8-K/A

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORTPursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 18, 2025 (December 3, 2024)

GOGO INC.

(Exact name of registrant as specified in its charter)

Delaware<br><br>(State or other jurisdiction of incorporation)	001-35975<br><br>(Commission File Number)	27-1650905<br><br>(IRS Employer Identification No.)
105 Edgeview Dr., Suite 300<br><br>Broomfield, CO<br><br>(Address of principal executive offices)	80021<br><br>(Zip Code)
---	---

Registrant’s telephone number, including area code:

303-301-3271

Not Applicable (Former name or former address, if changed since last report)

Check 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 following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $0.0001 per share	GOGO	NASDAQ Global Select Market
Preferred Stock Purchase Rights	GOGO	NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

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

EXPLANATORY NOTE

As previously disclosed on a Current Report on Form 8-K filed by Gogo Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”) on December 9, 2024 (the “Original 8-K”), Gogo Direct Holdings LLC, a Delaware limited liability company (“Gogo Direct”) and indirect wholly owned subsidiary of the Company, entered into the Purchase Agreement, dated as of September 29, 2024 (the “Purchase Agreement”), by and among Gogo Direct, Satcom Direct Holdings, Inc., a Delaware corporation (“SD Seller”), SDHC Holdings, Inc., a Delaware corporation (“SDHC Seller”), Satcom Direct Government Holdings, Inc., a Delaware corporation (“Satcom Government Seller”), ndtHost Holdings, Inc., a Delaware corporation (“ndtHost Seller” and, together with SD Seller, SDHC Seller and Satcom Government Seller, each a “Seller” and, collectively, “Sellers”), Satcom Direct, LLC, a Delaware limited liability company (f/k/a Satcom Direct, Inc., a Florida corporation) (“Satcom Direct”), Satcom Direct Holding Company, LLC, a Delaware limited liability company (formerly a Florida limited liability company) (“SDHC”), Satcom Direct Government, LLC (f/k/a Satcom Direct Government, Inc., a Florida corporation) (“Satcom Government”), ndtHost, LLC, a Delaware limited liability company (formerly a Florida limited liability company) (“ndtHost” and, together with Satcom Direct, SDHC, and Satcom Government, each, a “Parent Company” and, collectively, the “Parent Companies”), solely for purposes of Section 8.8 and Section 8.9 of the Purchase Agreement, James W. Jensen, in his individual capacity, and solely for purposes of Section 2.5 and Section 13.20, the Company. On December 3, 2024, the Company consummated the transactions contemplated by the Purchase Agreement.

Pursuant to the instructions to Item 9.01 of Form 8-K, this Amendment No. 1 is being filed by the Company to amend and supplement the Original 8-K to provide the financial information referred to in Item 9.01 (a) and (b) below. Except as provided herein, the disclosures made in the Original 8-K remain unchanged.

Item 9.01. Financial Statements and Exhibits.

(a) Financial statements of businesses or funds acquired.

The audited consolidated and combined financial statements of Satcom Direct and its subsidiaries and affiliates (collectively, “Satcom”) as of and for the years ended December 31, 2023 and 2022 are included as Exhibit 99.1 hereto. The unaudited consolidated and combined financial statements of Satcom as of and for the nine-month periods ended September 30, 2024 and 2023 are included as Exhibit 99.2 hereto.

(b) Pro forma financial information.

The unaudited pro forma condensed combined balance sheet as of September 30, 2024 and statements of operations for the year ended December 31, 2023 and nine-month period ended September 30, 2024 for the Company and Satcom are included as Exhibit 99.3 hereto.

(d) Exhibits.

Exhibit No.	Description
23.1	Consent of RSM US LLP, Independent Auditor for Satcom.
99.1	Audited consolidated and combined financial statements of Satcom as of and for the years ended December 31, 2023 and 2022.
99.2	Unaudited consolidated and combined financial statements of Satcom as of and for the nine-month periods ended September 30, 2024 and 2023.
99.3	Unaudited pro forma condensed combined balance sheet as of September 30, 2024 and statements of operations for the year ended December 31, 2023 and nine-month period ended September 30, 2024 for the Company and Satcom.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURES

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 the undersigned hereunto duly authorized.

By: /s/ Crystal L. Gordon Crystal L. Gordon Executive Vice President, General Counsel, Chief Administrative Officer, and Secretary

Date: February 18, 2025

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITOR

We consent to the incorporation by reference in Registration Statement No. 333-264687 on Form S-3 and Registration Statement Nos. 333-212072, 333-225716, 333-281173, 333-273788 and 333-281172 on Form S-8 of Gogo Inc. of our report dated April 25, 2024, except for the correction of misstatements, the change in method of accounting for goodwill and customer relationships and reclassifications described in Note 2 as to which the date is February 17, 2025 relating to the consolidated and combined financial statements of Satcom Direct Inc. and Subsidiaries and Combined Affiliates as of and for the year ended December 31, 2023 and 2022 appearing in this Current Report on Form 8-K/A filed by Gogo Inc. on February 18, 2025.

/s/ RSM US LLP

Orlando, Florida

February 18, 2025

EX-99.1

Exhibit 99.1

Satcom Direct, Inc.

and Subsidiaries and

Combined Affiliates

Consolidated and Combined Financial Report

December 31, 2023

Contents

Independent auditor’s report	1-2
Financial statements
Consolidated and combined balance sheets	3
Consolidated and combined statements of income	4
Consolidated and combined statements of comprehensive income	5
Consolidated and combined statements of changes in stockholder’s equity (deficit)	6
Consolidated and combined statements of cash flows	7
Notes to consolidated and combined financial statements	8-27

Independent Auditor’s Report

Board of Directors and Shareholder

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Opinion

We have audited the consolidated and combined financial statements of Satcom Direct, Inc. and Subsidiaries and Combined Affiliates (the Company), which comprise the consolidated and combined balance sheets as of December 31, 2023 and 2022, the related consolidated and combined statements of income, comprehensive income, changes in stockholder’s equity (deficit) and cash flows for the years then ended, and the related notes to the consolidated and combined financial statements (collectively, the financial statements).

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

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter

As discussed in Note 2 to the financial statements, the Company has elected to change its method of accounting for goodwill and customer relationships to eliminate the Private Company Council alternative elections previously taken and has made certain reclassifications in order to be in compliance with Regulation S-X. Our opinion is not modified with respect to this matter.

Emphasis of Matter

As discussed in Note 2 to the financial statements, the 2023 and 2022 financial statements have been restated to correct misstatements. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from

fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

/s/ RSM US LLP

Orlando, Florida

April 25, 2024, except for Note 2 as to

which the date is February 17, 2025

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Consolidated and Combined Balance Sheets

(in thousands)

			As Restated
			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	3,078		$	1,401
Accounts receivable, net of allowances of 2,547 and 2,860, respectively	71,235			51,270
Inventories, net	19,172			11,646
Prepaid expenses and other current assets	10,844			8,693
Total current assets	104,329			73,010
Non-current assets:
Property, plant and equipment, net	49,944			71,399
Intangible assets, net	3,543			4,547
Goodwill, net	9,869			9,869
Deferred income taxes	85			292
Deposits and other assets	4,290			353
Operating right-of-use assets	3,806			4,231
Total non-current assets	71,537			90,691
Total assets	175,866		$	163,701
Liabilities and Stockholder's Equity (Deficit)
Current liabilities:
Accounts payable	47,336		$	37,273
Accrued expenses	20,640			20,279
Deferred revenue, short-term	29,713			25,961
Current maturities of long-term debt	1,838			6,193
Current maturities of operating lease liabilities	452			512
Total current liabilities	99,979			90,218
Non-current liabilities:
Long-term debt, less current maturities	63,149			66,600
Deferred revenue, long-term	8,507			7,605
Due to stockholder	-			45
Operating lease liabilities, less current maturities	4,067			4,464
Total non-current liabilities	75,723			78,714
Total liabilities	175,702			168,932
Commitments and contingencies (Notes 7, 10, 11, and 12)
Stockholder's equity (deficit):
Common stock, 1 par value; 10,100 shares authorized; 2,100 shares issued
and outstanding at December 31, 2023, and 2022	2			2
Additional paid-in capital	3,187			3,187
Retained earnings	58,058			53,026
Accumulated other comprehensive loss	(1,083	)		(1,446	)
	60,164			54,769
Treasury stock, at cost, 630 shares held at December 31, 2023, and 2022	(60,000	)		(60,000	)
Total stockholder's equity (deficit)	164			(5,231	)
Total liabilities and stockholder's equity (deficit)	175,866		$	163,701

All values are in US Dollars.

See notes to consolidated and combined financial statements.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Consolidated and Combined Statements of Income

(in thousands)

	As Restated			As Restated
	For the Years Ended December 31,
	2023			2022
Revenue:
Service revenue	$	401,442		$	354,375
Equipment revenue		46,158			30,948
Total revenue		447,600			385,323
Operating expenses:
Cost of service revenue (exclusive of items shown below)		251,547			223,867
Cost of equipment revenue (exclusive of items shown below)		31,082			19,636
Employee expense		62,696			61,586
Travel and entertainment		4,398			4,025
Marketing expense		2,694			2,732
Depreciation and amortization expense		13,079			16,337
Loss (gain) on disposal of property, plant, and equipment		10,179			(8,943	)
Professional fees		5,051			4,688
Information technology services		4,836			5,449
Other general and administrative expenses		18,082			24,072
Total operating expenses		403,644			353,449
Operating Income		43,956			31,874
Other (expenses) income:
Interest expense		(3,957	)		(3,024	)
Other (expenses) income, net		1,549			1,200
Total other (expenses) income		(2,408	)		(1,824	)
Income before tax provision		41,548			30,050
Income tax provision		1,911			206
Net income	$	39,637		$	29,844

See notes to consolidated and combined financial statements.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Consolidated and Combined Statements of Comprehensive Income

(in thousands)

	As Restated		As Restated
	For the Years Ended<br>December 31,
	2023		2022
Net income	$	39,637	$	29,844
Other comprehensive income (loss):
Foreign currency translation adjustment		363		(356	)
Comprehensive income	$	40,000	$	29,488

See notes to consolidated and combined financial statements.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Consolidated and Combined Statements of Stockholder's (Deficit) Equity

(in thousands)

Years Ended December 31, 2023 and 2022

			Satcom Direct
			Government,
			Inc. and
			Subsidiaries			Combined
Common stock, 1.00 par value:
10,100 Authorized; 2,100 issued and outstanding beginning and ending:	2		$	-		$	2
Additional paid-in capital	3,187			-			3,187
Retained earnings:
Balance, beginning, as restated	37,555			15,471			53,026
Add net income (deduct net loss), as restated	39,816			(179	)		39,637
Deduct stockholder distributions	(33,272	)		(1,333	)		(34,605	)
Balance, ending	44,099			13,959			58,058
Accumulated other comprehensive income
Balance, beginning	(1,446	)		-			(1,446	)
Add foreign currency translation adjustment	363			-			363
Balance, ending	(1,083	)		-			(1,083	)
Treasury stock, at cost, 630 shares held at December 31, 2023 and 2022	(57,143	)		(2,857	)		(60,000	)
Total stockholder's (deficit) equity, as restated	(10,938	)	$	11,102		$	164
			Satcom Direct
			Government,
			Inc. and
			Subsidiaries			Combined
Common stock, 1.00 par value:
10,100 Authorized; 2,100 issued and outstanding beginning and ending:	2		$	-		$	2
Additional paid-in capital	3,187			-			3,187
Retained earnings:
Balance, beginning as previously stated	20,080			7,051			27,131
Change in method of accounting	3,131			-			3,131
Error corrections	(2,433	)		-			(2,433	)
Balance, restated	20,778			7,051			27,829
Add net income, as restated	21,054			8,790			29,844
Deduct stockholder distributions	(4,277	)		(370	)		(4,647	)
Balance, ending, as restated	37,555			15,471			53,026
Accumulated other comprehensive loss
Balance, beginning	(1,090	)		-			(1,090	)
Deduct foreign currency translation adjustment	(356	)		-			(356	)
Balance, ending	(1,446	)		-			(1,446	)
Treasury stock, at cost, 630 shares held at December 31, 2022 and 2021	(57,143	)		(2,857	)		(60,000	)
Total stockholder's (deficit) equity, as restated	(17,845	)	$	12,614		$	(5,231	)

All values are in US Dollars.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Consolidated and Combined Statements of Cash Flows

(in thousands)

	As Restated			As Restated
	For the Years Ended December 31,
	2023			2022
Cash flows from operating activities:
Net income	$	39,637		$	29,844
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		13,079			16,337
Debt issuance cost amortization		88			(78	)
Provision for credit losses		520			460
Reserve for inventory obsolescence		465			47
Loss (gain) on disposal of property, plant and equipment		10,179			(8,943	)
Deferred income taxes		207			(292	)
Accounts receivable		(20,438	)		(6,887	)
Inventories		(7,986	)		(2,458	)
Prepaid expenses and other current assets		(2,141	)		4,331
Intangible assets		(106	)		(57	)
Operating right-of-use assets		424			640
Deposits and other assets		(2,442	)		48
Accounts payable		9,977			(4,008	)
Accrued expenses		277			2,544
Deferred revenue		4,654			(12,448	)
Operating lease liabilities		(465	)		97
Net cash provided by operating activities		45,929			19,177
Cash flows from investing activities:
Purchases of property, plant and equipment		(6,718	)		(10,113	)
Proceeds from disposal of property, plant and equipment		6,049			24,844
Net cash (used in) provided by investing activities		(669	)		14,731
Cash flows from financing activities:
Stockholder distributions		(34,605	)		(4,647	)
Net proceeds (repayment) from line of credit		19,159			27,453
Proceeds from long-term debt		-			20,000
Payments on long-term debt		(27,054	)		(23,213	)
Purchase of interest rate swap		(1,360	)		-
Payments on amount due to stockholder		(45	)		(60,579	)
Net cash used in financing activities		(43,905	)		(40,986	)
Effect of foreign currency on cash		322			(154	)
Net increase (decrease) in cash and cash equivalents		1,677			(7,232	)
Cash and cash equivalents:
Beginning		1,401			8,633
Ending	$	3,078		$	1,401
Supplemental disclosures of cash flow information:
Cash paid for interest	$	3,738		$	2,954
Cash paid for income taxes	$	817		$	239

See notes to consolidated and combined financial statements.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

• Nature of Operations, Principles of Combination and Significant Accounting Policies

Nature of operations: Satcom Direct, Inc. and Subsidiaries (SD, the “Company,” “we,” “us” or “our”) and its related affiliates: Satcom Direct Government, Inc. and Subsidiaries (SDG), Satcom Direct Finance, Inc. (SDF) and Satcom Direct Holding Company, LLC and Subsidiaries (SDHC), provide global satellite based communication solutions primarily for business, military and government aircraft.

SD (and subsidiaries), a Florida based company founded in 1997 with world headquarters located in Melbourne Florida, provides most of the Company’s services for its business users. In 2023, SD de-registered from Minnesota and registered in Florida. Included within SD’s subsidiaries are the following entities: Stewart Ratcliff Aviation Services, Inc. (d/b/a Aircraftlogs.com) (ACL), Satcom Direct Avionics, Inc., Satcom Direct Avionics, ULC (SDA), Satcom Direct Canada, Inc., N321SD, Inc., Satcom Direct-Australia Pty Ltd, Satcom Direct International, Limited and Satcom Direct Rus, LLC, Satcom Direct Finance, Inc. (SDF), Satcom Direct PTE Ltd.

SDG (and subsidiaries), a Florida based company formed in 2013, provides the Company’s services primarily to the U.S. government. Included in SDG’s subsidiaries are the following entities: N929SD, Inc. and Comsat, Inc (Comsat).

SDF, a Florida based company, formed in 2021, provides the Company’s customers with trade receivable financing options. This company has no balances or activity as of December 31, 2023 or 2022, or the years then ended.

SDHC (and subsidiaries), a Florida limited liability company formed in 2011, provides the Company’s services in Brazil. This company has no balances or activity as of December 31, 2023 or 2022, or the years then ended.

Basis of presentation: The consolidated and combined financial statements include the consolidated accounts of SD and its wholly owned subsidiaries, the consolidated accounts of SDC and its wholly owned subsidiaries, the accounts of SDF, and the consolidated accounts of SDHC and its wholly owned subsidiaries, which have been combined on the basis of common ownership. All intercompany accounts and transactions have been eliminated in consolidation and combination.

The consolidated and combined financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and in conformity with Rule 3-05 of Regulation S-X promulgated under the Securities Act of 1933, as amended (the Securities Act).

A summary of the Company’s significant accounting policies is as follows:

Use of estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated and combined financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. On an ongoing basis, management evaluates the significant estimates and bases such estimates on historical experience and various other assumptions believed to be reasonable under the circumstances. However, actual results could differ materially from those estimates.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Significant risks and uncertainties: Our operations are subject to certain risks and uncertainties, including without limitation those associated with fluctuations in operating results, implementation of our technology roadmap, strategic alliances, relationships with customers, suppliers and dealers, supply chain disruptions, funding of our growth, financing terms that may restrict operations, regulatory issues, competition, the economy, technology trends, evolving industry standards and other events that may impact the demand for air travel.

Revenue recognition: The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers, which provides a five-step model to recognize revenue from contracts with customers through the following steps:

• Identification of the contract, or contracts with a customer
• Identification of the performance obligations in the contract
• Determination of the transaction price
• Allocation of the transaction price to the performance obligations in the contact
• Recognition of revenue as performance obligations are satisfied

Disaggregated revenue: The Company has a comprehensive offering of products and services including, connectivity services, hardware and software as a service (SaaS) that the Company sells to business aviation and the military and governments.

Below is a summary of the Company’s discrete service lines based off timing of revenue recognition

(in thousands):

	For the Years<br>Ended December 31,
	2023		2022
Connectivity services (transferred over time)	$	392,606	$	346,992
Hardware (transferred at point in time)		46,158		30,948
Software as a service (transferred over time)		8,836		7,383
Net sales	$	447,600	$	385,323

Connectivity services: The Company is a global service provider for satellite telecommunication connectivity services for aircraft’s, vehicles, vessels, and land-based use. Connectivity services include flights safety services, communication, navigation, and internet connectivity. The Company provides the stand-ready obligation to provide connectivity services of distinct time periods that are substantially the same and have the same pattern of transfer of control to the customer, and as such is accounted for as a series. The Company offers two types of connectivity services: usage-based and monthly subscription based, both of which are recognized over time. The usage-based revenues are recognized when the connectivity services are used by the customer and thus when the data is transferred to the customer over time. The monthly subscription based contract revenues are recognized ratably over the subscription term beginning on the date the service is made available to the customer. Generally, contract terms are one to two years in length.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Hardware products: The Company‘s hardware products include avionics communication equipment such as, routers, Wi-Fi hubs, data link units and antennas. The Company recognizes revenue when control of such hardware is transferred to the customer upon the shipment of products (point in time). The Company has elected to treat shipping and handling activities related to contracts with customers as fulfillment costs, and not as separate performance obligations, and accrues the related costs when the related revenue is recognized.

Software as a service: The Company’s SaaS includes flight scheduling data, engine cycle times, flight safety, communications, threat monitoring, cybersecurity, navigation, and application program interface (API) integrations with third party software services. The Company’s software as service subscription services represent a stand-ready obligation to provide access to the hosted software solution and customer support. Customers are not able to take possession of the software or transfer hosting to a third party. The SaaS is a stand-ready obligation to provide a series of distinct SaaS periods that are substantially the same and have the same pattern of transfer of control to the customer, and as such is accounted for as a series. The Company recognizes SaaS revenue ratably over the subscription term beginning on the date the service is made available to the customer (over time).

Contract balances: The timing of revenue recognition may not align with the right to invoice the customer. The Company records accounts receivable when it has the unconditional right to invoice regardless of whether revenue has been recognized. At the beginning of the year ending December 31, 2022, the accounts receivable, net balance is $44,998. If revenue has not yet been recognized, then a contract liability is also recorded. Such amounts are classified in the consolidated and combined balance sheets as deferred revenue. At the beginning of the year ending December 31, 2022, the deferred revenue, short-term and deferred revenue, long-term balances are $37,777 and $8,236, respectively. If revenue is recognized in advance of the right to invoice, a contract asset is recorded.

Payment terms are typically due within 30 days, but can occasionally be within 60 days. There are instances where the Company’s contracts contain upfront payment terms where services are being transferred over a period of time that can be up to two years and, therefore, contain a financing component. The Company separately evaluates the significance of the financing component for each contract. Generally, the Company does not believe that these payments contain a significant financing component as the difference between the amount of promised consideration and the cash selling price of the promised services arises for non-finance reasons. The Company also excludes from revenue government-assessed and imposed taxes on revenue-generating activities that are invoiced to customers.

Contract balances are classified as assets or liabilities on a contract-by-contract basis at the end of each reporting period.

Performance obligations: A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

Transaction price: The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods and services to its customer. Revenue from sales is recorded based on the transaction price, which includes estimates of variable consideration. The amount of variable consideration included in the transaction price is constrained and is included only to the extent it is probable that a significant reversal of revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company includes estimates for variable consideration within its determination of the transaction price, subject to the constraint. Generally, the Company does not believe the estimates of variable consideration to be material. Certain arrangements contain variable consideration such as providing free services in the beginning of the contract. The Company’s contracts include service level guarantees from

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

which we have not historically experienced any claims resulting in payments or credits to our customers. The Company estimates the impact of such service level guarantees using the expected value method. Based on our historic claims experience, we estimate the impact of service level guarantees on our contact transaction price to be immaterial.

The Company’s contracts generally do not contain rights of return, and the Company does not have a history of returns. The Company’s hardware contracts occasionally contain warranties that the equipment will be free from defects for a period of one year from the date of delivery. The Company does not have a history of payment of warranties.

Cash: The Company places its cash with high credit-quality institutions. The Company maintains cash balances that, from time to time, may exceed the federally insured limits. The Company has not experienced any losses as a result of this concentration and believes it is not exposed to any significant credit risk on cash balances.

Accounts Receivable: The Company adopted ASC 326, Financial Instruments-Credit Losses, as of January 1, 2023, with the cumulative-effect transition method with the required prospective approach. The measurement of expected credit losses under the current expected credit loss (CECL) methodology is applicable to financial assets measured at amortized cost, which consists of trade receivables. An allowance for credit losses under the CECL methodology is determined using the loss-rate approach and measured on a collective (pool) basis when similar risk characteristics exist. Where financial instruments do not share risk characteristics, they are evaluated on an individual basis. The CECL allowance is based on relevant available information from internal and external sources related to past events, current conditions, and reasonable and supportable forecasts. The allowance for credit losses was $2.5 million, is included within accounts receivable, net in the accompanying consolidated and combined balance sheet. The change in the allowance for credit losses during the year ended December 31, 2023, was not material to the consolidated and combined financial statements.

Prior to adoption of ASC 326, the Company maintained an allowance for doubtful accounts to reserve for potentially uncollectible receivables. The allowance for doubtful accounts as of December 31, 2022, $2.9 million, is included within the accounts receivable, net, in the accompanying consolidated and combined balance sheet.

Inventories: Inventories consisting of primarily purchased equipment are valued at the lower of cost or net realizable value, with cost determined on a first-in first-out basis (FIFO). We evaluate the need for write-downs associated with obsolete, slow-moving and nonsalable inventory by reviewing the net realizable inventory values on a periodic basis. At December 31, 2023 and 2022, an obsolescence reserve has been established totaling $0.4 million, for both years ended. The obsolescence reserve is included within inventories, net, in the accompanying consolidated and combined balance sheets.

Property, plant and equipment: Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the remaining lease term or estimated useful lives. Amortization of leasehold improvements is included in depreciation expense of property, plant and equipment. Expenditures that significantly increase values or extend useful lives of property and equipment are capitalized, whereas those for normal maintenance and repairs are expensed. Gains and losses on disposal of property and equipment are recorded in operations in the year of disposal.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Estimated useful lives are as follows:

	Years
Buildings	20-40
Aircraft and vehicles	5
Leasehold improvements	5-10
Equipment	3-10
Software	2-5

Intangible assets (except goodwill): Finite-lived intangible assets acquired in a business combination are recorded at fair value on the date of acquisition. Intangible assets not acquired in a business combination are recorded at cost. The Company amortizes finite-lived intangible assets over their estimated useful lives using the straight-line method. Costs incurred to renew or extend the term of recognized intangible assets are capitalized and amortized over the useful life of the asset. The cost of software that is developed or obtained for internal use is accounted for pursuant to ASC Topic 350, Intangibles—Goodwill and Other. Pursuant to ASC Topic 350, the Company capitalized costs for its SaaS based solutions during the application development stage and expensed costs incurred during the preliminary project and the post implementation operations stages of development. The Company did not capitalize software development costs during the fiscal years ended December 31, 2023 and 2022. The costs capitalized for each project are included in intangible assets and are amortized over their useful lives in the consolidated and combined financial statements.

Intangible assets that are deemed to have a finite life are amortized over their useful lives as follows:

	Years
Tradenames	5-10
Developed software	5
Customer relationships	10
Other	Indefinite, 3 - 5

Impairment of long-lived assets (except goodwill): The Company reviews long-lived assets or asset groups for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset or asset group may not be recoverable. Recoverability of long-lived assets or asset groups to be held and used is measured by a comparison of the carrying amount of a long-lived asset or asset groups to future net cash flows (undiscounted and without interest charges) expected to be generated by the long-lived asset or asset groups to determine if an impairment exists. If such long-lived assets or asset groups are determined to be impaired, the amount of the impairment is calculated as the difference between the excess of the carrying amount of the long-lived assets or assets groups over their fair value, which is estimated by calculating the discounted future net cash flows associated with the asset or asset group. Assets or asset groups to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Management has determined that there were no indicators of impairment of long-lived assets as of December 31, 2023 and 2022.

Goodwill: Goodwill represents the excess of the aggregate purchase price over the estimated fair value of the net assets acquired in business combinations. Goodwill is considered an indefinite lived asset and, therefore, not amortized for book purposes. Intangible assets with indefinite lives are not amortized but are reviewed for impairment at least annually or whenever events or circumstances indicate the carrying value of the asset may not be recoverable.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

The Company uses qualitative and quantitative approaches when testing goodwill for impairment. The Company performs a qualitative evaluation of events and circumstances impacting each reporting unit to determine the likelihood of a goodwill impairment charge. Based on that qualitative evaluation, if the Company determines it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary. If it is more likely than not that the carrying value of a reporting unit exceeds the fair value, then an indication of impairment exists and the Company must perform a quantitative fair value assessment. If the fair value of a reporting unit is less than its carrying value, then an impairment charge equal to the excess of the carrying value over the fair value is recorded to the results of operations. The Company may only write down the carrying value of its indefinite-lived intangible assets. The Company is not permitted to increase the carrying value if the fair value of the assets subsequently increases.

No impairment charge was recorded during the years ending December 31, 2023 and 2022.

Income taxes: SD, SDG and SDH have elected by consent of the stockholders to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the entities do not pay corporate income taxes on their taxable income. Instead, the stockholders are responsible for income taxes on taxable income. Therefore, no benefit or receivable for income taxes relating to these companies have been included in the consolidated and combined financial statements. Certain other subsidiaries are subject to U.S. and foreign income tax expense, for which the Company follows guidance under ASC 740, Income Taxes, to determine deferred taxes. Income taxes expenses and benefits for entities subject to tax were included in the Income tax provision in the accompanying consolidated and combined statements of income for the years ended December 31, 2023 and 2022. The Company has made the election to treat certain state taxes as paid at the entity level rather than the individual level. The election was made during the year ended December 31, 2023, and the estimated amount of taxes payable is approximately $0.6 million.

The Company accounts for uncertainty in income tax positions by assessing whether there are any uncertain tax positions which may give rise to income tax liabilities and has determined that there were no such matters requiring recognition in the accompanying consolidated and combined financial statements. The Company would have classified interest and penalties as income tax expense in the consolidated and combined financial statements had uncertain tax positions been identified.

In January 2024, the Company was notified that they will be under limited examination for nonresident services reporting for the years 2017 – 2022. As of the date of these consolidated and combined financial statements, no adjustments have been proposed and the Company is not aware of any potential adjustments that would give rise to an uncertain tax position.

Debt issuance costs: The Company capitalizes costs incurred with the issuance of debt. These costs are presented on the consolidated and combined balance sheets as a direct reduction from the carrying amount of the related debt. The Company amortizes such costs as additional interest expense using the effective interest method over the contractual term of the underlying debt instruments. Amortization of debt issuance costs was immaterial for the years ended December 31, 2023 and 2022. Amortization of debt issuance costs is included in interest expense in the accompanying consolidated and combined statements of income.

Concentration of credit risk: Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of SDG’s accounts receivable. Credit risk with respect to receivables is influenced by the limited number of customers, the concentration of certain customers in the market and the ability of these customers to repay the Company. Management regularly contacts its customers and monitors their payment history. The Company has provided allowances for credit losses at

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

December 31, 2023 and 2022, which management believes will be adequate to absorb any credit losses that may result from existing receivables.

Vendor concentration: As of December 31, 2023 and 2022, one vendor represented approximately 73% and 68% of cost of service and cost of equipment revenues, respectively, and approximately 39% and 30% of accounts payable and accrued expenses, respectively.

Advertising costs: The Company expenses advertising costs in the period when the costs are incurred. Advertising expense included in marketing expense in the accompanying consolidated and combined statements of income was $0.3 million and $0.4 million for the years ended December 31, 2023 and 2022, respectively.

Research and development costs: Expenditures for research and development are charged to expense as incurred and totaled $6.7 million and $7.6 million for the years ended December 31, 2023 and 2022, respectively. Research and development costs are included in other general and administrative expenses in the accompanying consolidated and combined statements of income.

Foreign currency translation: The accompanying consolidated and combined financial statements are presented in U.S. dollars (USD). The effects of translating the financial statements of foreign subsidiaries from the functional currency into the Company’s reporting currency (USD) are recognized as foreign currency translation adjustments in accumulated other comprehensive income. The translation of assets and liabilities to USD is made at the exchange rate in effect at the consolidated and combined balance sheet dates, while equity accounts are translated at historical rates. The translation of the consolidated and combined statement of income amounts is made monthly at the average currency exchange rate for the month. Net foreign currency transaction gains and losses on settled transactions were included in the other income (expenses) section of the Company’s consolidated and combined statements of income as of December 31, 2023 and 2022.

Leases: In accordance with ASC Topic 842, Leases, the Company is required to recognize most leases on their balance sheets as a right-of-use (ROU) asset representing the right to use an underlying asset and a lease liability representing the obligation to make lease payments over the lease term, measured on a discounted basis.

The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations. A contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) the Company obtains substantially all economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. The Company also considers whether its service arrangements include the right to control the use of an asset.

The Company made an accounting policy election available under Topic 842 not to recognize ROU assets and lease liabilities for leases with a term of 12 months or less. For all other leases, ROU assets and lease liabilities are measured based on the present value of future lease payments over the lease term at the commencement date of the lease (or January 1, 2022 for existing leases upon the adoption of Topic 842). The ROU assets also include any initial direct costs incurred and lease payments made at or before the commencement date and are reduced by any lease incentives. To determine the present value of lease payments, the Company utilizes our incremental borrowing rate, which is aligned with the lease term at the lease commencement date (or remaining term for leases existing upon the adoption of Topic 842).

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Future lease payments may include fixed rent escalation clauses or payments that depend on an index (such as the consumer price index), which is initially measured using the index or rate at lease commencement. Subsequent changes of an index and other periodic market-rate adjustments to base rent are recorded in variable lease expense in the period incurred. Residual value guarantees or payments for terminating the lease are included in the lease payments only when it is probable they will be incurred.

The Company has made an accounting policy election to account for lease and non-lease components in its contracts as a single lease component for all leases. The non-lease components typically represent additional services transferred to the Company, such as common area maintenance for real estate, which are variable in nature and recorded in variable lease expense in the period incurred.

Recent accounting pronouncement not yet adopted: The Company considers the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB). ASUs not listed below were assessed and determined to be either not applicable or expected to have minimal impact on our consolidated and combined financial statements and related notes.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures, most notably in the tax rate reconciliation and income taxes paid. This guidance is effective for annual periods beginning after December 15, 2025. Early adoption is permitted and the amendments should be applied on a prospective basis, however, retrospective application is permitted. We are currently evaluating the impact that this guidance will have upon our consolidated and combined financial statements and related notes.

The FASB and other entities issued new, modifications to, or interpretations of existing accounting guidance during the year ended December 31, 2023. The Company has considered the new pronouncements that altered U.S. GAAP, and does not believe that any other new or modified principles have a material impact on the Company’s reported financial position or operations in the near-term.

Subsequent events: Management has evaluated subsequent events through April 25, 2024, which is the date the consolidated and combined financial statements were available to be issued. Except as noted under Income Taxes, management has not identified other subsequent events impacting the consolidated and combined financial statements.

• Restatement of Previously Issued Consolidated and Combined Financial Statements

During the preparation of the Company’s Consolidated and Combined Financial Statements as of and for the years ended December 31, 2023 and 2022, to reflect a change in method of accounting for previous policy elections available to private companies provided by the Private Company Council (PCC) and reclassifications to be in compliance with Regulation S-X, the Company identified and corrected misstatements in the previously issued consolidated and combined financial statements. The misstatements included (a) recognition of current and long term unbilled receivables, previously included in accounts receivable, net and deposits and other assets, and current and long term deferred revenue associated with the Company’s connectivity services arrangements that lacked an unconditional right to invoice under the terms of the contracts with customers (b) misclassification of income tax provision amounts associated with tax in certain foreign jurisdictions, sales tax expense, and loss (gain) on disposal of property, plant and equipment in other income (expenses) (c) misclassification and improper valuation of deferred tax assets and (d) as of December 31, 2023, gross up instead of elimination of intercompany balances between accounts receivable, net and accounts payable.

The change in method of accounting related to ASU No. 2014-02, Intangibles-Goodwill and Other (Topic 350): Accounting for Goodwill and ASU No. 2014-18, Business Combinations (Topic 805): Accounting for

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Identifiable Assets in a Business Combination. The impacts of the removal of the PCC elections included the reversal of all previously recorded goodwill amortization, recording customer relationships intangible assets separate from goodwill, and recording amortization on those intangible assets.

The impact of the change in method of accounting, error corrections and reclassifications to be in compliance with Regulation S-X are summarized below (in thousands):

	As of December 31, 2023
	As<br>Previously<br>Reported			Change in Method of Accounting		Error<br>Corrections			As<br>Restated
Changes in Consolidated and Combined Balance<br>   Sheet:
Accounts receivable, net	$	92,810		$	-	$	(21,575	)	$	71,235
Total current assets	125,904				-		(21,575	)	104,329
Intangible assets, net	1,214			2,329			-		3,543
Goodwill, net	5,001			4,868			-		9,869
Deferred income taxes		-			-	85			85
Deposits and other assets	11,162				-		(6,872	)	4,290
Total non-current assets	71,127			7,197			(6,787	)	71,537
Total assets	197,031			7,197			(28,362	)	175,866
Accounts payable	52,644				-		(5,308	)	47,336
Deferred revenue, short-term	45,980				-		(16,267	)	29,713
Total current liabilities	121,554				-		(21,575	)	99,979
Deferred revenue, long-term	15,294				-		(6,787	)	8,507
Total non-current liabilities	82,510				-		(6,787	)	75,723
Total liabilities	204,064				-		(28,362	)	175,702
Retained earnings	50,861			7,197			-		58,058
Total stockholder's (deficit) equity		(7,033	)	7,197			-		164
Total liabilities and stockholder's (deficit) equity	197,031			7,197			(28,362	)	175,866

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

	As of December 31, 2022
	As<br>Previously<br>Reported			Change in Method of Accounting		Error<br>Corrections			As<br>Restated
Changes in Consolidated and Combined Balance<br>   Sheet:
Accounts receivable, net	$	66,805		$	-	$	(15,535	)	$	51,270
Total current assets	88,545				-		(15,535	)	73,010
Intangible assets, net	1,426			3,121			-		4,547
Goodwill, net	6,780			3,089			-		9,869
Deferred income taxes		-			-	292			292
Deposits and other assets	9,716				-		(9,363	)	353
Total non-current assets	93,552			6,210			(9,071	)	90,691
Total assets	182,097			6,210			(24,606	)	163,701
Deferred revenue, short-term	41,496				-		(15,535	)	25,961
Total current liabilities	105,753				-		(15,535	)	90,218
Deferred revenue, long-term	13,723				-		(6,118	)	7,605
Total non-current liabilities	84,832				-		(6,118	)	78,714
Total liabilities	190,585				-		(21,653	)	168,932
Retained earnings	49,769			6,210			(2,953	)	53,026
Total stockholders' deficit (equity)		(8,488	)	6,210			(2,953	)		(5,231	)
Total liabilities and stockholders' deficit (equity)	182,097			6,210			(24,606	)	163,701
	For the Year Ended December 31, 2023
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	As<br>Previously<br>Reported			Change in Method of Accounting			S-X<br>Compliance			Error<br>Corrections			As<br>Restated
Changes in Consolidated and Combined<br>   Statement of Income,
Comprehensive Income and Statement<br>   of Stockholder's (Deficit) Equity:
Revenues	$	447,600		$	-		$	(447,600	)	$	-		$	-
Service revenue		-			-		401,442				-		401,442
Equipment revenue		-			-		46,158				-		46,158
Cost of revenue	282,629				-			(282,629	)		-			-
Cost of service revenue		-			-		251,547				-		251,547
Cost of equipment revenue		-			-		31,082				-		31,082
Depreciation and amortization expense	14,066				(987	)		-			-		13,079
Other general and administrative<br>   expenses	19,846				-			-			(1,764	)	18,082
Loss on disposal of property, plant and<br>   equipment
(operating expenses)		-			-			-		10,179			10,179
Total operating expenses	396,216				(987	)		-		8,415			403,644
Operating income	51,384			987				-			(8,415	)	43,956
Loss on disposal of property, plant and<br>   equipment
(other (expense) income)		(10,179	)		-			-		10,179				-
Other (expenses) income, net		(1,550	)		-			-		3,099			1,549
Total other (expenses) income		(15,686	)		-			-		13,278				(2,408	)
Income tax provision (benefit)		-			(209	)		-		2,120			1,911
Net income	35,698			1,196				-		2,743			39,637
Comprehensive income	36,061			1,196				-		2,743			40,000

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

	For the Year Ended December 31, 2022
	As<br>Previously<br>Reported			Change in Method of Accounting			S-X<br>Compliance			Error<br>Corrections			As<br>Restated
Changes in Consolidated and Combined<br>   Statement of Income,
Comprensive Income and Stockholder's<br>   Deficit:
Revenues	$	385,323		$	-		$	(385,323	)	$	-		$	-
Service revenue		-			-		354,375				-		354,375
Equipment revenue		-			-		30,948				-		30,948
Cost of revenue	243,503				-			(243,503	)		-			-
Cost of service revenue		-			-		223,867				-		223,867
Cost of equipment revenue		-			-		19,636				-		19,636
Depreciation and amortization expense	17,324				(987	)		-			-		16,337
Gain on sale of property, plant and<br>   equipment (operating expenses)		-			-			-			(8,943	)		(8,943	)
Other general and administrative<br>   expenses	23,569				-					503			24,072
Total operating expenses	362,876				(987	)		-			(8,440	)	353,449
Operating income	22,447			987				-		8,440			31,874
Gain on sale of property, plant and<br>   equipment (other (expenses) income).	8,943				-			-			(8,943	)		-
Other (expenses) income, net		(1,081	)	2,092				-		189			1,200
Total other (expenses) income	4,838			2,092				-			(8,754	)		(1,824	)
Income tax provision (benefit)		-			(209	)		-		415			206
Net income (loss)	27,285			3,288				-			(729	)	29,844
Comprehensive income (loss)	26,929			3,288				-			(729	)	29,488
	For the Year Ended December 31, 2023
---	---	---	---	---	---	---	---	---	---	---	---	---
	As<br>Previously<br>Reported			Change in Method of Accounting			Error<br>Corrections			As<br>Restated
Changes in Consolidated and Combined
Statement of Cash Flows:
Net income	$	35,698		$	1,196		$	2,743		$	39,637
Depreciation and amortization	14,056				(977	)		-		13,079
Deferred income taxes		-			(209	)	416			207
Accounts receivable		(26,478	)		-		6,040				(20,438	)
Deposits and other assets	58				(10	)		(2,490	)		(2,442	)
Accounts payable	15,285				-			(5,308	)	9,977
Deferred revenue	6,055				-			(1,401	)	4,654
	For the Year Ended December 31, 2022
---	---	---	---	---	---	---	---	---	---	---	---	---
	As<br>Previously<br>Reported			Change in Method of Accounting			Error<br>Corrections			As<br>Restated
Changes in Consolidated and Combined
Statement of Cash Flows:
Net income (loss)	$	27,285		$	3,288		$	(729	)	$	29,844
Depreciation and amortization	17,324				(987	)		-		16,337
Deferred income taxes		-			(209	)		(83	)		(292	)
Loss on disposal of goodwill	2,092				(2,092	)		-			-
Accounts receivable		(6,699	)		-			(188	)		(6,887	)
Deposits and other assets		(809	)		-		857			48
Deferred revenue		(12,591	)		-		143				(12,448	)

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

• Composition of Certain Balance Sheet Accounts

Property, plant and equipment consist of the following as of December 31, 2023 and 2022

(in thousands):

	2023			2022
Land and buildings	$	31,450		$	45,130
Aircraft and vehicles		27,341			27,188
Leasehold improvements		5,059			5,050
Equipment		35,031			42,186
Software		140			140
		99,021			119,694
Less accumulated depreciation		(49,077	)		(48,295	)
	$	49,944		$	71,399

Depreciation expense as of December 31, 2023 and 2022, was $12.0 million and $14.6 million, respectively, and is included in depreciation and amortization expense in the accompanying consolidated and combined statements of income.

Inventories consist of the following as of December 31, 2023 and 2022 (in thousands):

	2023		2022
Work-in-process component parts	$	8,523	$	5,583
Finished good, net reserve for obsolescence		10,649		6,063
Total inventory	$	19,172	$	11,646

• Intangible Assets, Net

Intangible assets, other than goodwill, as of December 31, 2023 and 2022 were as follows (in thousands):

	As of December 31, 2023							As of December 31, 2022
	Gross<br>Carrying<br>Amount		Accumulated<br>Amortization			Net<br>Carrying<br>Amount		Gross<br>Carrying<br>Amount		Accumulated <br>Amortization			Net<br>Carrying<br>Amount
Intangible assets:
Tradenames	$	2,281	$	(1,562	)	$	719	$	2,281	$	(1,334	)	$	947
Developed Software		7,330		(7,240	)		90		7,215		(7,215	)		-
Customer Relationships		8,019		(5,689	)		2,330		8,019		(4,898	)		3,121
Other		2,162		(1,758	)		404		2,170		(1,691	)		479
Total intangible assets	$	19,792	$	(16,249	)	$	3,543	$	19,685	$	(15,138	)	$	4,547

Amortization expense as of December 31, 2023 and 2022, was $1.1 million and $1.7 million, respectively, and is included in depreciation and amortization expense in the accompanying consolidated and combined statements of income.

The estimated future amortization expense related to intangible assets subject to amortization as of December 31, 2023, is as follows (in thousands):

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Years ending December 31:
2024	$	1,102
2025		1,076
2026		1,026
2027		4
2028		2
	$	3,210

• Goodwill, Net

As of the beginning and end of the years December 31, 2023 and 2022, the carrying value of goodwill includes the gross amount of $13,228 and accumulated impairment losses of $3,359 for a net carrying value of $9,869.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

• Accrued Expense

Accrued expenses are composed of the following December 31, 2023 and 2022 (in thousands):

	2023		2022
Salaries and benefits	$	7,302	$	6,114
State and local sales taxes payable		4,766		6,537
Other taxes payable		1,690		355
Payables to vendors		6,882		7,273
	$	20,640	$	20,279

• Long-Term Debt

Notes payable consist of the following as of December 31, 2023 and 2022, (in thousands):

	2023			2022			Interest Rate	Maturity Date
Revolving Credit Facility (Wells Fargo)	$	-		$	27,453		SOFR + 1.65%	January 2027
Revolving Credit Facility (Bank of America)		46,612			-		SOFR + 1.25%	May 2028
Aircraft Note - Gulfstream G550		18,375			20,213		2.94%	December 2026
Term Loan		-			11,221		SOFR + 1.65%	January 2027
Office Building Note		-			7,995		SOFR + 1.86%	June 2026
Aircraft Hangar Note		-			3,366		SOFR + 1.61%	July 2024
Data Center Building Note		-			2,633		SOFR + 1.86%	September 2023
Debt issuance costs, net		-			(88	)
Total		64,987			72,793
Less current maturities		(1,838	)		(6,193	)
Total long-term debt obligations	$	63,149		$	66,600

Principal maturity requirements on long-term debt subsequent to December 31, 2023, are as follows (in thousands):

Years ending December 31:
2024	$	1,838
2025		1,838
2026		14,699
2027		-
2028		46,612
	$	64,987

As of December 31, 2023 and 2022, the Company’s total outstanding notes payable was $65.0 million and $72.8 million, respectively, which includes long-term and short-term debt.

The Company’s Aircraft Note – Gulfstream G550 note is payable in monthly principal and interest payments of $0.2 million, and is collateralized by an aircraft.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

The Revolving Credit Facility (Wells Fargo), Term Loan, Office Building Note, Aircraft Hangar Note and Data Center Building Note were payable to the same lender. All five obligations and related accrued interest were paid in full on May 9, 2023 with funds provided by the Revolving Credit Facility (Bank of America).

On May 1, 2023, the Company entered into the Revolving Credit Facility (Bank of America) for the purposes of borrowing on a revolving line of credit, collateralized by substantially all of the Company’s assets. The availability of funds under this agreement are $100 million, from May 1, 2023 until April 30, 2025, $95 million, from May 1, 2025 until April 30, 2027, then $90 million, from May 1, 2027 until April 30, 2028. Interest is payable monthly, and principal may be repaid and reborrowed until the expiration date of April 30, 2028. Interest accrues at the Secured Overnight Financing Rate (SOFR, 5.50% at December 31, 2023) plus an applicable rate. The applicable rate is either 1.45%, 1.35%, or 1.25% based on the Company’s financial test covenant ratios, as defined by the agreement. The Company is subject to an unused commitment fee of either 0.25%, 0.20%, or 0.15%, based on the Company’s financial test covenant ratios, as defined by the agreement. At December 31, 2023, the Company’s financial covenant ratio required the applicable rate to be 1.25% and the unused commitment fee to be 0.15%.

To hedge against interest rate risk on its floating-rate notes, the Company entered into an interest rate swap (the Swap) with a major U.S. bank as the counterparty. The Swap has a notional value of $45.0 million and the Company elected not to apply hedge accounting in accordance with ASC 815, Derivatives and Hedging. The Company pays interest on the notional value at 2.85% and receives interest on the notional value at the floating SOFR. The Swap matures on April 30, 2028. The effect of the Swap is to convert a portion of the Company’s floating-rate notes to fixed-rate debt.

On April 13, 2020, Comsat was the recipient of a $7.0 million Payroll Protection Program (PPP) loan as administered by the Small Business Administration (SBA) under The Coronavirus Air, Relief and Economic Security Act (the Cares Act). In 2021, the full amount of the loan was forgiven.

The SBA may audit whether the Company qualified for the PPP loans and met the conditions necessary for forgiveness of the loan for up to six years after it forgave the loans. Therefore, it is possible that the Company may have to repay an amount previously forgiven by the SBA.

• Leases

The Company leases real estate under operating lease agreements that have initial terms ranging from two to twenty-five years. Some leases include one or more options to renew, generally at the Company’s sole discretion, with renewal terms that can extend the lease term up to seven years. In addition, certain leases contain termination options, where the rights to terminate are held by either the Company, the lessor or both parties. These options to extend or terminate a lease are included in the lease terms when it is reasonably certain that the Company will exercise that option. The Company’s operating leases generally do not contain any material restrictive covenants or residual value guarantees. The Company is also a sub-lessor in one real estate lease that terminated in 2023.

Operating lease costs and sub-lease income is recognized on a straight-line basis over the lease term. Financing lease costs, should the Company enter into such agreement in the future, would be recognized as a combination of the amortization expense for the ROU assets and interest expense for the

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

outstanding lease liabilities, that would result in a front-loaded expense pattern over the lease term. The components of lease expense are as follows as of December 31, 2023 and 2022 (in thousands):

	2023			2022
Operating lease cost	$	551		$	593
Variable lease cost		1,280			2,161
Sublease income, Gross		(193	)		(322	)
Total lease cost	$	1,638		$	2,432

Supplemental cash flow and weighted average remaining lease term and discount rate information related to leases is as follows as of December 31, 2023 and 2022, (in thousands, except lease terms and discount rates):

	2023			2022
Cash paid for amounts included in measurement of lease liabilities -<br>   payments on operating leases	$	599		$	587
ROU assets obtained in exchange for new lease obligations:<br>   Operating leases upon adoption	$	-		$	4,871
Weighted average remaining lease term:	9.64years			10.38years
Weighted average remaining discount rate:		1.82	%		1.81	%

Future undiscounted cash flows for each of the next five years and thereafter and a reconciliation to the lease liabilities recognized on the consolidated and combined balance sheet are as follows as of December 31, 2023 (in thousands):

	Operating<br>Leases
Years ending December 31,
2024	$	530
2025		530
2026		550
2027		567
2028		600
Thereafter		2,193
Total future minimum lease payments		4,970
Less: Amount representing interest		(451	)
Total present value of lease liabilities		4,519
Less: Current maturities		(452	)
Total long-term lease liabilities	$	4,067

• Employee Benefit Plans

The Company has various plans that cover substantially all employees. The Satcom Direct, Inc. Profit Sharing Plan provides retirement benefits through a 401(k) plan for SD, SDG, ACL and Comsat employees. The Company’s matching contribution formula is based on service eligibility and the employees’ deferral contributions. Employees are 100% vested in their elective deferrals, the Company matching contributions are vested over a year three year period. Total matching contributions for the

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

years ended December 31, 2023 and 2022, were $1.8 million for both years, and are included in employee expense in the accompanying consolidated and combined statements of income. Additionally, the Company may make discretionary profit sharing contributions to this plan. These discretionary contributions are vested based on years of service. After two years of service, employees are vested 20% each year until year six when an employee is 100% vested. There was no discretionary profit sharing contribution made as of December 31, 2023 and 2022.

Total employer contributions to foreign plans are based on the laws specific to each particular country. Employer contributions expense to these plans was $0.5 million for both years ended December 31, 2023 and 2022. These amounts are included in employee expense in the accompanying consolidated and combined statements of income.

• Self-Insurance of Healthcare

The Company self-insures its employees’ health insurance benefits beginning July 1, 2023. The Company accrued $0.4 million for its self-insured liabilities as of December 31, 2023, which is included as a component of accrued expenses in the accompanying consolidated and combined balance sheets.

• Related Party Transactions

The Company leases several facilities from an entity related through common ownership. Rent expense associated with these leases for the years ended December 31, 2023 and 2022, was $0.2 million and $0.1 million, respectively.

• Contingencies

The Company is subject to various claims, legal actions and disputes in the normal course of business. The Company provides for losses, if any, in the year in which they can be reasonably estimated.

In accordance with ASC Topic 450-20 (Loss Contingencies) the Company records a liability in its financial statements when a loss is known or considered probable, and the amount can be reasonably estimated. The Company reviews the status of each significant matter each accounting period as additional information is known and adjusts the loss provision when appropriate. As of December 31, 2022, the Company accrued a contingent liability for state and local sales taxes in a variety of jurisdictions for periods between 2010 and 2022, which is included in accrued expenses in the accompanying consolidated and combined balance sheets in the amount of approximately $6.5 million. During the year ended December 31, 2023, the Company evaluated this contingent liability with new information, which included more accurate flight tracking data to evaluate the impact of sales in various jurisdictions, resulting in a reduction of the previously accrued liability of approximately $2.4 million. This change in estimate resulted in approximately $2.4 million increase to net income, included other general and administrative expenses, net in the accompanying consolidated and combined statements of income.

For the year ended December 31, 2023, the Company incurred an additional liability of $0.7 million. As of December 31, 2023, the contingent liability is approximately $4.8 million , which is included in accrued expenses in the accompanying consolidated and combined balance sheets. The Company believes that the reserve represents the best current estimate of any potential liability in the area of state and local taxes.

• Fair Value of Financial Assets

A three-tier fair value hierarchy has been established which prioritizes the inputs used in measuring fair value. These tiers include:

• Level 1 - defined as observable inputs such as quoted prices for identical assets or liabilities in active markets;

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

• Level 2 - defined as observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
• Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Our Swap is carried at fair value based on significant observable inputs (Level 2 inputs). Derivatives entered into by us are typically executed over-the-counter and are valued using discounted cash flows along with fair value models that primarily use market observable inputs. These models take into account a variety of factors including, where applicable, maturity, interest rate yield curves, and counterparty credit risks.

During the year ended December 31, 2023, the change in fair value of the asset under the Swap decreased $0.1 million and has been reflected as interest expense in the accompanying consolidated and combined statements of income. As of December 31, 2023, the fair value of the Swap asset was $1.3 million, which has been reported as deposits and other assets in the accompanying consolidated and combined balance sheet.

• Income Tax

For financial reporting purposes, the income before tax provision include the following components for the years ended December 31, 2023 and December 31, 2022 (in thousands):

	For the Years Ended<br>December 31,
	2023		2022
United States	$	38,646	$	34,154
Foreign		2,902		(4,104	)
Income tax provision	$	41,548	$	30,050

Significant components of the (benefit) provision of income taxes for the years ended December 31, 2023 and December 31, 2022 are as follows (in thousands):

	For the Years Ended<br>December 31,
	2023		2022
Current:
Federal	$	-	$	-
State		669		112
Foreign		1,216		(508	)
		1,885		(396	)
Deferred:
Federal		-		-
State		-		-
Foreign		26		602
		26		602
Total	$	1,911	$	206

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

The provision for income taxes differs from income taxes computed at the federal statutory tax rates for the years ended December 31, 2023 and December 31, 2022 as a result of the following items:

	For the Years Ended<br>December 31,
	2023			2022
Federal statutory rate		21.0	%		21.0	%
Effect of:
State income taxes		1.6	%		0.4	%
Other permanent differences
Non-taxable income		(19.5	)%		(24.3	)%
Foreign rate differential		1.3	%		3.8	%
Other		0.2	%		(0.1	)%
Effective tax rate		4.6	%		0.8	%

The effective tax rate for 2023 and 2022 was below the current U.S. federal statutory rate of 21% primarily due to pass-through income which is not taxed at the entity level for Federal US tax purposes, partially offset by state income taxes, and foreign losses the Company is not able to currently benefit from.

Components of the net deferred income tax assets and liabilities as of December 31, 2023 and December 31, 2022 are as follows (in thousands):

	2023			2022
Deferred income tax assets:
Foreign net operating loss	$	1,588		$	1,243
Foreign tax credits		1,208			1,208
Bad debt		61			99
Accrued expenses		-			46
Other		364			329
Total deferred income tax assets		3,221			2,925
Deferred income tax liabilities:
Finite-lived intangible assets		(809	)		(1,079	)
Property, plant and equipment		(709	)		(472	)
Other		(216	)		-
Total deferred income tax liabilities		(1,734	)		(1,551	)
Total deferred income tax		1,487			1,374
Valuation allowance		(1,402	)		(1,082	)
Net deferred income tax asset	$	85		$	292

As of December 31, 2023, and December 31, 2022, the Company had valuation allowances of $1.4 million and $1.1 million, respectively, against its deferred tax assets in Canada and Russia. The valuation allowance increased by $0.3 million during 2023. The gross net operating loss carry-forwards from Canadian operations are approximately $6.0 million and the net operating loss carry-forwards do not expire. The Company cannot benefit from these net operating losses currently, as such a valuation allowance has been established against such tax benefits.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Undistributed foreign earnings that the Company intends to reinvest indefinitely amounted to, an immaterial amount as of December 31, 2023.

The Company files income tax returns in the U.S., in various states and in certain international jurisdictions. We generally are no longer subject to U.S. federal, state, local, or international income tax examinations by tax authorities for years prior to 2020.

EX-99.2

Exhibit 99.2

Satcom Direct, Inc.

and Subsidiaries and

Combined Affiliates

Consolidated and Combined Financial Report

September 30, 2024

Contents

Financial statements
Consolidated and combined balance sheets	1
Consolidated and combined statements of income	2
Consolidated and combined statements of comprehensive income	3
Consolidated and combined statements of changes in stockholder equity (deficit)	4
Consolidated and combined statements of cash flows	5
Notes to consolidated and combined financial statements	6-20

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Consolidated and Combined Balance Sheets (Unaudited)

(in thousands)

			September 30, 2023
Assets
Current assets:
Cash and cash equivalents	3,437		$	2,970
Accounts receivable, net of allowances of 2,715 and 2,522, respectively	74,668			70,142
Inventories, net	21,309			16,207
Prepaid expenses and other current assets	10,651			11,466
Total current assets	110,065			100,785
Non-current assets:
Property, plant and equipment, net	47,378			66,555
Intangible assets, net	2,713			3,822
Goodwill, net	9,869			9,869
Deferred income taxes	14			70
Deposits and other assets	4,060			1,789
Operating right-of-use assets	3,477			3,628
Total non-current assets	67,511			85,733
Total assets	177,576		$	186,518
Liabilities and Stockholder's Equity (Deficit)
Current liabilities:
Accounts payable	54,208		$	44,542
Accrued expenses	18,963			22,937
Deferred revenue, short-term	27,931			26,797
Current maturities of long-term debt	1,838			1,838
Current maturities of operating lease liabilities	451			433
Total current liabilities	103,391			96,547
Non-current liabilities:
Long-term debt, less current maturities	44,600			84,707
Deferred revenue, long-term	8,716			6,233
Due to stockholder	-			45
Operating lease liabilities, less current maturities	3,687			4,169
Total non-current liabilities	57,003			95,154
Total liabilities	160,394			191,701
Commitments and contingencies (Notes 6, 9, 10, and 11)
Stockholder's equity (deficit):
Common stock, 1 par value; 10,100 shares authorized;
2,100 shares issued and outstanding at September 30, 2024, and 2023	2			2
Additional paid-in capital	3,187			3,187
Retained earnings	75,445			52,895
Accumulated other comprehensive loss	(1,452	)		(1,267	)
	77,182			54,817
Treasury stock, at cost, 630 shares held
at September 30, 2024, and 2023	(60,000	)		(60,000	)
Total stockholder's equity (deficit)	17,182			(5,183	)
Total liabilities and stockholder's equity (deficit)	177,576		$	186,518

All values are in US Dollars.

See notes to consolidated and combined financial statements.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Consolidated and Combined Statements of Income (Unaudited)

(in thousands)

	For the Nine Months Ended<br>September 30,
	2024			2023
Revenue:
Service Revenue	$	332,903		$	298,519
Equipment Revenue		32,582			26,308
Total Revenue		365,485			324,827
Operating expenses:
Cost of service revenue (exclusive of items shown below)		215,613			186,414
Cost of equipment revenue (exclusive of items shown below)		22,450			17,387
Employee expense		44,267			49,416
Travel and entertainment		3,295			3,336
Marketing expense		2,541			2,286
Depreciation and amortization expense		8,625			9,881
Professional fees		5,739			3,864
Information technology services		4,019			3,593
Other general and administrative expenses		15,291			14,165
Total operating expenses		321,840			290,342
Operating Income		43,645			34,485
Other (expenses) income:
Interest expense		(1,781	)		(2,984	)
Other income, net		74			1,273
Total other (expenses) income		(1,707	)		(1,711	)
Income before tax provision		41,938			32,774
Income tax provision		1,578			550
Net income	$	40,360		$	32,224

See notes to consolidated and combined financial statements.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Consolidated and Combined Statements of Comprehensive Income (Unaudited)

(in thousands)

	For the Nine Months Ended<br>September 30,
	2024			2023
Net income	$	40,360		$	32,224
Other comprehensive income (loss):
Foreign currency translation adjustment		(369	)		179
Comprehensive income	$	39,991		$	32,403

See notes to consolidated and combined financial statements.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Consolidated and Combined Statements of Stockholder's Equity (Deficit) (Unaudited)

(in thousands)

For the Nine Months Ended September 30, 2024 and 2023

			Satcom Direct
			Government,
			Inc. and
			Subsidiaries			Combined
Common stock, 1.00 par value:
10,100 Authorized; 2,100 issued and outstanding beginning and   ending:	2		$	-		$	2
Additional paid-in capital	3,187			-			3,187
Retained earnings:
Balance, beginning	44,099			13,959			58,058
Add net income	34,249			6,111			40,360
Deduct stockholder distributions	(22,948	)		(25	)		(22,973	)
Balance, ending	55,400			20,045			75,445
Accumulated other comprehensive income
Balance, beginning	(1,083	)		-			(1,083	)
Add foreign currency translation adjustment	(369	)		-			(369	)
Balance, ending	(1,452	)		-			(1,452	)
Treasury stock, at cost, 630 shares held at January 1, 2024 and    September 30, 2024	(57,143	)		(2,857	)		(60,000	)
Total stockholder's equity (deficit)	(6	)	$	17,188		$	17,182
			Satcom Direct
			Government,
			Inc. and
			Subsidiaries			Combined
Common stock, 1.00 par value:
10,100 Authorized; 2,100 issued and outstanding beginning and   ending:	2		$	-		$	2
Additional paid-in capital	3,187			-			3,187
Retained earnings:
Balance, beginning	37,555			15,471			53,026
Add net income	26,139			6,085			32,224
Deduct stockholder distributions	(31,087	)		(1,268	)		(32,355	)
Balance, ending	32,607			20,288			52,895
Accumulated other comprehensive loss
Balance, beginning	(1,446	)		-			(1,446	)
Add foreign currency translation adjustment	179			-			179
Balance, ending	(1,267	)		-			(1,267	)
Treasury stock, at cost, 630 shares held at January 1, 2023 and   September 30, 2023	(57,143	)		(2,857	)		(60,000	)
Total stockholder's equity (deficit)	(22,614	)	$	17,431		$	(5,183	)

All values are in US Dollars.

See notes to consolidated and combined financial statements.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Consolidated and Combined Statements of Cash Flows (Unaudited)

(in thousands)

	For the Nine Months Ended
	September 30, 2024			September 30, 2023
Cash flows from operating activities:
Net income	$	40,360		$	32,224
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		8,625			9,881
Debt issuance cost amortization		209			88
Provision for credit losses		379			264
Reserve for inventory obsolescence		1,091			246
Loss (gain) on sale of property, plant and equipment		135			101
Deferred income taxes		71			222
Accounts receivable		(4,048	)		(19,359	)
Inventories		(3,239	)		(4,806	)
Prepaid expenses and other current assets		196			(2,766	)
Intangible assets		-			(116	)
Operating right-of-use assets		329			603
Deposits and other assets		801			(84	)
Accounts payable		6,943			7,244
Accrued expenses		(1,685	)		2,698
Deferred revenue		(1,566	)		(537	)
Operating lease liabilities		(300	)		(397	)
Net cash provided by operating activities		48,301			25,506
Cash flows from investing activities:
Purchases of property, plant and equipment		(5,453	)		(4,291	)
Proceeds from disposal of property, plant and equipment		73			-
Net cash used in investing activities		(5,380	)		(4,291	)
Cash flows from financing activities:
Stockholder distributions		(22,973	)		(32,355	)
Net (repayment) proceeds from line of credit		(17,380	)		40,258
Payments on long-term debt		(1,378	)		(26,594	)
Purchase of interest rate swap		-			(1,360	)
Net cash used in financing activities		(41,731	)		(20,051	)
Effect of foreign currency on cash		(831	)		405
Net increase in cash and cash equivalents		359			1,569
Cash and cash equivalents:
Beginning		3,078			1,401
Ending	$	3,437		$	2,970
Supplemental disclosures of cash flow information:
Cash paid for interest	$	2,101		$	2,764
Cash paid for income taxes	$	1,242		$	257

See notes to consolidated and combined financial statements.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Note 1. Nature of Operations, Principles of Combination and Significant Accounting Policies

Nature of operations: Satcom Direct, Inc. and Subsidiaries (SD, the “Company,” “we,” “us” or “our”) and its related affiliates: Satcom Direct Government, Inc. and Subsidiaries (SDG), Satcom Direct Finance, Inc. (SDF) and Satcom Direct Holding Company, LLC and Subsidiaries (SDHC), provide global satellite-based communication solutions primarily for business, military and government aircraft.

SD (and subsidiaries), a Florida based company founded in 1997 with world headquarters located in Melbourne Florida, provides most of the Company’s services for its business users. In 2023, SD de-registered from Minnesota and registered in Florida. Included within SD’s subsidiaries are the following entities: Stewart Ratcliff Aviation Services, Inc. (d/b/a Aircraftlogs.com) (ACL), Satcom Direct Avionics, Inc., Satcom Direct Avionics, ULC (SDA), Satcom Direct Canada, Inc., N321SD, Inc., Satcom Direct-Australia Pty Ltd, Satcom Direct International, Limited, Satcom Direct Rus, LLC, Satcom Direct Finance, Inc. and Satcom Direct PTE Ltd.

SDG (and subsidiaries), a Florida based company formed in 2013, provides the Company’s services primarily to the U.S. government. Included in SDG’s subsidiaries are the following entities: N929SD, Inc. and Comsat, Inc (Comsat).

SDF, a Florida based company, formed in 2021, provides the Company’s customers with trade receivable financing operations. This company has no balances or activity as of September 30, 2024 or 2023, or the nine months then ended.

SDHC (and subsidiaries), a Florida limited liability company formed in 2011, provides the Company’s services in Brazil. This company has no balances or activity as of September 30, 2024 or 2023, or the nine months then ended.

Basis of presentation: The consolidated and combined financial statements include the consolidated accounts of SD and its wholly owned subsidiaries, the consolidated accounts of SDC and its wholly owned subsidiaries, the accounts of SDF, and the consolidated accounts of SDHC and its wholly owned subsidiaries, which have been combined based on common ownership. All intercompany accounts and transactions have been eliminated in consolidation and combination.

The consolidated and combined financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and in conformity with Rule 3-05 of Regulation S-X promulgated under the Securities Act of 1933, as amended (the Securities Act). Accordingly, they do not include all information and notes required by U.S. GAAP for complete financial statements and should be read in conjunction with our annual audited consolidated and combined financial statements and the notes thereto for the year ended December 31, 2023. These consolidated and combined financial statements reflect, in the opinion of management, all material adjustments (which include normal recurring adjustments) necessary to fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented.

A summary of the Company’s significant accounting policies is as follows:

Use of estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the combined financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. On an ongoing basis, management evaluates the significant estimates and bases such estimates on historical experience and various other assumptions believed to be reasonable under the circumstances. However, actual results could differ materially from those estimates.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Significant risks and uncertainties: Our operations are subject to certain risks and uncertainties, including without limitation those associated with fluctuations in operating results, implementation of our technology roadmap, strategic alliances, relationships with customers, suppliers and dealers, supply chain disruptions, funding of our growth, financing terms that may restrict operations, regulatory issues, competition, the economy, technology trends, evolving industry standards and other events that may impact the demand for air travel.

The results of operations and cash flows for the nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024.

Revenue recognition: The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers, which provides a five-step model to recognize revenue from contracts with customers through the following steps:

• Identification of the contract, or contracts with a customer
• Identification of the performance obligations in the contract
• Determination of the transaction price
• Allocation of the transaction price to the performance obligations in the contact
• Recognition of revenue as performance obligations are satisfied

Disaggregated revenue: The Company has a comprehensive offering of products and services including, connectivity services, hardware and software as a service (SaaS) that the Company sells to business aviation and the military and governments.

Below is a summary of the Company’s discrete service lines based off timing of revenue recognition (in thousands):

	For the Nine Months<br>Ended September 30,
	2024		2023
Connectivity services (transferred over time)	$	325,501	$	292,160
Hardware (transferred at point in time)		32,582		26,308
Software as a service (transferred over time)		7,402		6,359
Net sales	$	365,485	$	324,827

Connectivity services: The Company is a global service provider for satellite telecommunication connectivity services for aircraft’s, vehicles, vessels, and land-based use. Connectivity services include flights safety services, communication, navigation, and internet connectivity. The Company provides the stand-ready obligation to provide connectivity services of distinct time periods that are substantially the same and have the same pattern of transfer of control to the customer, and as such is accounted for as a series. The Company offers two types of connectivity services: usage-based and monthly subscription based, both of which are recognized over time. The usage-based revenues are recognized when the connectivity services are used by the customer and thus when the data is transferred to the customer over time. The monthly subscription-based contract revenues are recognized ratably over the subscription term beginning on the date the service is made available to the customer. Generally, contract terms are one to two years in length.

Hardware products: The Company‘s hardware products include avionics communication equipment such as, routers, Wi-Fi hubs, data link units and antennas. The Company recognizes revenue when control of

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

such hardware is transferred to the customer upon the shipment of products (point in time). The Company has elected to treat shipping and handling activities related to contracts with customers as fulfillment costs, and not as separate performance obligations, and accrues the related costs when the related revenue is recognized.

Software as a service: The Company’s SaaS includes flight scheduling data, engine cycle times, flight safety, communications, threat monitoring, cybersecurity, navigation, and application program interface (API) integrations with third party software services. The Company’s software as service subscription services represent a stand-ready obligation to provide access to the hosted software solution and customer support. Customers are not able to take possession of the software or transfer hosting to a third party. The SaaS is a stand-ready obligation to provide a series of distinct SaaS periods that are substantially the same and have the same pattern of transfer of control to the customer, and as such is accounted for as a series. The Company recognizes SaaS revenue ratably over the subscription term beginning on the date the service is made available to the customer (over time).

Contract balances: The timing of revenue recognition may not align with the right to invoice the customer. The Company records accounts receivable when it has the unconditional right to invoice regardless of whether revenue has been recognized. At the beginning of the nine months ending September 30, 2024 and 2023, the accounts receivable, net balances are $71,235 and $51,270, respectively. If revenue has not yet been recognized, then a contract liability is also recorded. Such amounts are classified in the consolidated and combined balance sheets as deferred revenue. At the beginning of the nine months ending September 30, 2024, the deferred revenue, short-term and deferred revenue, long-term balances are $29,713 and $8,507, respectively. At the beginning of the nine months ending September 30, 2023, the deferred revenue, short-term and deferred revenue, long-term balances are $25,961 and $7,605, respectively. If revenue is recognized in advance of the right to invoice, a contract asset is recorded.

Payment terms are typically due within 30 days, but can occasionally be within 60 days. There are instances where the Company’s contracts contain upfront payment terms where services are being transferred over a period of time that can be up to two years and, therefore, contain a financing component. The Company separately evaluates the significance of the financing component for each contract. Generally, the Company does not believe that these payments contain a significant financing component as the difference between the amount of promised consideration and the cash selling price of the promised services arises for non-finance reasons. The Company also excludes from revenue government-assessed and imposed taxes on revenue-generating activities that are invoiced to customers.

Contract balances are classified as assets or liabilities on a contract-by-contract basis at the end of each reporting period.

Performance obligations: A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

Transaction price: The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods and services to its customer. Revenue from sales is recorded based on the transaction price, which includes estimates of variable consideration. The amount of variable consideration included in the transaction price is constrained and is included only to the extent it is probable that a significant reversal of revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

The Company includes estimates for variable consideration within its determination of the transaction price, subject to the constraint. Generally, the Company does not believe the estimates of variable consideration to be material. Certain arrangements contain variable consideration such as providing free services in the beginning of the contract. The Company’s contracts include service level guarantees from which we have not historically experienced any claims resulting in payments or credits to our customers. The Company estimates the impact of such service level guarantees using the expected value method. Based on our historic claims experience, we estimate the impact of service level guarantees on our contact transaction price to be immaterial.

The Company’s contracts generally do not contain rights of return, and the Company does not have a history of returns. The Company’s hardware contracts occasionally contain warranties that the equipment will be free from defects for a period of one year from the date of delivery. The Company does not have a history of payment of warranties.

Cash: The Company places its cash with high credit-quality institutions. The Company maintains cash balances that, from time to time, may exceed the federally insured limits. The Company has not experienced any losses as a result of this concentration and believes it is not exposed to any significant credit risk on cash balances.

Accounts receivable: The Company adopted ASC 326, Financial Instruments—Credit Losses, as of January 1, 2023, with the cumulative-effect transition method with the required prospective approach. The measurement of expected credit losses under the current expected credit loss (CECL) methodology is applicable to financial assets measured at amortized cost, which consists of trade receivables. An allowance for credit losses under the CECL methodology is determined using the loss-rate approach and measured on a collective (pool) basis when similar risk characteristics exist. Where financial instruments do not share risk characteristics, they are evaluated on an individual basis. The CECL allowance is based on relevant available information from internal and external sources related to past events, current conditions, and reasonable and supportable forecasts. The allowance for credit losses was $2.7 million and $2.5 million as of September 30, 2024, and 2023, respectively, is included within accounts receivable, net in the accompanying consolidated and combined balance sheets. The change in the allowance for credit losses during the nine months ended September 30, 2024 and 2023, was not material to the consolidated and combined financial statements.

Inventories: Inventories consisting of purchased finished goods equipment are valued at the lower of cost or net realizable value, with cost determined on a first-in first-out basis (FIFO). We evaluate the need for write-downs associated with obsolete, slow-moving and nonsalable inventory by reviewing the net realizable inventory values on a periodic basis. At September 30, 2024 and 2023, an obsolescence reserve has been established totaling $0.1 million and $0.4 million, respectively. The obsolescence reserve is included within inventories, net, in the accompanying consolidated and combined balance sheets.

Property, plant and equipment: Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the remaining lease term or estimated useful lives. Amortization of leasehold improvements is included in depreciation expense of property, plant and equipment. Expenditures that significantly increase values or extend useful lives of property and equipment are capitalized, whereas those for normal maintenance and repairs are expensed. Gains and losses on disposal of property and equipment are recorded in operations in the year of disposal.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Estimated useful lives are as follows:

	Years
Buildings	20-40
Aircraft and vehicles	5
Leasehold improvements	5-10
Equipment	3-10
Software	2-5

Intangible assets (except goodwill): Finite-lived intangible assets acquired in a business combination are recorded at fair value on the date of acquisition. Intangible assets not acquired in a business combination are recorded at cost. The Company amortizes finite-lived intangible assets over their estimated useful lives using the straight-line method. Costs incurred to renew or extend the term of recognized intangible assets are capitalized and amortized over the useful life of the asset. The cost of software that is developed or obtained for internal use is accounted for pursuant to ASC Topic 350, Intangibles—Goodwill and Other. Pursuant to ASC Topic 350, the Company capitalized costs for its SaaS based solutions during the application development stage and expensed costs incurred during the preliminary project and the post implementation operations stages of development. The Company did not capitalize software development costs during the periods ended September 30, 2024 and 2023. The costs capitalized for each project are included in intangible assets and are amortized over their useful lives in the combined financial statements.

Intangible assets that are deemed to have a finite life are amortized over their useful lives as follows:

	Years
Tradenames	5-10
Developed software	5
Customer relationships	10
Other	Indefinite, 3-5

Impairment of long-lived assets (except goodwill): The Company reviews long-lived assets or asset groups for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset or asset group may not be recoverable. Recoverability of long-lived assets or asset groups to be held and used is measured by a comparison of the carrying amount of a long-lived asset or asset groups to future net cash flows (undiscounted and without interest charges) expected to be generated by the long-lived asset or asset groups to determine if an impairment exists. If such long-lived assets or asset groups are determined to be impaired, the amount of the impairment is calculated as the difference between the excess of the carrying amount of the long-lived assets or assets groups over their fair value, which is estimated by calculating the discounted future net cash flows associated with the asset or asset group. Assets or asset groups to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Management has determined that there were no indicators of impairment of long-lived assets as of September 30, 2024 and 2023.

Goodwill: Goodwill represents the excess of the aggregate purchase price over the estimated fair value of the net assets acquired in business combinations. Goodwill is considered an indefinite lived asset and, therefore, not amortized for book purposes. Intangible assets with indefinite lives are not amortized but are reviewed for impairment at least annually or whenever events or circumstances indicate the carrying value of the asset may not be recoverable.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

The Company uses qualitative and quantitative approaches when testing goodwill for impairment. The Company performs a qualitative evaluation of events and circumstances impacting each reporting unit to determine the likelihood of a goodwill impairment charge. Based on that qualitative evaluation, if the Company determines it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary. If it is more likely than not that the carrying value of a reporting unit exceeds the fair value, then an indication of impairment exists and the Company must perform a quantitative fair value assessment. If the fair value of a reporting unit is less than its carrying value, then an impairment charge equal to the excess of the carrying value over the fair value is recorded to the results of operations. The Company may only write down the carrying value of its indefinite-lived intangible assets. The Company is not permitted to increase the carrying value if the fair value of the assets subsequently increases.

There were no events or circumstances indicating the carrying value of the asset may not be recoverable during the nine months ended September 30, 2024 and 2023.

Income taxes: SD, SDG and SDH have elected by consent of the stockholders to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the entities do not pay corporate income taxes on their taxable income. Instead, the stockholders are responsible for income taxes on taxable income. Therefore, no benefit or receivable for income taxes relating to these companies have been included in the consolidated and combined financial statements. Certain other subsidiaries are subject to U.S. and foreign income tax expense, for which the Company follows guidance under ASC 740, Income Taxes, to determine deferred taxes. Income taxes expenses and benefits for entities subject to tax were included in the Income tax provision in the accompanying consolidated and combined statements of income for nine months ended September 30, 2024 and 2023. The Company has made the election to treat certain state taxes as paid at the entity level rather than the individual level. The estimated amount of taxes payable is approximately $0.2 million and $0.6 million as of September 30, 2024 and 2023, respectively. Taxes payable is included in accrued expenses in the accompanying consolidated and combined balance sheets.

The Company’s domestic and foreign income before tax provision for the nine-month period ended September 30, 2024, is $30.8 million and $11.1 million, respectively. The Company’s effective tax rate is 3.8% for the nine-month period ended September 30, 2024. The Company’s effective tax rate differs from the expected statutory rate of 21% based on two main components. The impact of the Subchapter S election on U.S. operations reduces the rate approximately 15.4% and the impact of the foreign rate further reduces the rate an additional 2.7%. The remaining impact on the rate is due to other immaterial items. The income tax provision is divided between domestic and foreign expense of $0.3 million and $1.3 million, respectively.

The Company’s domestic and foreign income before tax provision for the nine-month period ended September 30, 2023 is $32.9 million and $(0.1) million. The Company’s effective tax rate is 1.7% for the nine-month period ended September 30, 2023. The Company’s effective tax rate differs from the expected statutory rate of 21% based on one main component. The impact of the Subchapter S election on US operations reduces the rate approximately 20.8%. The remaining impact on the rate is due to other immaterial items. The income tax provision is divided between domestic and foreign expense of $0.3 million and $0.3 million, respectively.

The Company has a valuation allowance for deferred tax assets related to certain foreign net operating losses, as it is more likely than not, as of September 30, 2024 that these deferred tax assets will not be realized. The Company accounts for uncertainty in income tax positions by assessing whether there are any uncertain tax positions which may give rise to income tax liabilities and has determined that there were no such matters requiring recognition in the accompanying combined financial statements. The

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Company would have classified interest and penalties as income tax expense in the combined financial statements had uncertain tax positions been identified.

The Company files income tax returns in the United States federal jurisdiction, various states and in certain international jurisdictions. We are generally no longer subject to tax examinations before 2020.

Debt issuance costs: The Company capitalizes costs incurred with the issuance of debt. These costs are presented on the combined balance sheets as a direct reduction from the carrying amount of the related debt. The Company amortizes such costs as additional interest expense using the effective interest method over the contractual term of the underlying debt instruments. Amortization of debt issuance costs was immaterial for the nine months ended September 30, 2024 and 2023. Amortization of the debt issuance costs is included in interest expense in the accompanying consolidated and combined statements of income.

Concentration of credit risk: Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of SDG’s accounts receivable. Credit risk with respect to receivables is influenced by the limited number of customers, the concentration of certain customers in the market and the ability of these customers to repay the Company. Management regularly contacts its customers and monitors their payment history. The Company has provided allowances for credit losses at September 30, 2024 and 2023, which management believes will be adequate to absorb any credit losses that may result from existing receivables.

Vendor concentration: For the nine-month periods ended September 30, 2024 and 2023, one vendor represented approximately 75% and 74% of cost of service and cost of equipment revenues, respectively, and approximately 37% and 40% of accounts payable and accrued expenses, respectively.

Advertising costs: The Company expenses advertising costs in the period when the costs are incurred. Advertising expense included in marketing expense in the accompanying combined statements of income was $0.2 million for both the nine-months period ended September 30, 2024 and 2023.

Research and development costs: Expenditures for research and development are charged to expense as incurred and totaled $6.9 million and $4.8 million for the period ended September 30, 2024 and 2023, respectively. Research and development costs are included in other general and administrative expenses in the accompanying consolidated and combined statements of income.

Foreign currency translation: The accompanying consolidated and combined financial statements are presented in U.S. dollars (USD). The effects of translating the financial statements of foreign subsidiaries from the functional currency into the Company’s reporting currency (USD) are recognized as foreign currency translation adjustments in accumulated other comprehensive income. The translation of assets and liabilities to USD is made at the exchange rate in effect at the consolidated and combined balance sheet dates, while equity accounts are translated at historical rates. The translation of the consolidated and combined statement of income amounts is made monthly at the average currency exchange rate for the month. Net foreign currency transaction gains and losses on settled transactions were included in the other income (expenses) section of the Company’s consolidated and combined statements of income for the nine months ended September 30, 2024 and 2023.

Leases: In accordance with ASC Topic 842, Leases, the Company is required to recognize most leases on their balance sheet as a right-of-use (ROU) asset representing the right to use an underlying asset and lease liability representing the obligation to make lease payments over the lease term, measured on a discounted basis.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations. A contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) the Company obtains substantially all economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. The Company also considers whether its service arrangements include the right to control the use of an asset.

The Company made an accounting policy election available under Topic 842 not to recognize ROU assets and lease liabilities for leases with a term of 12 months or less. For all other leases, ROU assets and lease liabilities are measured based on the present value of future lease payments over the lease term at the commencement date of the lease (or January 1, 2022 for existing leases upon the adoption of Topic 842). The ROU assets also include any initial direct costs incurred and lease payments made at or before the commencement date and are reduced by any lease incentives. To determine the present value of lease payments, the Company utilizes our incremental borrowing rate, which is aligned with the lease term at the lease commencement date (or remaining term for leases existing upon the adoption of Topic 842).

Future lease payments may include fixed rent escalation clauses or payments that depend on an index (such as the consumer price index), which is initially measured using the index or rate at lease commencement. Subsequent changes of an index and other periodic market-rate adjustments to base rent are recorded in variable lease expense in the period incurred. Residual value guarantees or payments for terminating the lease are included in the lease payments only when it is probable they will be incurred.

The Company has made an accounting policy election to account for lease and non-lease components in its contracts as a single lease component for all leases. The non-lease components typically represent additional services transferred to the Company, such as common area maintenance for real estate, which are variable in nature and recorded in variable lease expense in the period incurred.

Recent accounting pronouncement not yet adopted: The Company considers the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB). ASUs not listed below were assessed and determined to be either not applicable or expected to have minimal impact on our consolidated and combined financial statements and related notes.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures, most notably in the tax rate reconciliation and income taxes paid. This guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted and the amendments should be applied on a prospective basis, with retrospective application permitted. We are currently evaluating the impact that this guidance will have upon our consolidated and combined financial statements and related notes.

The FASB and other entities issued new, modifications to, or interpretations of existing accounting guidance during the period ended September 30, 2024. The Company has considered the new pronouncements that altered U.S. GAAP, and does not believe that any other new or modified principles have a material impact on the Company’s reported financial position or operations in the near-term.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Note 2. Composition of Certain Balance Sheet Accounts

Property, plant and equipment consist of the following as of September 30, 2024 and 2023 (in thousands):

	September 30,
	2024			2023
Land and buildings	$	31,282		$	44,965
Aircraft and vehicles		27,623			27,613
Leasehold improvements		4,857			5,056
Equipment		37,926			43,172
Software		140			140
		101,828			120,946
Less accumulated depreciation		(54,450	)		(54,391	)
	$	47,378		$	66,555

Depreciation expense for the nine-month periods ended September 30, 2024 and 2023, was $7.8 million and $9.0 million, respectively, and is included in depreciation and amortization expense in the accompanying consolidated and combined statements of income.

Inventories consist of the following as of September 30, 2024 and 2023 (in thousands):

	September 30,
	2024		2023
Work-in-process component parts	$	13,118	$	8,845
Finished goods, net reserve for obsolescence		8,191		7,362
Total inventory	$	21,309	$	16,207

Note 3. Intangible Assets, Net

Intangible assets, other than goodwill, as of September 30, 2024 and 2023 were as follows (in thousands):

	As of September 30, 2024							As of September 30, 2023
	Gross<br>Carrying<br>Amount		Accumulated<br>Amortization			Net<br>Carrying<br>Amount		Gross<br>Carrying<br>Amount		Accumulated <br>Amortization			Net<br>Carrying<br>Amount
Intangible assets:
Tradenames	$	2,281	$	(1,733	)	$	548	$	2,281	$	(1,506	)	$	775
Developed Software		7,330		(7,269	)		61		7,330		(7,231	)		99
Customer Relationships		8,019		(6,283	)		1,736		8,019		(5,491	)		2,528
Other		2,162		(1,794	)		368		2,170		(1,750	)		420
Total intangible assets	$	19,792	$	(17,079	)	$	2,713	$	19,800	$	(15,978	)	$	3,822

Amortization expense for each of the nine-month periods ended September 30, 2024 and 2023, was $0.8 million, and is included in depreciation and amortization expense in the accompanying consolidated and combined statements of income.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

The estimated future amortization expense related to intangible assets subject to amortization as of September 30, 2024, is as follows (in thousands):

For the twelve month periods ending September 30:
2025	$	1,083
2026		1,047
2027		249
2028		3
	$	2,382

Note 4. Goodwill, Net

As of the beginning and end of the nine months ending September 30, 2024 and 2023, the carrying value of goodwill includes the gross amount of $13,228 and accumulated impairment losses of $3,359 for a net carrying value of $9,869.

Note 5. Accrued Expenses

Accrued expenses are composed of the following as of September 30, 2024 and 2023 (in thousands):

	September 30,
	2024		2023
Salaries and benefits	$	6,477	$	8,748
State and local sales taxes payable		4,971		6,836
Other taxes payable		1,735		526
Payables to vendors		5,780		6,827
	$	18,963	$	22,937

Note 6. Long-Term Debt

Notes payable consist of the following as of September 30, 2024 and 2023, (in thousands):

	September 30, 2024			September 30, 2023			Interest Rate	Maturity Date
Revolving Credit Facility	$	29,441		$	67,711		SOFR + 1.65%	January 2027
Aircraft Note - Gulfstream G550		16,997			18,834		2.94%	December 2026
Total		46,438			86,545
Less current maturities		(1,838	)		(1,838	)
Total long-term debt<br>   obligations	$	44,600		$	84,707

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Principal maturity requirements on long-term debt subsequent to September 30, 2024, are as follows (in thousands):

For the twelve month periods ending September 30:
2025	$	1,838
2026		15,159
2027		-
2028		29,441
	$	46,438

As of September 30, 2024 and 2023, the Company’s total outstanding notes payable was $46.4 million and $85.3 million, respectively, which includes long-term and short-term debt.

The Company’s Aircraft Note – Gulfstream G550 note is payable in monthly principal and interest payments of $0.2 million and is collateralized by an aircraft.

On May 1, 2023, the Company entered into the Revolving Credit Facility (Bank of America) for the purposes of borrowing on a revolving line of credit, collateralized by substantially all of the Company’s assets. The availability of funds under this agreement are $100.0 million, from May 1, 2023 until April 30, 2025, $95.0 million, from May 1, 2025 until April 30, 2027, then $90.0 million, from May 1, 2027 until April 30, 2028. Interest is payable monthly, and principal may be repaid and reborrowed until the expiration date of April 30, 2028. Interest accrues at the Secured Overnight Financing Rate (SOFR, 6.18%, at September 30, 2024) plus an applicable rate. The applicable rate is either 1.45%, 1.35%, or 1.25% based on the Company’s financial test covenant rations, as defined by the agreement. The Company is subject to an unused commitment fee of either 0.25%, 0.20%, or 0.15%, based on the Company’s financial test covenant ratios, as defined by the agreement. At September 30, 2024, the Company’s financial covenant ration required the applicable rate to be 1.25% and the unused commitment fee to be 0.15%.

To hedge against interest rate risk on its floating-rate notes, the Company entered into an interest rate swap (the Swap) with a major U.S. bank as the counterparty. The Swap has a notional value of $45.0 million and the Company elected not to apply hedge accounting in accordance with ASC 815, Derivatives and Hedging. The Company pays interest on the notional value at 2.85% and receives interest on the notional value at the floating SOFR. The Swap matures on April 30, 2028. The effect of the Swap is to convert a portion of the Company’s floating-rate notes to fixed-rate debt.

On April 13, 2020, Comsat was the recipient of a $7.0 million Payroll Protection Program (PPP) loan as administered by the Small Business Administration (SBA) under The Coronavirus Air, Relief and Economic Security Act (the Cares Act). In 2021, the full amount of the loan was forgiven.

The SBA may audit whether the Company qualified for the PPP loans and met the conditions necessary for forgiveness of the loan for up to six years after it forgave the loans. Therefore, it is possible that the Company may have to repay an amount previously forgiven by the SBA.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Note 7. Leases

The Company leases real estate under operating lease agreements that have initial terms ranging from two to twenty-five years. Some leases include one or more options to renew, generally at the Company’s sole discretion, with renewal terms that can extend the lease term up to seven years. In addition, certain leases contain termination options, where the rights to terminate are held by either the Company, the lessor or both parties. These options to extend or terminate a lease are included in the lease terms when it is reasonably certain that the Company will exercise that option. The Company’s operating leases generally do not contain any material restrictive covenants or residual value guarantees. The Company was also a sub-lessor in one real estate lease that terminated in 2023.

Operating lease costs and sub-lease income is recognized on a straight-line basis over the lease term. Financing lease costs, should the Company enter into such agreement in the future, would be recognized as a combination of the amortization expense for the ROU assets and interest expense for the outstanding lease liabilities, that would result in a front-loaded expense pattern over the lease term. The components of lease expense are as follows for the nine-month periods ended September 30, 2024 and 2023 (in thousands):

	For the Nine Months Ended<br>September 30,
	2024		2023
Operating lease cost	$	351	$	434
Variable lease cost		1,031		1,062
Sublease income, gross		-		(193	)
Total lease cost	$	1,382	$	1,303

Supplemental cash flow and weighted average remaining lease term and discount rate information related to leases is as follows for the nine months ended September 30, 2024 and 2023, (in thousands, except lease terms and discount rates):

	For the Nine Months Ended<br>September 30,
	2024			2023
Cash paid for amounts included in measurement of lease liabilities<br>   - payments on operating leases	$	390		$	469
Weighted average remaining lease term:	9.11 years			9.94 years
Weighted average discount rate:		1.83	%		1.82	%

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Future undiscounted cash flows for each of the next five years and thereafter and a reconciliation to the lease liabilities recognized on the balance sheet are as follows as of September 30, 2024 (in thousands):

	Operating<br>Leases
For the twelve month periods ending September 30,
2025	$	522
2026		536
2027		552
2028		586
2029		596
Thereafter		1,736
Total future minimum lease payments		4,528
Less: Amount representing interest		(390	)
Total present value of lease liabilities		4,138
Less: Current maturities		(451	)
Total long-term lease liabilities	$	3,687

Note 8. Employee Benefit Plans

The Company has various plans that cover substantially all employees. The Satcom Direct, Inc. Profit Sharing Plan provides retirement benefits through a 401(k) plan for SD, SDG, ACL and Comsat employees. The Company’s matching contribution formula is based on service eligibility and the employees’ deferral contributions. Employees are 100% vested in their elective deferrals, the Company matching contributions are vested over a year three-year period. Total matching contributions for the nine months ended September 30, 2024 and 2023, were $1.4 million, and $1.3 million, respectively, and are included in employee expense in the accompanying consolidated and combined statements of income. Additionally, the Company may make discretionary profit sharing contributions to this plan. These discretionary contributions are vested based on years of service. After two years of service, employees are vested 20% each year until year six when an employee is 100% vested. There was no discretionary profit sharing contribution made for the nine-month periods ended September 30, 2024 and 2023.

Total employer contributions to foreign plans are based on the laws specific to each particular country. Employer contributions expense to these plans was $0.4 million for both nine months ended September 30, 2024 and 2023. These amounts are included in employee expense in the accompanying consolidated and combined statements of income.

Note 9. Self-Insurance of Healthcare

The Company self-insures its employees’ health insurance benefits beginning July 1, 2023. The Company accrued $0.9 million and $0.4 million for its self-insured liabilities as of September 30, 2024 and 2023, respectively, which is included as a component of accrued expenses in the accompanying consolidated and combined balance sheets.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Note 10. Related-Party Transactions

The Company leases several facilities from an entity related through common ownership. Rent expense associated with these leases for the nine months ended September 30, 2024 and 2023, was $0.2 million and $0.1 million, respectively.

Note 11. Contingencies

The Company is subject to various claims, legal actions and disputes in the normal course of business. The Company provides for losses, if any, in the year in which they can be reasonably estimated.

As of September 30, 2024 and 2023, the Company accrued a contingent liability for state and local sales taxes in a variety of jurisdictions for periods between 2010 and 2023, which is included in accrued expenses in the accompanying combined and consolidated balance sheets in the amount of approximately $5.0 million and $6.8 million, respectively. The Company believes that the reserve represents the best current estimate of any potential liability in the area of state and local sales taxes.

Note 12. Fair Value of Financial Assets

A three-tier fair value hierarchy has been established which prioritizes the inputs used in measuring fair value. These tiers include:

• Level 1 - defined as observable inputs such as quoted prices for identical assets or liabilities in active markets;
• Level 2 - defined as observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
• Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Our Swap is carried at fair value based on significant observable inputs (Level 2 inputs). Derivatives entered into by us are typically executed over-the-counter and are valued using discounted cash flows along with fair value models that primarily use market observable inputs. These models take into account a variety of factors including, where applicable, maturity, interest rate yield curves, and counterparty credit risks.

During the nine months ended September 30, 2024, the change in fair value of the asset under the swap decreased $0.6 million. During the nine months ended September 30, 2023, the change in fair value of the asset under the swap increased $2.9 million. The change in value has been reflected as interest expense in the accompanying consolidated and combined statements of income. As of September 30, 2024 and 2023, the fair value of the Swap asset was $0.7 million and $2.9 million, respectively, which is reported as deposits and other assets in the accompanying consolidated and combined balance sheets.

Satcom Direct, Inc. and Subsidiaries and Combined Affiliates

Notes to Consolidated and Combined Financial Statements

Note 13. Subsequent Events

Management has evaluated subsequent events through February, 17 2025, which is the date the consolidated and combined financial statements were available to be issued. Except as disclosed below, management has not identified other subsequent events impacting the consolidated and combined financial statements.

On December 3, 2024, Gogo Inc. (“Gogo”) completed the acquisition of SD (and subsidiaries, with the exception of N321SD, Inc.), SDG (and subsidiaries) and SDH (and subsidiaries) by acquiring all their outstanding equity interest in exchange for (i) an aggregate cash purchase price of approximately $375,000,000, subject to customary post-Closing purchase price adjustments, (ii) 5,000,000 restricted shares of Gogo’s common stock, par value $0.0001 per share, and (iii) up to an additional $225,000,000 in potential earnout payments of cash and/or common stock tied to realizing certain financial performance milestones over the next four years.

As part of completing the acquisition, the Company’s Revolving Credit Facility (Bank of America) and Aircraft Note – Gulfstream G550 were paid off. Due to the payoff of the Revolving Credit Facility, the Company also terminated the Swap that hedged against interest rate risk.

EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Introduction and Description of Acquisition

On December 3, 2024 (the “Closing Date”), Gogo, Inc. and its directly and indirectly owned subsidiaries (collectively “Gogo” or “the Company”) completed its previously announced acquisition of Satcom Direct, LLC (f/k/a Satcom Direct, Inc.), Satcom Direct Holding Company, LLC (“SDHC”), Satcom Direct Government, LLC (f/k/a Satcom Direct Government, Inc.) (“Satcom Government”), and ndtHost, LLC (“ndtHost” and, together with Satcom Direct, LLC, SDHC, and Satcom Government, collectively, “Satcom Direct”), from Satcom Direct Holdings, Inc. (“SD Seller”), SDHC Holdings, Inc. (“SDHC Seller”), Satcom Direct Government Holdings, Inc. (“Satcom Government Seller”), and ndtHost Holdings, Inc. (“ndtHost Seller” and, together with SD Seller, SDHC Seller and Satcom Government Seller, each a “Seller” and, collectively, “SD Sellers”). Pursuant to the terms of the purchase agreement, dated as of September 29, 2024 (the “Purchase Agreement”), by and among, among others, Gogo Direct Holdings LLC (“Gogo Direct”), an indirect wholly owned subsidiary of the Company, SD Sellers and Satcom Direct, on the Closing Date, all of the issued and outstanding equity interest in Satcom Direct were acquired by Gogo Direct (the “Acquisition”) in exchange for: (i) $375,000,000 in cash, without interest, subject to customary post-closing purchase price adjustments (the “Cash Consideration”), (ii) 5,000,000 restricted shares (the “Stock Consideration”) of the Company’s common stock, par value of $0.0001 per share (“Common Stock”) , and (iii) up to an additional $225,000,000 in potential earnout payments of cash and/or Common Stock tied to realizing certain financial performance milestones over the next four years (the “Earnout Consideration” and, together with the Cash Consideration and Stock Consideration, the “Acquisition Consideration”).

On December 3, 2024, the Company announced that, following the closing of the Acquisition, the Company granted certain Satcom Direct executives awards consisting of time-based restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”). The RSUs will vest in equal annual installments over the five-year period following the grant date. The PSUs are subject to performance-based vesting and will vest when the performance-based vesting conditions are met. The RSUs and the PSUs (together, the “Inducement Grants”) were granted as an inducement material to certain executives’ acceptances of employment with the Company.

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed combined balance sheet as of September 30, 2024 gives effect to the Acquisition, the Debt Financing (as discussed in the “Description of Financing” section below), and the Inducement Grants as if those transactions had been completed on September 30, 2024 and combines the unaudited condensed balance sheet of the Company as of September 30, 2024 with Satcom Direct’s unaudited balance sheet as of September 30, 2024.

The unaudited pro forma condensed combined Statements of Operations for the year ended December 31, 2023 and the nine months ended September 30, 2024 give effect to the Acquisition, the Debt Financing, and the Inducement Grants as if those transactions had occurred on January 1, 2023, the first day of the Company’s fiscal year 2023 and combines the historical results of the Company and Satcom Direct. The unaudited pro forma condensed combined Statements of Operations for the fiscal year ended December 31, 2023, combines the audited Consolidated Statements of Operations of the Company for the fiscal year ended December 31, 2023, and Satcom Direct’s audited consolidated and combined Statements of Operations for the fiscal year ended December 31, 2023. The unaudited pro forma condensed combined Statements of Operations for the nine months ended September 30, 2024, combines the unaudited condensed consolidated Statements of Operations of the Company for the nine months ended September 30, 2024, with Satcom Direct’s unaudited condensed, consolidated and combined Statements of Operations for the nine months ended September 30, 2024.

The historical financial statements of the Company and Satcom Direct have been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events that are transaction accounting adjustments which are necessary to account for the Acquisition and the debt financing, in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The unaudited pro forma adjustments are based upon available information and certain assumptions that our management believes are reasonable.

The unaudited pro forma condensed combined financial information should be read in conjunction with:

• The accompanying notes to the unaudited pro forma condensed combined financial information;
• The separate audited financial statements of the Company as of and for the fiscal year ended December 31, 2023, and the related notes, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2024;
• The separate unaudited financial statements of the Company as of and for the nine months ended September 30, 2024, and the related notes, included in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2024, as filed with the SEC on November 5, 2024;
• The separate audited financial statements of Satcom Direct as of and for the fiscal year ended December 31, 2023, and the related notes for the fiscal year ended December 31, 2023 as filed with the SEC on February 18, 2025.
• The separate unaudited financial statements of Satcom Direct as of and for the nine months ended September 30, 2024, and the related notes for the period ended September 30, 2024 as filed with the SEC on February 18, 2025.

Description of the Financing

On the Closing Date, in connection with the consummation of the Acquisition, the Company and Gogo Intermediate Holdings, LLC (“Borrower”), a direct wholly owned subsidiary of the Company, entered into a credit agreement (the “HPS Credit Agreement”) by and among the Company, the Borrower and HPS Investment Partners, LLC, as administrative agent and the lenders party thereto, which provides for financing in aggregate principal amount of $250,000,000 consisting of a term loan facility (the “HPS Term Loan Facility”). The HPS Term Loan Facility is guaranteed by certain subsidiaries of the Company. Proceeds of the HPS Term Loan Facility, together with cash on hand, was used to fund the Cash Consideration. The HPS Term Loan Facility under the HPS Credit Agreement is referred to herein as the “Debt Financing” or “Financing”.

Accounting for the Acquisition

The Acquisition is being accounted for as a business combination using the acquisition method with the Company determined to be the accounting acquirer in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Under this method of accounting, the aggregate purchase consideration will be allocated to Satcom Direct’s assets acquired and liabilities assumed based upon their estimated fair values at the Closing Date. The process of valuing the net assets of Satcom Direct immediately prior to the Acquisition, as well as evaluating accounting policies for conformity, is preliminary. Any differences between the estimated fair value of the consideration transferred and the estimated fair value of the assets acquired, and liabilities assumed will be recorded as goodwill. Accordingly, the aggregate purchase consideration allocation and related adjustments reflected in this unaudited pro forma condensed combined financial information are preliminary and subject to revision based on a final determination of fair value. Refer to Note 1 - Basis of Presentation for more information.

All financial data included in the unaudited condensed combined financial information has been prepared on the basis of U.S. GAAP and the Company’s accounting policies.

The unaudited pro forma condensed combined financial information presented is for informational purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Acquisition, the Debt Financing, and the Inducement Grants had been completed on the dates set forth above, nor is it indicative of the future results or financial position of the combined company.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of September 30, 2024

(in thousands)

		Gogo Historical<br>As of September 30, 2024		Satcom Direct, Inc. Adjusted As of September 30, 2024 (Note 2)		(Note 4)		Acquisition Financing Adjustments	(Note 6)		Pro Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	176,678	$	3,437		4(a)	$	242,833	6(a)	$	29,532
Accounts receivable, net of allowances		45,875		73,506		4(b)		-			118,994
Inventories		74,848		21,309		4(c)		-			91,662
Prepaid expenses and other current assets		50,013		11,329		4(d)		-			66,386
Assets held for sale		-		-		4(e)		-			16,625
Total current assets		347,414		109,581				242,833			323,199
Non-current assets:
Property and equipment, net		93,830		30,232		4(f)		-			120,463
Intangible assets, net		64,888		2,853		4(g)		-			278,388
Goodwill		-		9,869		4(h)		-			182,081
Operating lease right-of-use assets		67,171		1,478		4(i)		-			70,665
Investment in convertible note		3,761		-				-			3,761
Other non-current assets, net of allowances		24,229		4,060				-			28,289
Deferred income taxes		209,444		14		4(j)		-			221,808
Total non-current assets		463,323		48,506				-			905,455
Total Assets	$	810,737	$	158,087			$	242,833		$	1,228,654
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	26,445	$	54,595		4(b)	$	-		$	80,653
Accrued liabilities		61,476		18,688		4(i), 4(m)		-			95,665
Deferred revenue		1,843		27,931				-			29,774
Current portion of long-term debt		7,250		1,838		4(k)		2,500	6(a)		9,750
Total current liabilities		97,014		103,052				2,500			215,842
Non-current liabilities:
Long-term debt		583,864		44,600		4(k)		240,333	6(a)		824,197
Non-current operating lease liabilities		68,005		1,699		4(i)		-			71,024
Earnout liability, at fair value		-		-		4(l)		-			53,000
Other non-current liabilities		9,130		8,941		4(j)		-			23,062
Total non-current liabilities		660,999		55,240				240,333			971,283
Total liabilities		758,013		158,292				242,833			1,187,125
Stockholders’ equity:
Common stock		14		2		4(n)		-			14
Additional paid-in capital		1,413,842		3,187		4(n)		-			1,465,712
Accumulated other comprehensive income		4,959		(1,452)		4(n)		-			4,959
Treasury stock, at cost		(194,159)		(60,000)		4(n)		-			(194,159)
Accumulated deficit		(1,171,932)		58,058		4(n)		-			(1,234,997)
Total stockholders’ equity		52,724		(205)				-			41,529
Total liabilities and stockholders’ equity	$	810,737	$	158,087			$	242,833		$	1,228,654

All values are in US Dollars.

See the accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

For The Nine Months Ended September 30, 2024

(in thousands, except per share amounts)

		Gogo Historical<br><br>Nine Months Ended<br><br>September 30, 2024,		Satcom Direct, Inc. Adjusted Nine Months Ended<br><br>September 30, 2024 (Note 2)		Transaction Accounting Adjustments	(Note 5)		Acquisition<br><br>Financing Adjustments	(Note 6)		Pro Forma Combined
Revenue:
Service revenue	$	245,459	$	332,903	$	-		$	-		$	578,362
Equipment revenue		61,451		32,582		-			-			94,033
Total revenue		306,910		365,485		-			-			672,395
Operating expenses:
Cost of service revenue (exclusive of amounts shown below)		55,793		220,325		-			-			276,118
Cost of equipment revenue (exclusive of amounts shown below)		47,383		22,450		-			-			69,833
Engineering, design and development		29,279		17,191		-			-			46,470
Sales and marketing		25,870		20,328		-			-			46,198
General and administrative		61,416		25,706		7,262	5(b)		-			94,384
Depreciation and amortization		11,743		4,254		28,934	5(c)		-			44,931
Total operating expenses		231,484		310,254		36,196			-			577,934
Operating income		75,426		55,231		(36,196)			-			94,461
Other expense (income):
Interest income		(6,587)		(29)		-			-			(6,616)
Interest expense		26,193		1,722		(1,722)	5(d)		21,139	6(b)		47,332
Other expense (income), net		1,286		50		-			-			1,336
Total other expense		20,892		1,743		(1,722)			21,139			42,052
Income before income taxes		54,534		53,488		(34,474)			(21,139)			52,409
Income tax provision		12,575		1,578		(1,430)	5(e)		-			12,723
Net income	$	41,959	$	51,910	$	(33,044)		$	(21,139)		$	39,686
Net income attributable to common stock per share:
Basic	$	0.33									$	0.30
Diluted	$	0.32									$	0.29
Weighted average number of shares
Basic		128,513										133,513
Diluted		131,538										136,707

See the accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

For the Year Ended December 31, 2023

(in thousands, except per share amounts)

		Gogo Historical<br><br>Year Ended<br><br>December 31, 2023,		Satcom Direct, Inc. Adjusted Year Ended<br><br>December 31, 2023<br><br>(Note 2)		Transaction Accounting Adjustments	(Note 5)		Acquisition Financing Adjustments	(Note 6)		Pro Forma<br><br>Combined
Revenue:
Service revenue	$	318,015	$	401,442	$	-		$	-		$	719,457
Equipment revenue		79,562		46,158		-			-			125,720
Total revenue		397,577		447,600		-			-			845,177
Operating expenses:
Cost of service revenue		69,568		257,926		-			-			327,494
Cost of equipment revenue		63,383		31,088		(4,495)	5(a)		-			89,976
Engineering, design and development		36,683		22,466		-			-			59,149
Sales and marketing		29,797		28,714		-			-			58,511
General and administrative		57,280		39,833		59,569	5(b)		-			156,682
Depreciation and amortization		16,701		7,442		36,808	5(c)		-			60,951
Total operating expenses		273,412		387,469		91,882			-			752,763
Operating income		124,165		60,131		(91,882)			-			92,414
Other expense (income):
Interest income		(7,403)		(1,395)		-			-			(8,798)
Interest expense		33,056		3,873		(3,873)	5(d)		28,141	6(b)		61,197
Loss on extinguishment of debt and settlement of convertible notes		2,224		-		-			-			2,224
Other (income) expense, net		(1,315)		387		-			-			(928)
Total other expense		26,562		2,865		(3,873)			28,141			53,695
Income before income taxes		97,603		57,266		(88,009)			(28,141)			38,719
Income tax provision		(48,075)		1,911		(11,853)	5(e)		(9,287)	6(c)		(67,304)
Net income	$	145,678	$	55,355	$	(76,156)		$	(18,854)		$	106,023
Net income attributable to common stock per share:
Basic	$	1.12									$	0.79
Diluted	$	1.09									$	0.76
Weighted average number of shares
Basic		129,753										134,753
Diluted	133,283	138,856
---	---	---

See the accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Note 1 - Basis of Presentation

The unaudited pro forma condensed combined financial information and related notes are prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses”. The unaudited pro forma condensed combined financial information presented is for illustrative purposes only and is not necessarily indicative of what the Company’s condensed combined Statements of Operations or Balance Sheets would have been had the Acquisition been consummated as of the dates indicated or will be for any future periods. The unaudited pro forma condensed combined financial information does not purport to project the future financial position or results of operations of the Company following the Closing Date. The actual financial position and results of operations may differ significantly from the unaudited pro forma amounts reflected herein due to a variety of factors. The pro forma condensed combined financial information reflects transaction accounting adjustments the Company’s management believes are necessary to present fairly the Company’s unaudited pro forma financial position and results of operations following the Closing Date as of and for the periods indicated. The transaction accounting adjustments represent the Company’s best estimates and are based upon currently available information and certain assumptions that the Company believes are reasonable under the circumstances.

The Company and Satcom Direct’s historical financial statements were prepared in accordance with U.S. GAAP and presented in U.S. dollars. As discussed in Note 2, certain reclassifications were made to align the Company and Satcom Direct’s financial statement presentation. The Company is currently in the process of evaluating Satcom Direct’s accounting policies, which will be finalized during the measurement period. With the information currently available, the Company has determined that no significant adjustments are necessary to conform Satcom Direct’s financial statements to the accounting policies used by the Company. The Company may identify additional differences between the accounting policies of the two companies, which when conformed, could have a material impact on the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting in accordance with ASC 805. The Company has been determined to be the accounting acquirer, using the fair value concepts defined in ASC Topic 820, Fair Value Measurement, and based on the historical financial statements of the Company and Satcom Direct. Under ASC 805, all assets acquired, and liabilities assumed in a business combination are recognized and measured at their assumed acquisition date fair value, while transaction costs associated with the business combination are expensed as incurred. The excess of purchase consideration over the estimated fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.

The allocation of the aggregate purchase consideration depends upon certain estimates and assumptions, all of which are preliminary. The allocation of the aggregate purchase consideration has been made for the purpose of developing the unaudited pro forma condensed combined financial information. The final determination of fair values of assets acquired and liabilities assumed relating to the Acquisition could differ materially from the preliminary allocation of aggregate purchase consideration. The final valuation will be based on the actual net tangible and intangible assets of Satcom Direct existing at the Closing Date.

The unaudited pro forma condensed combined Balance Sheets, as of September 30, 2024, the unaudited pro forma condensed combined Statements of Operations for the nine months ended September 30, 2024, and the unaudited pro forma condensed combined Statements of Operations for the year ended December 31, 2023, presented herein, are based on the historical financial statements of the Company and Satcom Direct.

• The unaudited pro forma condensed combined Balance Sheets as of September 30, 2024, is presented as if the Company’s acquisition of Satcom Direct had occurred on September 30, 2024, and combines the historical balance sheet of the Company as of September 30, 2024, with the historical balance sheet of Satcom Direct as of September 30, 2024.
• The unaudited pro forma condensed combined Statements of Operations for the nine months ended September 30, 2024, has been prepared as if the Acquisition had occurred on January 1, 2023, and combines the Company’s historical Statements of Operations for the nine months ended September 30, 2024, with Satcom Direct’s historical Statements of Operations for the nine months ended September 30, 2024.
• The unaudited pro forma condensed combined Statements of Operations for the year ended December 31, 2023, has been prepared as if the Acquisition had occurred on January 1, 2023, and combines the Company’s historical Statements of Operations for the fiscal year ended December 31, 2023, with Satcom Direct’s historical Statements of Operations for the fiscal year ended December 31, 2023.

The unaudited pro forma condensed combined financial information does not reflect any anticipated synergies or dyssynergies, revenue enhancements, operating efficiencies or cost savings that may result from the Acquisition or any acquisition and integration costs that may be incurred. The pro forma adjustments represent management’s best estimates and are based upon currently available information and certain assumptions that the Company believes are reasonable under the circumstances.

Note 2 – Satcom Direct reclassifications and perimeter adjustments

During the preparation of this unaudited pro forma condensed combined financial information, management performed a preliminary analysis of Satcom Direct’s financial information to identify differences in accounting policies as compared to those of the Company and differences in financial statement presentation as compared to the presentation of the Company. With the information currently available, the Company has determined that no significant adjustments are necessary to conform Satcom Direct’s financial statements to the accounting policies used by the Company. However, certain reclassification adjustments have been made to conform Satcom Direct’s historical financial statement presentation to the Company’s financial statement presentation. Following the Acquisition, the combined company will finalize the review of accounting policies and reclassifications, which could be materially different from the amounts set forth in the unaudited pro forma condensed combined financial information presented herein.

Additionally, the historical financial information of Satcom Direct has been adjusted to remove the net assets and operations of certain excluded assets (as defined in the Purchase Agreement) that are not being acquired as part of the Acquisition. As such, the following unaudited pro forma condensed balance sheet adjustments reflect the removal of the assets that are excluded from the perimeter of the Acquisition, and the following unaudited pro forma condensed combined statement of operations reflects the elimination of direct expenses related to those assets that are excluded from the perimeter of the Acquisition (the “Perimeter Adjustments”). Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information.

Refer to the table below for a summary of reclassification and Perimeter Adjustments made to present Satcom Direct’s balance sheet as of September 30, 2024, to conform with that of the Company’s:

Satcom Direct, Inc. Balance Sheet Line Items	Gogo Balance Sheet Line Items	Satcom Direct, Inc.<br>As of September 30, 2024		Reclassification Adjustments		Note	Perimeter Adjustments		Note		Satcom Direct, Inc. Adjusted<br>As of September 30, 2024
Cash and cash equivalents	Cash and cash equivalents	$	3,437	$	-		$	-			$	3,437
Accounts receivable, net	Accounts receivable, net of allowances		74,668		(1,162)	(a)		-				73,506
Prepaid expenses and other current assets	Prepaid expenses and other current assets		10,651		901	(a), (b)		(223)		(j)		11,329
Inventories, net	Inventories		21,309		-			-				21,309
Property, plant and equipment, net	Property and equipment, net		47,378		(140)	(c)		(17,006)		(k)		30,232
Intangible assets, net	Intangible assets, net		2,713		140	(c)		-				2,853
Goodwill, net	Goodwill		9,869		-			-				9,869
	Other non-current assets, net of allowances		-		4,060	(d)		-				4,060
	Deferred income taxes		-		14	(e)		-				14
Deposits and other assets			4,074		(4,074)	(d),(e)		-				-
Operating right-of-use assets	Operating lease right-of-use assets		3,477		261	(b)		(2,260)		(l)		1,478
Accounts payable	Accounts payable		54,208		387	(g)		-				54,595
Accrued expenses	Accrued liabilities		18,963		(161)	(f),(g),(i)		(114)		(m)		18,688
	Other non-current liabilities		-		8,941	(f),(h)		-				8,941
Deferred revenue, short-term	Deferred revenue		27,931		-			-				27,931
Current maturities of long-term debt	Current portion of long-term debt		1,838		-			-				1,838
Current maturities of operating lease liabilities			451		(451)	(i)		-				-
Long-term debt, less current maturities	Long-term debt		44,600		-			-				44,600
Deferred revenue, long-term			8,716		(8,716)	(h)		-				-
Due to stockholder, less current due			-		-			-				-
Operating lease liabilities, less current maturities	Non-current operating lease liabilities		3,687		-			(1,988)		(n)		1,699
Common stock	Common stock		2		-			-				2
Additional paid-in capital	Additional paid-in capital		3,187		-			-				3,187
Retained earnings	Accumulated deficit		75,445		-			(17,387)		(j), (k), (l), (m), (n)		58,058
Accumulated other comprehensive loss	Accumulated other comprehensive income	(1,452)	-	-	(1,452)
---	---	---	---	---	---
Treasury stock	Treasury stock, at cost	(60,000)	-	-	(60,000)

• Reclassification of $1,162 thousand of Accounts receivable, net to Prepaid expenses and other current assets.
• Reclassification of $261 thousand of Prepaid expenses and other current assets to Operating lease right-of-use assets.
• Reclassification of $140 thousand of Property, plant, and equipment, net to Intangible assets, net.
• Reclassification of $4,060 thousand of Deposits and other assets to Other non-current assets, net of allowances.
• Reclassification of $14 thousand of Deposits and other assets to Deferred Income taxes.
• Reclassification of $225 thousand of Accrued expenses to Other non-current liabilities.
• Reclassification of $387 thousand of Accrued expenses to Accounts payable.
• Reclassification of $8,716 thousand of Deferred revenue, long-term to Other non-current liabilities.
• Reclassification of $451 thousand of Current maturities of operating lease liabilities to Accrued liabilities.
• Removal of $223 thousand of Prepaid expenses and other current assets that are excluded from the perimeter of the Acquisition.
• Removal of $17,006 thousand of Property and equipment, net that are excluded from the perimeter of the Acquisition.
• Removal of $2,260 thousand of Operating lease right-of-use assets that are excluded from the perimeter of the Acquisition.
• Removal of $114 thousand of Accrued liabilities that are excluded from the perimeter of the Acquisition.
• Removal of $1,988 thousand of Non-current operating lease liabilities that are excluded from the perimeter of the Acquisition.

Refer to the table below for a summary of adjustments made to present Satcom Direct’s Statements of Operations for the nine months ended September 30, 2024, to conform with that of the Company’s:

Satcom Direct, Inc. Statements of Operations Line Items	Gogo Statements of Operations Line Items	Satcom Direct, Inc. Nine Months Ended September 30, 2024		Reclassification Adjustments		Note	Perimeter Adjustments		Note	Satcom Direct, Inc. Adjusted<br><br>Nine Months<br><br>Ended September 30, 2024
Service revenue	Service revenue		332,903		-			-			332,903
Equipment revenue	Equipment revenue		32,582		-			-			32,582
Cost of service revenue	Cost of service revenue		215,613		4,712	(a),(b),(c),(d),(e),(f)		-			220,325
Cost of equipment revenue	Cost of equipment revenue		22,450		-			-			22,450
Employee expense			44,267		(44,267)	(a)		-			-
Travel and entertainment			3,295		(3,295)	(b)		-			-
Marketing expense	Sales and marketing		2,541		17,843	(a),(b),(c),(d),(e),(f)		(56)	(i)		20,328
Depreciation and amortization expense	Depreciation and amortization		8,625		-			(4,371)	(j)		4,254
Professional fees			5,739		(5,739)	(d)		-			-
Information technology services			4,019		(4,019)	(e)		-			-
	Engineering, design and development		-		17,191	(a),(b),(c),(e),(f)		-			17,191
Other general and administrative expenses	General and administrative		15,291		17,538	(a),(b),(c),(d),(e),(f),<br><br>(g),(h)		(7,123)	(k)		25,706
Interest expense	Interest expense		1,781		(59)	(g)		-			1,722
(Loss) gain on disposal of property, plant and equipment			-		-			-			-
Other expense (income), net	Other expense (income), net		(74)		124	(h)		-			50
	Interest income		-		(29)	(h)		-			(29)
Income tax (benefit) provision	Income tax (benefit) provision		1,578		-			-			1,578

• Reclassification of Employee expense to Cost of service revenue of $2,580 thousand, Engineering design and development of $9,437 thousand, Sales and marketing of $15,403 thousand, and General and administrative of $16,847 thousand.
• Reclassification of Travel and entertainment to Cost of service revenue of $84 thousand, Engineering, design, and development of $410 thousand, Sales and marketing of $1,785 thousand, and General and administrative of $1,016 thousand.
• Reclassification of Marketing expense to Cost of service revenue of $62 thousand, Sales and marketing of $2,398 thousand, and General and administrative of $82 thousand.
• Reclassification of Professional fees to Cost of service revenue of $101 thousand, Engineering, design, and development of $315 thousand, Sales and marketing of $339 thousand, and General and administrative of $4,984 thousand.
• Reclassification of Information technology services to Cost of service revenue of $1,431 thousand, Engineering, design, and development of $30 thousand, Sales and marketing of $42 thousand, and General and Administrative of $2,516 thousand.
• Reclassification of Other general and administrative expenses to Cost of service revenue of $454 thousand, Engineering, design, and development of $6,999 thousand, and Sales and marketing of $418 thousand.
• Reclassification of Interest expense to General and administrative of $59 thousand.
• Reclassification of Other income and expenses, net to General and administrative of $(95) thousand and Interest income of $29 thousand.
• Removal of $56 thousand of Sales and marketing associated with assets that are excluded from the perimeter of the Acquisition.
• Removal of $4,371 thousand of Depreciation and amortization associated with assets that are excluded from the perimeter of the Acquisition.
• Removal of $7,123 thousand of General and administrative associated with assets that are excluded from the perimeter of the Acquisition.

Refer to the table below for a summary of adjustments made to present Satcom Direct’s Statements of Operations for the year ended December 31, 2023, to conform with that of the Company’s:

Satcom Direct, Inc. Statements of Operations Line Items	Gogo Statements of Operations Line Items	Satcom Direct, Inc. Year Ended December 31, 2023		Reclassification Adjustments			Note	Perimeter Adjustments			Note	Satcom Direct, Inc. Adjusted<br><br>Year Ended December 31, 2023
Service revenue	Service revenue		401,442		-				-				401,442
Equipment revenue	Equipment revenue		46,158		-				-				46,158
Cost of service revenue	Cost of service revenue		251,547		6,385	(a),(b),(c),(d),(e),(f)			(6)	(j)			257,926
Cost of equipment revenue	Cost of equipment revenue		31,082		6	(f)			-				31,088
Employee expense			62,696		(62,696)	(a)			-				-
Travel and entertainment			4,398		(4,398)	(b)			-				-
Marketing expense	Sales and marketing		2,694		26,103	(a),(b),(c),(d),(e),(f)			(83)	(k)			28,714
Depreciation and amortization expense	Depreciation and amortization		13,079		-				(5,637)	(l)			7,442
Professional fees			5,051		(5,051)	(d)			-				-
Information technology services			4,836		(4,836)	(e)			-				-
	Engineering, design and development		-		22,466	(a),(b),(c),(c),(d),(e),(f)			-				22,466
Other general and administrative expenses	General and administrative		18,082		31,743	(a),(b),(c),(d),(e),(f),(g),(h),(i)			(9,992)	(m)			39,833
Interest expense	Interest expense		3,957		(84)	(g)			-				3,873
(Loss) gain on disposal of property, plant and equipment			(10,179)		10,179	(h)			-				-
Other expense (income), net	Other expense (income), net		(1,549)		1,936	(i)			-				387
	Interest income		-		(1,395)	(i)			-				(1,395)
Income tax (benefit) provision	Income tax (benefit) provision		1,911		-				-				1,911

• Reclassification of Employee expense to Cost of service revenue of $3,868 thousand, Engineering, design, and development of $14,543 thousand, Sales and marketing of $22,736 thousand, and General and administrative of $21,549 thousand.

• Reclassification of Travel and entertainment to Cost of service revenue of $146 thousand, Engineering, design, and development of $509 thousand, Sales and marketing of $2,348 thousand, and General and administrative of $1,395 thousand.

• Reclassification of Marketing expense to Cost of service revenue of $4 thousand, Engineering, design, and development of $2 thousand, and General and administrative of $232 thousand.

• Reclassification of Professional fees to Cost of service revenue of $142 thousand, Engineering, design, and development of $619 thousand, Sales and marketing of $476 thousand, General and administrative of $3,814 thousand.

• Reclassification of Information technology services to Cost of service revenue of $1,613 thousand, Engineering, design, and development of $13 thousand, Sales and marketing of $166 thousand, and General and administrative of $3,044 thousand.

• Reclassification of Other general and administrative services to Cost of service revenue of $612 thousand, Cost of equipment revenue of $6 thousand, Engineering, design, and development of $6,780 thousand, and Sales and marketing of $615 thousand.

• Reclassification of Interest expense to General and administrative of $84 thousand.

• Reclassification of (Loss) gain on disposal of property, plant, and equipment to General and Administrative of $10,179 thousand.

• Reclassification of Other expense (income), net to General and administrative of $(541) thousand and Interest income of $1,395 thousand.

• Removal of $6 thousand of Cost of service revenue associated with assets that are excluded from the perimeter of the Acquisition.

• Removal of $83 thousand of Sales and marketing associated with assets that are excluded from the perimeter of the Acquisition.

• Removal of $5,637 thousand of Depreciation and amortization associated with assets that are excluded from the perimeter of the Acquisition.

• Removal of $9,992 thousand of General and Administrative associated with assets that are excluded from the perimeter of the Acquisition.

Note 3 – Preliminary purchase price allocation

Estimated Aggregate Acquisition Consideration

The following table summarizes the preliminary estimated aggregate Acquisition Consideration for Satcom Direct:

(in thousands, except share price)		Amount
Share consideration
Common Stock issued per the Purchase Agreement		5,000
Closing share price on December 2, 2024	$	8.10
Stock Consideration	$	40,500
Cash Consideration (i)	$	345,282
Settlement of pre-existing relationship (ii)		387
Estimated fair value of Earnout Consideration (iii)		53,000
Preliminary fair value of estimated aggregate Acquisition Consideration	$	439,169

• Represents the total Cash Consideration, comprising of $295,844 thousand for the Closing Date Cash Consideration calculated according to the Purchase Agreement, $46,438 thousand for the repayment of Satcom Direct's debt that the Company will not assume in the Acquisition, and $3,000 thousand deposited into escrow accounts for general representations and warranties.
• Represents an adjustment to the Acquisition Consideration for the settlement of a pre-existing relationship between Satcom Direct and Gogo. There were no off-market amounts associated with this pre-existing relationship.
• The Earnout Consideration represents the Closing Date provisional fair value of the estimated future payment to SD Sellers, based on the gross margin targets of the combined entity, with a maximum payment earnout payment amount of $225,000 thousand.

Preliminary Aggregate Acquisition Consideration Allocation

Under the acquisition method of accounting, the identifiable assets acquired, and liabilities assumed of Satcom Direct will be recognized and measured at fair value as of the Closing Date and added to those of the Company. The fair value and useful lives of assets and liabilities of Satcom Direct have been measured based on various preliminary estimates using assumptions that the Company’s management believes are reasonable and are based on currently available information. For the preliminary estimate of fair values of assets acquired and liabilities assumed of Satcom Direct, the Company primarily used income-based, market-based, and/or cost-based valuation approaches to conclude upon a preliminary estimate of fair values. The Company also used publicly available benchmarking information as well as a variety of other assumptions, including market participant assumptions when estimating fair value. The preliminary allocation of the purchase price to the acquired assets and assumed liabilities was based upon this preliminary estimate of fair values. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purposes of providing this unaudited pro forma condensed combined financial information. The final determination of the purchase price allocation will be based on Satcom Direct’s assets acquired and liabilities assumed as of the Closing Date. The allocation is dependent upon certain valuation and other studies that have not yet been completed. Accordingly, the pro forma purchase price allocation will be subject to further adjustments as additional information becomes available and as additional analyses and final valuations are completed. There can be no assurance that these additional analyses and final valuations will not result in significant changes to the estimates of fair value set forth below.

The following table sets forth a preliminary allocation of the Acquisition Consideration to the identifiable tangible and intangible assets acquired and liabilities assumed by the Company, as if the Acquisition had been consummated on September 30, 2024:

(in thousands)		Amount
Preliminary fair value of estimated total Acquisition Consideration	$	439,169
Assets acquired
Cash and cash equivalents	$	3,437
Accounts receivable, net of allowances		73,506
Inventories (i)		16,814
Prepaid expenses and other current assets		16,373
Assets held for sale		16,625
---	---	---
Property and equipment, net (iii)		26,633
Intangible assets, net (ii)		213,500
Operating lease right-of-use assets		3,494
Other non-current assets, net of allowances		4,060
Deferred income taxes (iv)		994
Total assets acquired	$	375,436
Liabilities assumed
Accounts payable	$	54,208
Accrued liabilities		19,258
Deferred revenue		27,931
Non-current operating lease liabilities		3,019
Other non-current liabilities		13,932
Total liabilities assumed	$	118,348
Net assets acquired	$	257,088
Goodwill	$	182,081

• The unaudited pro forma condensed combined balance sheet has been adjusted to record Satcom Direct’s inventories at a preliminary fair value of approximately $16,814 thousand, a decrease of $4,495 thousand from the carrying value. The unaudited pro forma condensed combined Statements of Operations for the year ended December 31, 2023, has been adjusted to recognize a decrease of cost of goods sold related to the reduced basis. This cost is not anticipated to affect the condensed combined Statements of Operations beyond twelve months after the Closing Date.
• The unaudited pro forma condensed combined balance sheet has been adjusted to record Satcom Direct's identifiable intangible assets at a fair value of approximately $213,500 thousand, an increase of $210,647 thousand from the carrying value. The unaudited pro forma condensed combined statements of operations have been adjusted to recognize additional amortization expense related to the increased basis under depreciation and amortization expense. The additional amortization expense is computed with the assumption that the various categories of assets will be amortized on a straight-line basis. Identifiable intangible assets in the unaudited pro forma condensed combined financial information consists of the following:

		Fair Value	Estimated Useful Life
Preliminary fair value of intangible assets acquired:
Service customer relationships	$	144,700	5
OEM customer relationships		10,300	8
Software		55,300	8
Tradename		3,200	5
Intangible assets acquired	$	213,500

• The unaudited pro forma condensed combined balance sheet has been adjusted to record Satcom Direct's property, plant and equipment at a fair value of approximately $26,633 thousand, an increase of $13,026 thousand from the carrying value. The unaudited pro forma condensed combined statements of operations have been adjusted to recognize additional depreciation expense related to the increased basis under depreciation and amortization expense. The additional depreciation expense is computed with the assumption that the various categories of assets will be depreciated on a straight-line basis. See note 4(f) for the estimated useful lives.
• Reflects an adjustment to the historical Satcom Deferred tax asset balance of $12,350 thousand of which $11,370 thousand was expensed as of the Closing Date. See notes 4(j) and 4(n). Deferred tax assets and liabilities were derived based on differences in the book and tax basis created from the preliminary purchase accounting.

Note 4 – Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet

Adjustments included in the Satcom Direct Transaction Accounting Adjustments column in the accompanying unaudited pro forma condensed combined balance sheet as of September 30, 2024, are as follows:

(a) Reflects adjustment to cash and cash equivalents:

(in thousands)		Amount
Pro forma transaction accounting adjustments:
Cash Consideration transferred	$	(295,844)
Cash deposited into escrow		(3,000)
Settlement of Satcom Direct's indebtedness		(46,438)
Cash paid for change of control bonuses (i)		(24,588)
Transaction costs (ii)		(23,546)
Net pro forma transaction accounting adjustment to cash and cash equivalents		(393,416)

• Reflects the payment of change of control bonuses. The pre-existing SD Seller change of control bonus arrangements were modified during negotiations of the Acquisition. The modification resulted in certain change of control bonus payments at closing and the remainder vesting over a two-year period post-closing.
• Total transaction costs consist of $33,410 thousand of legal advisory, financial advisory, accounting and consulting costs. The Company paid $23,546 thousand of transaction costs through the Closing Date, of which $10,365 thousand represents costs incurred by the Company and $13,181 thousand represent seller-reimbursed costs. Additionally, the Company incurred $9,864 thousand of transaction costs that remain unpaid as of Closing Date. See note 4(m).

(b) Reflects an adjustment to Accounts receivable, net of allowances and Accounts payable to eliminate owed amounts between the parties that were settled between Satcom Direct and Gogo prior to close.

(c) Represents a decrease in the carrying value of Satcom Direct’s inventory to its estimated acquisition-date fair value.

(d) Reflects an adjustment to record an indemnification asset to Prepaid expenses and other current assets for a liability for sales & use taxes of which the SD Seller has indemnified the Company.

(e) Shortly after the Closing Date, the Company entered into in a brokerage agreement to sell certain Satcom Direct assets, comprised of land, a building, and personal property assets. As the Company believes that these assets will be sold within one year, and the remaining criteria of ASC 360-10-45-9(a) through ASC 360-10-45-9(f) are probable of being met within a short period following the Close Date, the Company has reflected these amounts as held for sale in accordance with ASC 205-20, Discontinued Operations. These assets are measured at fair value less costs to sell as of the date of the Acquisition in accordance with ASC 360, Property, Plant, and Equipment.

(f) Reflects the preliminary purchase accounting adjustment for Property and equipment, net based on the acquisition method of accounting

(in thousands)		Preliminary Fair Value	Estimated Useful Life
Preliminary fair value of Property and equipment, net acquired:
Land and Buildings	$	23,165	5-39
Lease Improvements		537	2
Equipment and Network Equipment		19,556	2-29
Total fair value of Property and equipment		43,258
Satcom Direct's historical Property and equipment, net		(30,232)
Adjustment to record Property and equipment at fair value		13,026
Less: Reclassification of Land and Buildings to held for sale		(16,625)
Pro forma net adjustment to Property and equipment, net	$	(3,599)

(g) Represents the incremental fair value recognized for intangible assets acquired by the Company. Refer to Note 3 for additional detail regarding the intangible assets acquired.

(h) Reflects the elimination of Satcom Direct’s historical goodwill and the capitalization of the preliminary goodwill for the estimated Acquisition Consideration in excess of the fair value of the net assets acquired in connection with the Acquisition.

(in thousands)		Amount
Pro forma transaction accounting adjustments:
Elimination of Satcom Direct’s historical net book value of Goodwill	$	(9,869)
Fair value of consideration transferred in excess of the preliminary fair value of assets acquired and liabilities assumed (i)		182,081
Net pro forma transaction accounting adjustment to goodwill	$	172,212
---	---	---

• Refer to the table in Note 3 above for the calculation of the fair value of consideration transferred in excess of the preliminary fair value of assets acquired and liabilities assumed based on the preliminary allocation of the estimated Acquisition Consideration to the identifiable tangible and intangible assets acquired and liabilities assumed of Satcom Direct.

(i) Represents adjustment to remeasure acquired lease liabilities and right of use assets in accordance with ASC 842, Leases. As part of the allocation of the purchase price in a business combination, lease terms are compared to market terms to determine if the leases are favorable or unfavorable. Any favorable or unfavorable leasehold interests identified increase (favorable) or reduce (unfavorable) the associated right-of-use (“ROU") lease asset and are recognized over the life of the related right-of-use asset. The unaudited pro forma condensed combined financial information reflects the preliminary fair value adjustments of the unfavorable leasehold interests acquired from Satcom Direct. Consequently, for leases acquired by the Company, in the Acquisition, the Company has measured the lease liabilities at the present value of the remaining lease payments, as if the acquired lease were a new lease. The associated right-of-use asset was remeasured at the same amount as the lease liability, adjusted to reflect unfavorable terms of the lease when compared to market terms.

(in thousands)		Amount
Pro forma transaction accounting adjustments:
ROU Asset:
Elimination of Satcom Direct's historical net book value of operating lease right-of-use assets	$	(1,478)
Remeasurement of acquired operating lease right-of-use assets		3,494
	$	2,016
Current operating lease liability:
Elimination of Satcom Direct's historical net book value of current operating lease liabilities	$	(336)
Remeasurement of acquired current operating lease liabilities		906
	$	570
Non-current operating lease liability:
Elimination of Satcom Direct's historical net book value of non-current operating lease liabilities	$	(1,699)
Remeasurement of acquired non-current operating lease liabilities		3,019
	$	1,320

(j) Represents the adjustment to deferred tax asset of $12,350 thousand associated with the differences in the book and tax basis primarily related to transaction related expenses, with the majority of the transaction related expenses being the change of control bonus. Represents the deferred tax liability of $4,991 thousand associated with the differences in the book and tax basis created from the preliminary purchase allocation, primarily resulting from the preliminary fair value of intangible assets.

(k) Reflects the settlement of Satcom Direct’s indebtedness that the Company will not assume.

(l) Reflects the adjustment to establish the liability associated with the provisional Earnout Consideration. The preliminary estimated fair value of the earnout was valued using a Monte Carlo simulation. Any changes to the earnout liability after the Closing Date that are not part of an adjustment associated with an initial change in value during the measurement period will be recognized in our Consolidated Statement of Operations as a component of operating income or expense.

(m) Reflects adjustment to Accrued liabilities:

(in thousands)		Amount
Pro forma transaction accounting adjustments:
Change of control bonus (i)	$	5,067
Lease remeasurement (ii)		570
Transaction costs (iii)		9,864
Net pro forma transaction accounting adjustments to accrued liabilities	$	15,501

• Reflects the accrual for change of control bonus amounts that vested at the Closing Date but have not yet been paid by the Company.
• Reflects the adjustment to remeasure acquired lease liabilities. See note 4(i).
• Reflects the accrual for transaction costs incurred but not yet paid by the Company.

(n) Reflects the adjustments to Stockholders’ equity:

(in thousands)		Common stock		APIC		AOCI		Treasury stock		Accumulated deficit
Pro forma transaction accounting adjustments:
Elimination of Satcom Direct’s historical equity	$	(2)	$	(3,187)	$	1,452	$	60,000	$	(58,058)
Value of shares of Gogo restricted common shares issued to SD Sellers		-		40,500		-		-		-
---	---	---	---	---	---	---	---	---	---	---
Gogo Transaction Costs(i)		-		-		-		-		(33,410)
Change of control bonus		-		-		-		-		(29,655)
Deferred income taxes		-		11,370		-		-		-
Net pro forma transaction accounting adjustments to equity	$	(2)	$	48,683	$	1,452	$	60,000	$	(121,123)

• Reflects the adjustment to recognize estimated transaction costs for Gogo resulting in an adjustment to Accumulated Deficit. Refer to Note 4(a).

Note 5 – Pro Forma Adjustments to the Unaudited Condensed Combined Statements of Operations

Adjustments included in the Satcom Direct Transaction Accounting Adjustments column in the accompanying unaudited pro forma condensed combined Statements of Operations for the nine months ended September 30, 2024, and fiscal year ended December 31, 2023, are as follows:

(a) Represents a reduction of Cost of Equipment due to the decrease associated with the fair value of acquired inventory.

(b) Reflects adjustment to General and Administrative:

(in thousands)		For the Nine Months Ended September 30, 2024		For the Year Ended December 31, 2023
Pro forma transaction accounting adjustments:
Transaction expenses (i)	$	-	$	20,229
Stock compensation expense (ii)		3,462		4,618
Change of control bonuses (iii)		3,800		34,722
Net pro forma transaction accounting adjustment to General and administrative	$	7,262	$	59,569

• Reflects the adjustments for transaction expenses incurred in connection with the Acquisition. These costs include legal, advisory, and other costs directly associated with the transaction.
• Reflects the adjustment to General and administrative for stock compensation expense related to the grant of 2,275 Inducement Grants following the Closing Date, comprising 1,225 units subject to time-based vesting and 1,050 units subject to market-based vesting.
• Reflects the adjustment for change of control bonuses as post-combination compensation expense.

(c) Reflects the adjustments to Depreciation and Amortization including the amortization of the estimated fair value of intangibles and the depreciation of the estimated fair value of the property and equipment, net.

(in thousands)		For the Nine Months Ended September 30, 2024		For the Year Ended<br><br>December 31, 2023
Pro forma transaction accounting adjustments:
Removal of historical Satcom Direct amortization of intangible assets	$	(830)	$	(1,119)
Amortization of intangible assets (i)		28,335		37,780
Removal of historical Satcom Direct depreciation of property and equipment, net		(3,424)		(6,323)
Depreciation of property and equipment, net (ii)		4,853		6,470
Net pro forma transaction accounting adjustment to Depreciation and amortization	$	28,934	$	36,808

• A 10% change in the valuation in Intangible assets, net would result in a corresponding increase or decrease in the pro forma amortization expense of approximately $3,778 thousand and $2,834 thousand for the twelve months ended December 31, 2023 and nine months ended September 30, 2024, respectively.
• A 10% change in the valuation of Property and equipment, net would result in a corresponding increase or decrease in the pro forma depreciation expense of approximately $647 thousand and $485 thousand for the twelve months ended December 31, 2023 and nine months ended September 30, 2024, respectively.

(d) Reflects the removal of historical interest expense associated with Satcom Direct’s existing indebtedness, which will be extinguished upon consummation of the Acquisition on the Closing Date, $1,722 thousand for the nine months ended September 30, 2024 and $3,873 thousand for the year ended December 31, 2023.

(e) The adjustment pertains to estimated income tax considerations associated with the Acquisition. Satcom Direct was previously held under a pass-through S-Corp structure. For the unaudited pro forma condensed combined Statements of Operations for the nine months ended September 30, 2024, and fiscal year ended December 31, 2023, income tax expense is recognized at an effective tax rate of 33%.

Note 6 – Financing Adjustments

Adjustments included in the Satcom Direct Transaction Accounting Adjustments – Financing column in the accompanying unaudited pro forma condensed combined Balance Sheet as of September 30, 2024 and pro forma condensed combined Statements of Operations, are as follows:

Unaudited Pro Forma Condensed Combined Balance Sheet

(a) Reflects an increase in Cash and cash equivalents of $242,833 thousand representing the gross proceeds from the issuance of the HPS Term Loan Facility of $250,000 thousand, net of $7,167 thousand in financing-related transaction costs. The HPS Term Loan Facility results in an increase to short-term current portion of long-term debt of $2,500 thousand and long-term debt of $240,333 thousand.

Unaudited Pro Forma Condensed Combined Statement of Income

(b) Reflects the expense related to the Financing and amortization of issuance costs related to the Acquisition:

(in thousands)		For the Nine Months Ended September 30, 2024		For the Year Ended<br><br>December 31, 2023
Pro forma transaction accounting adjustments - financing:
New interest expense on transaction financing:
HPS Term Loan Facility (i)	$	19,627	$	26,401
Amortization of debt issuance costs related to the HPS Term Loan Facility		1,512		1,740
Net pro forma transaction accounting adjustments - financing to interest expense	$	21,139	$	28,141

• The new interest expense on transaction financing adjustments included in the unaudited pro forma condensed combined Statements of Operations reflects the interest expense and amortization of debt issuance costs associated with the HPS Term Loan Facility. The interest rate used in calculating the unaudited pro forma adjustments for the HPS Term Loan Facility is 10.60%. The interest rate used is calculated using the Secured Overnight Financing Rate (“SOFR”) as of the Closing Date, plus 6%.

A hypothetical 1/8th of a percent increase/decrease in the interest rate used would result in an increase/decrease of approximately $231 thousand in pro forma interest expense for the nine months ended September 30, 2024 and $311 thousand in pro forma interest expense for the twelve months ended December 31, 2023.

(c) The adjustment pertains to estimated income tax considerations associated with the Acquisition. Satcom Direct was previously held under a pass-through S-Corp structure. For the unaudited pro forma condensed combined Statements of Operations for the nine months ended September 30, 2024, and fiscal year ended December 31, 2023, income tax expense is recognized at an effective tax rate of 33%.

Note 7 – Pro Forma Earnings per Share

The pro forma basic and diluted weighted average shares outstanding are a combination of historic weighted average shares of Gogo common stock and issuances of shares in connection with the Acquisition. In connection with the Acquisition, the Company issued new equity awards to Satcom Direct employees. The calculation of Pro Forma earnings per share – diluted excludes the PSUs under the contingently issuable guidance, as all the necessary conditions have not been satisfied at the end of the period. Diluted earnings per share, if dilutive, includes the incremental effect of issuable shares from the RSUs, as determined using the treasury stock method. The pro forma basic and diluted weighted average shares outstanding are as follows:

(in thousands, except per share amounts)		For the Nine Months Ended September 30, 2024		For the Year Ended December 31, 2023
Net income	$	93,869	$	201,033
Pro Forma adjustments to net income		(54,183)		(95,010)
Pro Forma net income	$	39,686	$	106,023
Basic
Weighted average shares outstanding		128,513		129,753
Common stock issuance adjustment		5,000		5,000
---	---	---	---	---
Pro Forma weighted average shares outstanding		133,513		134,753
Pro Forma earnings per share - basic	$	0.30	$	0.79
Diluted
Pro Forma weighted average shares outstanding		133,513		134,753
Effect of dilutive stock-based compensation		3,194		4,103
Total Pro Forma weighted average diluted shares outstanding		136,707		138,856
Pro Forma earnings per share - diluted	$	0.29	$	0.76