leasing market, how are airlines responding to that lack of OEM aircraft supply? Is that a\nconversation you guys are having with airlines about capacity at this point?\nJoseph P. Adams\nChairman & CEO\nYes, it's good for us. I like the fact that it's harder to make new airplanes because it makes owning the\nones we own better and more demand. So there's a lot of demand for the existing 737NGs and A320ceo\nasset. So we've got as travel demand has been very, very robust and relatively pricing elastic, airlines\nneed lift and need capacity. So to the extent that new deliveries get stretched out, it just extends the\nlongevity of the fleet that we own, which is good.\n\nAnd then the other thing I mentioned, which is also good for us is inflation. Because as inflation increases,\nthe price of a shop visit, our advantage gets bigger and also our revenue collected from maintenance\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 9\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 11 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\nreserves goes up. So we like both of those trends. And it seems like as people have indicated, it's not\ngoing to be -- I think somebody said they're not going to be talking about -- stop talking about this\nprobably until 2024 is the expectation. So we've got a pretty good period where it's going to be positive, I\nthink, for us.\nJoshua Ward Sullivan\nThe Benchmark Company, LLC, Research Division\nAnd then one for Ken, just on Phase II for Repauno. Do you have customers in place? Or what are you\nseeing there to drive the next phase?\nKenneth Nicholson;CEO, FTAI Infrastructure\nJosh, we are very close. I can't tell you we have a contract signed with an offtaker. I will tell you the\nteam at Repauno spent the better part of 2 weeks in Europe recently. And I think we're in a very good\nposition to sign something up in the third quarter. Plenty of demand from very large investment grade\ncounterparties. We want to make sure we sign the best deals, but we're close, everything is ready to go.\nBut we're not at the point yet where we have a contract executed, but we're close.\nOperator\nWe'll take our next question from Chris Wetherbee with Citi.\nEli Winski\nCitigroup Inc., Research Division\nThis is Eli Winski on for Chris. So maybe thinking about some of the sensitivity around the infrastructure\nside. And going over to Jefferson, and you were talking about, you'll obviously get the Exxon contract and\nthen you're going to focus on better asset utilization. But what are some of the puts and takes to getting\nbetter asset utilization, specifically on maybe the rail congestion side? How does that impact growing some\nof that business?\nJoseph P. Adams\nChairman & CEO\nReally no issues with congestion. We can handle double the train activity we're handling today. I mean\nthat's one of the things we can -- working on as we developed the terminal, ensuring that whether it's\ninbound crude trains or outbound refined product trains, we've got plenty of capacity to handle the\nadditional business.\nWhen we go through the calculation of exactly what our throughput capacity is, there's about 400,000\nbarrels per day, that's the capacity. We take all that stuff into consideration. I mean, I don't -- we're not\ntoo concerned about congestion issues. We've got plenty of tracks at the terminals. And so we haven't --\ncertainly haven't experienced any congestion to-date and I don't think congestion is going to be an issue\nfor us.\nEli Winski\nCitigroup Inc., Research Division\nOkay. That makes sense. And then on the Exxon side, you said you have a lot of the assets in place, but\nwhat is left? And then separately, on the $20 million of incremental EBITDA, what does that ramp up there\nlook like? So you said that's $20 million annually. But when does that really start to pick up? When should\nwe expect a lot of that to be coming in? What's left to there?\nKenneth Nicholson;CEO, FTAI Infrastructure\nThat really there should be a very short ramp up to that contract. I mean, there could be operations\ncommenced when everything is built. What is being built specifically is just -- under 2 million barrels of\ntotal storage. So we have storage tanks that are under construction. We built 4 million barrels to-date.\nThis is an additional 2 million we're bringing online. And then, just piping and manifolds, the way that\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 10\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 12 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\nsystem will work is we will receive refined products by pipe, accumulate and store the refined products.\nAnd then we will load large ships for export of those products.\n\nSo it's really just down to storage tanks, piping and manifolds, all stuff we've built before. So far, on track\nfor completion during the fourth quarter. Feel pretty good with our ability to get it done, I would say,\nmid part of the fourth quarter, although the team down there is very focused on completing as quickly\nas possible. There's not -- I wouldn't say we're at a stage of construction now where most of the risks\nthat you would typically see, geotechnical and what have you are behind us. And now we're welding and\npainting. We're not digging any holes or driving piles or anything like that that can typically be a cause for\ndelay.\nEli Winski\nCitigroup Inc., Research Division\nYes. It sounds like the tougher stages are over. On to Mexico for refined products, how involved is the\ngovernment right now, still in restricting moves? So you said that you're going to see a substantial pick up\nthere. What is the government play?\nJoseph P. Adams\nChairman & CEO\nYes. I'll tell you. We're -- I mean it's always an ongoing dialogue. Right now, we're not seeing any\nreduction in movements. I mean, Exxon as active as ever in loading trains for movements on to Mexico,\nwe watch it closely. And there are on occasion, percolation of -- a story here or a story there. But at the\nend of the day, the country needs gasoline and diesel. And Exxon's got a base of about 1,000 ExxonMobil\ngas stations that they need to serve. And so, we have not seen any issues or any slowdowns coming\nacross from some of the -- some of what you might read in the papers about government interaction.\nOperator\nWe'll take our next question from Justin Long with Stephens.\nJustin Trennon Long\nStephens Inc., Research Division\nI know in the slides, you called out a $200 million plus EBITDA run rate for the infrastructure businesses\nover the next 1 to 2 years. You referenced $80 million from Jefferson earlier. I think you gave the number\nof $100 million for Transtar in the slide. So when I add up the pieces, it sounds like we could be a decent\nfit above $200 million. So I was wondering if you could just kind of refresh us on your latest thoughts on\nthe EBITDA contribution from each of the different assets as you look out the next couple of years. And\nmaybe what level of corporate costs are getting factored into that forecast as well?\nJoseph P. Adams\nChairman & CEO\nYes, yes, absolutely. You are spot on, on the companies that you mentioned. Transtar is $100 million of the\ntotal of $200 million; Jefferson $80 million. Long Ridge, we're targeting $50 million, could easily be more\nto the extent we produce excess gas, particularly at current market pricing, but holds 50-plus for Long\nRidge. And Repauno, right now, we're including at $10 million, which is really only including Phase I and a\nlittle bit of incremental activity that does not include Phase II. So that's not in the $200 million estimate.\nYou add all that up and yes, you get in excess of $200 million, closer to $240 million. And then we deduct\n$30 million to $40 million of corporate expense and that gets you to just north of $200 million.\nJustin Trennon Long\nStephens Inc., Research Division\nPerfect. And secondly, I wanted to ask about the pro forma debt for the 2 businesses post spin next week.\nI know you gave the numbers in the slides. But how are you thinking about targeted leverage for each of\nthese businesses a year from now? And based on that target, what's the capacity that you feel like you\nhave for each entity to invest in growth?\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 11\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 13 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\nJoseph P. Adams\nChairman & CEO\nSo for Aviation, we're targeting -- maintaining a BB ratio and somewhere probably in the neighborhood\nof 4x to 5x debt-to-EBITDA. So there's capacity, I think, to go up as we grow EBITDA. But I think we're\ncomfortable where it is at this point.\nKenneth Nicholson;CEO, FTAI Infrastructure\nAnd I would say for Infrastructure, it's generally the same in terms of the ratio. It's obviously, the\ninfrastructure business slightly smaller business right now. But in terms of a ratio, it's in that sort of 4x to\n5x EBITDA target. The beauty of The Infrastructure business is in terms of investment capital for growth,\na lot of what we do is eligible for tax exempt financing and that's something we've used historically at\nJefferson and we can use at Repauno and potentially even at Long Ridge.\n\nAnd so debt capacity, obviously, we'll be smart and disciplined about incurring debt. But we've been\nsuccessful in the past, growing through investment by accessing the tax markets. And at Jefferson, our\naverage rate of borrowing is in the high 2s as an example. And we'll -- I'm not sure in this current market\nenvironment, Repauno for Phase II will be at a similar rate. But it will still be a significantly lower rate than\nwhere the more traditional taxable markets would be. So I feel like we can maintain a 4x to 5x leverage\nratio. But at the same time, continue to incur debt for specific projects at attractive levels.\nOperator\nWe'll take our next question from Frank Galanti with Stifel.\nFrank Galanti\nStifel, Nicolaus & Company, Incorporated, Research Division\nCongratulations on getting the financing done to be able to spin the Infrastructure business. I wanted\nto follow up on the engine maintenance program. So you had mentioned when you sold a couple of the\nengines, you were able to keep the maintenance portion. Can you sort of talk about what that physically\nentails and then sort of the economics? So is that simply using The Module Factory? Or is that full overhaul\nservices up in Montreal? And then, how should we think about that from an economic -- unit economics\nperspective?\nJoseph P. Adams\nChairman & CEO\nSure. It's a good question. So how it works is that we sell the aircraft to the new owner and agree to\nprovide replacement engines for the life of those leases when needed. So when an engine is due for a\nshop visit, we would take the engine that needs the shop visit and exchange and return an engine that\nis -- meets minimum requirements of cycles and hours available in a swap. And so that engine then\nbecomes our engine. And we can either put it in The Module Factory or do an overhaul or sell it. And the\neconomics in the meantime, what we're doing is we're collecting the full maintenance reserves from the\nairline for that engine along the way. So the way we price it out, given our advantaged cost with -- on\nthe maintenance side is we could generate an additional $1 million per aircraft per year through that\ntransaction. So it's a very attractive for us.\n\nAnd it's also attractive for the new owner. Obviously, they're doing it voluntarily because managing those\nengine events is not something everybody is capable or experienced or has had good outcomes on.\n\nSo we think it's an example of our ability to provide a competitive service at something that we can then\ngenerate a significant profit because of our proprietary products and advantage. So very exciting, I think,\nbecause it opens up a very, very large market. 60% of the world's fleet is owned by leasing companies. So\nas we look out, that's an important area for us to spend time and to try to grow and to profit from. And so\nthis is a way to do that on a pretty significant scale.\nFrank Galanti\nStifel, Nicolaus & Company, Incorporated, Research Division\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 12\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 14 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\nThat's super helpful. And then sort of continuing to get on the Aviation path. I wanted to ask about The\nModule Factory. Can you sort of talk about customer interest since the inception of that? And I guess my\nassumption is that it's picking up. But in that way, are there needs to put more engines into that business?\nIf I remember correctly, there's about 10 that was originally put in. And then, is there any interest or need\nto move pass the 3 modules that you guys have developed and expand those services?\nJoseph P. Adams\nChairman & CEO\nIn terms of the scale, I mean, yes, we will probably -- as volume grows, and obviously, what we're doing\nis we're turning modules. So we would increase the number of modules in The Module Factory as the\nbusiness grows. We are seeing very broad-based growth in users. As I mentioned, we've got -- it takes\na while to market this. But we've spent time with many, many airlines. And each week, we are educating\nairlines, are spending time with them and finding that they have needs and demands. And we're building\nbacklog for 2023 right now.\n\nSo we're seeing a very broad-based acceptance on the airline level. All of the maintenance shops have\nbeen very, I would say, much easier to sell because they're in the business of doing this regularly. And\nthere's never been, for many of these shops, they never had a place to go to buy a fan or to buy an LPT.\nSo this is something now that they're recognizing they can use to generate additional income for their own\nmaintenance shop.\n\nAnd then, as I mentioned, the leasing companies, we're seeing the leasing companies use this now for\nreturn compensation. So at the end of the lease, an engine, you often have returned comp issues with the\nairline. The airline has to provide a certain minimum number of hours and cycles back. And if they don't,\nthey have to pay cash. And so we can -- oftentimes, if it's an LPT that doesn't meet the requirements,\nwe could sell an LPT to the airline or the leasing company so that the return comp conditions are met and\nthey save money and they don't have to do a shop visit. So it's becoming a useful tool for people to save\nmoney on end-of-lease issues.\n\nSo really developing a very broad market for this and it is an education process. It takes time. But given\nthat we can sell to almost everybody in the ecosystem, it's a huge growth opportunity for us. And the\nbacklog, as I mentioned, is continuing to build. And as we -- with the sale of these assets and retaining\nthe engine maintenance agreements, that gives us committed volume, which we like as with the WestJet\ndeal, we have an 8-year deal or a 7-year deal, we now have 2 8-year deals, so we'll add to that. So we\nsee it with a nice ramp.\n\nIn terms of -- if we did double the volume, if we had 10 engines, we might have 15 engines or as much\nas 20. But a fleet engine is sort of $2 million to $3 million. It's not a huge investment to get that kind of a\nturnover ramp, which we would expect to turn a module within 3 to 6 months and so do it multiple times a\nyear. So I don't see that as a big capital user and it should scale quite easily.\n\nIn terms of going beyond these 3 modules, I don't -- we don't see anything quite as attractive as this right\nnow. So our focus is really on that. And we could develop something later in the future. But right now, all\neyes on this opportunity.\nFrank Galanti\nStifel, Nicolaus & Company, Incorporated, Research Division\nAnd I'd squeeze in one more question, if I could on the PMA business. So can you sort of talk about the\napproval process and why it's taken longer than anticipated? And I guess are there customers that are\ninterested in just one part that's approved? Or are they sort of waiting until there's a number of parts\nbefore engaging?\nJoseph P. Adams\nChairman & CEO\nYes. Well, I think it's -- I mean, people know that additional parts are in development. So having a critical\nmass is very helpful. So I think that's part of what we're attempting to achieve from the very beginning.\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 13\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 15 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\nAnd so once we have that critical mass, then I think people will know that that's coming, so they tend to\nkey off that.\n\nThe process is just -- I think there's been an element of cautiousness. There's a lot of data requests and\na slower turnaround time than normal. So it's all those factors. But we've got a great partner. They know\nhow to do this. They've done it hundreds of times. And the parts are very, very happy with what we've got\nin the pipeline.\nOperator\nAnd that concludes today's question-and-answer session. I would like to turn the call back over to Alan\nAndreini for any additional or closing remarks.\nAlan John Andreini\nInvestor Relations\nThank you. Thank you all for participating in today's conference call. We look forward to updating you for\nboth companies after Q3.\nOperator\nAnd that concludes today's presentation. Thank you for your participation. You may now disconnect.\n\n\n\n\nCopyright \u00a9 2022 S&P Global Market Intelligence, a division of S&P Global Inc. All Rights reserved.\nspglobal.com/marketintelligence 14\n\f Case 1:25-cv-00541-JAV Document 70-16 Filed 11/20/25 Page 16 of 16\nFORTRESS TRANSPORTATION AND INFRASTRUCTURE... FQ2 2022 EARNINGS CALL | JUL 28,\n2022\n\n\nCopyright \u00a9 2022 by S&P Global Market Intelligence, a division of S&P Global Inc. 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All Rights reserved.\nspglobal.com/marketintelligence 15\n\f","ocr_status":2,"date_upload":"2026-05-12T04:15:52.982891-07:00","document_number":"70","attachment_number":16,"pacer_doc_id":"127038602960","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit P - 2Q22 Earnings Call Transcript","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874417/","id":478874417,"tags":[],"absolute_url":"/docket/69558488/70/17/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.586817-07:00","date_modified":"2026-05-14T07:08:01.858672-07:00","sha1":"0504c9adc61fb0ee16e2ce8ebe9443fc4ace14fb","page_count":97,"file_size":4848174,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.17.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.17.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":"2026-05-12T04:16:35.227443-07:00","document_number":"70","attachment_number":17,"pacer_doc_id":"127038602961","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit Q - 2022 Form 10-K","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874418/","id":478874418,"tags":[],"absolute_url":"/docket/69558488/70/18/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.598858-07:00","date_modified":"2026-05-14T07:12:21.044551-07:00","sha1":"9c438a87d17b73045e322a02324a966e8421a8b3","page_count":7,"file_size":279086,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.18.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.18.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-18 Filed 11/20/25 Page 1 of 7\n\n\n\n\n Exhibit R\n\f Case 1:25-cv-00541-JAV Document 70-18 Filed 11/20/25 Page 2 of 7\n\n\n\n\n UNITED STATES\n SECURITIES AND EXCHANGE COMMISSION\n WASHINGTON, D.C. 20549\n\n FORM 8-K\n CURRENT REPORT\n Pursuant to Section 13 or 15(d)\n of the Securities Exchange Act of 1934\n\n Date of Report (Date of Earliest Event Reported): January 18, 2025\n\n\n FTAI Aviation Ltd.\n (Exact Name of Registrant as Specified in its Charter)\n Cayman Islands 001-37386 XX-XXXXXXX\n (State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)\n\n 415 West 13th Street, 7th Floor, New York, New York 10014\n (Address of Principal Executive Offices) (Zip Code)\n\n (332) 239-7600\n (Registrant\u2019s Telephone Number, Including Area Code)\n\n Not Applicable\n (Former Name or Former Address, if Changed Since Last Report)\n\nCheck the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the\nfollowing provisions:\n\u2610 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)\n\u2610 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)\n\u2610 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))\n\u2610 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))\n\nIndicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933\n(\u00a7230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (\u00a7240.12b-2 of this chapter).\nEmerging growth company \u2610\nIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with\nany new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. \u2610\n\n Securities registered pursuant to Section 12(b) of the Act:\n\n Title of each class: Trading Name of each exchange on\n Symbol: which registered:\n Ordinary shares, $0.01 par value per share FTAI The Nasdaq Global Select Market\n8.00% Fixed-to-Floating Rate Series B Cumulative Perpetual Redeemable Preferred FTAIO The Nasdaq Global Select Market\n Shares\n 8.25% Fixed Rate Reset Series C Cumulative Perpetual Redeemable Preferred FTAIN The Nasdaq Global Select Market\n Shares\n 9.50% Fixed Rate Reset Series D Cumulative Perpetual Redeemable Preferred FTAIM The Nasdaq Global Select Market\n Shares\n\f Case 1:25-cv-00541-JAV Document 70-18 Filed 11/20/25 Page 3 of 7\n\n\nItem 7.01 Regulation FD Disclosure.\n\n On January 21, 2025, FTAI Aviation Ltd.\u2019s (together with its consolidated subsidiaries, the \u201cCompany,\u201d \u201cwe,\u201d \u201cus\u201d or \u201cour\u201d) Chairman and\nChief Executive Officer, Joseph P. Adams, Jr. will participate in an industry event and provide certain updates about the Company. A copy of the\nremarks (the \u201cRemarks\u201d) that Mr. Adams is expected to make is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 7.01.\n\n As used in the Remarks, \u201caverage gross assets\u201d is the average gross leasing equipment between December 31, 2023 and September 30,\n2024 and \u201cEBIT\u201d is Adjusted EBITDA for the nine months ended September 30, 2024 for the Aviation Leasing reportable segment, adjusted to\nexclude the Depreciation and Amortization, and annualized.\n\n EBIT is not a financial measure in accordance with U.S. generally accepted accounting principles (\u201cGAAP\u201d). We believe EBIT is a useful\nmetric for investors and analysts for purposes of assessing our operational performance. Investors should use Non\u2010GAAP information in addition\nto, and not as an alternative to, financial information prepared in accordance with GAAP. This Non-GAAP measure may not be identical or\ncomparable to measures with the same name presented by other companies. See the appendices of the FTAI Aviation Ltd. Earnings Supplement for\nthe period ended September 30, 2024 for more information on non-GAAP measures and a reconciliation of Adjusted EBITDA to the most\ncomparable GAAP measure.\n\n The information in this Item 7.01 and Exhibit 99.1 attached hereto shall not be deemed \u201cfiled\u201d for purposes of Section 18 of the Securities\nExchange Act of 1934, as amended (the \u201cExchange Act\u201d), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated\nby reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in\nsuch a filing.\n\nItem 8.01 Other Events.\n\n On January 18, 2025, the Audit Committee of the Board of Directors of the Company determined to commence a review (which included the\nengagement of independent advisors) in response to the assertions alleged in the January 15, 2025 report issued by Muddy Waters Research (the\n\u201cShort-Seller Report\u201d), a well-known short-seller.\n\n The Company strongly disagrees with the assertions made in the Short-Seller Report. However, in view of the timing of the Short-Seller\nReport relative to the preparation of the Company\u2019s audited financial statements for fiscal year 2024, and the potential time required for any review\nof this nature, the Company cannot rule out the possibility that the filing of Company\u2019s Annual Report on Form 10-K for fiscal year 2024 (the\n\u201cAnnual Report\u201d) may be delayed.\n\n The Company reiterates its commitment to maintaining high standards of corporate governance and internal controls, as well as\ntransparent and timely disclosure in compliance with applicable rules and regulations.\n\f Case 1:25-cv-00541-JAV Document 70-18 Filed 11/20/25 Page 4 of 7\n\n\nItem 9.01 Financial Statements and Exhibits.\n\n(d) Exhibits.\n\nExhibit\nNumber Description\n99.1 Remarks, dated January 21, 2025.\n\n104 Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.\n\nCautionary Language Regarding Forward-Looking Statements\n\nThis communication contains \u201cforward-looking statements\u201d within the meaning of the Private Securities Litigation Reform Act of 1995, including\nbut not limited to, management\u2019s expected fiscal year 2025 Adjusted EBITDA guidance from its reportable segments, cost savings, the launching of\na strategic capital initiative and the initial partnership and its follow-on partnerships being the primary buyer of on-lease 737NG and A320ceo\naircraft going forward, how many aircraft are ultimately owned by such partnerships, providing aircraft management services to such partnerships,\nPMA certification, statements regarding any response to any short seller and related litigation, any findings from our review of the allegations in\nthe Short-Seller Report and our ability to finish the review without a delay in filing the Annual Report or material impact on our financial results.\nForward-looking statements are not statements of historical fact but instead are based on our present beliefs and assumptions and on information\ncurrently available to us. You can identify these forward-looking statements by the use of forward-looking words such as \u201coutlook,\u201d \u201cbelieves,\u201d\n\u201cexpects,\u201d \u201cpotential,\u201d \u201ccontinues,\u201d \u201cmay,\u201d \u201cwill,\u201d \u201cshould,\u201d \u201ccould,\u201d \u201cseeks,\u201d \u201capproximately,\u201d \u201cpredicts,\u201d \u201cintends,\u201d \u201cplans,\u201d \u201cestimates,\u201d\n\u201canticipates,\u201d \u201ctarget,\u201d \u201cprojects,\u201d \u201ccontemplates\u201d or the negative version of those words or other comparable words. Any forward-looking\nstatements contained in this communication are based upon our historical performance and on our current plans, estimates and expectations in light\nof information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us that the\nfuture plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and\nuncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity.\nAccordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements,\nincluding, but not limited to, the risk factors set forth in Item 1A. \u201cRisk Factors\u201d of our Annual Report on Form 10-K for the year ended December\n31, 2023 and our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2024, June 30, 2024, and September 30, 2024, as updated\nby annual, quarterly and other reports we file with the Securities and Exchange Commission.\n\f Case 1:25-cv-00541-JAV Document 70-18 Filed 11/20/25 Page 5 of 7\n\n\n SIGNATURE\n\n Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by\nthe undersigned hereunto duly authorized.\n\n FTAI Aviation Ltd.\n\n By: /s/ Joseph P. Adams, Jr.\n Name: Joseph P. Adams, Jr.\n Title: Chief Executive Officer\n\nDate: January 21, 2025\n\f Case 1:25-cv-00541-JAV Document 70-18 Filed 11/20/25 Page 6 of 7\n\n\n Exhibit 99.1\n\n FTAI CEO & Chairman Joe Adams Prepared Remarks\n RBC event, January 21, 2025\n\nGood morning.\n\nConsidering recent events, I would like to first address last week\u2019s misleading short sale piece. We take our obligations and any valid assertions\nseriously but we strongly disagree with the assertions made in the report. We believe such report mischaracterizes our business and that these\nmisrepresentations are baseless and nonsensical.\n\nWe are committed to maintaining high standards of corporate governance and internal controls. We believe that suggestions that we engaged in\nimproper financial accounting are wrong.\n\nOur depreciation policy and methodology have not changed since our IPO in 2015, are in accordance with accounting standards and in line with\naviation leasing peers, and are reviewed on a quarterly basis. To provide further detail on engine depreciation, current residual values are\napproximately 50% of the acquisition cost and are depreciated over the expected time between shop visits (2 to 6 years). Furthermore, we take great\npride in the profitability of our leasing business. Notably, our Return on Gross Assets (defined as EBIT over average gross assets) stands at\napproximately 10% for the nine months ended September 30, 2024, which is in line with or exceeds that of industry peers.\n\nNow let me talk about the exciting developments at FTAI.\n\nOver the last 4 years, our business has evolved from an engine leasing company into a vertically integrated full-service provider of aftermarket\npower and maintenance for the most widely-used commercial jet engines.\n\nTwo years ago we laid out our plan to grow EBITDA to $1 billion by 2026 with $500 million coming from our fast growing Aerospace Products\nsector powered by our innovative MRE business.\n\nOn December 30, 2024, we disclosed that we expect 2025 Adjusted EBITDA of approximately $1.1 to $1.15 billion from its reportable segments,\ncomprised of approximately $500 million from Aviation Leasing and approximately $600 to $650 million from Aerospace Products.\n\nLet\u2019s talk about how we think about our business today from both an operating and commercial perspective.\n\nFrom an operating perspective, our primary business model consists of 3 parts:\n\n - Acquire unserviceable engines\n - Repair\n - Sell, exchange, lease\n\nIn the engine maintenance department, our business has developed extensive capability over the last several years.\n\nWe own and operate two facilities - in Miami and Montreal - and would invite all of you to visit and see the complex maintenance we perform every\nday at each location.\n\f Case 1:25-cv-00541-JAV Document 70-18 Filed 11/20/25 Page 7 of 7\n\n\n FTAI CEO & Chairman Joe Adams Prepared Remarks\n RBC event, January 21, 2025\n\nA few numbers to keep in mind:\n\n 1. In the first nine months of 2024, we spent over $400 million, comprised of approximately $270mm on rebuilding modules or repairing parts,\n plus an additional over $130 million in prepaid maintenance\n 2. Approximately 500 employees at our two maintenance facilities\n\nMoving to commercial operations.\n\nOur value proposition to airlines and asset owners is to deliver cost savings and flexibility through engine and module exchanges. We eliminate the\nneed for owners to manage engine shop visits and all the costs connected with that. The traditional shop visit is expensive, time consuming, and\ndoes not align interest between customer and maintenance provider.\n\nWe have experienced broad and increasing customer acceptance of our unique product offering continuing to add new customers and greater\nusage bolstering our confidence in our growth rate.\n\nWe offer customers a choice of 1, 2, or 3 modules (a whole engine) sales or exchanges and have reflected that the choice is driven by customer\npreference.\n\nWe are seeing high demand for core modules, which require the most maintenance of the three modules due to exposure to higher temperatures and\nhaving a shorter LLP life. Many customers prefer whole engine exchanges to service core modules because it generally eliminates turnaround time.\nWe believe this is a positive development as it is our highest value add product and combines all of our capabilities.\n\nRepairs at our engine facilities include everything from limited workscopes to maintain serviceability, up to heavier maintenance work such as\nperformance overhauls. We value both limited and heavy maintenance and plan to always focus on finding opportunities to reduce cost and time,\nminimize waste and increase efficiency.\n\nLet me conclude with updates on two major initiatives that we expect will be material positive contributors in the near future:\n\n 1. Strategic Capital Initiative\n 2. PMA\n\nIn December 2024, FTAI announced the launch of a Strategic Capital initiative in collaboration with third-party institutional investors. The first\npartnership is focused on acquiring on-lease 737NG and A320ceo aircraft and we believe this market opportunity will allow for the deployment of\n$3.0+ billion of capital annually. This first partnership is also in the process of acquiring 46 on-lease narrowbody aircraft from FTAI for an estimated\nnet purchase price of $549 million. All aircraft engines owned by the partnership will be exclusively powered through engine and module exchanges\nwith FTAI\u2019s Maintenance, Repair and Exchange business.\n\nOn PMA, we have received approval for two of the five parts, and certification for the next part is very close. We believe that having this part will\nbe a milestone for the company, accelerating production at our facilities and contributing to growing margins.\n\nThank you.\n\f","ocr_status":2,"date_upload":"2026-05-12T04:16:29.771349-07:00","document_number":"70","attachment_number":18,"pacer_doc_id":"127038602962","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit R - 1/21/25 Form 8-K","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874419/","id":478874419,"tags":[],"absolute_url":"/docket/69558488/70/19/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.609008-07:00","date_modified":"2026-05-14T07:11:51.161062-07:00","sha1":"901df95eddc8480b0cca083fa6df359a9ee50f8a","page_count":6,"file_size":272249,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.19.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.19.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-19 Filed 11/20/25 Page 1 of 6\n\n\n\n\n Exhibit S\n\f Case 1:25-cv-00541-JAV Document 70-19 Filed 11/20/25 Page 2 of 6\n\n\n\n\n UNITED STATES\n SECURITIES AND EXCHANGE COMMISSION\n WASHINGTON, D.C. 20549\n\n FORM 8-K\n CURRENT REPORT\n Pursuant to Section 13 or 15(d)\n of the Securities Exchange Act of 1934\n\n Date of Report (Date of Earliest Event Reported): February 20, 2025\n\n\n FTAI Aviation Ltd.\n (Exact Name of Registrant as Specified in its Charter)\n Cayman Islands 001-37386 XX-XXXXXXX\n (State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)\n\n 415 West 13th Street, 7th Floor, New York, New York 10014\n (Address of Principal Executive Offices) (Zip Code)\n\n (332) 239-7600\n (Registrant\u2019s Telephone Number, Including Area Code)\n\n Not Applicable\n (Former Name or Former Address, if Changed Since Last Report)\n\nCheck the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the\nfollowing provisions:\n\n\u2610 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)\n\u2610 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)\n\u2610 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))\n\u2610 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))\n\n Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933\n (\u00a7230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (\u00a7240.12b-2 of this chapter).\n Emerging growth company \u2610\n If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying\n with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. \u2610\n\n Securities registered pursuant to Section 12(b) of the Act:\n\n Title of each class: Trading Symbol: Name of each exchange on which registered:\n Ordinary shares, $0.01 par value per share FTAI The Nasdaq Global Select Market\n 8.00% Fixed-to-Floating Rate Series B Cumulative Perpetual FTAIO The Nasdaq Global Select Market (Redeemed)\n Redeemable Preferred Shares\n8.25% Fixed Rate Reset Series C Cumulative Perpetual Redeemable FTAIN The Nasdaq Global Select Market\n Preferred Shares\n9.50% Fixed Rate Reset Series D Cumulative Perpetual Redeemable FTAIM The Nasdaq Global Select Market\n Preferred Shares\n\f Case 1:25-cv-00541-JAV Document 70-19 Filed 11/20/25 Page 3 of 6\n\n\nItem 8.01. Other Events.\n\n On February 20, 2025, FTAI Aviation Ltd. (\u201cFTAI\u201d or the \u201cCompany\u201d) issued a press release announcing that the Company\u2019s Board of\nDirectors\u2019 Audit Committee has completed its review, conducted by independent legal and forensic accounting advisors, into assertions made by\ncertain short seller reports in January 2025 and determined that the allegations made against the Company are without merit. The Company expects\nto file its Form 10-K timely.\n\n A copy of the Company\u2019s press release is attached to this Current Report on Form 8-K (the \u201cCurrent Report\u201d) as Exhibit 99.1 and is\nincorporated herein by reference.\n\nForward-Looking Statements\n\n This communication contains \u201cforward-looking statements\u201d within the meaning of the Private Securities Litigation Reform Act of 1995,\nincluding but not limited to, statements relating to the timing of the filing of the Company\u2019s Annual Report Form 10-K. Forward-looking statements\nare not statements of historical fact but instead are based on the Company\u2019s present beliefs and assumptions and on information currently available\nto the Company. You can identify these forward-looking statements by the use of forward-looking words such as \u201coutlook,\u201d \u201cbelieves,\u201d \u201cexpects,\u201d\n\u201cpotential,\u201d \u201ccontinues,\u201d \u201cmay,\u201d \u201cwill,\u201d \u201cshould,\u201d \u201ccould,\u201d \u201cseeks,\u201d \u201capproximately,\u201d \u201cpredicts,\u201d \u201cintends,\u201d \u201cplans,\u201d \u201cestimates,\u201d \u201canticipates,\u201d\n\u201ctarget,\u201d \u201cprojects,\u201d \u201ccontemplates\u201d or the negative version of those words or other comparable words. Any forward-looking statements contained\nin this communication are based upon the Company\u2019s historical performance and on its current plans, estimates and expectations in light of\ninformation currently available to the Company. The inclusion of this forward-looking information should not be regarded as a representation by\nthe Company that the future plans, estimates or expectations contemplated by the Company will be achieved. Such forward-looking statements are\nsubject to various risks and uncertainties and assumptions relating to the Company\u2019s operations, financial results, financial condition, business,\nprospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause the Company\u2019s actual results to differ\nmaterially from those indicated in these statements, including, but not limited to, the risk factors set forth in Item 1A. \u201cRisk Factors\u201d of the\nCompany\u2019s Annual Report on Form 10-K for the year ended December 31, 2023 and the Company\u2019s Quarterly Reports on Form 10-Q for the\nquarterly periods ended March 31, 2024, June 30, 2024, and September 30, 2024, as updated by annual, quarterly and other reports the Company\nfiles with the Securities and Exchange Commission.\n\nItem 9.01 Financial Statements and Exhibits.\n(d) Exhibits.\n\n Exhibit\n Number Description\n\n99.1 Press release, dated February 20, 2025, issued by FTAI Aviation Ltd.\n104 Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document\n\f Case 1:25-cv-00541-JAV Document 70-19 Filed 11/20/25 Page 4 of 6\n\n\n SIGNATURE\n\n Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by\nthe undersigned hereunto duly authorized.\n\n FTAI Aviation Ltd.\n\n By: /s/ Eun (Angela) Nam\n Name: Eun (Angela) Nam\n Title: Chief Financial Officer and Chief Accounting Officer\n\nDate: February 20, 2025\n\f Case 1:25-cv-00541-JAV Document 70-19 Filed 11/20/25 Page 5 of 6\n\n\n Exhibit 99.1\n\n FTAI Aviation Audit Committee Completes Independent Review, Expects to File 10-K Timely\n\nNEW YORK - February 20, 2025 - FTAI Aviation Ltd. (NASDAQ: FTAI) (\u201cFTAI\u201d or the \u201cCompany\u201d) today announced that the Board of\nDirectors\u2019 Audit Committee has completed its review, conducted by independent legal and forensic accounting advisors, into assertions made by\ncertain short seller reports in January 2025 and determined that the allegations made against the Company are without merit. The Company expects\nto file its Form 10-K timely.\n\nPaul R. Goodwin, Chair of the Audit Committee, commented, \u201cAfter a thorough and comprehensive review with the support of our independent\nlegal and forensic accounting advisors, we have determined that the assertions made in the short seller reports are unsupported and have no merit.\nThe Audit Committee and full Board continue to take seriously our responsibility to FTAI shareholders to maintain high standards of corporate\ngovernance and internal compliance and financial reporting controls, as well as transparent and timely disclosure.\u201d\n\nFourth Quarter and Full Year 2024 Earnings\n\nAs previously disclosed, the Company plans to announce its financial results for the fourth quarter and full year 2024 after the closing of Nasdaq\non Wednesday, February 26, 2025. Management will host a conference call on Thursday, February 27, 2025 at 8:00 A.M. Eastern Time. The\nconference call may be accessed by registering via the following link https://register.vevent.com/register/BId401ec69ff8f491fb21444c5bbd87f54/.\nOnce registered, participants will receive a dial-in and unique pin to access the call. A simultaneous webcast of the conference call will be available\nto the public on a listen-only basis at https://www.ftaiaviation.com/.\n\nABOUT FTAI AVIATION\n\nFTAI owns and maintains commercial jet engines with a focus on CFM56 and V2500 engines. FTAI\u2019s propriety portfolio of products, including the\nModule Factory and a joint venture to manufacture engine PMA, enables it to provide cost savings and flexibility to our airline, lessor, and\nmaintenance, repair, and operations customer base. Additionally, FTAI owns and leases jet aircraft which often facilitates the acquisition of engines\nat attractive prices. FTAI invests in aviation assets and aerospace products that generate strong and stable cash flows with the potential for\nearnings growth and asset appreciation.\n\nFORWARD-LOOKING STATEMENTS\n\nThis communication contains \u201cforward-looking statements\u201d within the meaning of the Private Securities Litigation Reform Act of 1995, including\nbut not limited to, statements relating to the timing of the filing of the Company\u2019s Annual Report Form 10-K. Forward-looking statements are not\nstatements of historical fact but instead are based on the Company\u2019s present beliefs and assumptions and on information currently available to the\nCompany. You can identify these forward-looking statements by the use of forward-looking words such as \u201coutlook,\u201d \u201cbelieves,\u201d \u201cexpects,\u201d\n\u201cpotential,\u201d \u201ccontinues,\u201d \u201cmay,\u201d \u201cwill,\u201d \u201cshould,\u201d \u201ccould,\u201d \u201cseeks,\u201d \u201capproximately,\u201d \u201cpredicts,\u201d \u201cintends,\u201d \u201cplans,\u201d \u201cestimates,\u201d \u201canticipates,\u201d\n\u201ctarget,\u201d \u201cprojects,\u201d \u201ccontemplates\u201d or the negative version of those words or other comparable words. Any forward-looking statements contained\nin this communication are based upon the Company\u2019s historical performance and on its current plans, estimates and expectations in light of\ninformation currently available to the Company. The inclusion of this forward-looking information should not be regarded as a representation by\nthe Company that the future plans, estimates or expectations contemplated by the Company will be achieved. Such forward-looking statements are\nsubject to various risks and uncertainties and assumptions relating to the Company\u2019s operations, financial results, financial condition, business,\nprospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause the Company\u2019s actual results to differ\nmaterially from those indicated in these statements, including, but not limited to, the risk factors set forth in Item 1A. \u201cRisk Factors\u201d of the\nCompany\u2019s Annual Report on Form 10-K for the year ended December 31, 2023 and the Company\u2019s Quarterly Reports on Form 10-Q for the\nquarterly periods ended March 31, 2024, June 30, 2024, and September 30, 2024, as updated by annual, quarterly and other reports the Company\nfiles with the Securities and Exchange Commission.\n\f Case 1:25-cv-00541-JAV Document 70-19 Filed 11/20/25 Page 6 of 6\n\n\nContacts\n\nAlan Andreini\nInvestor Relations\nFTAI Aviation Ltd.\n(646) 734-9414\naandreini@ftaiaviation.com\n\nMedia\n\nTim Lynch / Aaron Palash / Kelly Sullivan\nJoele Frank, Wilkinson Brimmer Katcher\n(212) 355-4449\n\f","ocr_status":1,"date_upload":"2026-05-12T04:16:02.251146-07:00","document_number":"70","attachment_number":19,"pacer_doc_id":"127038602963","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit S - 2/20/25 Form 8-K","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874420/","id":478874420,"tags":[],"absolute_url":"/docket/69558488/70/20/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.618696-07:00","date_modified":"2026-05-14T07:08:00.001039-07:00","sha1":"5bcaf2671594153cd75b27d0e698a20e1b19f9da","page_count":165,"file_size":1590454,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.20.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.20.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":"2026-05-12T04:16:07.910352-07:00","document_number":"70","attachment_number":20,"pacer_doc_id":"127038602964","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit T - 2015 Form 10-K","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874421/","id":478874421,"tags":[],"absolute_url":"/docket/69558488/70/21/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.628476-07:00","date_modified":"2026-05-14T07:09:30.375586-07:00","sha1":"ee83030fd2508bc3fc7918675334238dda4944a8","page_count":10,"file_size":360816,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.21.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.21.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-21 Filed 11/20/25 Page 1 of 10\n\n\n\n\n Exhibit U\n\f Case 1:25-cv-00541-JAV Document 70-21 Filed 11/20/25 Page 2 of 10\n\n\n\n\n UNITED STATES\n SECURITIES AND EXCHANGE COMMISSION\n WASHINGTON, D.C. 20549\n\n FORM 8-K\n CURRENT REPORT\n Pursuant to Section 13 or 15(d)\n of the Securities Exchange Act of 1934\n\n Date of Report (Date of Earliest Event Reported): July 23, 2024\n\n\n FTAI Aviation Ltd.\n (Exact Name of Registrant as Specified in its Charter)\n Cayman Islands 001-37386 XX-XXXXXXX\n (State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)\n\n 415 West 13th Street, 7h Floor, New York, New York 10014\n (Address of Principal Executive Offices) (Zip Code)\n\n (332) 239-7600\n (Registrant\u2019s Telephone Number, Including Area Code)\n\n Not Applicable\n (Former Name or Former Address, if Changed Since Last Report)\n\nCheck the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the\nfollowing provisions:\n\u2610 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)\n\u2610 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)\n\u2610 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))\n\u2610 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))\n\n Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933\n (\u00a7230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (\u00a7240.12b-2 of this chapter).\n Emerging growth company \u2610\n If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying\n with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. \u2610\n\n Securities registered pursuant to Section 12(b) of the Act:\n Title of each class: Trading Symbol: Name of each exchange on which registered:\n Class A Common shares, $0.01 par value per share FTAI The Nasdaq Global Select Market\n 8.25% Fixed-to-Floating Rate Series A Cumulative Perpetual FTAIP The Nasdaq Global Select Market\n Redeemable Preferred Shares\n 8.00% Fixed-to-Floating Rate Series B Cumulative Perpetual FTAIO The Nasdaq Global Select Market\n Redeemable Preferred Shares\n 8.25% Fixed Rate Reset Series C Cumulative Perpetual FTAIN The Nasdaq Global Select Market\n Redeemable Preferred Shares\n 9.50% Fixed Rate Reset Series D Cumulative Perpetual FTAIM The Nasdaq Global Select Market\n Redeemable Preferred Shares\n\f Case 1:25-cv-00541-JAV Document 70-21 Filed 11/20/25 Page 3 of 10\n\n\nItem 2.02. Results of Operations and Financial Condition.\n\n On July 23, 2024, FTAI Aviation Ltd. (\u201cFTAI\u201d or the \u201cCompany\u201d) issued a press release announcing the Company\u2019s results for its fiscal\nquarter ended June 30, 2024. A copy of the Company\u2019s press release is attached to this Current Report on Form 8-K (the \u201cCurrent Report\u201d) as\nExhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.\n\n This Current Report, including the exhibit attached hereto, is being furnished and shall not be deemed to be filed for purposes of Section\n18 of the Securities Exchange Act of 1934, as amended (the \u201cExchange Act\u201d), or otherwise subject to the liabilities of that section, nor shall it be\nincorporated by reference into any of the Company\u2019s filings under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly\nset forth as being incorporated by reference into such filing.\n\nItem 9.01 Financial Statements and Exhibits.\n(d) Exhibits.\n\nExhibit\nNumber Description\n\n99.1 Press release, dated July 23, 2024, issued by FTAI Aviation Ltd.\n104 Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document\n\f Case 1:25-cv-00541-JAV Document 70-21 Filed 11/20/25 Page 4 of 10\n\n\n SIGNATURE\n\n Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by\nthe undersigned hereunto duly authorized.\n\n FTAI Aviation Ltd.\n\n By: /s/ Eun (Angela) Nam\n Name: Eun (Angela) Nam\n Title: Chief Financial Officer and Chief Accounting Officer\n\nDate: July 23, 2024\n\f Case 1:25-cv-00541-JAV Document 70-21 Filed 11/20/25 Page 5 of 10\n\n\n Exhibit 99.1\n\n\n\n\nPRESS RELEASE\n\nFTAI Aviation Ltd. Reports Second Quarter 2024 Results, Declares Dividend of $0.30 per Ordinary Share\n\n\n\nNEW YORK, July 23, 2024 (GLOBE NEWSWIRE) - FTAI Aviation Ltd. (NASDAQ: FTAI) (the \u201cCompany\u201d or \u201cFTAI\u201d) today reported financial\nresults for the second quarter 2024. The Company\u2019s consolidated comparative financial statements and key performance measures are attached as\nan exhibit to this press release.\n\nFinancial Overview\n\n (in thousands, except per share data)\n Selected Financial Results Q2\u201924\n Net Loss Attributable to Shareholders $ (228,205)\n Basic Loss per Ordinary Share $ (2.26)\n Diluted Loss per Ordinary Share $ (2.26)\n Adjusted EBITDA(1) $ 213,904\n\n (1) For definitions and reconciliations of non-GAAP measures, please refer to the exhibit to this press release.\n\n\nSecond Quarter 2024 Dividends\n\nOn July 23, 2024, the Company\u2019s Board of Directors (the \u201cBoard\u201d) declared a cash dividend on our ordinary shares of $0.30 per share for the quarter\nended June 30, 2024, payable on August 20, 2024 to the holders of record on August 12, 2024.\n\nAdditionally, on July 23, 2024, the Board declared cash dividends on its Fixed-to-Floating Rate Series A Cumulative Perpetual Redeemable Preferred\nShares (\u201cSeries A Preferred Shares\u201d), Fixed-to-Floating Rate Series B Cumulative Perpetual Redeemable Preferred Shares (\u201cSeries B Preferred\nShares\u201d), Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares (\u201cSeries C Preferred Shares\u201d) and Fixed-Rate Reset Series D\nCumulative Perpetual Redeemable Preferred Shares (\u201cSeries D Preferred Shares\u201d) of $0.51563, $0.50000, $0.51563 and $0.59375 per share,\nrespectively, for the quarter ended June 30, 2024, payable on September 16, 2024 to the holders of record on September 6, 2024.\n\nBusiness Highlights\n\n \u2022 Aerospace Products reaches new Adjusted EBITDA high of $91.2mm for Q2. (1)\n\n \u2022 FTAI has inducted 20 V2500 engines year to date and expects to induct an additional 30 by year end.\n\n \u2022 FTAI\u2019s Module Factory\u2122 now has over 50 active customers worldwide.\n\n (1) For definitions and reconciliations of non-GAAP measures, please refer to the exhibit to this press release.\n\n\n\n 1\n\f Case 1:25-cv-00541-JAV Document 70-21 Filed 11/20/25 Page 6 of 10\n\n\nAdditional Information\n\nFor additional information that management believes to be useful for investors, please refer to the presentation posted on the Investor Center\nsection of the Company\u2019s website, https://www.ftaiaviation.com, and the Company\u2019s Quarterly Report on Form 10-Q, when available on the\nCompany\u2019s website. Nothing on the Company\u2019s website is included or incorporated by reference herein.\n\nConference Call\n\nIn addition, management will host a conference call on Wednesday, July 24, 2024, at 8:00 A.M. Eastern Time. The conference call may be accessed\nby registering via the following link https://register.vevent.com/register/BIdca77333acf741569740cfda9a5d8b1a/. Once registered, participants will\nreceive a dial-in and unique pin to access the call.\n\nA simultaneous webcast of the conference call will be available to the public on a listen-only basis at https://www.ftaiaviation.com/. Please allow\nextra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast.\n\nA replay of the conference call will be available after 11:30 A.M. on Wednesday, July 24, 2024 through 11:30 A.M. on Wednesday, July 31, 2024 on\nhttps://ir.ftaiaviation.com/news-events/presentations/.\n\nThe information contained on, or accessible through, any websites included in this press release is not incorporated by reference into, and should\nnot be considered a part of, this press release.\n\nAbout FTAI Aviation Ltd.\n\nFTAI owns and maintains commercial jet engines with a focus on CFM56 and V2500 engines. FTAI\u2019s propriety portfolio of products, including the\nModule Factory and a joint venture to manufacture engine PMA, enables it to provide cost savings and flexibility to our airline, lessor, and\nmaintenance, repair, and operations customer base. Additionally, FTAI owns and leases jet aircraft which often facilitates the acquisition of engines\nat attractive prices. FTAI invests in aviation assets and aerospace products that generate strong and stable cash flows with the potential for\nearnings growth and asset appreciation.\n\nCautionary Note Regarding Forward-Looking Statements\n\nCertain statements in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform\nAct of 1995, including, but not limited to, expectations for inducting an additional 30 V2500 engines by year end. These statements are based on\nmanagement's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ\nmaterially from those described in the forward-looking statements, many of which are beyond the Company\u2019s control. The Company can give no\nassurance that its expectations will be attained and such differences may be material. Accordingly, you should not place undue reliance on any\nforward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could affect such\nforward-looking statements, see the sections entitled \u201cRisk Factors\u201d and \u201cManagement\u2019s Discussion and Analysis of Financial Condition and\nResults of Operations\u201d in the Company\u2019s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are available on the\nCompany\u2019s website (www.ftaiaviation.com). In addition, new risks and uncertainties emerge from time to time, and it is not possible for the\nCompany to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking\nstatements. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to\nrelease publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations\nwith regard thereto or change in events, conditions, or circumstances on which any statement is based. This release shall not constitute an offer to\nsell or the solicitation of an offer to buy any securities.\n\n\n 2\n\f Case 1:25-cv-00541-JAV Document 70-21 Filed 11/20/25 Page 7 of 10\n\n\nFor further information, please contact:\n\nAlan Andreini\nInvestor Relations\nFTAI Aviation Ltd.\n(646) 734-9414\naandreini@fortress.com\n\n\n 3\n\f Case 1:25-cv-00541-JAV Document 70-21 Filed 11/20/25 Page 8 of 10\n\n\nExhibit - Financial Statements\n FTAI AVIATION LTD.\n CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)\n (Dollar amounts in thousands, except share and per share data)\n\n Three Months Ended June 30, Six Months Ended June 30,\n 2024 2023 2024 2023\nRevenues\nLease income $ 70,754 $ 59,541 $ 123,915 $ 115,519\nMaintenance revenue 51,187 42,065 96,977 77,206\nAsset sales revenue 72,433 76,836 111,040 185,527\nAerospace products revenue 245,200 92,725 434,257 177,838\nOther revenue 4,020 3,178 4,099 10,973\nTotal revenues 443,594 274,345 770,288 567,063\n\nExpenses\nCost of sales 205,857 104,532 348,661 250,202\nOperating expenses 29,099 24,797 54,416 47,331\nGeneral and administrative 2,969 3,188 6,652 7,255\nAcquisition and transaction expenses 8,019 2,672 14,198 5,934\nManagement fees and incentive allocation to affiliate 3,554 5,563 8,449 8,560\nInternalization fee to affiliate 300,000 - 300,000 -\nDepreciation and amortization 56,691 38,514 106,611 79,440\nAsset impairment - - 962 1,220\nInterest expense 55,196 38,499 102,903 77,791\nTotal expenses 661,385 217,765 942,852 477,733\n\nOther (expense) income\nEquity in losses of unconsolidated entities (694) (380) (1,361) (1,715)\nLoss on extinguishment of debt (13,920) - (13,920) -\nOther (expense) income (498) 408 136 416\nTotal other (expense) income (15,112) 28 (15,145) (1,299)\n(Loss) income before income taxes (232,903) 56,608 (187,709) 88,031\n(Benefit from) provision for income taxes (13,033) 1,855 (7,461) 3,881\nNet (loss) income (219,870) 54,753 (180,248) 84,150\nLess: Dividends on preferred shares 8,335 8,335 16,670 15,126\nNet (loss) income attributable to shareholders $ (228,205) $ 46,418 $ (196,918) $ 69,024\n\n(Loss) Earnings per share:\nBasic $ (2.26) $ 0.47 $ (1.96) $ 0.69\nDiluted $ (2.26) $ 0.46 $ (1.96) $ 0.69\n\nWeighted average shares outstanding:\nBasic 100,958,524 99,732,179 100,602,214 99,730,223\nDiluted 100,958,524 100,462,277 100,602,214 100,314,508\n\n\n 4\n\f Case 1:25-cv-00541-JAV Document 70-21 Filed 11/20/25 Page 9 of 10\n\n\n FTAI AVIATION LTD.\n CONSOLIDATED BALANCE SHEETS\n (Dollar amounts in thousands, except share and per share data)\n\n (Unaudited)\n December 31,\n June 30, 2024 2023\nAssets\nCash and cash equivalents $ 169,485 $ 90,756\nRestricted cash 150 150\nAccounts receivable, net 154,051 115,156\nLeasing equipment, net 2,202,866 2,032,413\nProperty, plant, and equipment, net 33,078 45,175\nInvestments 19,886 22,722\nIntangible assets, net 42,138 50,590\nGoodwill 4,630 4,630\nInventory, net 373,282 316,637\nOther assets 449,686 286,456\nTotal assets $ 3,449,252 $ 2,964,685\n\nLiabilities\nAccounts payable and accrued liabilities $ 128,708 $ 112,907\nDebt, net 3,077,596 2,517,343\nMaintenance deposits 75,939 65,387\nSecurity deposits 41,536 41,065\nOther liabilities 55,906 52,100\nTotal liabilities $ 3,379,685 $ 2,788,802\n\nCommitments and contingencies\n\nEquity\nOrdinary shares ($0.01 par value per share\u037e 2,000,000,000 shares authorized\u037e 102,211,402 and 100,245,905 shares\nissued and outstanding as of June 30, 2024 and December 31, 2023, respectively) $ 1,022 $ 1,002\nPreferred shares ($0.01 par value per share\u037e 200,000,000 shares authorized\u037e 15,920,000 and 15,920,000 shares\nissued and outstanding as of June 30, 2024 and December 31, 2023, respectively) 159 159\nAdditional paid in capital 330,419 255,973\nAccumulated deficit (262,033) (81,785)\nShareholders' equity 69,567 175,349\nNon-controlling interest in equity of consolidated subsidiaries - 534\nTotal equity 69,567 175,883\nTotal liabilities and equity $ 3,449,252 $ 2,964,685\n\n\n 5\n\f Case 1:25-cv-00541-JAV Document 70-21 Filed 11/20/25 Page 10 of 10\n\n\nKey Performance Measures\n\nThe Chief Operating Decision Maker (\u201cCODM\u201d) utilizes Adjusted EBITDA as our key performance measure.\n\nAdjusted EBITDA provides the CODM with the information necessary to assess operational performance, as well as make resource and allocation\ndecisions. Adjusted EBITDA is defined as net income (loss) attributable to shareholders from continuing operations, adjusted (a) to exclude the\nimpact of provision for income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or\nextinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive\nallocations, depreciation and amortization expense, dividends on preferred shares, and interest expense, internalization fee to affiliate, (b) to include\nthe impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings (losses) of\nunconsolidated entities and the non-controlling share of Adjusted EBITDA.\n\nThe following table sets forth a reconciliation of net (loss) income attributable to shareholders to Adjusted EBITDA for the three and six months\nended June 30, 2024 and 2023:\n\n Six Months Ended\n Three Months Ended June 30, June 30,\n(in thousands) 2024 2023 Change 2024 2023 Change\nNet (loss) income attributable to\n shareholders $ (228,205) $ 46,418 $ (274,623) $ (196,918) $ 69,024 $ (265,942)\nAdd: (Benefit from) provision for income\n taxes (13,033) 1,855 (14,888) (7,461) 3,881 (11,342)\nAdd: Equity-based compensation\n expense 638 510 128 1,148 618 530\nAdd: Acquisition and transaction\n expenses 8,019 2,672 5,347 14,198 5,934 8,264\nAdd: Losses on the modification or\nextinguishment of debt and capital lease\nobligations 13,920 - 13,920 13,920 - 13,920\nAdd: Changes in fair value of non-hedge\nderivative instruments - - - - - -\nAdd: Asset impairment charges - - - 962 1,220 (258)\nAdd: Incentive allocations 3,148 5,324 (2,176) 7,456 8,266 (810)\nAdd: Depreciation and amortization\n expense (1) 65,809 48,934 16,875 124,931 97,704 27,227\nAdd: Interest expense and dividends on\npreferred shares 63,531 46,834 16,697 119,573 92,917 26,656\nAdd: Internalization fee to affiliate 300,000 - 300,000 300,000 - 300,000\nAdd: Pro-rata share of Adjusted EBITDA\nfrom unconsolidated entities (2) (617) 150 (767) (1,165) (546) (619)\nLess: Equity in losses of unconsolidated\n entities 694 380 314 1,361 1,715 (354)\nLess: Non-controlling share of Adjusted\n EBITDA - - - - - -\nAdjusted EBITDA (non-GAAP) $ 213,904 $ 153,077 $ 60,827 $ 378,005 $ 280,733 $ 97,272\n\n\n\n(1) Includes the following items for the three months ended June 30, 2024 and 2023: (i) depreciation and amortization expense of $56,691 and $38,514,\n (ii) lease intangible amortization of $3,786 and $3,616 and (iii) amortization for lease incentives of $5,332 and $6,804, respectively. Includes the\n following items for the six months ended June 30, 2024 and 2023: (i) depreciation and amortization expense of $106,611 and $79,440, (ii) lease\n intangible amortization of $7,762 and $7,762 and (iii) amortization for lease incentives of $10,558 and $10,665, respectively.\n\n(2) Includes the following items for the three months ended June 30, 2024 and 2023: (i) net loss of $694 and $380, (ii) depreciation and amortization\n expense of $77 and $435, and (iii) acquisition and transaction expenses of $0 and $95, respectively. Includes the following items for the six months\n ended June 30, 2024 and 2023: (i) net loss of $1,361 and $1,715, (ii) depreciation and amortization expense of $196 and $835, and (iii) acquisition\n and transaction expenses of $0 and $334, respectively.\n\n\n 6\n\f","ocr_status":1,"date_upload":"2026-05-12T04:16:12.813965-07:00","document_number":"70","attachment_number":21,"pacer_doc_id":"127038602965","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit U - 7/24/24 Form 8-K","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874422/","id":478874422,"tags":[],"absolute_url":"/docket/69558488/70/22/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.639318-07:00","date_modified":"2026-05-14T07:12:24.434666-07:00","sha1":"808b561013474e6243ab8ead1cb685eee14c251c","page_count":32,"file_size":1241950,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.22.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.22.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 1 of 32\n\n\n\n\n Exhibit V\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 2 of 32\nPresentation\n\n230 Statement of Cash Flows\n 10 Overall\n00 Status\n\n\n General Note:The Status Section identifies changes to this Subtopic resulting from Accounting\n Standards Updates. The Section provides references to the affected Codification content and links to\n the related Accounting Standards Updates. Nonsubstantive changes for items such as editorial, link\n and similar corrections are included separately in Maintenance Updates.\n\n\n\n\n General\n 230-10- The following table identifies the changes made to this Subtopic.\n 00-1\n Accounting Standards\n Paragraph Action Date\n Update\n\n Board-Designated Endowment Accounting Standards Update\n Added 08/18/2016\n Fund No. 2016-14\n Accounting Standards Update\n Conditional Contribution Added 06/21/2018\n No. 2018-08\n Accounting Standards Update\n Contract Added 02/25/2016\n No. 2016-02\n Accounting Standards Update\n Contribution Amended 06/21/2018\n No. 2018-08\n Accounting Standards Update\n Contribution Added 08/18/2016\n No. 2016-14\n Accounting Standards Update\n Donor-Imposed Condition Added 06/21/2018\n No. 2018-08\n Accounting Standards Update\n Donor-Imposed Restriction Added 08/18/2016\n No. 2016-14\n Accounting Standards Update\n Donor-Restricted Endowment Fund Added 08/18/2016\n No. 2016-14\n Accounting Standards Update\n Effective Interest Rate Amended 12/14/2016\n No. 2016-19\n Accounting Standards Update\n Effective Interest Rate Added 08/26/2016\n No. 2016-15\n Accounting Standards Update\n Endowment Fund Added 08/18/2016\n No. 2016-14\n Accounting Standards Update\n Fair Value (3rd def.) Added 10/01/2012\n No. 2012-04\n Accounting Standards Update\n Financial Asset (1st def.) Superseded 12/14/2016\n No. 2016-19\n Accounting Standards Update\n Financial Asset (1st def.) Added 10/22/2012\n No. 2012-05\n Accounting Standards Update\n Financial Asset (2nd def.) Added 12/14/2016\n No. 2016-19\n Accounting Standards Update\n Funds Functioning as Endowment Added 08/18/2016\n No. 2016-14\n Accounting Standards Update\n Inherent Contribution Added 08/18/2016\n No. 2016-14\n\fCase 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 3 of 32\n Accounting Standards Update\n Lease Added 02/25/2016\n No. 2016-02\n Accounting Standards Update\n Lease Liability Added 02/25/2016\n No. 2016-02\n Accounting Standards Update\n Lease Payments Added 02/25/2016\n No. 2016-02\n Accounting Standards Update\n Lease Term Added 02/25/2016\n No. 2016-02\n Accounting Standards Update\n Lessee Added 02/25/2016\n No. 2016-02\n Accounting Standards Update\n Lessor Added 02/25/2016\n No. 2016-02\n Accounting Standards Update\n Net Assets Added 08/18/2016\n No. 2016-14\n Accounting Standards Update\n Net Assets with Donor Restrictions Added 08/18/2016\n No. 2016-14\n Net Assets without Donor Accounting Standards Update\n Added 08/18/2016\n Restrictions No. 2016-14\n Accounting Standards Update\n Promise to Give Added 06/21/2018\n No. 2018-08\n\n Public Business Entity Amended Maintenance Update 2017-06 04/07/2017\n\n Accounting Standards Update\n Public Business Entity Added 11/17/2016\n No. 2016-18\n Purchased Financial Assets with Accounting Standards Update\n Amended 12/14/2016\n Credit Deterioration No. 2016-19\n Purchased Financial Assets with Accounting Standards Update\n Added 08/26/2016\n Credit Deterioration No. 2016-15\n Accounting Standards Update\n Right-of-Use Asset Added 02/25/2016\n No. 2016-02\n Accounting Standards Update\n Underlying Asset Added 02/25/2016\n No. 2016-02\n\n Accounting Standards Update\n 230-10-05-3 Amended 06/10/2014\n No. 2014-10\n Accounting Standards Update\n 230-10-15-4 Amended 05/01/2015\n No. 2015-07\n Accounting Standards Update\n 230-10-15-4 Amended 06/07/2013\n No. 2013-08\n Accounting Standards Update\n 230-10-15-4 Amended 10/01/2012\n No. 2012-04\n Accounting Standards Update\n 230-10-45-4 Amended 11/17/2016\n No. 2016-18\n Accounting Standards Update\n 230-10-45-5 Amended 11/17/2016\n No. 2016-18\n Accounting Standards Update\n 230-10-45-11 through 45-13 Amended 01/05/2016\n No. 2016-01\n Accounting Standards Update\n 230-10-45-12 Amended 10/22/2012\n No. 2012-05\n Accounting Standards Update\n 230-10-45-12 Amended 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-45-13 Amended 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-45-14 Amended 08/18/2016\n No. 2016-14\n Accounting Standards Update\n 230-10-45-14 Amended 03/30/2016\n No. 2016-09\n\fCase 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 4 of 32\n Accounting Standards Update\n 230-10-45-15 through 45-17 Amended 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-45-15 Amended 06/20/2018\n No. 2018-07\n Accounting Standards Update\n 230-10-45-15 Amended 03/30/2016\n No. 2016-09\n Accounting Standards Update\n 230-10-45-17 Amended 08/18/2016\n No. 2016-14\n Accounting Standards Update\n 230-10-45-17 Amended 03/30/2016\n No. 2016-09\n Accounting Standards Update\n 230-10-45-19 Amended 01/05/2016\n No. 2016-01\n Accounting Standards Update\n 230-10-45-20 Amended 06/12/2015\n No. 2015-10\n Accounting Standards Update\n 230-10-45-21 Amended 06/16/2016\n No. 2016-13\n Accounting Standards Update\n 230-10-45-21 Amended 01/05/2016\n No. 2016-01\n Accounting Standards Update\n 230-10-45-21 Amended 10/01/2012\n No. 2012-04\n Accounting Standards Update\n 230-10-45-21A Amended 12/13/2023\n No. 2023-08\n Accounting Standards Update\n 230-10-45-21A Amended 12/14/2016\n No. 2016-19\n Accounting Standards Update\n 230-10-45-21A Added 10/22/2012\n No. 2012-05\n Accounting Standards Update\n 230-10-45-21B through 45-21D Added 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-45-22 Amended 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-45-22A Added 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-45-24 Amended 11/17/2016\n No. 2016-18\n Accounting Standards Update\n 230-10-45-24 Amended 01/09/2015\n No. 2015-01\n Accounting Standards Update\n 230-10-45-24 Amended 04/10/2014\n No. 2014-08\n Accounting Standards Update\n 230-10-45-24A Added 04/10/2014\n No. 2014-08\n Accounting Standards Update\n 230-10-45-25 Amended 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-45-25 Amended 03/30/2016\n No. 2016-09\n Accounting Standards Update\n 230-10-45-27A Amended 12/13/2023\n No. 2023-08\n\n 230-10-45-28 Amended Maintenance Update 2014-20 09/29/2014\n\n Accounting Standards Update\n 230-10-45-28 Amended 02/02/2010\n No. 2010-08\n Accounting Standards Update\n 230-10-45-29 Amended 08/18/2016\n No. 2016-14\n Accounting Standards Update\n 230-10-45-30 Amended 08/18/2016\n No. 2016-14\n Accounting Standards Update\n 230-10-50-2 Amended 12/14/2023\n No. 2023-09\n\fCase 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 5 of 32\n Accounting Standards Update\n 230-10-50-2 Amended 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-50-2A Added 12/14/2023\n No. 2023-09\n Accounting Standards Update\n 230-10-50-4 Amended 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-50-4 Amended 02/25/2016\n No. 2016-02\n\n 230-10-50-7 Amended Maintenance Update 2021-09 08/20/2021\n\n Accounting Standards Update\n 230-10-50-7 Added 11/17/2016\n No. 2016-18\n\n 230-10-50-8 Amended Maintenance Update 2021-09 08/20/2021\n\n Accounting Standards Update\n 230-10-50-8 Added 11/17/2016\n No. 2016-18\n Accounting Standards Update\n 230-10-50-9 Added 10/09/2023\n No. 2023-06\n Accounting Standards Update\n 230-10-55-10 Amended 11/17/2016\n No. 2016-18\n Accounting Standards Update\n 230-10-55-10 Amended 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-55-10 Amended 02/25/2016\n No. 2016-02\n Accounting Standards Update\n 230-10-55-11 Amended 02/25/2016\n No. 2016-02\n Accounting Standards Update\n 230-10-55-12A Added 11/17/2016\n No. 2016-18\n Accounting Standards Update\n 230-10-55-13 Amended 11/17/2016\n No. 2016-18\n Accounting Standards Update\n 230-10-55-13 Amended 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-55-13 Amended 02/25/2016\n No. 2016-02\n Accounting Standards Update\n 230-10-55-14 Amended 12/14/2023\n No. 2023-09\n Accounting Standards Update\n 230-10-55-15 Amended 02/25/2016\n No. 2016-02\n Accounting Standards Update\n 230-10-55-18A Added 11/17/2016\n No. 2016-18\n Accounting Standards Update\n 230-10-55-19 Amended 11/17/2016\n No. 2016-18\n Accounting Standards Update\n 230-10-55-19 Amended 02/25/2016\n No. 2016-02\n Accounting Standards Update\n 230-10-55-20 Amended 11/17/2016\n No. 2016-18\n Accounting Standards Update\n 230-10-55-20 Amended 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-55-20 Amended 02/25/2016\n No. 2016-02\n Accounting Standards Update\n 230-10-60-2 Amended 01/05/2016\n No. 2016-01\n Accounting Standards Update\n 230-10-60-2A Added 01/05/2016\n No. 2016-01\n Accounting Standards Update\n 230-10-60-5 Superseded 06/10/2014\n No. 2014-10\n Accounting Standards Update\n 230-10-65-1 Added 10/22/2012\n No. 2012-05\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 6 of 32\n Accounting Standards Update\n 230-10-65-2 Added 08/26/2016\n No. 2016-15\n Accounting Standards Update\n 230-10-65-3 Added 11/17/2016\n No. 2016-18\n\n\n\n\n05 Overview and Background\n\n\n General Note:The Overview and Background Section provides overview and background material for\n the guidance contained in the Subtopic. It does not provide the historical background or due process. It\n may contain certain material that users generally consider useful to understand the typical situations\n addressed by the standards. The Section does not summarize the accounting and reporting\n requirements.\n\n\n\n\n General\n 230-10- The Statement of Cash Flows Topic presents standards for reporting cash flows in general-purpose financial\n 05-1\n statements.\n\n 230-10- Specific guidance is provided on all of the following:\n 05-2\n aClassifying in the statement of cash flows of cash receipts and payments as either operating\n activities, investing activities, or financing activities\n bApplying the direct method and the indirect method of reporting cash flows\n cPresenting the required information about noncash investing and financing activity and other events\n dClassifying cash receipts and payments related to hedging activities.\n\n\n 230-10- Other Topics, including industry-specific Topics, may have Statement of Cash Flows Subtopics that address\n 05-3\n the Topic-specific requirements for the statement of cash flows. The guidance in those Subtopics is intended to\n be incremental to the guidance otherwise established in this Statement of Cash Flows Topic. Topics with\n incremental Statement of Cash Flows Subtopics are:\n aForeign Currency Matters, Subtopic 830-230\n bSubparagraph superseded by Accounting Standards Update No. 2014-10.\n cEntertainment\u2014Films, Subtopic 926-230\n dFinancial Services\u2014Depository and Lending, Subtopic 942-230\n eFinancial Services\u2014Investment Companies, Subtopic 946-230\n fNot-for-Profit Entities, Subtopic 958-230\n gReal Estate\u2014General, Subtopic 970-230\n hReal Estate\u2014Time Sharing Activities, Subtopic 978-230.\n\n\n\n\n10 Objectives\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 7 of 32\n\n General Note:The Objectives Section provides the high-level objectives that the Subtopic is intended to\n accomplish or attain. The Section does not summarize or discuss the main principles of accounting and\n reporting requirements.\n\n\n\n\n General\n 230-10- The primary objective of a statement of cash flows is to provide relevant information about the cash receipts\n 10-1\n and cash payments of an entity during a period.\n\n 230-10- The information provided in a statement of cash flows, if used with related disclosures and information in the\n 10-2\n other financial statements, should help investors, creditors, and others (including donors) to do all of the\n following:\n aAssess the entity's ability to generate positive future net cash flows\n bAssess the entity's ability to meet its obligations, its ability to pay dividends, and its needs for external\n financing\n cAssess the reasons for differences between net income and associated cash receipts and payments\n dAssess the effects on an entity's financial position of both its cash and noncash investing and financing\n transactions during the period.\n\n\n\n\n15 Scope and Scope Exceptions\n\n\n General Note:The Scope and Scope Exceptions Section outlines the items (for example, the entities,\n transactions, instruments, or events) to which the guidance in the Subtopic does or does not apply. In\n some cases, the Section may contain definitional or other text to frame the scope.\n\n\n\n\n General\n > Overall Guidance\n 230-10- The Scope Section of the Overall Subtopic establishes the pervasive scope for the Statement of Cash Flows\n 15-1\n Topic.\n\n\n > Entities\n 230-10- The guidance in the Statement of Cash Flows Topic applies to all entities, including both business entities and\n 15-2\n not-for-profit entities (NFPs), with specific exceptions noted below. The phrase investors, creditors, and\n others includes donors. The terms income statement and net income apply to a business entity; the\n terms statement of activities and change in net assets apply to an NFP.\n\n 230-10- A business entity or NFP that provides a set of financial statements that reports both financial position and\n 15-3\n results of operations shall also provide a statement of cash flows for each period for which results of\n operations are provided.\n\n 230-10- The guidance in this Topic does not apply to the following entities:\n 15-4\n aA statement of cash flows is not required to be provided by a defined benefit pension plan that presents\n financial information in accordance with the provisions of Topic 960. Other employee benefit plans that\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 8 of 32\n present financial information similar to that required by Topic 960 (including the presentation of plan\n investments at fair value) also are not required to provide a statement of cash flows. Employee benefit\n plans are encouraged to include a statement of cash flows with their annual financial statements when\n that statement would provide relevant information about the ability of the plan to meet future obligations\n (for example, when the plan invests in assets that are not highly liquid or obtains financing for\n investments).\n bProvided that the conditions in (c) are met, a statement of cash flows is not required to be provided by\n the following entities:\n\n 1An investment company within the scope of Topic 946 on investment companies\n\n 2Subparagraph superseded by Accounting Standards Update No. 2013-08.\n\n 3A common trust fund, variable annuity account, or similar fund maintained by a bank, insurance\n entity, or other entity in its capacity as a trustee, administrator, or guardian for the collective\n investment and reinvestment of funds.\n cFor an investment company specified in (b) to be exempt from the requirement to provide a statement of\n cash flows, all of the following conditions must be met:\n\n 1Subparagraph superseded by Accounting Standards Update No. 2013-08.\n\n 2During the period, substantially all of the entity's investments were carried at fair value and classified\n in accordance with Topic 820 as Level 1 or Level 2 measurements or were measured using the\n practical expedient in paragraph 820-10-35-59 to determine their fair values and are redeemable in\n the near term at all times.\n\n 3The entity had little or no debt, based on the average debt outstanding during the period, in relation\n to average total assets. For the purpose of determining average debt outstanding, obligations\n resulting from redemptions of shares by the entity from unsettled purchases of securities or similar\n assets, or from covered options written generally may be excluded. However, any extension of credit\n by the seller that is not in accordance with standard industry practices for redeeming shares or for\n settling purchases of investments shall be included in average debt outstanding.\n\n 4The entity provides a statement of changes in net assets.\n\n\n\n\n20 Glossary\n\n\n General Note:The Master Glossary contains all terms identified as glossary terms throughout the\n Codification. Clicking on any term in the Master Glossary will display where the term is used. The\n Master Glossary may contain identical terms with different definitions, some of which may not be\n appropriate for a particular Subtopic. For any particular Subtopic, users should only use the glossary\n terms included in the particular Subtopic Glossary Section (Section 20).\n\n\n\n\n Board-Designated Endowment Fund\n\n An endowment fund created by a not-for-profit entity's (NFP's) governing board by designating a portion of\n its net assets without donor restrictions to be invested to provide income for a long but not necessarily\n specified period (sometimes called funds functioning as endowment or quasi-endowment funds). In rare\n circumstances, a board-designated endowment fund also can include a portion of net assets with donor\n restrictions. For example, if an NFP is unable to spend donor-restricted contributions in the near term, then the\n board sometimes considers the long-term investment of these funds. See Endowment Fund.\n\n Cash\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 9 of 32\n Consistent with common usage, cash includes not only currency on hand but demand deposits with banks or\n other financial institutions. Cash also includes other kinds of accounts that have the general characteristics of\n demand deposits in that the customer may deposit additional funds at any time and also effectively may\n withdraw funds at any time without prior notice or penalty. All charges and credits to those accounts are cash\n receipts or payments to both the entity owning the account and the bank holding it. For example, a bank's\n granting of a loan by crediting the proceeds to a customer's demand deposit account is a cash payment by the\n bank and a cash receipt of the customer when the entry is made.\n\nCash Equivalents\n\n Cash equivalents are short-term, highly liquid investments that have both of the following characteristics:\n aReadily convertible to known amounts of cash\n bSo near their maturity that they present insignificant risk of changes in value because of changes in\n interest rates.\n Generally, only investments with original maturities of three months or less qualify under that\n definition. Original maturity means original maturity to the entity holding the investment. For example, both a\n three-month U.S. Treasury bill and a three-year U.S. Treasury note purchased three months from maturity\n qualify as cash equivalents. However, a Treasury note purchased three years ago does not become a cash\n equivalent when its remaining maturity is three months. Examples of items commonly considered to be cash\n equivalents are Treasury bills, commercial paper, money market funds, and federal funds sold (for an entity\n with banking operations).\n\nConditional Contribution\n\n A contribution that contains a donor-imposed condition.\n\nContract\n\n An agreement between two or more parties that creates enforceable rights and obligations.\n\nContribution\n\n An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a\n reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity\n acting other than as an owner. Those characteristics distinguish contributions from:\n aExchange transactions, which are reciprocal transfers in which each party receives and sacrifices\n approximately commensurate value\n bInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity\n and its owners\n cOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which\n are not voluntary transfers.\n In a contribution transaction, the resource provider often receives value indirectly by providing a societal\n benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the\n potential public benefits are secondary to the potential direct benefits to the resource provider. The\n term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central\n activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent\n Contribution and Conditional Contribution.\n\nDonor-Imposed Condition\n\n A donor stipulation (donors include other types of contributors, including makers of certain grants) that\n represents a barrier that must be overcome before the recipient is entitled to the assets transferred or\n promised. Failure to overcome the barrier gives the contributor a right of return of the assets it has transferred\n or gives the promisor a right of release from its obligation to transfer its assets.\n\nDonor-Imposed Restriction\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 10 of 32\n A donor stipulation (donors include other types of contributors, including makers of certain grants) that\n specifies a use for a contributed asset that is more specific than broad limits resulting from the following:\n aThe nature of the not-for-profit entity (NFP)\n bThe environment in which it operates\n cThe purposes specified in its articles of incorporation or bylaws or comparable documents for an\n unincorporated association.\n Some donors impose restrictions that are temporary in nature, for example, stipulating that resources be used\n after a specified date, for particular programs or services, or to acquire buildings or equipment. Other donors\n impose restrictions that are perpetual in nature, for example, stipulating that resources be maintained in\n perpetuity. Laws may extend those limits to investment returns from those resources and to other\n enhancements (diminishments) of those resources. Thus, those laws extend donor-imposed restrictions.\n\nDonor-Restricted Endowment Fund\n\n An endowment fund that is created by a donor stipulation (donors include other types of contributors, including\n makers of certain grants) requiring investment of the gift in perpetuity or for a specified term. Some donors or\n laws may require that a portion of income, gains, or both be added to the gift and invested subject to similar\n restrictions. The term does not include a Board-Designated Endowment Fund. See Endowment Fund.\n\nEffective Interest Rate\n\n The rate of return implicit in the financial asset, that is, the contractual interest rate adjusted for any net\n deferred fees or costs, premium, or discount existing at the origination or acquisition of the financial\n asset. For purchased financial assets with credit deterioration, however, to decouple interest income from\n credit loss recognition, the premium or discount at acquisition excludes the discount embedded in the\n purchase price that is attributable to the acquirer's assessment of credit losses at the date of acquisition.\n\nEndowment Fund\n\n An established fund of cash, securities, or other assets to provide income for the maintenance of a not-for-\n profit entity (NFP). The use of the assets of the fund may be with or without donor-imposed\n restrictions. Endowment funds generally are established by donor-restricted gifts and bequests to provide a\n source of income in perpetuity or for a specified period. See Donor-Restricted Endowment Fund. Alternatively,\n an NFP's governing board may earmark a portion of its net assets as a Board-Designated Endowment Fund.\n See Funds Functioning as Endowment.\n\nFair Value\n\n The price that would be received to sell an asset or paid to transfer a liability in an orderly\n transaction between market participants at the measurement date.\n\nFinancial Asset\n\n Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either\n of the following:\n aReceive cash or another financial instrument from a second entity\n bExchange other financial instruments on potentially favorable terms with the second entity.\n\n\nFinancing Activities\n\n Financing activities include obtaining resources from owners and providing them with a return on, and a return\n of, their investment; receiving restricted resources that by donor stipulation must be used for long-term\n purposes; borrowing money and repaying amounts borrowed, or otherwise settling the obligation; and\n obtaining and paying for other resources obtained from creditors on long-term credit.\n\nFunds Functioning as Endowment\n\n Net assets without donor restrictions (donors include other types of contributors, including makers of certain\n grants) designated by an entity's governing board to be invested to provide income for generally a long but not\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 11 of 32\n necessarily specified period. A board-designated endowment, which results from an internal designation, is\n generally not donor-restricted and is classified as net assets without donor restrictions. The governing board\n has the right to decide at any time to expend such funds. In rare circumstances, funds functioning as\n endowment also can include a portion of net assets with donor restrictions. For example, if an NFP is unable\n to spend donor-restricted contributions in the near term, the board sometimes considers the long-term\n investment of these funds. (Sometimes referred to as quasi-endowment funds or board-designated\n endowment funds.)\n\nInherent Contribution\n\n A contribution that results if an entity voluntarily transfers assets (or net assets) or performs services for\n another entity in exchange for either no assets or for assets of substantially lower value and unstated rights or\n privileges of a commensurate value are not involved.\n\nInvesting Activities\n\n Investing activities include making and collecting loans and acquiring and disposing of debt or equity\n instruments and property, plant, and equipment and other productive assets, that is, assets held for or used in\n the production of goods or services by the entity (other than materials that are part of the entity's inventory).\n Investing activities exclude acquiring and disposing of certain loans or other debt or equity instruments that are\n acquired specifically for resale, as discussed in paragraphs 230-10-45-12 and 230-10-45-21.\n\nLease\n\n A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or\n equipment (an identified asset) for a period of time in exchange for consideration.\n\nLease Liability\n\n A lessee's obligation to make the lease payments arising from a lease, measured on a discounted basis.\n\nLease Payments\n\n See paragraph 842-10-30-5 for what constitutes lease payments from the perspective of a lessee and\n a lessor.\n\nLease Term\n\n The noncancellable period for which a lessee has the right to use an underlying asset, together with all of the\n following:\n aPeriods covered by an option to extend the lease if the lessee is reasonably certain to exercise that\n option\n bPeriods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise\n that option\n cPeriods covered by an option to extend (or not to terminate) the lease in which exercise of the option is\n controlled by the lessor.\n\n\nLessee\n\n An entity that enters into a contract to obtain the right to use an underlying asset for a period of time in\n exchange for consideration.\n\nLessor\n\n An entity that enters into a contract to provide the right to use an underlying asset for a period of time in\n exchange for consideration.\n\nMarket Participants\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 12 of 32\n Buyers and sellers in the principal (or most advantageous) market for the asset or liability that have all of the\n following characteristics:\n aThey are independent of each other, that is, they are not related parties, although the price in a related-\n party transaction may be used as an input to a fair value measurement if the reporting entity has evidence\n that the transaction was entered into at market terms\n bThey are knowledgeable, having a reasonable understanding about the asset or liability and the\n transaction using all available information, including information that might be obtained through due\n diligence efforts that are usual and customary\n cThey are able to enter into a transaction for the asset or liability\n dThey are willing to enter into a transaction for the asset or liability, that is, they are motivated but not\n forced or otherwise compelled to do so.\n\n\nNet Assets\n\n The excess or deficiency of assets over liabilities of a not-for-profit entity, which is divided into two mutually\n exclusive classes according to the existence or absence of donor-imposed restrictions. See Net Assets with\n Donor Restrictions and Net Assets without Donor Restrictions.\n\nNet Assets with Donor Restrictions\n\n The part of net assets of a not-for-profit entity that is subject to donor-imposed restrictions (donors include\n other types of contributors, including makers of certain grants).\n\nNet Assets without Donor Restrictions\n\n The part of net assets of a not-for-profit entity that is not subject to donor-imposed restrictions (donors include\n other types of contributors, including makers of certain grants).\n\nNot-for-Profit Entity\n\n An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business\n entity:\n aContributions of significant amounts of resources from resource providers who do not expect\n commensurate or proportionate pecuniary return\n bOperating purposes other than to provide goods or services at a profit\n cAbsence of ownership interests like those of business entities.\n Entities that clearly fall outside this definition include the following:\n aAll investor-owned entities\n bEntities that provide dividends, lower costs, or other economic benefits directly and proportionately to\n their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural\n electric cooperatives, and employee benefit plans.\n\n\nOperating Activities\n\n Operating activities include all transactions and other events that are not defined as investing or financing\n activities (see paragraphs 230-10-45-12 through 45-15). Operating activities generally involve producing and\n delivering goods and providing services. Cash flows from operating activities are generally the cash effects of\n transactions and other events that enter into the determination of net income.\n\nOrderly Transaction\n\n A transaction that assumes exposure to the market for a period before the measurement date to allow for\n marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a\n forced transaction (for example, a forced liquidation or distress sale).\n\nPromise to Give\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 13 of 32\n A written or oral agreement to contribute cash or other assets to another entity. A promise carries rights and\n obligations\u2014the recipient of a promise to give has a right to expect that the promised assets will be transferred\n in the future, and the maker has a social and moral obligation, and generally a legal obligation, to make the\n promised transfer. A promise to give may be either conditional or unconditional.\n\nPublic Business Entity\n\n A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit\n entity nor an employee benefit plan is a business entity.\n aIt is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial\n statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including\n other entities whose financial statements or financial information are required to be or are included in a\n filing).\n bIt is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations\n promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the\n SEC.\n cIt is required to file or furnish financial statements with a foreign or domestic regulatory agency in\n preparation for the sale of or for purposes of issuing securities that are not subject to contractual\n restrictions on transfer.\n dIt has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange\n or an over-the-counter market.\n eIt has one or more securities that are not subject to contractual restrictions on transfer, and it is required\n by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make\n them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet\n both of these conditions to meet this criterion.\n An entity may meet the definition of a public business entity solely because its financial statements or financial\n information is included in another entity's filing with the SEC. In that case, the entity is only a public business\n entity for purposes of financial statements that are filed or furnished with the SEC.\n\nPurchased Financial Assets with Credit Deterioration\n\n Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that\n as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since\n origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on\n the meaning of similar risk characteristics for assets measured on an amortized cost basis.\n\nRelated Parties\n\n Related parties include:\n aAffiliates of the entity\n bEntities for which investments in their equity securities would be required, absent the election of the fair\n value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the\n equity method by the investing entity\n cTrusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or\n under the trusteeship of management\n dPrincipal owners of the entity and members of their immediate families\n eManagement of the entity and members of their immediate families\n fOther parties with which the entity may deal if one party controls or can significantly influence the\n management or operating policies of the other to an extent that one of the transacting parties might be\n prevented from fully pursuing its own separate interests\n gOther parties that can significantly influence the management or operating policies of the transacting\n parties or that have an ownership interest in one of the transacting parties and can significantly influence\n the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its\n own separate interests.\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 14 of 32\n Right-of-Use Asset\n\n An asset that represents a lessee's right to use an underlying asset for the lease term.\n\n Security\n\n A share, participation, or other interest in property or in an entity of the issuer or an obligation of the issuer that\n has all of the following characteristics:\n aIt is either represented by an instrument issued in bearer or registered form or, if not represented by an\n instrument, is registered in books maintained to record transfers by or on behalf of the issuer.\n bIt is of a type commonly dealt in on securities exchanges or markets or, when represented by an\n instrument, is commonly recognized in any area in which it is issued or dealt in as a medium for\n investment.\n cIt either is one of a class or series or by its terms is divisible into a class or series of shares,\n participations, interests, or obligations.\n\n\n Unconditional Promise to Give\n\n A promise to give that depends only on passage of time or demand by the promisee for performance.\n\n Underlying Asset\n\n An asset that is the subject of a lease for which a right to use that asset has been conveyed to a lessee. The\n underlying asset could be a physically distinct portion of a single asset.\n\n\n\n\n45 Other Presentation Matters\n\n\n General Note:The Other Presentation Matters Section provides guidance on other presentation\n matters not addressed in the Recognition, Initial Measurement, Subsequent Measurement, and\n Derecognition Sections. Other presentation matters may include items such as current or long-term\n balance sheet classification, cash flow presentation, earnings per share matters, and so forth. The\n FASB Codification also contains Presentation Topics, which provide guidance for general presentation\n and display items. See those Topics for general guidance.\n\n\n\n\n General Related Proposed ASUs\n\n\n > Form and Content\n 230-10- A statement of cash flows shall report the cash effects during a period of an entity's operations, its investing\n 45-1\n transactions, and its financing transactions.\n\n 230-10- A reconciliation of net income and net cash flow from operating activities, which generally provides information\n 45-2\n about the net effects of operating transactions and other events that affect net income and operating cash\n flows in different periods, also shall be provided.\n\n 230-10- Financial statements shall not report an amount of cash flow per share. Neither cash flow nor any component\n 45-3\n of it is an alternative to net income as an indicator of an entity's performance, as reporting per-share amounts\n might imply. Reporting a contractually determined per-unit amount, such as a per unit amount of cash flow\n distributable under the terms of a partnership agreement or other agreement between an entity and its\n owners, is not the same as reporting a cash flow per-share amount intended to provide information useful to\n all investors and creditors and thus is not precluded by this Subtopic.\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 15 of 32\n\u00b7 > Cash and Cash Equivalents\n230-10- A statement of cash flows shall explain the change during the period in the total of cash, cash equivalents, and\n45-4\n amounts generally described as restricted cash or restricted cash equivalents. The statement shall use\n descriptive terms such as cash or cash and cash equivalents rather than ambiguous terms such as\n funds. When cash, cash equivalents, and amounts generally described as restricted cash or restricted cash\n equivalents are presented in more than one line item within the statement of financial position, an entity shall\n provide the disclosures required in paragraph 230-10-50-8.\n\n230-10- Cash purchases and sales of items commonly considered to be cash equivalents generally are part of the\n45-5\n entity's cash management activities rather than part of its operating, investing, and financing activities, and\n details of those transactions need not be reported in a statement of cash flows. In addition, transfers between\n cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents are\n not part of the entity's operating, investing, and financing activities, and details of those transfers are not\n reported as cash flow activities in the statement of cash flows.\n\n230-10- Not all investments that qualify are required to be treated as cash equivalents. An entity shall establish a policy\n45-6\n concerning which short-term, highly liquid investments that satisfy the definition of cash equivalents are\n treated as cash equivalents. For example, an entity having banking operations might decide that all\n investments that qualify except for those purchased for its trading account will be treated as cash equivalents,\n while an entity whose operations consist largely of investing in short-term, highly liquid investments might\n decide that all those items will be treated as investments rather than cash equivalents.\n\n\u00b7 > Gross and Net Cash Flows\n230-10- Generally, information about the gross amounts of cash receipts and cash payments during a period is more\n45-7\n relevant than information about the net amounts of cash receipts and payments. However, the net amount of\n related receipts and payments provides sufficient information not only for cash equivalents, as noted in\n paragraph 230-10-45-5, but also for certain other classes of cash flows specified in paragraphs 230-10-45-8\n through 45-9 and paragraph 230-10-45-28.\n\n230-10- For certain items, the turnover is quick, the amounts are large, and the maturities are short. For certain other\n45-8\n items, such as demand deposits of a bank and customer accounts payable of a broker-dealer, the entity is\n substantively holding or disbursing cash on behalf of its customers. Only the net changes during the period in\n assets and liabilities with those characteristics need be reported because knowledge of the gross cash\n receipts and payments related to them may not be necessary to understand the entity's operating, investing,\n and financing activities.\n\n230-10- Providing that the original maturity of the asset or liability is three months or less, cash receipts and payments\n45-9\n pertaining to any of the following qualify for net reporting for the reasons stated in the preceding paragraph:\n aInvestments (other than cash equivalents)\n bLoans receivable\n cDebt.\n For purposes of this paragraph, amounts due on demand are considered to have maturities of three months or\n less. For convenience, credit card receivables of financial services operations\u2014generally, receivables resulting\n from cardholder charges that may, at the cardholder's option, be paid in full when first billed, usually within one\n month, without incurring interest charges and that do not stem from the entity's sale of goods or services\u2014also\n are considered to be loans with original maturities of three months or less.\n\n\n> Classification\n230-10- A statement of cash flows shall classify cash receipts and cash payments as resulting from investing,\n45-10\n financing, or operating activities.\n\n\u00b7 > Cash Flows from Investing Activities\n230-10- Cash flows from purchases, sales, and maturities of available-for-sale debt securities shall be classified as\n45-11\n cash flows from investing activities and reported gross in the statement of cash flows.\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 16 of 32\n230-10- All of the following are cash inflows from investing activities:\n45-12\n aReceipts from collections or sales of loans made by the entity and of other entities' debt instruments\n (other than cash equivalents, certain debt instruments that are acquired specifically for resale as\n discussed in paragraph 230-10-45-21, and certain donated debt instruments received by not-for-profit\n entities (NFPs) as discussed in paragraph 230-10-45-21A) and collections on a transferor's beneficial\n interests in a securitization of the transferor's trade receivables\n bReceipts from sales of equity instruments of other entities (other than certain equity instruments carried\n in a trading account as described in paragraph 230-10-45-18and certain donated equity instruments\n received by NFPs as discussed in paragraph 230-10-45-21A) and from returns of investment in those\n instruments\n cReceipts from sales of property, plant, and equipment and other productive assets\n dSubparagraph not used.\n eReceipts from sales of loans that were not specifically acquired for resale. That is, if loans were acquired\n as investments, cash receipts from sales of those loans shall be classified as investing cash inflows\n regardless of a change in the purpose for holding those loans.\n For purposes of this paragraph, receipts from disposing of loans, debt or equity instruments, or property, plant,\n and equipment include directly related proceeds of insurance settlements, such as the proceeds of insurance\n on a building that is damaged or destroyed.\n\n230-10- All of the following are cash outflows for investing activities:\n45-13\n aDisbursements for loans made by the entity and payments to acquire debt instruments of other entities\n (other than cash equivalents and certain debt instruments that are acquired specifically for resale as\n discussed in paragraph 230-10-45-21).\n bPayments to acquire equity instruments of other entities (other than certain equity instruments carried in\n a trading account as described in paragraph 230-10-45-18).\n cPayments at the time of purchase or soon before or after purchase to acquire property, plant, and\n equipment and other productive assets, including interest capitalized as part of the cost of those\n assets. Generally, only advance payments, the down payment, or other amounts paid at the time of\n purchase or soon before or after purchase of property, plant, and equipment and other productive assets\n are investing cash outflows. However, incurring directly related debt to the seller is a financing transaction\n (see paragraphs 230-10-45-14 through 45-15), and subsequent payments of principal on that debt thus\n are financing cash outflows.\n dPayments made soon after the acquisition date of a business combination by an acquirer to settle a\n contingent consideration liability.\n\n\n\u00b7 > Cash Flows from Financing Activities\n230-10- All of the following are cash inflows from financing activities:\n45-14\n aProceeds from issuing equity instruments\n bProceeds from issuing bonds, mortgages, notes, and from other short- or long-term borrowing\n cReceipts from contributions and investment income that by donor stipulation are restricted for the\n purposes of acquiring, constructing, or improving property, plant, equipment, or other long-lived assets or\n establishing or increasing a donor-restricted endowment fund\n dProceeds received from derivative instruments that include financing elements at inception, whether the\n proceeds were received at inception or over the term of the derivative instrument, other than a financing\n element inherently included in an at-the-market derivative instrument with no prepayments\n eSubparagraph superseded by Accounting Standards Update No. 2016-09.\n\n\n230-10- All of the following are cash outflows for financing activities:\n45-15\n aPayments of dividends or other distributions to owners, including outlays to reacquire the entity's equity\n instruments. Cash paid to a tax authority by a grantor when withholding shares from a grantee's award for\n tax-withholding purposes shall be considered an outlay to reacquire the entity's equity instruments.\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 17 of 32\n bRepayments of amounts borrowed, including the portion of the repayments made to settle zero-coupon\n debt instruments that is attributable to the principal or the portion of the repayments made to settle other\n debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of\n the borrowing that is attributable to the principal.\n cOther principal payments to creditors who have extended long-term credit. See paragraph 230-10-45-\n 13(c), which indicates that most principal payments on seller-financed debt directly related to a purchase\n of property, plant, and equipment or other productive assets are financing cash outflows.\n dDistributions to counterparties of derivative instruments that include financing elements at\n inception, other than a financing element inherently included in an at-the-market derivative instrument with\n no prepayments. The distributions may be either at inception or over the term of the derivative instrument.\n ePayments for debt issue costs.\n fPayments, or the portion of the payments, not made soon after the acquisition date of a business\n combination by an acquirer to settle a contingent consideration liability up to the amount of the contingent\n consideration liability recognized at the acquisition date, including measurement-period adjustments, less\n any amounts paid soon after the acquisition date to settle the contingent consideration liability. See also\n paragraph 230-10-45-17(ee).\n gPayments for debt prepayment or debt extinguishment costs, including third-party costs, premiums paid,\n and other fees paid to lenders that are directly related to the debt prepayment or debt extinguishment,\n excluding accrued interest.\n\n\u00b7 > Cash Flows from Operating Activities\n230-10- All of the following are cash inflows from operating activities:\n45-16\n aCash receipts from sales of goods or services, including receipts from collection or sale of accounts and\n both short- and long-term notes receivable from customers arising from those sales. The\n term goods includes certain loans and other debt and equity instruments of other entities that are acquired\n specifically for resale, as discussed in paragraph 230-10-45-21.\n bCash receipts from returns on loans, other debt instruments of other entities, and equity securities\u2014\n interest and dividends.\n cAll other cash receipts that do not stem from transactions defined as investing or financing activities,\n such as amounts received to settle lawsuits and refunds from suppliers.\n\n\n230-10- All of the following are cash outflows for operating activities:\n45-17\n aCash payments to acquire materials for manufacture or goods for resale, including principal payments\n on accounts and both short- and long-term notes payable to suppliers for those materials or goods. The\n term goods includes certain loans and other debt and equity instruments of other entities that are acquired\n specifically for resale, as discussed in paragraph 230-10-45-21.\n bCash payments to other suppliers and employees for other goods or services.\n cCash payments to governments for taxes, duties, fines, and other fees or penalties.\n dCash payments to lenders and other creditors for interest, including the portion of the payments made to\n settle zero-coupon debt instruments that is attributable to accreted interest related to the debt discount or\n the portion of the payments made to settle other debt instruments with coupon interest rates that are\n insignificant in relation to the effective interest rate of the borrowing that is attributable to accreted interest\n related to the debt discount. For all other debt instruments, an issuer shall not bifurcate cash payments to\n lenders and other creditors at settlement for amounts attributable to accreted interest related to the debt\n discount, nor classify such amounts as cash outflows for operating activities.\n eCash payment made to settle an asset retirement obligation.\n eeCash payments, or the portion of the payments, not made soon after the acquisition date of a business\n combination by an acquirer to settle a contingent consideration liability that exceed the amount of the\n contingent consideration liability recognized at the acquisition date, including measurement-period\n adjustments, less any amounts paid soon after the acquisition date to settle the contingent consideration\n liability. See also paragraph 230-10-45-15(f).\n fAll other cash payments that do not stem from transactions defined as investing or financing activities,\n such as payments to settle lawsuits, cash contributions to charities, and cash refunds to customers.\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 18 of 32\n\u00b7 > Acquisitions and Sales of Certain Securities and Loans\n230-10- Banks, brokers and dealers in securities, and other entities may carry securities and other assets in a trading\n45-18\n account. Characteristics of trading account activities are described in Topics 255 and 940.\n\n PENDING CONTENT\n\n\n Transition Date: December 16, 2024; December 16, 2024 Transition Guidance: 350-60-65-1\n Editor's Note: The heading preceding paragraph 230-10-45-18 will be amended upon transition as\n noted below. The content of the paragraph will not change.\n \u2219 > Acquisitions and Sales of Certain Securities, Loans, and Crypto Assets\n Banks, brokers and dealers in securities, and other entities may carry securities and other assets in a\n trading account. Characteristics of trading account activities are described in Topics 255 and 940.\n\n\n230-10- Cash receipts and cash payments resulting from purchases and sales of securities classified as trading debt\n45-19\n securities accounted for in accordance with Topic 320and equity securities accounted for in accordance with\n Topic 321shall be classified pursuant to this Topic based on the nature and purpose for which the securities\n were acquired.\n\n230-10- Cash receipts and cash payments resulting from purchases and sales of other securities and other assets\n45-20\n shall be classified as operating cash flows if those assets are acquired specifically for resale and are carried\n at fair value in a trading account.\n\n230-10- Some loans are similar to debt securities in a trading account in that they are originated or purchased\n45-21\n specifically for resale and are held for short periods of time. Cash receipts and cash payments resulting from\n acquisitions and sales of loans also shall be classified as operating cash flows if those loans are acquired\n specifically for resale and are carried at fair value or at the lower of amortized cost basis or fair value. For\n example, mortgage loans held for sale are required to be reported at the lower of amortized cost basis or fair\n value in accordance with Topic 948.\n\n230-10- Cash receipts resulting from the sale of donated financial assets (for example, donated debt or equity\n45-21A\n instruments) by NFPs that upon receipt were directed without any NFP-imposed limitations for sale and were\n converted nearly immediately into cash shall be classified as operating cash flows. If, however, the donor\n restricted the use of the contributed resource to a long-term purpose of the nature of those described in\n paragraph 230-10-45-14(c), then those cash receipts meeting all the conditions in this paragraph shall be\n classified as a financing activity.\n\n PENDING CONTENT\n\n\n Transition Date: December 16, 2024; December 16, 2024 Transition Guidance: 350-60-65-1\n Cash receipts resulting from the sale of donated financial assets (for example, donated debt or equity\n instruments) or crypto assets accounted for in accordance with Subtopic 350-60by NFPs that upon receipt\n were directed without any NFP-imposed limitations for sale and were converted nearly immediately into\n cash shall be classified as operating cash flows. If, however, the donor restricted the use of the\n contributed resource to a long-term purpose of the nature of those described in paragraph 230-10-45-\n 14(c), then those cash receipts meeting all the conditions in this paragraph shall be classified as a\n financing activity.\n\n\n\u00b7 > Proceeds from the Settlement of Insurance Claims\n230-10- Cash receipts resulting from the settlement of insurance claims, excluding proceeds received from corporate-\n45-21B\n owned life insurance policies and bank-owned life insurance policies, shall be classified on the basis of the\n related insurance coverage (that is, the nature of the loss). For insurance proceeds that are received in a\n lump-sum settlement, an entity shall determine the classification on the basis of the nature of each loss\n included in the settlement.\n\n230-10- Cash receipts resulting from the settlement of corporate-owned life insurance policies, including bank-owned\n45-21C\n life insurance policies, shall be classified as cash inflows from investing activities. Cash payments for\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 19 of 32\n premiums on corporate-owned life insurance policies, including bank-owned life insurance policies, may be\n classified as cash outflows for investing activities, operating activities, or a combination of cash outflows for\n investing and operating activities.\n\n\u00b7 > Distributions Received from Equity Method Investees\n230-10- When a reporting entity applies the equity method, it shall make an accounting policy election to classify\n45-21D\n distributions received from equity method investees using either of the following approaches:\n aCumulative earnings approach: Distributions received are considered returns on investment and shall be\n classified as cash inflows from operating activities unless the investor's cumulative distributions received\n less distributions received in prior periods that were determined to be returns of investment exceed\n cumulative equity in earnings recognized by the investor (as adjusted for amortization of basis\n differences). When such an excess occurs, the current-period distribution up to this excess is considered\n a return of investment and shall be classified as cash inflows from investing activities.\n bNature of the distribution approach: Distributions received shall be classified on the basis of the nature of\n the activity or activities of the investee that generated the distribution as either a return on investment\n (classified as a cash inflow from operating activities) or a return of investment (classified as a cash inflow\n from investing activities) when such information is available.\n If an entity elects to apply the nature of the distribution approach and the information to apply that approach to\n distributions received from an individual equity method investee is not available to the investor, the entity shall\n report a change in accounting principle on a retrospective basis by applying the cumulative earnings approach\n described in (a) above for that investee. In such situations, an entity shall disclose that a change in accounting\n principle has occurred with respect to the affected investee(s) due to the lack of available information and shall\n provide the disclosures required in paragraphs 250-10-50-1(b) and 250-10-50-2, as applicable. With either\n approach described in (a) or (b) above, an entity also shall comply with the applicable accounting policy\n disclosure requirements in paragraphs 235-10-50-1 through 50-6.\n\n\u00b7 > More than One Class of Cash Flows\n\n230-10- Certain cash receipts and payments may have aspects of more than one class of cash flows. The\n45-22\n classification of those cash receipts and payments shall be determined first by applying specific guidance in\n this Topic and other applicable Topics. In the absence of specific guidance, a reporting entity shall determine\n each separately identifiable source or each separately identifiable use within the cash receipts and cash\n payments on the basis of the nature of the underlying cash flows, including when judgment is necessary to\n estimate the amount of each separately identifiable source or use. A reporting entity shall then classify each\n separately identifiable source or use within the cash receipts and payments on the basis of their nature in\n financing, investing, or operating activities.\n\n230-10- In situations in which cash receipts and payments have aspects of more than one class of cash flows and\n45-22A\n cannot be separated by source or use (for example, when a piece of equipment is acquired or produced by an\n entity to be rented to others for a period of time and then sold), the appropriate classification shall depend on\n the activity that is likely to be the predominant source or use of cash flows for the item.\n\n230-10- Another example where cash receipts and payments include more than one class of cash flows involves a\n45-23\n derivative instrument that includes a financing element at inception, other than a financing element inherently\n included in an at-the-market derivative instrument with no prepayments, because the borrower's cash flows\n are associated with both the financing element and the derivative instrument. For that derivative instrument, all\n cash inflows and outflows shall be considered cash flows from financing activities by the borrower.\n\n\u00b7 > Reporting Operating, Investing, and Financing Activities\n230-10- A statement of cash flows for a period shall report net cash provided or used by operating, investing, and\n45-24\n financing activities and the net effect of those flows on the total of cash, cash equivalents, and amounts\n generally described as restricted cash or restricted cash equivalents during the period. The statement of cash\n flows shall report that information in a manner that reconciles beginning and ending totals of cash, cash\n equivalents, and amounts generally described as restricted cash or restricted cash equivalents.\n\n230-10- For cash flow disclosures related to a discontinued operation, see paragraph 205-20-50-5B(c).\n45-24A\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 20 of 32\n230-10- In reporting cash flows from operating activities, entities are encouraged to report major classes of gross cash\n45-25\n receipts and gross cash payments and their arithmetic sum\u2014the net cash flow from operating activities (the\n direct method). (Paragraphs 230-10-55-1 through 55-4 and paragraph 230-10-55-21, respectively, discuss and\n illustrate a method by which those major classes of gross operating cash receipts and payments generally\n may be determined indirectly.) Entities that do so shall, at a minimum, separately report the following classes\n of operating cash receipts and payments:\n aCash collected from customers, including lessees, licensees, and the like\n bInterest and dividends received. Interest and dividends that are donor restricted for long-term purposes\n as included in the list of financing activities and paragraph 230-10-45-14(c) are not part of operating cash\n receipts.\n cOther operating cash receipts, if any\n dCash paid to employees and other suppliers of goods or services, including suppliers of insurance,\n advertising, and the like\n eInterest paid, including the portion of the payments made to settle zero-coupon debt instruments that is\n attributable to accreted interest related to the debt discount or the portion of the payments made to settle\n other debt instruments with coupon interest rates that are insignificant in relation to the effective interest\n rate of the borrowing that is attributable to accreted interest related to the debt discount\n fIncome taxes paid\n gOther operating cash payments, if any.\n Entities are encouraged to provide further breakdowns of operating cash receipts and payments that they\n consider meaningful and feasible. For example, a retailer or manufacturer might decide to further divide cash\n paid to employees and suppliers (category (d) in the preceding paragraph) into payments for costs of inventory\n and payments for selling, general, and administrative expenses.\n\n230-10- Except for items described in paragraphs 230-10-45-8 through 45-9, both investing cash inflows and outflows\n45-26\n and financing cash inflows and outflows shall be reported separately in a statement of cash flows\u2014for\n example, outlays for acquisitions of property, plant, and equipment shall be reported separately from proceeds\n from sales of property, plant, and equipment; proceeds of borrowings shall be reported separately from\n repayments of debt; and proceeds from issuing stock shall be reported separately from outlays to reacquire\n the entity's stock.\n\n\u00b7 > Cash Receipts and Payments Related to Hedging Activities\n\n230-10- Generally, each cash receipt or payment is to be classified according to its nature without regard to whether it\n45-27\n stems from an item intended as a hedge of another item. For example, the proceeds of a borrowing are a\n financing cash inflow even though the debt is intended as a hedge of an investment, and the purchase or sale\n of a futures contract is an investing activity even though the contract is intended as a hedge of a firm\n commitment to purchase inventory. However, cash flows from a derivative instrument that is accounted for as\n a fair value hedge or cash flow hedge may be classified in the same category as the cash flows from the items\n being hedged provided that the derivative instrument does not include an other-than-insignificant financing\n element at inception, other than a financing element inherently included in an at-the-market derivative\n instrument with no prepayments (that is, the forward points in an at-the-money forward contract) and that the\n accounting policy is disclosed. If the derivative instrument includes an other-than-insignificant financing\n element at inception, all cash inflows and outflows of the derivative instrument shall be considered cash flows\n from financing activities by the borrower. If for any reason hedge accounting for an instrument that hedges an\n identifiable transaction or event is discontinued, then any cash flows after the date of discontinuance shall be\n classified consistent with the nature of the instrument.\n\n\u00b7 > Crypto Assets Received as Noncash Consideration\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 21 of 32\n230-10-\n45-27A PENDING CONTENT\n\n\n Transition Date: December 16, 2024; December 16, 2024 Transition Guidance: 350-60-65-1\n If crypto assets accounted for in accordance with Subtopic 350-60 are received as noncash consideration\n in the ordinary course of business (for example, in exchange for goods and services transferred to a\n customer) and converted nearly immediately into cash, the cash received shall be classified as operating\n activities. In this context, the term nearly immediately refers to a short period of time that is expected to be\n within hours or a few days, rather than weeks.\n\n\n\n> Reconciliation of Net Income and Net Cash Flow from Operating\nActivities\n230-10- Entities that choose not to provide information about major classes of operating cash receipts and payments\n45-28\n by the direct method as encouraged in paragraph 230-10-45-25 shall determine and report the same amount\n for net cash flow from operating activities indirectly by adjusting net income of a business entity or change in\n net assets of a not-for-profit entity (NFP) to reconcile it to net cash flow from operating activities (the indirect or\n reconciliation method). That requires adjusting net income of a business entity or change in net assets of an\n NFP to remove both of the following:\n aThe effects of all deferrals of past operating cash receipts and payments, such as changes during the\n period in inventory, deferred income, and the like, and all accruals of expected future operating cash\n receipts and payments, such as changes during the period in receivables and payables. Adjustments to\n net income of a business entity or change in net assets of an NFP to determine net cash flow from\n operating activities shall reflect accruals for interest earned but not received and interest incurred but not\n paid. Those accruals may be reflected in the statement of financial position in changes in assets and\n liabilities that relate to investing or financing activities, such as loans or deposits. However, interest\n credited directly to a deposit account that has the general characteristics of cash is a cash outflow of the\n payor and a cash inflow of the payee when the entry is made.\n bAll items that are included in net income of a business entity or change in net assets of an NFP that do\n not affect net cash provided from, or used for, operating activities such as depreciation of property, plant,\n and equipment and amortization of finite-life intangible assets. This includes all items whose cash effects\n are related to investing or financing cash flows, such as gains or losses on sales of property, plant, and\n equipment and discontinued operations (which relate to investing activities), and gains or losses on\n extinguishment of debt (which relate to financing activities).\n\n230-10- The reconciliation of net income of a business entity to net cash flow from operating activities described in\n45-29\n paragraph 230-10-45-28 shall be provided regardless of whether the direct or indirect method of reporting net\n cash flow from operating activities is used. However, NFPs that use the direct method of reporting net cash\n flows from operations are not required to provide a reconciliation of change in net assets to net cash flow from\n operating activities. Additional guidance for NFPs is found in Subtopic 958-230. The reconciliation shall\n separately report all major classes of reconciling items. For example, major classes of deferrals of past\n operating cash receipts and payments and accruals of expected future operating cash receipts and payments,\n including, at a minimum, changes during the period in receivables pertaining to operating activities, in\n inventory, and in payables pertaining to operating activities, shall be separately reported. Entities are\n encouraged to provide further breakdowns of those categories that they consider meaningful. For example,\n changes in receivables from customers for an entity's sale of goods or services might be reported separately\n from changes in other operating receivables.\n\n230-10- If an entity other than an NFP uses the direct method of reporting net cash flow from operating activities, the\n45-30\n reconciliation of net income to net cash flow from operating activities shall be provided in a separate schedule.\n\n230-10- If the indirect method is used, the reconciliation may be either reported within the statement of cash flows or\n45-31\n provided in a separate schedule, with the statement of cash flows reporting only the net cash flow from\n operating activities.\n\n230-10- If the reconciliation is presented in the statement of cash flows, all adjustments to net income of a business\n45-32\n entity or change in net assets of an NFP to determine net cash flow from operating activities shall be clearly\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 22 of 32\n identified as reconciling items.\n\n\n\n\n50 Disclosure\n\n\n General Note:The Disclosure Section provides guidance regarding the disclosure in the notes to\n financial statements. In some cases, disclosure may relate to disclosure on the face of the financial\n statements.\n\n\n\n\n General Related Proposed ASUs\n\n\n > Cash Equivalents Policy\n 230-10- An entity shall disclose its policy for determining which items are treated as cash equivalents. Any change to\n 50-1\n that policy is a change in accounting principle that shall be effected by restating financial statements for earlier\n years presented for comparative purposes.\n\n\n > Interest and Income Taxes Paid\n 230-10- If the indirect method is used, amounts of interest paid (net of amounts capitalized), including the portion of the\n 50-2\n payments made to settle zero-coupon debt instruments that is attributable to accreted interest related to the\n debt discount or the portion of the payments made to settle other debt instruments with coupon interest rates\n that are insignificant in relation to the effective interest rate of the borrowing that is attributable to accreted\n interest related to the debt discount, and income taxes paid during the period shall be disclosed.\n\n PENDING CONTENT\n\n\n Transition Date: December 16, 2024; December 16, 2025 Transition Guidance: 740-10-65-9\n If the indirect method is used, amounts of interest paid (net of amounts capitalized), including the portion\n of the payments made to settle zero-coupon debt instruments that is attributable to accreted interest\n related to the debt discount or the portion of the payments made to settle other debt instruments with\n coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing that is\n attributable to accreted interest related to the debt discount, shall be disclosed.\n\n\n 230-10-\n 50-2A PENDING CONTENT\n\n\n Transition Date: December 16, 2024; December 16, 2025 Transition Guidance: 740-10-65-9\n Income taxes paid (net of refunds received) shall be disclosed in accordance with paragraphs 740-10-50-\n 22 through 50-23.\n\n\n\n > Noncash Investing and Financing Activities\n 230-10- Information about all investing and financing activities of an entity during a period that affect recognized assets\n 50-3\n or liabilities but that do not result in cash receipts or cash payments in the period shall be disclosed. Those\n disclosures may be either narrative or summarized in a schedule, and they shall clearly relate the cash and\n noncash aspects of transactions involving similar items.\n\n 230-10- Examples of noncash investing and financing transactions are converting debt to equity; acquiring assets by\n 50-4\n assuming directly related liabilities, such as purchasing a building by incurring a mortgage to the\n seller; obtaining a right-of-use asset in exchange for a lease liability; obtaining a beneficial interest as\n consideration for transferring financial assets (excluding cash), including the transferor's trade receivables, in a\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 23 of 32\n securitization transaction; obtaining a building or investment asset by receiving a gift; and exchanging noncash\n assets or liabilities for other noncash assets or liabilities.\n\n 230-10- Some transactions are part cash and part noncash; only the cash portion shall be reported in the statement of\n 50-5\n cash flows.\n\n 230-10- If there are only a few such noncash transactions, it may be convenient to include them on the same page as\n 50-6\n the statement of cash flows. Otherwise, the transactions may be reported elsewhere in the financial\n statements, clearly referenced to the statement of cash flows.\n\n\n > Restrictions on Cash and Cash Equivalents\n 230-10- An entity shall disclose information about the nature of restrictions on its cash, cash equivalents, and amounts\n 50-7\n generally described as restricted cash or restricted cash equivalents. An entity within the scope of\n Topic 958 on not-for-profit entities also shall provide the disclosures required in paragraph 958-210-50-3 (see\n paragraphs 230-10-55-12A and 230-10-55-18A).\n\n 230-10- When cash, cash equivalents, and amounts generally described as restricted cash or restricted cash\n 50-8\n equivalents are presented in more than one line item within the statement of financial position, an entity shall,\n for each period that a statement of financial position is presented, present on the face of the statement of cash\n flows or disclose in the notes to the financial statements, the line items and amounts of cash, cash\n equivalents, and amounts generally described as restricted cash or restricted cash equivalents reported within\n the statement of financial position. The amounts, disaggregated by the line item in which they appear within\n the statement of financial position, shall sum to the total amount of cash, cash equivalents, and amounts\n generally described as restricted cash or restricted cash equivalents at the end of the corresponding period\n shown in the statement of cash flows. This disclosure may be provided in either a narrative or a tabular format\n (see paragraphs 230-10-55-12A and 230-10-55-18A).\n\n\n > Accounting Policy for Derivative Instruments\n 230-10-\n 50-9 PENDING CONTENT\n\n\n Transition Date: June 30, 2027; June 30, 2027 Transition Guidance: 105-10-65-7\n An entity shall disclose its accounting policy for where cash flows associated with derivative instruments\n and their related gains and losses are presented.\n\n\n\n\n55 Implementation Guidance and Illustrations\n\n\n General Note:The Implementation Guidance and Illustrations Section contains implementation\n guidance and illustrations that are an integral part of the Subtopic. The implementation guidance and\n illustrations do not address all possible variations. Users must consider carefully the actual facts and\n circumstances in relation to the requirements of the Subtopic.\n\n\n\n\n General\n > Implementation Guidance\n \u00b7 > Indirectly Determining Amounts of Operating Cash Receipts and Payments\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 24 of 32\n230-10- Given sufficiently detailed information, major classes of operating cash receipts and payments may be\n55-1\n determined indirectly by adjusting revenue and expense amounts for the change during the period in related\n asset and liability accounts. For example, cash collected from customers may be determined indirectly by\n adjusting sales for the change during the period in receivables from customers for the entity's delivery of\n goods or services. Likewise, cash paid to suppliers and employees may be determined indirectly by adjusting\n cost of sales and expenses (exclusive of depreciation, interest, and income taxes) for the change during the\n period in inventories and payables for operating items. That procedure, of course, requires the availability of\n information concerning the change during the period in the appropriate classes of receivables and payables.\n The more detailed the categories of operating cash receipts and payments to be reported, the more complex\n the procedure for determining them. For the resulting operating cash receipts and payments to be accurate,\n the effects of all noncash entries to accounts receivable and payable, inventory, and other balance sheets\n accounts used in the calculation shall be eliminated. For example, the change in accounts receivable would\n have to be determined exclusive of any bad debt write-offs and other noncash charges and credits to customer\n accounts during the period.\n\n230-10- Amounts of operating cash receipts and payments at the minimum level of detail specified in paragraph 230-\n55-2\n 10-45-25 often may be determined indirectly without incurring unduly burdensome costs over those involved in\n appropriately applying the indirect method. For example, determining net cash flow from operating activities by\n the indirect method requires the availability of the total amount of operating receivables. That is, any\n receivables for investing or financing items shall be segregated. Within the total amount of operating\n receivables, information on receivables from customers for an entity's delivery of goods or services may well\n be available separately from those for interest and dividends. Thus, it may be possible to determine indirectly\n cash collected from customers and interest and dividends received using much the same information needed\n to determine net cash flow from operating activities using the indirect method.\n\n230-10- The same procedure may be used to determine cash paid to suppliers and employees. Determining net cash\n55-3\n flow from operating activities by the direct method requires the availability of the total amount of payables\n pertaining to operating activities. Within that amount, payables to suppliers and employees may well be\n available separately from those for interest and taxes. However, determining operating cash payments in more\n detail than the minimum specified in paragraph 230-10-45-25 might involve significant incremental costs over\n those already required to apply the indirect method because information on subcategories of payables to\n suppliers and employees may not be available.\n\n230-10- Many entities may well be able to determine amounts of operating cash receipts and payments at the\n55-4\n minimum level of detail that this Subtopic encourages (see paragraph 230-10-45-25) indirectly at reasonable\n cost by the procedure discussed in paragraphs 230-10-55-1 through 55-3. But few, if any, entities have\n experimented with the procedure, and the degree of difficulty encountered in applying it undoubtedly would\n vary depending on the nature of an entity's operations and the features of its current accounting system.\n\n\n> Illustrations\n230-10- The Examples below provide illustrations for the preparation of statements of cash flows of business entities.\n55-5\n\n230-10- Section 958-205-55 provides illustrations for the preparation of statements of cash flows for a not-for-profit\n55-6\n entity (NFP).\n\n\u00b7 > Example 1: Direct and Indirect Method for a Manufacturing Entity\n\n230-10- This Example illustrates a statement of cash flows under both the direct method and the indirect method for a\n55-7\n domestic manufacturing entity.\n\n230-10- The illustrations of the reconciliation of net income to net cash provided by operating activities may provide\n55-8\n detailed information in excess of that required for a meaningful presentation.\n\n230-10- Other formats or levels of detail may be appropriate for particular circumstances.\n55-9\n\n230-10- The following is a statement of cash flows for the year ended December 31, 19X1, for Entity A, a U.S.\n55-10\n corporation engaged principally in manufacturing activities. This statement of cash flows illustrates the direct\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 25 of 32\n method of presenting cash flows from operating activities, as encouraged in paragraph 230-10-45-25.\n\n\n\n\n230-10- The supplemental schedule of noncash investing and financing activities is as follows.\n55-11\n Entity A purchased all of the capital stock of Entity B for $950. In conjunction with the acquisition, liabilities\n were assumed as follows.\n\n\n\n\n A finance lease obligation of $850 was incurred when Entity A entered into a lease for new equipment.\n Additional common stock was issued upon the conversion of $500 of long-term debt.\n\n\n230-10- The disclosure of accounting policy is as follows.\n55-12\n For purposes of the statement of cash flows, the entity considers all highly liquid debt instruments\n purchased with a maturity of three months or less to be cash equivalents.\n\n\n230-10- Shown below is an illustrative disclosure of the nature of restrictions on cash, cash equivalents, and amounts\n55-12A\n generally described as restricted cash or restricted cash equivalents required by paragraph 230-10-50-7, as\n well as an illustrative disclosure of the line items and amounts of cash, cash equivalents, and amounts\n generally described as restricted cash or restricted cash equivalents reported within the statement of financial\n position that sum to the total of the same such amounts at the end of the period shown in the statement of\n cash flows as required by paragraph 230-10-50-8 (in this illustrative example, assume Entity A has no\n restricted cash equivalents). Comparative statements of financial position are provided in the illustrative\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 26 of 32\n example in paragraph 230-10-55-19 only to facilitate understanding of the statement of cash flows. For\n purposes of applying paragraphs 230-10-50-7 through 50-8 to this illustrative example, assume that the year\n ended December 31, 19X1, is the only period for which a statement of financial position is presented.\n The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within\n the statement of financial position that sum to the total of the same such amounts shown in the statement\n of cash flows.\n\n\n\n\n Amounts included in restricted cash represent those required to be set aside by a contractual agreement\n with an insurer for the payment of specific workers' compensation claims. Restricted cash included in\n other long-term assets on the statement of financial position represents amounts pledged as collateral for\n long-term financing arrangements as contractually required by a lender. The restriction will lapse when the\n related long-term debt is paid off.\n\n230-10- The following is Entity A's statement of cash flows for the year ended December 31, 19X1, prepared using the\n55-13\n indirect method, as described in paragraph 230-10-45-28.\n\n\n\n\n230-10- The following table illustrates the supplemental disclosures of cash flow information.\n55-14\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 27 of 32\n PENDING CONTENT\n\n230-10- The supplemental schedule of noncash investing and financing activities is as follows.\n55-15\n Entity A purchased all of the capital stock of Entity B for $950. In conjunction with the acquisition, liabilities\n were assumed as follows.\n\n\n\n\n A finance lease obligation of $850 was incurred when Entity A entered into a lease for new equipment.\n Additional common stock was issued upon the conversion of $500 of long-term debt.\n\n\n230-10- Paragraph not used.\n55-16\n\n230-10- Paragraph not used.\n55-17\n\n230-10- The disclosure of accounting policy is as follows.\n55-18\n For purposes of the statement of cash flows, the Entity considers all highly liquid debt instruments\n purchased with a maturity of three months or less to be cash equivalents.\n\n\n230-10- Shown below is an illustrative disclosure of the nature of restrictions on cash, cash equivalents, and amounts\n55-18A\n generally described as restricted cash or restricted cash equivalents required by paragraph 230-10-50-7, as\n well as an illustrative disclosure of the line items and amounts of cash, cash equivalents, and amounts\n generally described as restricted cash or restricted cash equivalents reported within the statement of financial\n position that sum to the total of the same such amounts at the end of the period shown in the statement of\n cash flows as required by paragraph 230-10-50-8 (in this illustrative example, assume Entity A has no\n restricted cash equivalents). Comparative statements of financial position are provided in the illustrative\n example in paragraph 230-10-55-19 only to facilitate understanding of the statement of cash flows. For\n purposes of applying paragraphs 230-10-50-7 through 50-8 to this illustrative example, assume that the year\n ended December 31, 19X1, is the only period for which a statement of financial position is presented.\n The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within\n the statement of financial position that sum to the total of the same such amounts shown in the statement\n of cash flows.\n\n\n\n\n Amounts included in restricted cash represent those required to be set aside by a contractual agreement\n with an insurer for the payment of specific workers' compensation claims. Restricted cash included in\n other long-term assets on the statement of financial position represents amounts pledged as collateral for\n long-term financing arrangements as contractually required by a lender. The restriction will lapse when the\n related long-term debt is paid off.\n\n\n230-10- The following summarizes financial information for the current year for Entity A, which provides the basis for\n55-19\n the statements of cash flows presented in paragraphs 230-10-55-10 through 55-18A.\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 28 of 32\n\n\n\n\n230-10- The following transactions were entered into by Entity A during 19X1 and are reflected in the preceding\n55-20\n financial statements:\n aEntity A wrote off $350 of accounts receivable when a customer filed for bankruptcy. A provision for\n losses on accounts receivable of $200 was included in Entity A's selling, general, and administrative\n expenses.\n bEntity A collected the third and final annual installment payment of $100 on a note receivable for the sale\n of inventory and collected the third of four annual installment payments of $150 each on a note receivable\n for the sale of a plant. Interest on these notes through December 31 totaling $55 was also collected.\n cEntity A received a distribution of $20 from an affiliate accounted for under the equity method of\n accounting. Entity A made an accounting policy election to apply the cumulative earnings approach\n described in paragraph 230-10-45-21D(a) and determined that the distribution was a return on\n investment.\n dEntity A sold a facility with a book value of $520 and an original cost of $750 for $600 cash.\n eEntity A constructed a new facility for its own use and placed it in service. Accumulated expenditures\n during the year of $1,000 included capitalized interest of $10.\n fEntity A entered into a capital lease for new equipment with a fair value of $850. The entity classified the\n lease as a finance lease. Principal payments under the lease obligation totaled $125.\n gEntity A purchased all of the capital stock of Entity B for $950 in a business combination. The fair values\n of Entity B's assets and liabilities at the date of acquisition are presented below.\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 29 of 32\n hEntity A borrowed and repaid various amounts under a line-of-credit agreement in which borrowings are\n payable 30 days after demand. The net increase during the year in the amount borrowed against the line-\n of-credit totaled $300.\n iEntity A issued $400 of long-term debt securities.\n jEntity A's provision for income taxes included a deferred provision of $150.\n kEntity A's depreciation of property, plant, and equipment and amortization of right-of-use assets arising\n from a finance lease totaled $430, and amortization of intangible assets totaled $15.\n lEntity A's selling, general, and administrative expenses included an accrual for incentive compensation of\n $50 that has been deferred by executives until their retirement. The related obligation was included in\n other liabilities.\n mEntity A collected insurance proceeds of $15 ($5 from a business interruption claim that resulted when a\n storm precluded shipment of inventory for one week and $10 from a property claim that resulted when\n fully depreciated manufacturing equipment was damaged by a fire).\n nEntity A paid $30 to settle a lawsuit for patent infringement.\n oEntity A issued $1,000 of additional common stock of which $500 was issued for cash and $500 was\n issued upon conversion of long-term debt.\n pEntity A paid dividends of $200.\n qEntity A paid $100 from its restricted cash for workers' compensation claims accrued before January 1,\n 19X1. Before January 1, 19X1, Entity A's insurer required $225 to be set aside by a contractual\n tf th t f ifi k ' ti l i\n 230-10- Based on the financial data from the preceding paragraphs, which illustrated the statement of cash flows\n 55-21\n prepared using the direct method, the following computations illustrate a method of indirectly determining cash\n received from customers and cash paid to suppliers and employees for use in a statement of cash flows under\n the direct method.\n\n\n\n\n60 Relationships\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 30 of 32\n\n General Note:The Relationships Section contains links to guidance that may be helpful to, but not\n required by, a user of the Subtopic. This Section may not be all-inclusive. The relationship items are\n organized according to the Topic structure in the Codification.\n\n\n\n\n General\n 230-10- The Other Presentation Matters Sections of individual Subtopics address various presentation matters related\n 60-1\n to the Subtopic, including the statement of cash flows and other financial statement matters. The following may\n not be an all-inclusive list; there are numerous sources that address the statement of cash flows in the\n relevant Subtopics.\n\n\n > Investments\u2014Debt Securities\n 230-10- For guidance on classification and reporting in the statement of cash flows of cash flows from available-for-\n 60-2\n sale, held-to-maturity, and trading debt securities, see Topic 320.\n\n\n > Investments\u2014Equity Securities\n 230-10- For guidance on classification and reporting in the statement of cash flows of cash flows from equity securities,\n 60-2A\n see Topic 321 on investments\u2014equity securities.\n\n\n > Investments\u2014Other\n 230-10- For guidance on classification in the statement of cash flows of cash receipts and cash payments related to life\n 60-3\n settlement contracts, see Section 325-30-45.\n\n\n > Foreign Currency Matters\n 230-10- For reporting and implementation guidance for presenting a statement of cash flows of an entity with foreign\n 60-4\n currency transactions or foreign currency operations, see Topic 830.\n\n 230-10- Paragraph superseded by Accounting Standards Update No. 2014-10.\n 60-5\n\n\n\n\n65 Transition and Open Effective Date Information\n\n\n General Note:The Transition Section contains a description of the required transition provisions and a\n list of the related paragraphs that have been modified. This Section will retain the transition content\n during the transition period. After the transition period, the transition content will be removed yet will be\n available in archived versions of the Section.\n\n\n\n\n General\n 230-10- Paragraph superseded on 12/17/2014 after the end of the transition period stated in Accounting Standards\n 65-1\n Update No. 2012-05, Statement of Cash Flows (Topic 230): Not-for-Profit Entities: Classification of the Sale\n Proceeds of Donated Financial Assets in the Statement of Cash Flows.\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 31 of 32\n230-10- Paragraph superseded on 08/12/2020 after the end of the transition period stated in Accounting Standards\n65-2\n Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash\n Payments.\n\n230-10- Paragraph superseded on 07/20/2020 after the end of the transition period stated in Accounting Standards\n65-3\n Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash.\n\f Case 1:25-cv-00541-JAV Document 70-22 Filed 11/20/25 Page 32 of 32\n\n\nCopyright\nCopyright \u00a9 2025 by Financial Accounting Foundation. All rights reserved. Certain portions may\ninclude material copyrighted by American Institute of Certified Public Accountants. Content\ncopyrighted by Financial Accounting Foundation, or any third parties who have not provided specific\npermission, may not be reproduced, stored in a retrieval system, or transmitted, in any form or by any\nmeans, electronic, mechanical, photocopying, recording, or otherwise, without the prior written\npermission of Financial Accounting Foundation or such applicable third party. Financial Accounting\nFoundation claims no copyright in any portion hereof that constitutes a work of the United States\nGovernment.\n\f","ocr_status":1,"date_upload":"2026-05-12T04:16:14.610957-07:00","document_number":"70","attachment_number":22,"pacer_doc_id":"127038602966","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit V - FASB ASC Topic 230","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/478874423/","id":478874423,"tags":[],"absolute_url":"/docket/69558488/70/23/shannahan-v-ftai-aviation-ltd/","date_created":"2026-05-12T04:15:00.649827-07:00","date_modified":"2026-05-14T07:09:24.427084-07:00","sha1":"d40b9b8bf5495b7613d00be88e8c8d1a7a9372a6","page_count":9,"file_size":476318,"filepath_local":"recap/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.23.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.635285/gov.uscourts.nysd.635285.70.23.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:25-cv-00541-JAV Document 70-23 Filed 11/20/25 Page 1 of 9\n\n\n\n\n Exhibit W\n\fCase 1:25-cv-00541-JAV Document 70-23 Filed 11/20/25 Page 2 of 9\n\n\n\n\n FTAI Aviation LLC (FTAI)\n July 23, 2024 \u2013 September 18, 2025\n Source: Yahoo! Finance\n Date Adjusted Closing Price Volume\n July 23, 2024 $107.84 1,540,930\n July 24, 2024 $109.25 2,757,966\n July 25, 2024 $105.33 1,783,575\n July 26, 2024 $112.63 2,386,326\n July 29, 2024 $112.59 1,555,202\n July 30, 2024 $109.90 961,081\n July 31, 2024 $111.45 1,297,696\n August 1, 2024 $108.92 1,058,281\n August 2, 2024 $101.96 1,633,253\n August 5, 2024 $97.18 1,736,041\n August 6, 2024 $101.61 1,068,914\n August 7, 2024 $100.78 776,871\n August 8, 2024 $104.76 585,298\n August 9, 2024 $104.70 415,676\n August 12, 2024 $103.78 770,814\n August 13, 2024 $103.75 1,447,685\n August 14, 2024 $104.51 906,702\n August 15, 2024 $106.44 863,241\n August 16, 2024 $113.52 1,276,174\n August 19, 2024 $115.13 814,163\n August 20, 2024 $114.30 641,881\n August 21, 2024 $119.15 886,709\n August 22, 2024 $119.56 986,316\n August 23, 2024 $121.74 1,180,105\n August 26, 2024 $122.15 648,830\n August 27, 2024 $121.53 507,198\n August 28, 2024 $120.68 476,293\n August 29, 2024 $124.63 744,769\n August 30, 2024 $127.81 956,181\n September 3, 2024 $117.93 1,020,495\n September 4, 2024 $119.41 588,349\n September 5, 2024 $118.88 467,618\n September 6, 2024 $112.55 1,142,280\n September 9, 2024 $113.03 1,092,126\n September 10, 2024 $113.89 571,375\n\n\n 1\n\fCase 1:25-cv-00541-JAV Document 70-23 Filed 11/20/25 Page 3 of 9\n\n\n\n\n Date Adjusted Closing Price Volume\n September 11, 2024 $115.88 812,257\n September 12, 2024 $121.07 1,044,337\n September 13, 2024 $125.23 1,146,827\n September 16, 2024 $126.96 2,152,410\n September 17, 2024 $126.77 757,496\n September 18, 2024 $126.43 954,957\n September 19, 2024 $130.22 1,443,719\n September 20, 2024 $130.39 3,087,593\n September 23, 2024 $130.00 815,843\n September 24, 2024 $130.12 864,449\n September 25, 2024 $130.07 629,993\n September 26, 2024 $126.04 800,529\n September 27, 2024 $129.55 1,137,462\n September 30, 2024 $132.90 1,499,356\n October 1, 2024 $131.65 1,205,539\n October 2, 2024 $134.62 1,305,051\n October 3, 2024 $133.45 842,803\n October 4, 2024 $140.15 1,691,614\n October 7, 2024 $139.38 992,415\n October 8, 2024 $146.45 1,467,829\n October 9, 2024 $144.95 1,187,089\n October 10, 2024 $144.10 1,783,852\n October 11, 2024 $146.40 1,368,091\n October 14, 2024 $148.09 1,150,749\n October 15, 2024 $145.01 1,392,341\n October 16, 2024 $145.80 696,498\n October 17, 2024 $145.29 639,403\n October 18, 2024 $143.55 864,858\n October 21, 2024 $142.36 926,968\n October 22, 2024 $140.23 964,636\n October 23, 2024 $140.83 785,414\n October 24, 2024 $143.18 1,125,539\n October 25, 2024 $144.24 732,636\n October 28, 2024 $142.51 951,759\n October 29, 2024 $143.43 992,337\n October 30, 2024 $145.30 1,145,670\n October 31, 2024 $134.44 2,465,489\n November 1, 2024 $142.46 2,497,481\n\n\n 2\n\fCase 1:25-cv-00541-JAV Document 70-23 Filed 11/20/25 Page 4 of 9\n\n\n\n\n Date Adjusted Closing Price Volume\n November 4, 2024 $137.55 1,372,314\n November 5, 2024 $139.14 1,542,176\n November 6, 2024 $149.02 1,771,656\n November 7, 2024 $150.02 1,116,974\n November 8, 2024 $157.07 1,308,683\n November 11, 2024 $164.68 1,188,893\n November 12, 2024 $161.45 815,102\n November 13, 2024 $162.43 678,690\n November 14, 2024 $157.65 710,640\n November 15, 2024 $158.44 632,418\n November 18, 2024 $163.02 999,010\n November 19, 2024 $171.02 1,188,312\n November 20, 2024 $171.21 982,327\n November 21, 2024 $174.96 1,041,985\n November 22, 2024 $173.71 1,203,150\n November 25, 2024 $168.26 1,177,999\n November 26, 2024 $171.96 755,909\n November 27, 2024 $165.32 870,891\n November 29, 2024 $168.82 358,885\n December 2, 2024 $166.80 693,922\n December 3, 2024 $161.22 1,371,656\n December 4, 2024 $164.93 1,107,999\n December 5, 2024 $158.35 786,371\n December 6, 2024 $157.11 1,699,518\n December 9, 2024 $149.90 1,580,167\n December 10, 2024 $150.00 1,351,218\n December 11, 2024 $149.67 933,147\n December 12, 2024 $135.08 2,398,417\n December 13, 2024 $131.72 2,343,598\n December 16, 2024 $130.64 2,057,354\n December 17, 2024 $130.15 1,843,000\n December 18, 2024 $126.66 2,314,645\n December 19, 2024 $131.14 2,388,442\n December 20, 2024 $133.49 2,518,609\n December 23, 2024 $128.04 1,267,331\n December 24, 2024 $129.38 431,077\n December 26, 2024 $129.84 707,837\n December 27, 2024 $127.11 676,662\n\n\n 3\n\fCase 1:25-cv-00541-JAV Document 70-23 Filed 11/20/25 Page 5 of 9\n\n\n\n\n Date Adjusted Closing Price Volume\n December 30, 2024 $126.51 1,143,371\n December 31, 2024 $144.04 3,247,029\n January 2, 2025 $144.44 1,862,800\n January 3, 2025 $151.38 1,122,613\n January 6, 2025 $157.96 2,148,020\n January 7, 2025 $159.91 1,685,503\n January 8, 2025 $168.78 1,632,215\n January 10, 2025 $174.02 2,509,857\n January 13, 2025 $164.57 3,052,010\n January 14, 2025 $153.29 2,267,308\n January 15, 2025 $116.08 20,029,142\n January 16, 2025 $120.00 8,449,376\n January 17, 2025 $112.38 5,554,301\n January 21, 2025 $83.79 18,433,614\n January 22, 2025 $91.99 7,458,778\n January 23, 2025 $101.50 7,302,372\n January 24, 2025 $90.98 5,369,749\n January 27, 2025 $91.65 3,611,784\n January 28, 2025 $100.02 2,635,249\n January 29, 2025 $97.00 6,418,952\n January 30, 2025 $103.35 1,569,424\n January 31, 2025 $100.53 1,782,979\n February 3, 2025 $108.20 3,635,801\n February 4, 2025 $109.60 2,325,087\n February 5, 2025 $116.95 2,468,458\n February 6, 2025 $118.81 2,121,328\n February 7, 2025 $112.84 2,283,304\n February 10, 2025 $116.68 1,725,795\n February 11, 2025 $119.51 918,297\n February 12, 2025 $114.71 1,693,717\n February 13, 2025 $107.92 2,515,296\n February 14, 2025 $113.59 1,765,091\n February 18, 2025 $119.18 1,408,563\n February 19, 2025 $125.75 1,929,179\n February 20, 2025 $143.82 6,253,274\n February 21, 2025 $129.31 3,872,237\n February 24, 2025 $130.10 2,859,581\n February 25, 2025 $132.95 1,949,698\n\n\n 4\n\fCase 1:25-cv-00541-JAV Document 70-23 Filed 11/20/25 Page 6 of 9\n\n\n\n\n Date Adjusted Closing Price Volume\n February 26, 2025 $140.32 2,106,933\n February 27, 2025 $129.63 2,452,558\n February 28, 2025 $128.71 2,157,574\n March 3, 2025 $118.61 3,764,426\n March 4, 2025 $115.16 2,667,938\n March 5, 2025 $113.13 1,963,154\n March 6, 2025 $108.28 2,550,883\n March 7, 2025 $104.22 2,791,478\n March 10, 2025 $97.69 2,192,713\n March 11, 2025 $105.58 1,874,023\n March 12, 2025 $103.24 2,186,611\n March 13, 2025 $101.18 1,332,990\n March 14, 2025 $104.31 1,214,630\n March 17, 2025 $106.98 1,011,903\n March 18, 2025 $102.39 1,066,981\n March 19, 2025 $109.01 1,275,129\n March 20, 2025 $106.70 1,333,512\n March 21, 2025 $107.23 1,451,571\n March 24, 2025 $114.91 1,279,124\n March 25, 2025 $116.94 1,977,081\n March 26, 2025 $114.00 2,123,918\n March 27, 2025 $114.52 1,071,849\n March 28, 2025 $112.36 1,543,785\n March 31, 2025 $111.03 1,468,967\n April 1, 2025 $113.59 1,014,419\n April 2, 2025 $115.94 946,911\n April 3, 2025 $104.34 3,549,083\n April 4, 2025 $88.32 4,020,577\n April 7, 2025 $90.13 2,742,154\n April 8, 2025 $89.99 2,385,668\n April 9, 2025 $108.95 3,046,070\n April 10, 2025 $96.43 1,972,410\n April 11, 2025 $98.92 1,149,193\n April 14, 2025 $99.07 1,101,597\n April 15, 2025 $95.83 1,311,514\n April 16, 2025 $94.41 1,687,849\n April 17, 2025 $93.00 1,879,301\n April 21, 2025 $87.35 1,581,536\n\n\n 5\n\fCase 1:25-cv-00541-JAV Document 70-23 Filed 11/20/25 Page 7 of 9\n\n\n\n\n Date Adjusted Closing Price Volume\n April 22, 2025 $92.04 1,492,290\n April 23, 2025 $95.83 1,227,315\n April 24, 2025 $101.37 1,246,423\n April 25, 2025 $104.84 1,013,924\n April 28, 2025 $108.22 1,161,907\n April 29, 2025 $109.15 1,043,334\n April 30, 2025 $107.11 1,686,467\n May 1, 2025 $86.90 6,352,157\n May 2, 2025 $89.95 4,384,739\n May 5, 2025 $100.75 3,300,766\n May 6, 2025 $108.01 2,674,170\n May 7, 2025 $110.01 2,258,669\n May 8, 2025 $110.01 1,529,160\n May 9, 2025 $107.13 1,839,488\n May 12, 2025 $112.96 1,330,448\n May 13, 2025 $117.81 1,688,755\n May 14, 2025 $118.35 1,064,795\n May 15, 2025 $117.71 1,500,980\n May 16, 2025 $117.98 1,514,431\n May 19, 2025 $122.40 1,165,756\n May 20, 2025 $119.30 1,064,397\n May 21, 2025 $114.52 1,370,725\n May 22, 2025 $112.93 935,818\n May 23, 2025 $114.58 1,206,500\n May 27, 2025 $119.90 1,268,359\n May 28, 2025 $118.24 827,140\n May 29, 2025 $117.75 749,603\n May 30, 2025 $117.15 1,023,074\n June 2, 2025 $120.35 868,100\n June 3, 2025 $123.35 1,120,536\n June 4, 2025 $122.82 663,762\n June 5, 2025 $123.49 849,987\n June 6, 2025 $129.17 1,046,107\n June 9, 2025 $124.73 1,133,461\n June 10, 2025 $121.13 1,121,696\n June 11, 2025 $120.35 890,037\n June 12, 2025 $123.74 837,373\n June 13, 2025 $123.77 1,201,697\n\n\n 6\n\fCase 1:25-cv-00541-JAV Document 70-23 Filed 11/20/25 Page 8 of 9\n\n\n\n\n Date Adjusted Closing Price Volume\n June 16, 2025 $124.06 1,104,705\n June 17, 2025 $123.25 1,104,079\n June 18, 2025 $130.08 1,496,814\n June 20, 2025 $129.09 1,626,227\n June 23, 2025 $130.23 1,476,729\n June 24, 2025 $135.05 1,198,479\n June 25, 2025 $125.00 2,287,279\n June 26, 2025 $122.01 2,157,175\n June 27, 2025 $118.60 17,044,568\n June 30, 2025 $115.04 2,754,017\n July 1, 2025 $113.86 2,595,204\n July 2, 2025 $113.14 2,046,098\n July 3, 2025 $114.95 961,130\n July 7, 2025 $111.49 1,736,749\n July 8, 2025 $109.76 1,684,501\n July 9, 2025 $110.41 1,432,177\n July 10, 2025 $112.68 1,818,650\n July 11, 2025 $110.98 1,296,336\n July 14, 2025 $114.66 1,576,434\n July 15, 2025 $113.79 1,255,638\n July 16, 2025 $115.15 1,017,522\n July 17, 2025 $115.65 1,070,532\n July 18, 2025 $113.59 822,649\n July 21, 2025 $113.88 787,493\n July 22, 2025 $110.92 897,115\n July 23, 2025 $112.20 947,775\n July 24, 2025 $109.92 825,468\n July 25, 2025 $117.18 1,357,171\n July 28, 2025 $114.38 1,472,714\n July 29, 2025 $114.14 1,213,011\n July 30, 2025 $144.46 7,157,646\n July 31, 2025 $137.61 2,788,191\n August 1, 2025 $137.32 1,888,711\n August 4, 2025 $141.47 1,163,341\n August 5, 2025 $138.98 1,236,646\n August 6, 2025 $137.63 1,392,163\n August 7, 2025 $138.07 966,904\n August 8, 2025 $136.06 592,847\n\n\n 7\n\fCase 1:25-cv-00541-JAV Document 70-23 Filed 11/20/25 Page 9 of 9\n\n\n\n\n Date Adjusted Closing Price Volume\n August 11, 2025 $138.02 797,989\n August 12, 2025 $142.56 978,048\n August 13, 2025 $146.00 1,205,645\n August 14, 2025 $144.90 864,327\n August 15, 2025 $144.72 887,589\n August 18, 2025 $142.46 1,062,047\n August 19, 2025 $141.01 833,884\n August 20, 2025 $140.40 1,078,013\n August 21, 2025 $146.09 1,390,977\n August 22, 2025 $147.71 1,383,193\n August 25, 2025 $148.81 1,129,746\n August 26, 2025 $149.19 1,015,440\n August 27, 2025 $149.91 998,345\n August 28, 2025 $155.39 1,152,588\n August 29, 2025 $153.85 1,346,682\n September 2, 2025 $150.09 936,491\n September 3, 2025 $150.89 961,183\n September 4, 2025 $155.55 1,003,935\n September 5, 2025 $154.00 1,489,384\n September 8, 2025 $166.42 2,326,339\n September 9, 2025 $165.39 1,141,752\n September 10, 2025 $168.12 1,141,094\n September 11, 2025 $169.85 1,356,744\n September 12, 2025 $171.66 1,015,627\n September 15, 2025 $172.51 831,729\n September 16, 2025 $173.75 651,457\n September 17, 2025 $174.04 855,900\n September 18, 2025 $178.17 1,180,591\n\n\n\n\n 8\n\f","ocr_status":2,"date_upload":"2026-05-12T04:16:14.384858-07:00","document_number":"70","attachment_number":23,"pacer_doc_id":"127038602967","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit W - FTAI Historical Stock Price Chart","acms_document_guid":""}],"date_created":"2025-11-20T19:10:03.178523-08:00","date_modified":"2025-12-22T18:26:25.882138-08:00","date_filed":"2025-11-20","time_filed":"21:47:45","entry_number":70,"recap_sequence_number":"2025-11-20.004","pacer_sequence_number":283,"description":"DECLARATION of Tansy Woan in Support re: 68 MOTION to Dismiss the Amended Class Action Complaint.. 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